I-SEARCH (tm) V1.89P Retrieved Documents Listing on 10/13/93 at 20:13:44. Database: USCODE Search: (11:CITE) ------DocID 14670 Document 1 of 646------ -CITE- 11 USC TITLE 11 -EXPCITE- TITLE 11 -HEAD- TITLE 11 - BANKRUPTCY -MISC1- THIS TITLE WAS ENACTED BY PUB. L. 95-598, TITLE I, SEC. 101, NOV. 6, 1978, 92 STAT. 2549 Chap. Sec. 1. General Provisions 101 3. Case Administration 301 5. Creditors, the Debtor, and the Estate 501 7. Liquidation 701 9. Adjustment of Debts of a Municipality 901 11. Reorganization 1101 12. Adjustment of Debts of Family Farmers with Regular Annual Income 1201 13. Adjustment of Debts of an Individual With Regular Income 1301 15. (FOOTNOTE 1) United States Trustees 1501 (FOOTNOTE 1) Chapter repealed by Pub. L. 99-554 without corresponding amendment of chapter analysis. AMENDMENTS 1986 - Pub. L. 99-554, title II, Sec. 257(a), Oct. 27, 1986, 100 Stat. 3114, added item for chapter 12. Table I This Table lists the sections of former Title 11, Bankruptcy, and hich cover similar and related subject matter. --------------------------------------------------------------------- Title 11 Former Sections Title 11 New Sections --------------------------------------------------------------------- 1(1)-(3) Rep. 1(4) 101(12) 1(5)-(7) Rep. 1(8) 101(8) 1(9), (10) Rep. 1(11) 101(9) 1(12), (13) Rep. 1(14) 101(11) 1(15), (16) Rep. 1(17) 101(17), (18) 1(18) Rep. 1(19) 101(26) 1(20)-(22) Rep. 1(23) 101(30) 1(24) 101(31) 1(25), (26) Rep. 1(27) 101(34) 1(28), (29) Rep. 1(29a) 101(38) 1(30) 101(40) 1(31) Rep. 1(32) 101(24) 1(33), (34) Rep. 1(35) 102(7) 11(a)(1) 109(a) 11(a)(2) 502(j) 11(a)(2A) 505(a), (b) 11(a)(3), (4) Rep. 11(a)(5) 721 11(a)(6) Rep. 11(a)(7) 363 11(a)(8) 350 11(a)(9)-(14) Rep. 11(a)(15) 105 11(a)(16) Rep. 11(a)(17) 324 11(a)(18) 303(i) 11(a)(19), (20) Rep. 11(a)(21) 543(b), (c) 11(a)(22) 305(a)(2) 11(b) Rep. 21 303(h) 22 109(b) 22(a) 301 22(b) 303(a) 23(a) Rep. 23(b) 303(b) 23(c)-(f) Rep. 23(g) 723 23(h)-(k) Rep. 24 522 25(a)(1) 343, 521(4) 25(a)(2) Rep. 25(a)(3) 521(2) 25(a)(4) 521(3) 25(a)(5) 521(3) 25(a)(6) 521(2) 25(a)(7) 521(2) 25(a)(8), (9) 521(1) 25(a)(10) 343, 344 25(a)(11) 521(3) 25(b) Rep. 26 541(a) 27, 28 Rep. 29(a) 362 29(b)-(d) Rep. 29(e) 108(a), (b) 29(f) 108(c) 30, 31 (See former 501-1103) 32(a) 727(a)(10), 1141(d)(4) 32(b) 727(c) 32(c)(1) 727(a)(2), (4) 32(c)(2) 727(a)(3) 32(c)(3) 727(a)(4) 32(c)(4) 727(a)(2) 32(c)(5) 727(a)(8), (9) 32(c)(6) 727(a)(6) 32(c)(7) 727(a)(5) 32(c)(8) Rep. 32(d), (e) Rep. 32(f) 524(a) 32(g), (h) Rep. 33 727(d), (e), 1328(e) 34 524(e) 35(a)(1) 523(a)(1) 35(a)(2) 523(a)(2) 35(a)(3) 523(a)(3) 35(a)(4) 523(a)(4) 35(a)(5), (6) Rep. 35(a)(7) 523(a)(5) 35(a)(8) 523(a)(6) 35(b) 523(b), 349(a) 35(c) 523(c) 35(c)(4) 362 41(a) Rep. 41(b) 303(d) 41(c)-(e) Rep. 41(f) 301 42 T. 28 Sec. 1480 43 Rep. 44(a) 343 44(b)-(f) Rep. 44(g) 549(c) 44(h)-(l) Rep. 45-51 Rep. 52, 53 Rep. 54 Rep. 55 T. 28 Sec. 1475 61-71 Rep. 72(a) 702 72(b) 705 72(c) 327(c) 73 321 74 325, 703(a) 75(a)(1) 704(1) 75(a)(2) 345 75(a)(3) 704(2) 75(a)(4) Rep. 75(a)(5) 704(2) 75(a)(6) Rep. 75(a)(7) 704(3) 75(a)(8) 704(4) 75(a)(9) 704(5) 75(a)(10) 704(6) 75(a)(11), (12) Rep. 75(a)(13) 704(8) 75(a)(14) Rep. 75(b), (c) Rep. 76(a), (b) Rep. 76(c) 326(a), 330 76(d) Rep. 76(e) 326(d) 76(f), (g) Rep. 76a 330 77 107 78(a) Rep. 78(b) 322(a) 78(c) 322(b)(1) 78(d) 322(b)(2) 78(e) Rep. 78(f), (g) 322(b)(2) 78(h) Rep. 78(i) 322(c) 78(j)-(l) Rep. 78(m) 322(d) 78(n) Rep. 79-82 Rep. 91, 92 341 93(a)-(c) Rep. 93(d) 502(a), (c) 93(e) Rep. 93(f) 502(b) 93(g) 502(d) 93(h) 506(a), (b) 93(i) 501(b), 509 93(j) 724(a) 93(k) 502(j) 93(l), (m) Rep. 93(n) 501(a), 726(a)(3) 93a Rep. 94 342 95(a) 301 95(b) 303(b) 95(c), (d) Rep. 95(e) 303(b) 95(f) 303(c) 95(g) 303(j), 707 95(h) Rep. 96 547 96(a)(4) 547(e)(1)(B) 96(b) 550, 551 96(c) 547(c)(4), 553 96(d) 329 96(e)(1) 741 96(e)(2) 745, 751, 752 96(e)(3) 753 96(e)(5) 749 101 345 101a Rep. 102(a)(1) 503(b)(2) 102(a)(2)-(4) Rep. 102(b) Rep. 102(c) 504 102(d) Rep. 103 101(4) 103(a)(9) 502(b)(7) 103(c) 365 103a Rep. 104(a) 507 104(a)(1) 503(b) 104(a)(2) 507(a)(3) 104(a)(4) 502(b)(4), 505(a), (b) 104(b) Rep. 105(a)-(c) Rep. 105(d) 508 105(e) Rep. 106(a) 347(a) 106(b) Rep. 107(a) 349(b), 547(b), (d), 551 107(b), (c) 545 107(c)(1)(A) 545(1) 107(c)(1)(B) 545(2), 546(b) 107(c)(1)(C) 545(3), (4) 107(c)(2) 551 107(c)(3) 724(b) 107(d)(1)(a)-(c) Rep. 107(d)(1)(d) 101(26) 107(d)(1)(e) Rep. 107(d)(2) 548(a) 107(d)(3) 550 107(d)(4) 548(b) 107(d)(5) 548(d)(1) 107(d)(6) 548(c), 550, 551 107(d)(7) Rep. 107(e), (f) Rep. 108 502(b)(3), 553 109(a) 303(e) 109(b) 303(i) 109(c) Rep. 109(d) 303(g), 543(b), (c) 110(a) 541(a) 110(a)(3) 541(b) 110(a)(5) 522(d)(7), (8) 110(b) 365 110(c) 541(e), 544(a) 110(d)(1) 549(a) 110(d)(2), (3) 542(c) 110(d)(4), (5) Rep. 110(e) 544(b) 110(f) 363 110(g)-(i) Rep. 111, 112 Rep. 201, 202 (See former 501-1103) 202a-204 Rep. 205(a) Rep. 205(b) 1171(b), 1172 205(c)(1) 1163 205(c)(2) 1166 205(c)(3)-(5) Rep. 205(c)(6) 1169 205(c)(7)-(13) Rep. 205(d) Rep. 205(e) 1173 205(f)-(i) Rep. 205(j) 1168 205(k), (l) Rep. 205(m) 101(33) 205(n) 1167, 1171(a) 205(o) 1170 205(p)-(s) Rep. 205a Rep. 206, 207 (See former 501-1103) 208 Rep. 301-303 Rep. 401(1) 101(4) 401(2) Rep. 401(3) 101(9) 401(4) Rep. 401(5) 101(11) 401(6) 101(28) 401(7) 101(30) 401(8) 101(12) 401(9) Rep. 401(10) 902(2) 401(11) 903(3) 402(a) Rep. 402(b)(1), (2) 901 402(b)(3) Rep. 402(c) 904 402(d) 921(b) 403 903 404 101(29), 109(c) 405(a) 921(a), (c)-(f) 405(b) 901, 924 405(c) Rep. 405(d) 923 405(e) 901 405(e)(1) 922(a) 405(f), (g) Rep. 405(h) 901, 926 406, 407 Rep. 408(a) 925 408(b) 901 408(c) Rep. 409 901 410(a) 941, 942 410(b) 942 411, 412 901 413 901, 943(a) 414(a) 901 414(b)(1) 943(b)(5), (6) 414(b)(2) 943(b)(2) 414(b)(3) Rep. 414(b)(4) 943(b)(3) 414(b)(5) Rep. 414(b)(6) 943(b)(4) 415(a) 944(a) 415(b)(1) 944(b) 415(b)(2) 944(c) 416(a) Rep. 416(b) 901 416(c) Rep. 416(d) 347(b), 901 416(e) 945(a) 416(f) Rep. 417 946 418 927 501, 502 Rep. 506(1) 101(4) 506(2), (3) Rep. 506(4) 101(9) 506(5) 101(12) 506(6) 101(11) 506(7) Rep. 506(8) 101(23) 506(9) 101(31) 506(10) Rep. 506(11) 101(35) 506(12), (13) Rep. 507 1124 511, 512 Rep. 513 362 514, 515 Rep. 516(1) 365 516(2) 364 516(3) 363 516(4) 362 516(5), (6) 1110 517-521 Rep. 526 303(b) 527 Rep. 528 T. 28 Sec. 1472 529-533 Rep. 536, 537 303(d) 541-549 Rep. 556 1104(a) 557 327 558 101(13) 559 1105 560 324, 1104(c) 561, 562 Rep. 563 1107(a) 564 1106(a)(2) 565 Rep. 566 107 567(1) 1106(a)(3) 567(2) Rep. 567(3) 1106(a)(4)(A) 567(4) Rep. 567(5) 1106(a)(4) 567(6) Rep. 568 1104(b), 1106(b) 569 1106(a)(5) 570 1121 571-574 Rep. 575 1125(d) 576 1125(b) 577, 578 Rep. 579 1126, 1128(a) 580 1128(b) 586 541(a) 587 1106 588 1107(a) 589 1108 590 Rep. 591 327 596 501(a), 1111 597 1122 598 501(a) 599 1126(a) 600, 601 Rep. 602 502(b)(7) 603 1126(e) 604 1143 605 347(b) 606 1109(b) 607 1109 608 1109(a) 609-613 Rep. 616(1) 1123(b)(1) 616(2) 1123(a)(5), (b)(4) 616(3) Rep. 616(4) 1123(b)(2) 616(5) 1123(a)(3) 616(6) 1123(a)(2) 616(7)-(9) Rep. 616(10) 1123(a)(5) 616(11) 1123(a)(7) 616(12)(a) 1123(a)(6) 616(12)(b) Rep. 616(13) 1123(b)(3) 616(14) 1123(b)(5) 621(1) 1129(a)(1) 621(2) 1129(a)(7), (11) 621(3) 1129(a)(3) 621(4) 1129(a)(4) 621(5) 1129(a)(5) 622 1127 623 1127(d) 624(1) 1141(a) 624(2) 1129(a)(6), 1142(a) 624(3), (4) Rep. 625 Rep. 626 1141(c) 627 1142(b) 628(1) 1141(d)(1)-(3) 628(2)-(4) Rep. 629(a) 1101(2) 629(b) Rep. 629(c) 1127(b) 636 1112(b) 637 Rep. 638 348 641(1), (2) Rep. 641(3), (4) 330 641(5) 503(b)(4) 642(1) 503(b)(3), (5) 642(2) Rep. 642(3) 503(b)(4) 643 503(b)(3), (4) 644(1) 330 644(2) 503(b)(4) 644(3) 330 644(4) 503(b)(3), (4) 645-650 Rep. 656-659 Rep. 661 108(c) 662 Rep. 663 362 664(a) 1145(a) 664(b) 1145(b) 665, 666 Rep. 667 1146(c) 668 346(j)(1) 669 1129(d) 670 346(j)(5) 671, 672 Rep. 676 Rep. 701, 702 Rep. 706(1), (2) Rep. 706(3) 101(12), 109(d) 706(4) Rep. 706(5) 101(31) 707(1) 101(9) 707(2) 101(4), (11) 708 1124 711, 712 Rep. 713(1) 365 713(2) 363 713(3) Rep. 714 362 715, 716 Rep. 721-728 Rep. 731-733 Rep. 734 341 735 341 735(3) 1128(a) 736 341 736(2) 501(a) 736(3) 343 737(1) Rep. 737(2) 1129(a)(9) 737(3) 1128(a) 738 1102 739(1)(a) 1103(c)(2) 739(1)(b)-(e) 1103(c)(3) 739(1)(f) 1104(c)(5) 739(2) 503(b)(4), 1103(a) 741 Rep. 742 1107(a) 743 1108 744 364 751 1122 752 Rep. 753 502(b)(7) 754, 755 Rep. 755a 501(a) 756 Rep. 757(1) Rep. 757(2) 1123(b)(2) 757(3)-(7) Rep. 757(8) 1123(b)(5) 761 1129(a)(3) 762 Rep. 763 1127 764 1127(d) 765 1127(c) 766(1) 1129(a)(1) 766(2) 1129(a)(7), (11) 766(3) 1129(a)(2) 766(4) 1129(a)(3) 767(1) 1141(a) 767(2)-(4) Rep. 768-770 Rep. 771 1141(d)(1)-(3) 772 Rep. 776, 777 1112(b) 778 348 779-781 Rep. 786 1144 787(1) 1127(b) 787(2) 1127(c) 787(3) 1127(d) 787(4) Rep. 791 108(c) 792 Rep. 793(a) 1145(a) 793(b) 1145(b) 794 Rep. 795 346(j)(1) 796 346(j)(5) 797 Rep. 799 Rep. 801, 802 Rep. 806(1) Rep. 806(2) 101(4) 806(3), (4) Rep. 806(5) 101(9) 806(6) 101(12), 109(d) 806(7) 101(11) 806(8) 101(23) 806(9) 101(31) 807 1124 811, 812 Rep. 813(1) 365 813(2) 363 813(3) Rep. 814 362 815, 816 Rep. 821-827 Rep. 828 362 831 Rep. 832 1104(a) 833 Rep. 834 341 835 341, 1128(a) 836 341 836(2) 501(a) 836(3) 343 837(1) 1104(a) 837(2) Rep. 837(3) 1128(a) 841 Rep. 842 1106 843 348 844 1107(a) 845 1108 846 364 851 501(a), 1111 852 1122 853 Rep. 854 501(a) 855-857 Rep. 858 502(b)(7) 859 Rep. 861(1)-(3) Rep. 861(4) 1123(b)(2) 861(5), (6) Rep. 861(7) 1123(b)(4) 861(8) Rep. 861(9) 1123(a)(3) 861(10) 1123(a)(2) 861(11) Rep. 861(12) 1123(a)(5) 861(13) 1123(b)(5) 866 Rep. 867 1129(a)(3) 868 Rep. 869 1127(a), (b) 870 1127(d) 871 1127(c) 872(1) 1129(a)(1) 872(2) 1129(a)(7), (11) 872(3) 1129(a)(2) 872(4) 1129(a)(3) 872(5) 1129(a)(4) 873(1) 1141(a) 873(2) 1142(a) 873(3) Rep. 874 1141(c) 875 1142(b) 876 1141(d)(1)-(3) 877 Rep. 881, 882 1112(b) 883 348 884-886 Rep. 891(1) Rep. 891(2), (3) 330 892(1) 503(b)(3) 892(2) Rep. 892(3) 503(b)(4) 893(1) Rep. 893(2) 503(b)(4) 893(3) 330 893(4) 503(b)(4) 894-898 Rep. 906-909 Rep. 911 1144 916 108(c) 917 362 918(a) 1145(a) 918(b) 1145(b) 919 Rep. 920 346(j)(1) 921 1129(d) 922 346(j)(5) 923 Rep. 926 Rep. 1001, 1002 Rep. 1006(1) 101(4) 1006(2) 101(9) 1006(3) 101(12), 109(e) 1006(4) 101(11) 1006(5) Rep. 1006(6) 101(31) 1006(7) Rep. 1006(8) 101(24), 109(e) 1007 Rep. 1011, 1012 Rep. 1013(1) 365 1013(2) Rep. 1014 362 1015, 1016 Rep. 1021-1026 Rep. 1031 Rep. 1032, 1033 341 1033(1) 343, 501(a) 1033(2) 1321 1033(5) 1324 1036 1303 1037 Rep. 1041-1044 Rep. 1046(1) 1322(b)(1) 1046(2) 1322(b)(2) 1046(3) 1322(a)(2) 1046(4) 1322(a)(1) 1046(5) 1329(a) 1046(6) 1322(b)(7) 1046(7) 1322(b)(10) 1051 1325(a)(3) 1052 Rep. 1053 1323(a) 1054 1323(c) 1055 Rep. 1056(a)(1) 1325(a)(1) 1056(a)(2) 1325(a)(6) 1056(a)(3) Rep. 1056(a)(4) 1325(a)(3) 1056(b) 502(b) 1057 1327(a) 1058 Rep. 1059 1326(a) 1060 1328(a), (c), (d) 1061 1328(b) 1062 Rep. 1066 348, 1307 1067 348 1068, 1069 Rep. 1071 1330 1076 108(c) 1077-1079 Rep. 1080 1305(a)(1) 1086 Rep. 1101-1103 Rep. 1200-1255 Rep. ------------------------------- Table II This Table lists the sections of revised Title 11, Bankruptcy, and d related subject matter. --------------------------------------------------------------------- Title 11 New Sections Title 11 Former Sections --------------------------------------------------------------------- 101(1)-(3) 101(4) 103, 401(1), 506(1), 707(2), 806(2), 1006(1) 101(5)-(7) 101(8) 1(8) 101(9) 1(11), 401(3), 506(4), 707(1), 806(5), 1062(2) 101(10) 101(11) 1(14), 401(5), 506(6), 707(2), 806(7), 1006(4) 101(12) 1(4), 401(8), 506(5), 706(3), 806(6), 1006(3) 101(13) 558 101(14)-(16) 101(17), (18) 1(17) 101(19)-(21) 101(22) T. 15 Sec. 77ccc(7) 101(23) 506(8), 806(8) 101(24) 1(32), 1006(8) 101(25) 101(26) 1(19), 107(d)(1)(d) 101(27) 101(28) 401(6) 101(29) 404 101(30) 1(23), 401(7) 101(31) 1(24), 506(9), 706(5), 806(9), 1006(6) 101(32) 101(33) 205(m) 101(34) 1(27) 101(35) 506(11) 101(36), (37) 101(38) 1(29a) 101(39) T. 15 Sec. 78c(a)(4), (5) 101(40) 1(30) 102(1)-(6) 102(7) 1(35) 102(8) 103, 104 105 11(a)(15) 106 107 77, 566 108(a), (b) 29(e) 108(c) 29(f), 661, 791, 1076 109(a) 11(a)(1) 109(b) 22 109(c) 404 109(d) 706(3), 806(6) 109(e) 1006(3), (8) 301 22(a), 41(f), 95(a) 302 303(a) 22(b) 303(b) 23(b), 95(b), (e), 526 303(c) 95(f) 303(d) 41(b), 536, 537 303(e) 109(a) 303(f) 303(g) 109(d) 303(h) 21 303(i) 11(a)(18), 19(b) 303(j) 95(g) 303(k) 304 305(a)(1) 305(a)(2) 11(a)(22) 305(b), (c) 306 321 73 322(a) 78(b) 322(b)(1) 78(c) 322(b)(2) 78(d), (f), (g) 322(c) 78(i) 322(d) 78(m) 323 324 11(a)(17), 560 325 74 326(a) 76(c) 326(b), (c) 326(d) 76(e) 327 557, 591 327(c) 72(c) 328 329 96(d) 330 76(c), 76a, 641(3), (4), 644(1), (3), 891(2), (3), 893(3) 331 341 91, 92, 734-736, 834-836, 1032, 1033 342 94 343 44(a), 25(a)(1), (10), 736(3), 836(3), 1033(1) 344 25(a)(10) 345 101, 75(a)(2) 346(a)-(i) 346(j)(1) 668, 795, 920 346(j)(2)-(4) 346(j)(5) 670, 796, 922 346(j)(6), (7) 347(a) 106(a) 347(b) 416(d), 605 348 638, 778, 843, 1066, 1067 349(a) 35(b) 349(b) 107(a) 350 11(a)(8) 361 362 29(a), 35(c)(4), 513, 516(4), 663, 714, 814, 828, 917, 1014 363 11(a)(7), 110(f), 516(3), 713(2), 813(2) 364 516(2), 744, 846 365 103(c), 110(b), 516(1), 713(1), 813(1), 1013(1) 366 501(a) 93(n), 596, 598, 736(2), 755a, 836(2), 851, 854, 1033(1) 501(b) 93(i) 501(c), (d) 502(a) 93(d) 502(b) 93(f), 1056(b) 502(b)(3) 108 502(b)(4) 104(a)(4) 502(b)(7) 103(a)(9), 602, 753, 858 502(c) 93(d) 502(d) 93(g) 502(e)-(i) 502(j) 93(k), 11(a)(2) 503(a) 503(b) 104(a)(1) 503(b)(2) 102(a)(1) 503(b)(3) 642(1), 643, 644(4), 892(1) 503(b)(4) 641(5), 642(3), 643, 644(2), (4), 739(2), 892(3), 893(2), (4) 503(b)(5) 642(1) 504 102(c) 505(a), (b) 11(a)(2A), 104(a)(4) 505(c) 506(a), (b) 93(h) 506(c), (d) 507 104(a) 507(a)(3) 104(a)(2) 508 105(d) 509 93(i) 510 521(1) 25(a)(8), (9) 521(2) 25(a)(3), (6), (7) 521(3) 25(a)(4), (5), (11) 521(4) 25(a)(1) 522 24 523(a)(1) 35(a)(1) 523(a)(2) 35(a)(2) 523(a)(3) 35(a)(3) 523(a)(4) 35(a)(4) 523(a)(5) 35(a)(7) 523(a)(6) 35(a)(8) 523(a)(7)-(9) 523(b) 35(b) 523(c) 35(c) 523(d) 524(a) 32(f) 524(b)-(d) 524(e) 34 525 541(a) 26, 110(a), 586 541(b) 110(a)(3) 541(c), (d) 541(e) 110(c) 542(a), (b) 542(c) 110(d)(2), (3) 542(d), (e) 543(a) 543(b), (c) 11(a)(21), 109(d) 543(d) 544(a) 110(c) 544(b) 110(e) 545 107(b), (c) 545(1) 107(c)(1)(A) 545(2) 107(c)(1)(B) 545(3), (4) 107(c)(1)(C) 546(a) 546(b) 107(c)(1)(B) 546(c) 547 96 547(b) 107(a) 547(c)(4) 96(c) 547(d) 107(a) 547(e)(1)(B) 96(a)(4) 548(a) 107(d)(2) 548(b) 107(d)(4) 548(c) 107(d)(6) 548(d)(1) 107(d)(5) 548(d)(2) 549(a) 110(d)(1) 549(b) 549(c) 44(g) 549(d) 550 96(b), 107(d)(3), (6) 551 96(b), 107(a)(3), (c)(2), (d)(6), 110(e)(2) 552 553 96(c), 108 554 701 702 72(a) 703(a) 74 703(b), (c) 704(1) 75(a)(1) 704(2) 75(a)(3), (5) 704(3) 75(a)(7) 704(4) 75(a)(8) 704(5) 75(a)(9) 704(6) 75(a)(10) 704(7) 704(8) 75(a)(13) 705 72(b) 706 707 95(g) 721 11(a)(5) 722 723 23(g) 724(a) 93(j) 724(b) 107(c)(3) 724(c), (d) 725 726(a)(1), (2) 726(a)(3) 93(n) 726(a)(4)-(6), (b), (c) 727(a)(1) 727(a)(2) 32(c)(1), (4) 727(a)(3) 32(c)(2) 727(a)(4) 32(c)(1), (3) 727(a)(5) 32(c)(7) 727(a)(6) 32(c)(6) 727(a)(7) 727(a)(8), (9) 32(c)(5) 727(a)(10) 32(a) 727(b) 727(c) 32(b) 727(d), (e) 33 728 741 96(e)(1) 742-744 745 96(e)(2) 746-748 749 96(e)(5) 750 751 96(e)(2) 752 96(e)(2), (3) 761-766 901 402(b)(1), (2), 405(b), (e), (h), 408(b), 409, 411, 412, 413, 414(a), 416(b), (d) 902(1) 902(2) 401(10) 902(3) 401(11) 902(4) 903 403 904 402(c) 921(a) 405(a) 921(b) 402(d) 921(c)-(f) 405(a) 922(a) 405(e)(1) 922(b) 923 405(d) 924 405(b) 925 408(a) 926 405(h) 927 418 941 410(a) 942 410(a), (b) 943(a) 413 943(b)(1) 943(b)(2) 414(b)(2) 943(b)(3) 414(b)(4) 943(b)(4) 414(b)(6) 943(b)(5), (6) 414(b)(1) 944(a) 415(a) 944(b) 415(b)(1) 944(c) 415(b)(2) 945(a) 416(e) 945(b) 946 417 1101(1) 1101(2) 629(a) 1102 738 1103(a) 739(2) 1103(b), (c)(1) 1103(c)(2) 739(1)(a) 1103(c)(3) 739(1)(b)-(e) 1103(c)(4) 1103(c)(5) 739(1)(f) 1103(d) 1104(a) 556, 832, 837(1) 1104(b) 568 1104(c) 560 1105 559 1106 587, 842 1106(a)(2) 564 1106(a)(3) 567(1) 1106(a)(4) 567(5) 1106(a)(4)(A) 567(3) 1106(a)(5) 569 1106(b) 568 1107(a) 563, 588, 742, 844 1107(b) 1108 589, 743, 845 1109 607 1109(a) 608 1109(b) 606 1110 516(5), (6) 1111 596, 851 1112(a) 1112(b) 636, 776, 777, 881, 882 1112(c)-(e) 1121 570 1122 597, 751, 852 1123(a)(1) 1123(a)(2) 616(6), 861(10) 1123(a)(3) 616(5), 861(9) 1123(a)(4) 1123(a)(5) 616(2), (10), 861(12) 1123(a)(6) 616(12)(a) 1123(a)(7) 616(11) 1123(b)(1) 616(1) 1123(b)(2) 616(4), 757(2), 861(4) 1123(b)(3) 616(13) 1123(b)(4) 616(2), 861(7) 1123(b)(5) 616(14), 757(8), 861(13) 1123(c) 1124 507, 708, 807 1125(a) 1125(b) 576 1125(c) 1125(d) 575 1125(e) 1126 579 1126(a) 599 1126(e) 603 1127 622, 763 1127(a) 869 1127(b) 629(c), 787(1), 869 1127(c) 765, 787(2), (3), 871 1127(d) 623, 764, 870 1128(a) 579, 735(3), 737(3), 835, 837(3) 1128(b) 580 1129(a)(1) 621(1), 766(1), 872(1) 1129(a)(2) 766(3), 872(3) 1129(a)(3) 621(3), 761, 766(4), 867, 872(4) 1129(a)(4) 621(4), 872(5) 1129(a)(5) 621(5) 1129(a)(6) 624(2) 1129(a)(7) 621(2), 766(2), 872(2) 1129(a)(8) 1129(a)(9) 737(2) 1129(a)(10) 1129(a)(11) 621(2), 766(2), 872(2) 1129(b), (c) 1129(d) 669, 921 1141(a) 624(1), 767(1), 873(1) 1141(b) 1141(c) 626, 874 1141(d)(1)-(3) 628(1), 771, 876 1141(d)(4) 32(a) 1142(a) 624(2), 873(2) 1142(b) 627, 875 1143 604 1144 786, 911 1145(a) 664(a), 793(a), 918(a) 1145(b) 664(b), 793(b), 918(b) 1145(c), (d) 1146(a), (b) 1146(c) 667 1146(d) 1161, 1162 1163 205(c)(1) 1164, 1165 1166 205(c)(2) 1167 205(n) 1168 205(j) 1169 205(c)(6) 1170 205(o) 1171(a) 205(n) 1171(b) 205(b) 1172 205(b) 1173 205(e) 1174 1301, 1302 1303 1036 1304 1305(a)(1) 1080 1305(a)(2), (b), (c) 1306 1307 1066 1321 1033(2) 1322(a)(1) 1046(4) 1322(a)(2) 1046(3) 1322(a)(3) 1322(b)(1) 1046(1) 1322(b)(2) 1046(2) 1322(b)(3)-(6) 1322(b)(7) 1046(6) 1322(b)(8), (9) 1322(b)(10) 1046(7) 1322(c) 1323(a) 1053 1323(b) 1323(c) 1054 1324 1033(5) 1325(a)(1) 1056(a)(1) 1325(a)(2) 1325(a)(3) 1051, 1056(a)(4) 1325(a)(4), (5) 1325(a)(6) 1056(a)(2) 1325(b) 1326(a) 1059 1326(b) 1327(a) 1057 1327(b), (c) 1328(a) 1060 1328(b) 1061 1328(c), (d) 1060 1328(e) 33 1329(a) 1046(5) 1329(b), (c) 1330 1071 1501-151326 ------------------------------- ENACTING CLAUSE Pub. L. 95-598, title I, Sec. 101, Nov. 6, 1978, 92 Stat. 2549, provided in part: 'The law relating to bankruptcy is codified and enacted as title 11 of the United States Code, entitled 'Bankruptcy', and may be cited as 11 U.S.C. Sec. - .' REPEALS Pub. L. 95-598, title IV, Sec. 401(a), Nov. 6, 1978, 92 Stat. 2682, provided that: 'The Bankruptcy Act (act July 1, 1898, ch. 541, 30 Stat. 544, as amended) is repealed.' EFFECTIVE DATE Pub. L. 95-598, title IV, Sec. 402, Nov. 6, 1978, 92 Stat. 2682, as amended by Pub. L. 98-249, Sec. 1(a), Mar. 31, 1984, 98 Stat. 116; Pub. L. 98-271, Sec. 1(a), Apr. 30, 1984, 98 Stat. 163; Pub. L. 98-299, Sec. 1(a), May 25, 1984, 98 Stat. 214; Pub. L. 98-325, Sec. 1(a), June 20, 1984, 98 Stat. 268; Pub. L. 98-353, title I, Sec. 113, 121(a), July 10, 1984, 98 Stat. 343, 345; Pub. L. 98-454, title X, Sec. 1001, Oct. 5, 1984, 98 Stat. 1745, provided that: '(a) Except as otherwise provided in this title (sections 401 to 411), this Act (for classification to the Code, see Tables) shall take effect on October 1, 1979. '(b) Except as provided in subsections (c) and (d) of this section, the amendments made by title II (sections 201 to 252) of this Act shall not be effective. '(c) The amendments made by sections 210, 214, 219, 220, 222, 224, 225, 228, 229, 235, 244, 245, 246, 249, and 251 of this Act shall take effect on October 1, 1979. '(d) The amendments made by sections 217, 218, 230, 247, 302, 314(j), 317, 327, 328, 338, and 411 of this Act shall take effect on the date of enactment of this Act (Nov. 6, 1978). '(e) (Repealed. Pub. L. 98-454, title X, Sec. 1001, Oct. 5, 1984, 98 Stat. 1745).' (Amendment of section 402(b) of Pub. L. 95-598, set out above, by section 113 of Pub. L. 98-353 effective June 27, 1984, see section 122(c) of Pub. L. 98-353, set out as an Effective Date note under section 151 of Title 28, Judiciary and Judicial Procedure.) SAVINGS PROVISION Pub. L. 95-598, title IV, Sec. 403, Nov. 6, 1978, 92 Stat. 2683, as amended by Pub. L. 98-353, title III, Sec. 382, July 10, 1984, 98 Stat. 364, provided that: '(a) A case commenced under the Bankruptcy Act, (act July 1, 1898, ch. 541, 30 Stat. 544, as amended), and all matters and proceedings in or relating to any such case, shall be conducted and determined under such Act as if this Act had not been enacted, and the substantive rights of parties in connection with any such bankruptcy case, matter, or proceeding shall continue to be governed by the law applicable to such case, matter, or proceeding as if the (this) Act had not been enacted. '(b) Notwithstanding subsection (a) of this section, sections 1165, 1167, 1168, 1169, and 1171 of title 11 of the United States Code, as enacted by section 101 of this Act, apply to cases pending under section 77 of the Bankruptcy Act ((former) 11 U.S.C. 205) on the date of enactment of this Act (Nov. 6, 1978) in which the trustee has not filed a plan of reorganization. '(c) The repeal (of the Bankruptcy Act) made by section 401(a) of this Act does not affect any right of a referee in bankruptcy, United States bankruptcy judge, or survivor of a referee in bankruptcy or United States bankruptcy judge to receive any annuity or other payment under the civil service retirement laws. '(d) The amendments made by section 314 of this Act (for classification to the Code, see Tables) do not affect the application of chapter 9, chapter 96, section 2516, section 3057, or section 3284 of title 18 of the United States Code to any act of any person - '(1) committed before October 1, 1979; or '(2) committed after October 1, 1979, in connection with a case commenced before such date. '(e) Notwithstanding subsection (a) of this section - '(1) a fee may not be charged under section 40c(2)(a) of the Bankruptcy Act (former 11 U.S.C. 68(c)(2)(a)) in a case pending under such Act after September 30, 1979, to the extent that such fee exceeds $200,000; '(2) a fee may not be charged under section 40c(2)(b) of the Bankruptcy Act in a case in which the plan is confirmed after September 30, 1978, or in which the final determination as to the amount of such fee is made after September 30, 1979, notwithstanding an earlier confirmation date, to the extent that such fee exceeds $100,000; '(3) after September 30, 1979, all moneys collected for payment into the referees' salary and expense fund in cases filed under the Bankruptcy Act shall be collected and paid into the general fund of the Treasury; and '(4) any balance in the referees' salary and expense fund in the Treasury on October 1, 1979, shall be transferred to the general fund of the Treasury and the referees' salary and expense fund account shall be closed.' Pub. L. 98-353, title III, Sec. 381, July 10, 1984, 98 Stat. 364, provided that: 'This subtitle ((Sec. 381, 382) amending section 403(e) of Pub. L. 95-598, set out above) may be cited as the 'Referees Salary and Expense Fund Act of 1984'.' HISTORY OF BANKRUPTCY ACTS The bankruptcy laws were revised generally and enacted as Title 11, Bankruptcy, by Pub. L. 96-598, Nov. 6, 1978, 92 Stat. 2549. Earlier bankruptcy laws included the following acts: Apr. 4, 1800, ch. 19, 2 Stat. 19, repealed Dec. 19, 1803, ch. 6, 2 Stat. 248. Aug. 19, 1841, ch. 9, 5 Stat. 440, repealed Mar. 3, 1843, ch. 82, 5 Stat. 614. Mar. 2, 1867, ch. 176, 14 Stat. 517, the provisions of which were incorporated in Rev. Stat. Title LXI, Sec. 4972 to 5132, were materially amended June 22, 1874, ch. 390, 18 Stat. 178, and were repealed June 7, 1878, ch. 160, 20 Stat. 99. The Bankruptcy Act of July 1, 1898, ch. 541, 30 Stat. 544, as amended, sometimes called the Nelson Act, repealed by Pub. L. 95-598. The Chandler Act of July 22, 1938, ch. 575, 52 Stat. 883, which revised the Bankruptcy Act generally and materially amended the provisions covering corporate reorganizations, repealed by Pub. L. 95-598. COMMISSION ON THE BANKRUPTCY LAWS OF THE UNITED STATES Pub. L. 91-354, Sec. 1-6, July 24, 1970, 84 Stat. 468, as amended by Pub. L. 92-251, Mar. 17, 1972, 86 Stat. 63; Pub. L. 93-56, Sec. 1, July 1, 1973, 87 Stat. 140, established the Commission on the Bankruptcy Laws of the United States, to study and recommend changes to this title, which ceased to exist 30 days after the date of submission of its final report which was required prior to July 31, 1973. -SECREF- TITLE REFERRED TO IN OTHER SECTIONS This title is referred to in title 7 sections 12, 24; title 8 section 1154; title 10 sections 2005, 2130a; title 12 sections 1150, 1467a, 1787, 1821; title 15 sections 77c, 77ccc, 78eee, 78fff, 78fff-1, 78fff-2, 78fff-4, 78lll, 79k, 80a-2, 80a-25, 80b-2, 1681c, 1870; title 17 section 201; title 18 sections 151, 152, 154, 155, 1961, 2516, 3284; title 19 section 1485; title 25 section 1616a; title 26 sections 56, 108, 351, 368, 382, 422, 422A, 542, 1017, 1361, 1398, 1399, 3302, 4980B, 6012, 6036, 6103, 6161, 6212, 6213, 6327, 6503, 6512, 6532, 6658, 6871, 6872, 7434, 7464, 7508; title 28 sections 156, 157, 526, 586, 1334, 1408, 1409, 1411, 1412, 1930, 2075, 3003; title 29 sections 152, 402, 1163, 1341, 1362, 1368, 1391, 1402, 1405, 1413; title 30 section 934; title 31 section 3713; title 33 section 511; title 37 sections 301b, 301d, 302, 302b, 302d, 302e, 308e, 308f, 308g, 308h, 308i, 315, 317; title 38 sections 1832, 4334; title 40 section 316; title 41 section 41; title 42 sections 254o, 294f, 300ff-76, 656, 1473, 2000e, 3602, 6924, 6991b, 6991c, 9602, 9608; title 43 sections 617p, 1606, 1636; title 45 sections 701, 791, 912, 1007; title 48 sections 1424-4, 1614, 1694; title 49 section 11304; title 49 App. section 1602. ------DocID 14821 Document 2 of 646------ -CITE- 11 USC CHAPTER 11 -EXPCITE- TITLE 11 CHAPTER 11 -HEAD- CHAPTER 11 - REORGANIZATION -MISC1- SUBCHAPTER I - OFFICERS AND ADMINISTRATION Sec. 1101. Definitions for this chapter. 1102. Creditors' and equity security holders' committees. 1103. Powers and duties of committees. 1104. Appointment of trustee or examiner. 1105. Termination of trustee's appointment. 1106. Duties of trustee and examiner. 1107. Rights, powers, and duties of debtor in possession. 1108. Authorization to operate business. 1109. Right to be heard. 1110. Aircraft equipment and vessels. 1111. Claims and interests. 1112. Conversion or dismissal. 1113. Rejection of collective bargaining agreements. 1114. Payment of insurance benefits to retired employees. SUBCHAPTER II - THE PLAN 1121. Who may file a plan. 1122. Classification of claims or interests. 1123. Contents of plan. 1124. Impairment of claims or interests. 1125. Postpetition disclosure and solicitation. 1126. Acceptance of plan. 1127. Modification of plan. 1128. Confirmation hearing. 1129. Confirmation of plan. SUBCHAPTER III - POSTCONFIRMATION MATTERS 1141. Effect of confirmation. 1142. Implementation of plan. 1143. Distribution. 1144. Revocation of an order of confirmation. 1145. Exemption from securities laws. 1146. Special tax provisions. SUBCHAPTER IV - RAILROAD REORGANIZATION 1161. Inapplicability of other sections. 1162. Definition. 1163. Appointment of trustee. 1164. Right to be heard. 1165. Protection of the public interest. 1166. Effect of subtitle IV of title 49 and of Federal, State, or local regulations. 1167. Collective bargaining agreements. 1168. Rolling stock equipment. 1169. Effect of rejection of lease of railroad line. 1170. Abandonment of railroad line. 1171. Priority claims. 1172. Contents of plan. 1173. Confirmation of plan. 1174. Liquidation. HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Chapter 11 of the House amendment is derived in large part from chapter 11 as contained in the House bill. Unlike chapter 11 of the Senate amendment, chapter 11 of the House amendment does not represent an extension of chapter X of current law (chapter 10 of former title 11) or any other chapter of the Bankruptcy Act (former title 11). Rather chapter 11 of the House amendment takes a new approach consolidating subjects dealt with under chapters VIII, X, XI, and XII of the Bankruptcy Act (chapters 8, 10, 11, and 12 of former title 11). The new consolidated chapter 11 contains no special procedure for companies with public debt or equity security holders. Instead, factors such as the standard to be applied to solicitation of acceptances of a plan of reorganization are left to be determined by the court on a case-by-case basis. In order to insure that adequate investigation of the debtor is conducted to determine fraud or wrongdoing on the part of present management, an examiner is required to be appointed in all cases in which the debtor's fixed, liquidated, and unsecured debts, other than debts for goods, services, or taxes, or owing to an insider, exceed $5 million. This should adequately represent the needs of public security holders in most cases. However, in addition, section 1109 of the House amendment enables both the Securities and Exchange Commission and any party in interest who is creditor, equity security holder, indenture trustee, or any committee representing creditors or equity security holders to raise and appear and be heard on any issue in a case under chapter 11. This will enable the bankruptcy court to evaluate all sides of a position and to determine the public interest. This approach is sharply contrasted to that under chapter X of present law in which the public interest is often determined only in terms of the interest of public security holders. The advisory role of the Securities and Exchange Commission will enable the court to balance the needs of public security holders against equally important public needs relating to the economy, such as employment and production, and other factors such as the public health and safety of the people or protection of the national interest. In this context, the new chapter 11 deletes archaic rules contained in certain chapters of present law such as the requirement of an approval hearing and the prohibition of prepetition solicitation. Such requirements were written in an age before the enactment of the Trust Indenture Act (15 U.S.C. 77aaa et seq.) and the development of securities laws had occurred. The benefits of these provisions have long been outlived but the detriment of the provisions served to frustrate and delay effective reorganization in those chapters of the Bankruptcy Act in which such provisions applied. Chapter 11 thus represents a much needed revision of reorganization laws. A brief discussion of the history of this important achievement is useful to an appreciation of the monumental reform embraced in chapter 11. Under the existing Bankruptcy Act (former title 11) debtors seeking reorganization may choose among three reorganization chapters, chapter X, chapter XI, and chapter XII (chapters 10, 11, and 12 of former title 11). Individuals and partnerships may file under chapter XI or, if they own property encumbered by mortgage liens, they may file under chapter XII. A corporation may file under either chapter X or chapter XI, but is ineligible to file under chapter XII. Chapter X was designed to facilitate the pervasive reorganization of corporations whose creditors include holders of publicly issued debt securities. Chapter XI, on the other hand, was designed to permit smaller enterprises to negotiate composition or extension plans with their unsecured creditors. The essential differences between chapters X and XI are as follows. Chapter X mandates that, first, an independent trustee be appointed and assume management control from the officers and directors of the debtor corporation; second, the Securities and Exchange Commission must be afforded an opportunity to participate both as an adviser to the court and as a representative of the interests of public security holders; third, the court must approve any proposed plan of reorganization, and prior to such approval, acceptances of creditors and shareholders may not be solicited; fourth, the court must apply the absolute priority rule; and fifth, the court has the power to affect, and grant the debtor a discharge in respect of, all types of claims, whether secured or unsecured and whether arising by reason of fraud or breach of contract. The Senate amendment consolidates chapters X, XI, and XII (chapters 10, 11, and 12 of former title 11), but establishes a separate and distinct reorganization procedure for 'public companies.' The special provisions applicable to 'public companies' are tantamount to the codification of chapter X of the existing Bankruptcy Act and thus result in the creation of a 'two-track system.' The narrow definition of the term 'public company' would require many businesses which could have been rehabilitated under chapter XI to instead use the more cumbersome procedures of chapter X, whether needed or not. The special provisions of the Senate amendment applicable to a 'public company' are as follows: (a) Section 1101(3) defines a 'public company' as a debtor who, within 12 months prior to the filing of the petition, had outstanding $5 million or more in debt and had not less than 1000 security holders; (b) Section 1104(a) requires the appointment of a disinterested trustee irrespective of whether creditors support such appointment and whether there is cause for such appointment; (c) Section 1125(f) prohibits the solicitation of acceptances of a plan of reorganization prior to court approval of such plan even though the solicitation complies with all applicable securities laws; (d) Section 1128(a) requires the court to conduct a hearing on any plan of reorganization proposed by the trustee or any other party; (e) Section 1128(b) requires the court to refer any plans 'worthy of consideration' to the Securities and Exchange Commission for their examination and report, prior to court approval of a plan; and (f) Section 1128(c) and section 1130(a)(7) requires the court to approve a plan or plans which are 'fair and equitable' and comply with the other provisions of chapter 11. The record of the Senate hearings on S. 2266 and the House hearings on H.R. 8200 is replete with evidence of the failure of the reorganization provisions of the existing Bankruptcy Act (former title 11) to meet the needs of insolvent corporations in today's business environment. Chapter X (chapter 10 of former title 11) was designed to impose rigid and formalized procedures upon the reorganization of corporations and, although designed to protect public creditors, has often worked to the detriment of such creditors. As the House report has noted: The negative results under chapter X (chapter 10 of former title 11) have resulted from the stilted procedures, under which management is always ousted and replaced by an independent trustee, the courts and the Securities and Exchange Commission examine the plan of reorganization in great detail, no matter how long that takes, and the court values the business, a time consuming and inherently uncertain procedure. The House amendment deletes the 'public company' exception, because it would codify the well recognized infirmities of chapter X (chapter 10 of former title 11), because it would extend the chapter X approach to a large number of new cases without regard to whether the rigid and formalized procedures of chapter X are needed, and because it is predicated upon the myth that provisions similar to those contained in chapter X are necessary for the protection of public investors. Bankruptcy practice in large reorganization cases has also changed substantially in the 40 years since the Chandler Act (June 22, 1938, ch. 575, 52 Stat. 883, amending former title 11) was enacted. This change is, in large part, attributable to the pervasive effect of the Federal securities laws and the extraordinary success of the Securities and Exchange Commission in sensitizing both management and members of the bar to the need for full disclosure and fair dealing in transactions involving publicly held securities. It is important to note that Congress passed the Chandler Act (June 22, 1938, ch. 575, 52 Stat. 883, amending former title 11) prior to enactment of the Trust Indenture Act of 1939 (15 U.S.C. section 77aaa et seq.) and prior to the definition and enforcement of the disclosure requirements of the Securities Act of 1933 (15 U.S.C. 77a et seq.) and the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). The judgments made by the 75th Congress in enacting the Chandler Act are not equally applicable to the financial markets of 1978. First of all, most public debenture holders are neither weak nor unsophisticated investors. In most cases, a significant portion of the holders of publicly issued debentures are sophisticated institutions, acting for their own account or as trustees for investment funds, pension funds, or private trusts. In addition, debenture holders, sophisticated, and unsophisticated alike, are represented by indenture trustees, qualified under section 77ggg of the Trust Indenture Act (probably should be 'section 307' which is 15 U.S.C. 77ggg). Given the high standard of care to which indenture trustees are bound, they are invariably active and sophisticated participants in efforts to rehabilitate corporate debtors in distress. It is also important to note that in 1938 when the Chandler Act (June 22, 1938, ch. 575, 52 Stat. 883, amending former title 11) was enacted, public investors commonly held senior, not subordinated, debentures and corporations were very often privately owned. In this environment, the absolute priority rule protected debenture holders from an erosion of their position in favor of equity holders. Today, however, if there are public security holders in a case, they are likely to be holders of subordinated debentures and equity and thus the application of the absolute priority rule under chapter X (chapter 10 of former title 11) leads to the exclusion, rather than the protection, of the public. The primary problem posed by chapter X (chapter 10 of former title 11) is delay. The modern corporation is a complex and multifaceted entity. Most corporations do not have a significant market share of the lines of business in which they compete. The success, and even the survival, of a corporation in contemporary markets depends on three elements: First, the ability to attract and hold skilled management; second, the ability to obtain credit; and third, the corporation's ability to project to the public an image of vitality. Over and over again, it is demonstrated that corporations which must avail themselves of the provisions of the Bankruptcy Act (former title 11) suffer appreciable deterioration if they are caught in a chapter X proceeding for any substantial period of time. There are exceptions to this rule. For example, King Resources filed a chapter X (chapter 10 of former title 11) petition in the District of Colorado and it emerged from such proceeding as a solvent corporation. The debtor's new found solvency was not, however, so much attributable to a brilliant rehabilitation program conceived by a trustee, but rather to a substantial appreciation in the value of the debtor's oil and uranium properties during the pendency of the proceedings. Likewise, Equity Funding is always cited as an example of a successful chapter X (chapter 10 of former title 11) case. But it should be noted that in Equity Funding there was no question about retaining existing management. Rather, Equity Funding involved fraud on a grand scale. Under the House amendment with the deletion of the mandatory appointment of a trustee in cases involving 'public companies,' a bankruptcy judge, in a case like Equity Funding, would presumably have little difficulty in concluding that a trustee should be appointed under section 1104(6). While I will not undertake to list the chapter X (chapter 10 of former title 11) failures, it is important to note a number of cases involving corporations which would be 'public companies' under the Senate amendment which have successfully skirted the shoals of chapter X and confirmed plans of arrangement in chapter XI (chapter 11 of former title 11). Among these are Daylin, Inc. ('Daylin') and Colwell Mortgage Investors ('Colwell'). Daylin filed a chapter XI (chapter 11 of former title 11) petition on February 26, 1975, and confirmed its plan of arrangement on October 20, 1976. The success of its turnaround is best evidenced by the fact that it had consolidated net income of $6,473,000 for the first three quarters of the 1978 fiscal year. Perhaps the best example of the contrast between chapter XI and chapter X (chapters 11 and 10 of former title 11) is the recent case of In re Colwell Mortgage Investors. Colwell negotiated a recapitalization plan with its institutional creditors, filed a proxy statement with the Securities and Exchange Commission, and solicited consents of its creditors and shareholders prior to filing its chapter XI petition. Thereafter, Colwell confirmed its plan of arrangement 41 days after filing its chapter XI petition. This result would have been impossible under the Senate amendment since Colwell would have been a 'public company.' There are a number of other corporations with publicly held debt which have successfully reorganized under chapter XI (chapter 11 of former title 11). Among these are National Mortgage Fund (NMF), which filed a chapter XI petition in the northern district of Ohio on June 30, 1976. Prior to commencement of the chapter XI proceeding, NMF filed a proxy statement with the Securities and Exchange Commission and solicited acceptances to a proposed plan of arrangement. The NMF plan was subsequently confirmed on December 14, 1976. The Securities and Exchange Commission did not file a motion under section 328 of the Bankruptcy Act (section 728 of former title 11) to transfer the case to chapter X (chapter 10 of former title 11) and a transfer motion which was filed by private parties was denied by the court. While there are other examples of large publicly held companies which have successfully reorganized in chapter XI (chapter 11 of former title 11), including Esgrow, Inc. (C.D.Cal. 73-02510), Sherwood Diversified Services Inc. (S.D.N.Y. 73-B-213), and United Merchants and Manufacturers, Inc. (S.D.N.Y. 77-B-1513), the numerous successful chapter XI cases demonstrate two points: first, the complicated and time-consuming provisions of chapter X (chapter 10 of former title 11) are not always necessary for the successful reorganization of a company with publicly held debt, and second, the more flexible provisions in chapter XI permit a debtor to obtain relief under the Bankruptcy Act (former title 11) in significantly less time than is required to confirm a plan of reorganization under chapter X of the Bankruptcy Act. One cannot overemphasize the advantages of speed and simplicity to both creditors and debtors. Chapter XI (chapter 11 of former title 11) allows a debtor to negotiate a plan outside of court and, having reached a settlement with a majority in number and amount of each class of creditors, permits the debtor to bind all unsecured creditors to the terms of the arrangement. From the perspective of creditors, early confirmation of a plan of arrangement: first, generally reduces administrative expenses which have priority over the claims of unsecured creditors; second, permits creditors to receive prompt distributions on their claims with respect to which interest does not accrue after the filing date; and third, increases the ultimate recovery on creditor claims by minimizing the adverse effect on the business which often accompanies efforts to operate an enterprise under the protection of the Bankruptcy Act (former title 11). Although chapter XI (chapter 11 of former title 11) offers the corporate debtor flexibility and continuity of management, successful rehabilitation under chapter XI is often impossible for a number of reasons. First, chapter XI does not permit a debtor to 'affect' secured creditors or shareholders, in the absence of their consent. Second, whereas a debtor corporation in chapter X (chapter 10 of former title 11), upon the consummation of the plan or reorganization, is discharged from all its debts and liabilities, a corporation in chapter XI may not be able to get a discharge in respect of certain kinds of claims including fraud claims, even in cases where the debtor is being operated under new management. The language of chapter 11 in the House amendment solves these problems and thus increases the utility and flexibility of the new chapter 11, as compared to chapter XI of the existing Bankruptcy Act (chapter 11 of former title 11). Those who would urge the adoption of a two-track system have two major obstacles to meet. First, the practical experience of those involved in business rehabilitation cases, practitioners, debtors, and bankruptcy judges, has been that the more simple and expeditious procedures of chapter XI (chapter 11 of former title 11) are appropriate in the great majority of cases. While attempts have been made to convince the courts that a chapter X (chapter 10 of former title 11) proceeding is required in every case where public debt is present, the courts have categorically rejected such arguments. Second, chapter X has been far from a success. Of the 991 chapter X cases filed during the period of January 1, 1967, through December 31, 1977, only 664 have been terminated. Of those cases recorded as 'terminated,' only 140 resulted in consummated plans. This 21 percent success rate suggests one of the reasons for the unpopularity of chapter X. In summary, it has been the experience of the great majority of those who have testified before the Senate and House subcommittees that a consolidated approach to business rehabilitation is warranted. Such approach is adopted in the House amendment. Having discussed the general reasons why chapter 11 of the House amendment is sorely needed, a brief discussion of the differences between the House bill, Senate amendment, and the House amendment, is in order. Since chapter 11 of the House amendment rejects the concept of separate treatment for a public company, sections 1101(3), 1104(a), 1125(f), 1128, and 1130(a)(7) of the Senate amendment have been deleted. AMENDMENTS 1988 - Pub. L. 100-334, Sec. 2(c), June 16, 1988, 102 Stat. 613, added item 1114. 1984 - Pub. L. 98-353, title III, Sec. 514(b), 541(b), July 10, 1984, 98 Stat. 387, 391, added item 1113 and substituted 'Implementation' for 'Execution' in item 1142. 1983 - Pub. L. 97-449, Sec. 5(a)(1), Jan. 12, 1983, 96 Stat. 2442, substituted 'subtitle IV of title 49' for 'Interstate Commerce Act' in item 1166. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in sections 103, 109, 303, 326, 327, 329, 346, 347, 362, 363, 365, 502, 503, 706, 1102, 1203, 1301, 1306, 1307 of this title; title 26 sections 108, 1398, 6012; title 28 sections 157, 586, 1930; title 29 sections 1341, 1342. ------DocID 15143 Document 3 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 11 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 11. - Involuntary Case: Creditors' Petition -STATUTE- (CAPTION AS IN FORM NO. 1) INVOLUNTARY CASE: CREDITORS' PETITION 1. Petitioners, XXXXXXX XXXXX, of *XXXXXXXX, and XXXXXXXX XXX, of *XXXXXXXX, and XXXXXXX XXXXX, of *XXXXXXXXXXXXXX, are creditors of XXXXXXXXXX, of *XXXXXXXXXX XXXXXXXX (include county), holding claims against the debtor, not contingent as to liability and not subject to bona fide dispute, amounting in the aggregate, in excess of the value of any lien held by them on the debtor's property securing such claims, to at least $5000. The nature and amount of petitioners' claims are as follows: XXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX 2. The debtor's principal place of business (or principal assets or domicile or residence) has been within this district for the 180 days preceding the filing of this petition (or for a longer portion of the 180 days preceding the filing of this petition than in any other district). 3. The debtor is a person against whom an order for relief may be entered under title 11, United States Code. 4. (The debtor is generally not paying its debts which are not subject to bona fide dispute as they become due as indicated by the f XXXXXXXXXXXXXXXXXXXXXXXXX.) or (Within 120 days preceding the filing of this petition, a custodian was appointed for or has taken possession of substantially all of the property of the debtor, as follows: XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX.) WHEREFORE petitioners pray that an order of relief be entered againstXXXXXXXX under chapter 7 (or 11) of title 11, United States Code. Signed: XXXXXXXXXXXXXX, Attorney for Petitioners. Address:XXXXXXXXXXXXXX XXXXXXXXXXXXXX (Petitioners sign if not represented by attorney) XXXXXXXXXXXXXX, XXXXXXXXXXXXXX, XXXXXXXXXXXXXX, Petitioners. I, XXXXXXXX, one of the petitioners named in the foregoing petition, declare under penalty of perjury that the foregoing is true and correct according to the best of my knowledge, information, and belief. Executed on XXXXXXXX Signature: XXXXXXXX, Petitioner. * State mailing address. -SOURCE- (As amended Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES The requisites for an involuntary petition are specified in Sec. 303 of the Code. 28 U.S.C. Sec. 1746 permits the unsworn declaration in lieu of a verification. See Advisory Committee Note to Form No. 1. NOTES OF ADVISORY COMMITTEE ON RULES - 1986 AMENDMENT The inclusion in paragraphs 1 and 4 of the allegations that the debts are not subject to bona fide dispute reflects the requirements added to Sec. 303(b)(i) and 303(h)(i) of the Code by the 1984 amendments. ------DocID 7947 Document 4 of 646------ -CITE- 5 USC CHAPTER 11 -EXPCITE- TITLE 5 PART II CHAPTER 11 -HEAD- CHAPTER 11 - OFFICE OF PERSONNEL MANAGEMENT -MISC1- Sec. 1101. Office of Personnel Management. 1102. Director; Deputy Director; Associate Directors. 1103. Functions of the Director. 1104. Delegation of authority for personnel management. 1105. Administrative procedure. AMENDMENTS 1978 - Pub. L. 95-454, title II, Sec. 201(a), Oct. 13, 1978, 92 Stat. 1119, substituted in chapter heading 'OFFICE OF PERSONNEL MANAGEMENT' for 'ORGANIZATION', in item 1101 'Office of Personnel Management' for 'Appointment of Commissioners', in item 1102 'Director; Deputy Director; Associate Directors' for 'Term of office; filling vacancies; removal', in item 1103 'Functions of the Director' for 'Chairman; Vice Chairman; Executive Director', in item 1104 'Delegation of authority for personnel management' for 'Functions of Chairman', and in item 1105 'Administrative procedure' for 'Boards of examiners'. ------DocID 8879 Document 5 of 646------ -CITE- 5 USC APPENDIX - FEDERAL ADVISORY COMMITTEE ACT Sec. 11 -EXPCITE- TITLE 5 APPENDIX FEDERAL ADVISORY COMMITTEE ACT -HEAD- Sec. 11. Availability of transcripts; 'agency proceeding' -STATUTE- (a) Except where prohibited by contractual agreements entered into prior to the effective date of this Act, agencies and advisory committees shall make available to any person, at actual cost of duplication, copies of transcripts of agency proceedings or advisory committee meetings. (b) As used in this section 'agency proceeding' means any proceeding as defined in section 551(12) of title 5, United States Code. -SOURCE- (Pub. L. 92-463, Sec. 11, Oct. 6, 1972, 86 Stat. 775.) -REFTEXT- REFERENCES IN TEXT Effective date of this Act, referred to in subsec. (a), as meaning effective upon expiration of ninety days following enactment of Pub. L. 92-463 on Oct. 6, 1972, see section 15 of Pub. L. 92-463. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in title 15 section 4806; title 19 sections 2155, 2605; title 42 section 6273; title 50 App. section 2158a. ------DocID 8901 Document 6 of 646------ -CITE- 5 USC APPENDIX - INSPECTOR GENERAL ACT OF 1978 Sec. 11 -EXPCITE- TITLE 5 APPENDIX INSPECTOR GENERAL ACT OF 1978 -HEAD- Sec. 11. Definitions -STATUTE- As used in this Act - (1) the term 'head of the establishment' means the Secretary of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Housing and Urban Development, the Interior, Labor, State, Transportation, or the Treasury; the Attorney General; the Administrator of the Agency for International Development, Environmental Protection, General Services, National Aeronautics and Space, Small Business, or Veterans' Affairs; the Director of the Federal Emergency Management Agency, the Office of Personnel Management or the United States Information Agency; the Chairman of the Nuclear Regulatory Commission or the Railroad Retirement Board (FOOTNOTE 1) the Oversight Board and the Board of Directors of the Resolution Trust Corporation; as the case may be; (FOOTNOTE 1) So in original. Probably should be followed by a semicolon. (2) the term 'establishment' means the Department of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Housing and Urban Development, the Interior, Justice, Labor, State, Transportation, or the Treasury; the Agency for International Development, the Environmental Protection Agency, the Federal Emergency Management Agency, the General Services Administration, the National Aeronautics and Space Administration, the Nuclear Regulatory Commission, the Office of Personnel Management, the Railroad Retirement Board, the Resolution Trust Corporation, the Small Business Administration, the United States Information Agency, or the Veterans' Administration; as the case may be; (3) the term 'Inspector General' means the Inspector General of an establishment; (4) the term 'Office' means the Office of Inspector General of an establishment; and (5) the term 'Federal agency' means an agency as defined in section 552(e) of title 5 (including an establishment as defined in paragraph (2)), United States Code, but shall not be construed to include the General Accounting Office. -SOURCE- (Pub. L. 95-452, Sec. 11, Oct. 12, 1978, 92 Stat. 1109; Pub. L. 96-88, title V, Sec. 509(n)(3), (4), Oct. 17, 1979, 93 Stat. 695; Pub. L. 97-113, title VII, Sec. 705(a)(2), Dec. 29, 1981, 95 Stat. 1544; Pub. L. 97-252, title XI, Sec. 1117(a)(4), (5), Sept. 8, 1982, 96 Stat. 750; Pub. L. 99-93, title I, Sec. 150(a)(2), Aug. 16, 1985, 99 Stat. 427; Pub. L. 99-399, title IV, Sec. 412(a)(2), Aug. 27, 1986, 100 Stat. 867; Pub. L. 100-504, title I, Sec. 102(c), Oct. 18, 1988, 102 Stat. 2515; Pub. L. 100-527, Sec. 13(h)(2), (3), Oct. 5, 1988, 102 Stat. 2643; Pub. L. 101-73, title V, Sec. 501(b)(1), Aug. 9, 1989, 103 Stat. 393.) -MISC1- AMENDMENTS 1989 - Par. (1). Pub. L. 101-73, Sec. 501(b)(1)(A), which directed the amendment of par. (1) by inserting 'the Oversight Board and the Board of Directors of the Resolution Trust Corporation' before '; as the case may be,', was executed by making the insertion before '; as the case may be;' as the probable intent of Congress. Par. (2). Pub. L. 101-73, Sec. 501(b)(1)(B), inserted 'the Resolution Trust Corporation,' after 'the Railroad Retirement Board,'. 1988 - Pars. (1), (2). Pub. L. 100-527, Sec. 13(h)(2), (3), substituted 'Transportation, or Veterans' Affairs,' for 'or Transportation' and 'or Small Business' for 'Small Business, or Veterans' Affairs' in par. (1), and substituted 'Transportation, or Veterans Affairs,' for 'or Transportation' and 'or the United States Information Agency' for 'the United States Information Agency or the Veterans' Administration' in par. (2). Pub. L. 100-504 added pars. (1) and (2) and struck out former pars. (1) and (2) which read as follows: '(1) the term 'head of the establishment' means the Secretary of Agriculture, Commerce, Defense, Education, Housing and Urban Development, the Interior, Labor, State, Transportation, or Veterans' Affairs, or the Administrator of the Agency for International Development, Community Services, Environmental Protection, General Services, National Aeronautics and Space, or Small Business, or the Director of the United States Information Agency as the case may be; '(2) the term 'establishment' means the Department of Agriculture, Commerce, Defense, Education, Housing and Urban Development, the Interior, Labor, State, Transportation, or Veterans Affairs, or the Agency for International Development, the Community Services Administration, the Environmental Protection Agency, the General Services Administration, the National Aeronautics and Space Administration, the Small Business Administration, or the United States Information Agency, as the case may be;'. 1986 - Pars. (1), (2). Pub. L. 99-399 inserted 'or the Director of the United States Information Agency' in par. (1) and 'the United States Information Agency' in par. (2). 1985 - Pars. (1), (2). Pub. L. 99-93 inserted 'State,' after 'Labor,'. 1982 - Pars. (1), (2). Pub. L. 97-252 inserted 'Defense,' after 'Commerce,'. 1981 - Pars. (1), (2). Pub. L. 97-113 inserted 'the Agency for International Development,' after 'Administrator of' in par. (1), and inserted 'the Agency for International Development,' after 'Transportation or' in par. (2). 1979 - Pars. (1), (2). Pub. L. 96-88 inserted 'Education,' after 'Commerce,'. -CHANGE- CHANGE OF NAME References to Administrator of Veterans' Affairs and to Veterans' Administration deemed to refer to Secretary of Veterans Affairs and to Department of Veterans Affairs, respectively, pursuant to section 10 of Pub. L. 100-527, set out as a Department of Veterans Affairs Act note under section 201 of Title 38, Veterans' Benefits. -MISC4- EFFECTIVE DATE OF 1988 AMENDMENTS Amendment by Pub. L. 100-527 effective Mar. 15, 1989, see section 18(a) of Pub. L. 100-527, set out as a Department of Veterans Affairs Act note under section 201 of Title 38, Veterans' Benefits. Amendment by Pub. L. 100-504 effective 180 days after Oct. 18, 1988, see section 113 of Pub. L. 100-504, set out as a note under section 5 of Pub. L. 95-452 in this Appendix. EFFECTIVE DATE OF 1979 AMENDMENT Amendment by Pub. L. 96-88 effective May 4, 1980, with specified exceptions, see section 601 of Pub. L. 96-88, set out as an Effective Date note under section 3401 of Title 20, Education. -TRANS- COMMUNITY SERVICES ADMINISTRATION The Community Services Administration, which was established by section 601 of the Economic Opportunity Act of 1964, as amended (42 U.S.C. 2941), was terminated when the Economic Opportunity Act of 1964, Pub. L. 88-452, Aug. 20, 1964, 78 Stat. 508, as amended, was repealed, except for titles VIII and X, effective Oct. 1, 1981, by section 683(a) of Pub. L. 97-35, title VI, Aug. 13, 1981, 95 Stat. 519, which is classified to 42 U.S.C. 9912(a). An Office of Community Services, headed by a Director, was established in the Department of Health and Human Services by section 676 of Pub. L. 97-35, which is classified to 42 U.S.C. 9905. -MISC5- OFFICE OF INSPECTOR GENERAL OF RESOLUTION TRUST CORPORATION; AUTHORIZATION OF APPROPRIATIONS Section 501(b)(2)(B) of Pub. L. 101-73 provided that: 'There is hereby authorized to be appropriated such sums as may be necessary for the operation of the Office of Inspector General established by the amendment made by paragraph (1) of this subsection (amending this section).' -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in title 22 sections 3929, 4861; title 31 sections 1105, 3801. ------DocID 8964 Document 7 of 646------ -CITE- 5 USC APPENDIX - REORGANIZATION PLAN NO. 11 OF 1950 -EXPCITE- TITLE 5 APPENDIX REORGANIZATION PLANS REORGANIZATION PLAN NO -HEAD- REORGANIZATION PLAN NO. 11 OF 1950 -MISC1- Reorganization Plan No. 11 of 1950, which proposed reorganizations in the Federal Communications Commission, was submitted to Congress on Mar. 13, 1950, and was disapproved by the Senate on May 17, 1950. ------DocID 9081 Document 8 of 646------ -CITE- 7 USC Sec. 11 -EXPCITE- TITLE 7 CHAPTER 1 -HEAD- Sec. 11. Vacation on request of designation as 'contract market'; redesignation -STATUTE- Any board of trade that has been designated a contract market in the manner provided in this chapter may have such designation vacated and set aside by giving notice in writing to the Commission requesting that its designation as a contract market be vacated, which notice shall be served at least ninety days prior to the date named therein as the date when the vacation of designation shall take effect. Upon receipt of such notice the Commission shall forthwith order the vacation of the designation of such board of trade as a contract market, effective upon the day named in the notice, and shall forthwith send a copy of the notice and its order to all other contract markets. From and after the date upon which the vacation became effective the said board of trade can thereafter be designated again a contract market by making application to the Commission in the manner in this chapter provided for an original application. -SOURCE- (Sept. 21, 1922, ch. 369, Sec. 7, 42 Stat. 1002; Oct. 23, 1974, Pub. L. 93-463, title I, Sec. 103(a), (e), 88 Stat. 1392.) -MISC1- AMENDMENTS 1974 - Pub. L. 93-463 substituted 'Commission' for 'Secretary of Agriculture' and 'its order' for 'his order'. EFFECTIVE DATE OF 1974 AMENDMENT For effective date of amendment by Pub. L. 93-463, see section 418 of Pub. L. 93-463, set out as a note under section 2 of this title. ------DocID 9394 Document 9 of 646------ -CITE- 7 USC CHAPTER 11 -EXPCITE- TITLE 7 CHAPTER 11 -HEAD- CHAPTER 11 - HONEYBEES -MISC1- Sec. 281. Importation of honeybees and honeybee semen restricted. (a) Honeybees. (b) Honeybee semen. (c) Rules and regulations. (d) Destruction or immediate exportation of nonexcepted honeybees or honeybee semen offered for import or intercepted. (e) 'Honeybee' defined. 282. Punishment for unlawful importation. 283. Propagation of stock and release of germ plasm. 284. Eradication and control of undesirable species and subspecies. (a) Operations in United States. (b) Cooperation with certain foreign governments; measure and character; consultation with Secretary of State. (c) Responsibility for authority to carry out operations. 285. Uses of funds. 286. Authorization of appropriations. ------DocID 11538 Document 10 of 646------ -CITE- 8 USC CHAPTER 11 -EXPCITE- TITLE 8 CHAPTER 11 -HEAD- CHAPTER 11 - NATIONALITY ------DocID 11774 Document 11 of 646------ -CITE- 9 USC Sec. 11 -EXPCITE- TITLE 9 CHAPTER 1 -HEAD- Sec. 11. Same; modification or correction; grounds; order -STATUTE- In either of the following cases the United States court in and for the district wherein the award was made may make an order modifying or correcting the award upon the application of any party to the arbitration - (a) Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award. (b) Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted. (c) Where the award is imperfect in matter of form not affecting the merits of the controversy. The order may modify and correct the award, so as to effect the intent thereof and promote justice between the parties. -SOURCE- (July 30, 1947, ch. 392, 61 Stat. 673.) -MISC1- DERIVATION Act Feb. 12, 1925, ch. 213, Sec. 11, 43 Stat. 885. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 9 of this title; title 5 sections 590, 591; title 41 section 607. ------DocID 11883 Document 12 of 646------ -CITE- 10 USC CHAPTER 11 -EXPCITE- TITLE 10 Subtitle A PART I CHAPTER 11 -HEAD- CHAPTER 11 - RESERVE COMPONENTS -MISC1- Sec. 261. Reserve components named. 262. Purpose. 263. Basic policy for order into Federal service. 264. Reserve affairs: designation of general or flag officer of each armed force; personnel and logistic support for Reserves. 265. Policies and regulations: participation of reserve officers in preparation and administration. 266. Boards for appointment, promotion, and certain other purposes: composition. 267. Ready Reserve; Standby Reserve; Retired Reserve: placement and status of members. 268. Ready Reserve. 269. Ready Reserve: placement in; transfer from. 270. Ready Reserve: training requirements. 271. Ready Reserve: continuous screening. 272. Ready Reserve: transfer back from Standby Reserve. 273. Standby Reserve: composition; inactive status list. 274. Retired Reserve. 275. Personnel records. 276. Mobilization forces: maintenance. 277. Regular and reserve components: discrimination prohibited. 278. Dissemination of information. (279. Repealed.) 280. Regulations. 281. Adjutants general and assistant adjutants general: reference to other officers of National Guard. AMENDMENTS 1984 - Pub. L. 98-525, title XIV, Sec. 1405(7)(C), Oct. 19, 1984, 98 Stat. 2622, in item 264 substituted 'armed force' for 'military department' and 'Reserves' for 'reserves' and struck out '; reports to Congress' at end. 1978 - Pub. L. 95-485, title IV, Sec. 406(b)(2), Oct. 20, 1978, 92 Stat. 1616, struck out item 279 'Training reports'. 1967 - Pub. L. 90-168, Sec. 2(7), Dec. 1, 1967, 81 Stat. 522, substituted 'designation of general or flag officers of each military department; personnel and logistic support for reserves; reports to Congress' for 'responsibility for' in item 264. 1960 - Pub. L. 86-559, Sec. 1(2)(D), June 30, 1960, 74 Stat. 264, added item 281. 1958 - Pub. L. 85-861, Sec. 1(6), Sept. 2, 1958, 72 Stat. 1439, added items 270, 271, 272 and 279. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in section 280 of this title. ------DocID 14593 Document 13 of 646------ -CITE- 10 USC APPENDIX - RULES OF COURT OF MILITARY APPEALS Rule 11 -EXPCITE- TITLE 10 APPENDIX UNITED STATES COURT OF MILITARY APPEALS CLERK'S OFFICE -HEAD- Rule 11. Calendar -STATUTE- (a) The Clerk shall prepare a calendar, consisting of the cases that have become or will be available for hearing, which shall be arranged in the first instance in the chronological order in which petitions for grant of review have been granted or certified questions and mandatory appeals have been filed with the Court. The arrangement of cases on the calendar shall be subject to modification in light of the availability of pleadings, extensions of time to file briefs, and orders to advance or specially set cases for hearing. (b) The Clerk shall periodically publish hearing lists in advance of each Court session for the convenience of counsel and the information of the public. (c) The Clerk shall advise counsel when they are required to be present in Court. See Rule 40(b)(1). (d) Cases may be advanced or postponed by order of the Court, upon motion duly made showing good cause therefor, or on the Court's own motion. See Rule 40(b). (e) Two or more cases involving the same question may, on the Court's own order or by special permission, be heard together as one case or on such terms as may be prescribed. ------DocID 14651 Document 14 of 646------ -CITE- 10 USC APPENDIX - RULES OF COURTS OF MILITARY REVIEW Rule 11 -EXPCITE- TITLE 10 APPENDIX COURTS OF MILITARY REVIEW -HEAD- Rule 11. Assignment of counsel -STATUTE- (a) When a record of trial is referred to the Court - (1) if the accused has requested representation by appellate defense counsel, pursuant to Article 70(c)(1), counsel detailed pursuant to Article 70(a) will be assigned to represent the accused; (2) if the accused gives notice that he or she has retained or has taken action to retain civilian counsel, appellate defense counsel shall be assigned to represent the interests of the accused pending appearance of civilian counsel. Assigned defense counsel will continue to assist after appearance by civilian counsel unless excused by the accused; (3) if the accused has neither requested appellate counsel nor given notice of action to retain civilian counsel, but has not waived representation by counsel, apellate defense counsel will be assigned to represent the accused, subject to excusal by the accused or by direction of the Court. (b) In any case - (1) the Court may request counsel when counsel have not been assigned; (2) pursuant to Article 70(c)(2), appellate defense counsel will represent the accused when the United States is represented by counsel before the Court. ------DocID 7098 Document 15 of 646------ -CITE- 2 USC Sec. 61a-11 -EXPCITE- TITLE 2 CHAPTER 4 -HEAD- Sec. 61a-11. Abolition of statutory positions in Office of Secretary of Senate; Secretary's authority to establish and fix compensation for positions -STATUTE- Effective October 1, 1981, all statutory positions in the Office of the Secretary (other than the positions of the Secretary of the Senate, Assistant Secretary of the Senate, Parliamentarian, Financial Clerk, and Director of the Office of Classified National Security Information) are abolished, and in lieu of the positions hereby abolished the Secretary of the Senate is authorized to establish such number of positions as he deems appropriate and appoint and fix the compensation of employees to fill the positions so established; except that the annual rate of compensation payable to any employee appointed to fill any position established by the Secretary of the Senate shall not, for any period of time, be in excess of $1,000 less than the annual rate of compensation of the Secretary of the Senate for that period of time; and except that nothing in this section shall be construed to affect any position authorized by statute, if the compensation for such position is to be paid from the contingent fund of the Senate. -SOURCE- (Pub. L. 97-51, Sec. 114, Oct. 1, 1981, 95 Stat. 963.) -MISC1- INCREASES IN COMPENSATION Increases in compensation for Senate officers and employees under authority of Federal Pay Comparability Act of 1970 (Pub. L. 91-656), see Salary Directives of President pro tempore of the Senate, set out as notes under section 60a-1 of this title. ------DocID 14671 Document 16 of 646------ -CITE- 11 USC CHAPTER 1 -EXPCITE- TITLE 11 CHAPTER 1 -HEAD- CHAPTER 1 - GENERAL PROVISIONS -MISC1- Sec. 101. Definitions. 102. Rules of construction. 103. Applicability of chapters. 104. Adjustment of dollar amounts. 105. Power of court. 106. Waiver of sovereign immunity. 107. Public access to papers. 108. Extension of time. 109. Who may be a debtor. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in section 103 of this title; title 15 section 78fff. ------DocID 14672 Document 17 of 646------ -CITE- 11 USC Sec. 101 -EXPCITE- TITLE 11 CHAPTER 1 -HEAD- Sec. 101. Definitions -STATUTE- In this title - (1) 'accountant' means accountant authorized under applicable law to practice public accounting, and includes professional accounting association, corporation, or partnership, if so authorized; (2) 'affiliate' means - (A) entity that directly or indirectly owns, controls, or holds with power to vote, 20 percent or more of the outstanding voting securities of the debtor, other than an entity that holds such securities - (i) in a fiduciary or agency capacity without sole discretionary power to vote such securities; or (ii) solely to secure a debt, if such entity has not in fact exercised such power to vote; (B) corporation 20 percent or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by the debtor, or by an entity that directly or indirectly owns, controls, or holds with power to vote, 20 percent or more of the outstanding voting securities of the debtor, other than an entity that holds such securities - (i) in a fiduciary or agency capacity without sole discretionary power to vote such securities; or (ii) solely to secure a debt, if such entity has not in fact exercised such power to vote; (C) person whose business is operated under a lease or operating agreement by a debtor, or person substantially all of whose property is operated under an operating agreement with the debtor; or (D) entity that operates the business or substantially all of the property of the debtor under a lease or operating agreement; (3) 'Federal depository institutions regulatory agency' means - (A) with respect to an insured depository institution (as defined in section 3(c)(2) of the Federal Deposit Insurance Act) for which no conservator or receiver has been appointed, the appropriate Federal banking agency (as defined in section 3(q) of such Act); (B) with respect to an insured credit union (including an insured credit union for which the National Credit Union Administration has been appointed conservator or liquidating agent), the National Credit Union Administration; (C) with respect to any insured depository institution for which the Resolution Trust Corporation has been appointed conservator or receiver, the Resolution Trust Corporation; and (D) with respect to any insured depository institution for which the Federal Deposit Insurance Corporation has been appointed conservator or receiver, the Federal Deposit Insurance Corporation; (4) 'attorney' means attorney, professional law association, corporation, or partnership, authorized under applicable law to practice law; (5) 'claim' means - (A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or (B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured; (6) 'commodity broker' means futures commission merchant, foreign futures commission merchant, clearing organization, leverage transaction merchant, or commodity options dealer, as defined in section 761 of this title, with respect to which there is a customer, as defined in section 761(9) of this title; (7) 'community claim' means claim that arose before the commencement of the case concerning the debtor for which property of the kind specified in section 541(a)(2) of this title is liable, whether or not there is any such property at the time of the commencement of the case; (8) 'consumer debt' means debt incurred by an individual primarily for a personal, family, or household purpose; (9) 'corporation' - (A) includes - (i) association having a power or privilege that a private corporation, but not an individual or a partnership, possesses; (ii) partnership association organized under a law that makes only the capital subscribed responsible for the debts of such association; (iii) joint-stock company; (iv) unincorporated company or association; or (v) business trust; but (B) does not include limited partnership; (10) 'creditor' means - (A) entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor; (B) entity that has a claim against the estate of a kind specified in section 348(d), 502(f), 502(g), 502(h) or 502(i) of this title; or (C) entity that has a community claim; (11) 'custodian' means - (A) receiver or trustee of any of the property of the debtor, appointed in a case or proceeding not under this title; (B) assignee under a general assignment for the benefit of the debtor's creditors; or (C) trustee, receiver, or agent under applicable law, or under a contract, that is appointed or authorized to take charge of property of the debtor for the purpose of enforcing a lien against such property, or for the purpose of general administration of such property for the benefit of the debtor's creditors; (12) 'debt' means liability on a claim; (13) 'debtor' means person or municipality concerning which a case under this title has been commenced; (14) 'disinterested person' means person that - (A) is not a creditor, an equity security holder, or an insider; (B) is not and was not an investment banker for any outstanding security of the debtor; (C) has not been, within three years before the date of the filing of the petition, an investment banker for a security of the debtor, or an attorney for such an investment banker in connection with the offer, sale, or issuance of a security of the debtor; (D) is not and was not, within two years before the date of the filing of the petition, a director, officer, or employee of the debtor or of an investment banker specified in subparagraph (B) or (C) of this paragraph; and (E) does not have an interest materially adverse to the interest of the estate or of any class of creditors or equity security holders, by reason of any direct or indirect relationship to, connection with, or interest in, the debtor or an investment banker specified in subparagraph (B) or (C) of this paragraph, or for any other reason; (15) 'entity' includes person, estate, trust, governmental unit, and United States trustee; (16) 'equity security' means - (A) share in a corporation, whether or not transferable or denominated 'stock', or similar security; (B) interest of a limited partner in a limited partnership; or (C) warrant or right, other than a right to convert, to purchase, sell, or subscribe to a share, security, or interest of a kind specified in subparagraph (A) or (B) of this paragraph; (17) 'equity security holder' means holder of an equity security of the debtor; (18) 'family farmer' means - (A) individual or individual and spouse engaged in a farming operation whose aggregate debts do not exceed $1,500,000 and not less than 80 percent of whose aggregate noncontingent, liquidated debts (excluding a debt for the principal residence of such individual or such individual and spouse unless such debt arises out of a farming operation), on the date the case is filed, arise out of a farming operation owned or operated by such individual or such individual and spouse, and such individual or such individual and spouse receive from such farming operation more than 50 percent of such individual's or such individual and spouse's gross income for the taxable year preceding the taxable year in which the case concerning such individual or such individual and spouse was filed; or (B) corporation or partnership in which more than 50 percent of the outstanding stock or equity is held by one family, or by one family and the relatives of the members of such family, and such family or such relatives conduct the farming operation, and (i) more than 80 percent of the value of its assets consists of assets related to the farming operation; (ii) its aggregate debts do not exceed $1,500,000 and not less than 80 percent of its aggregate noncontingent, liquidated debts (excluding a debt for one dwelling which is owned by such corporation or partnership and which a shareholder or partner maintains as a principal residence, unless such debt arises out of a farming operation), on the date the case is filed, arise out of the farming operation owned or operated by such corporation or such partnership; and (iii) if such corporation issues stock, such stock is not publicly traded; (19) 'family farmer with regular annual income' means family farmer whose annual income is sufficiently stable and regular to enable such family farmer to make payments under a plan under chapter 12 of this title; (20) 'farmer' means (except when such term appears in the term 'family farmer') person that received more than 80 percent of such person's gross income during the taxable year of such person immediately preceding the taxable year of such person during which the case under this title concerning such person was commenced from a farming operation owned or operated by such person; (21) 'farming operation' includes farming, tillage of the soil, dairy farming, ranching, production or raising of crops, poultry, or livestock, and production of poultry or livestock products in an unmanufactured state; (22) 'financial institution' means a person that is a commercial or savings bank, industrial savings bank, savings and loan association, or trust company and, when any such person is acting as agent or custodian for a customer in connection with a securities contract, as defined in section 741(7) of this title, such customer; (23) 'foreign proceeding' means proceeding, whether judicial or administrative and whether or not under bankruptcy law, in a foreign country in which the debtor's domicile, residence, principal place of business, or principal assets were located at the commencement of such proceeding, for the purpose of liquidating an estate, adjusting debts by composition, extension, or discharge, or effecting a reorganization; (24) 'foreign representative' means duly selected trustee, administrator, or other representative of an estate in a foreign proceeding; (25) 'forward contract' means a contract (other than a commodity contract) for the purchase, sale, or transfer of a commodity, as defined in section 761(8) of this title, or any similar good, article, service, right, or interest which is presently or in the future becomes the subject of dealing in the forward contract trade, or product or byproduct thereof, with a maturity date more than two days after the date the contract is entered into, including, but not limited to, a repurchase transaction, reverse repurchase transaction, consignment, lease, swap, hedge transaction, deposit, loan, option, allocated transaction, unallocated transaction, or any combination thereof or option thereon; (26) 'forward contract merchant' means a person whose business consists in whole or in part of entering into forward contracts as or with merchants in a commodity, as defined in section 761(8) of this title, or any similar good, article, service, right, or interest which is presently or in the future becomes the subject of dealing in the forward contract trade; (27) 'governmental unit' means United States; State; Commonwealth; District; Territory; municipality; foreign state; department, agency, or instrumentality of the United States (but not a United States trustee while serving as a trustee in a case under this title), a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic government; (28) 'indenture' means mortgage, deed of trust, or indenture, under which there is outstanding a security, other than a voting-trust certificate, constituting a claim against the debtor, a claim secured by a lien on any of the debtor's property, or an equity security of the debtor; (29) 'indenture trustee' means trustee under an indenture; (30) 'individual with regular income' means individual whose income is sufficiently stable and regular to enable such individual to make payments under a plan under chapter 13 of this title, other than a stockbroker or a commodity broker; (31) 'insider' includes - (A) if the debtor is an individual - (i) relative of the debtor or of a general partner of the debtor; (ii) partnership in which the debtor is a general partner; (iii) general partner of the debtor; or (iv) corporation of which the debtor is a director, officer, or person in control; (B) if the debtor is a corporation - (i) director of the debtor; (ii) officer of the debtor; (iii) person in control of the debtor; (iv) partnership in which the debtor is a general partner; (v) general partner of the debtor; or (vi) relative of a general partner, director, officer, or person in control of the debtor; (C) if the debtor is a partnership - (i) general partner in the debtor; (ii) relative of a general partner in, general partner of, or person in control of the debtor; (iii) partnership in which the debtor is a general partner; (iv) general partner of the debtor; or (v) person in control of the debtor; (D) if the debtor is a municipality, elected official of the debtor or relative of an elected official of the debtor; (E) affiliate, or insider of an affiliate as if such affiliate were the debtor; and (F) managing agent of the debtor; (32) 'insolvent' means - (A) with reference to an entity other than a partnership and a municipality, financial condition such that the sum of such entity's debts is greater than all of such entity's property, at a fair valuation, exclusive of - (i) property transferred, concealed, or removed with intent to hinder, delay, or defraud such entity's creditors; and (ii) property that may be exempted from property of the estate under section 522 of this title; (B) with reference to a partnership, financial condition such that the sum of such partnership's debts is greater than the aggregate of, at a fair valuation - (i) all of such partnership's property, exclusive of property of the kind specified in subparagraph (A)(i) of this paragraph; and (ii) the sum of the excess of the value of each general partner's nonpartnership property, exclusive of property of the kind specified in subparagraph (A) of this paragraph, over such partner's nonpartnership debts; and (C) with reference to a municipality, financial condition such that the municipality is - (i) generally not paying its debts as they become due unless such debts are the subject of a bona fide dispute; or (ii) unable to pay its debts as they become due; (33) 'institution-affiliated party' - (A) with respect to an insured depository institution (as defined in section 3(c)(2) of the Federal Deposit Insurance Act), has the meaning given it in section 3(u) of the Federal Deposit Insurance Act (12 U.S.C. 1813(u)); and (B) with respect to an insured credit union, has the meaning given it in section 206(r) of the Federal Credit Union Act (12 U.S.C. 1786(r)); (34) 'insured credit union' has the meaning given it in section 101(7) of the Federal Credit Union Act (12 U.S.C. 1752(7)); (35) 'insured depository institution' - (A) has the meaning given it in section 3(c)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)(2)); and (B) includes an insured credit union (except in the case of paragraphs (3) and (33)(A) of this subsection); (36) 'judicial lien' means lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding; (37) 'lien' means charge against or interest in property to secure payment of a debt or performance of an obligation; (38) 'margin payment' means, for purposes of the forward contract provisions of this title, payment or deposit of cash, a security or other property, that is commonly known in the forward contract trade as original margin, initial margin, maintenance margin, or variation margin, including mark-to-market payments, or variation payments; and (FOOTNOTE 1) (FOOTNOTE 1) So in original. The word 'and' probably should not appear. (39) 'settlement payment' means, for purposes of the forward contract provisions of this title, a preliminary settlement payment, a partial settlement payment, an interim settlement payment, a settlement payment on account, a final settlement payment, a net settlement payment, or any other similar payment commonly used in the forward contract trade; (40) 'municipality' means political subdivision or public agency or instrumentality of a State; (41) 'person' includes individual, partnership, and corporation, but does not include governmental unit, Provided, however, That any governmental unit that acquires an asset from a person as a result of operation of a loan guarantee agreement, or as receiver or liquidating agent of a person, will be considered a person for purposes of section 1102 of this title. (FOOTNOTE 2) (FOOTNOTE 2) So in original. The period probably should be a semicolon. (42) 'petition' means petition filed under section 301, 302, 303, or 304 of this title, as the case may be, commencing a case under this title; (43) 'purchaser' means transferee of a voluntary transfer, and includes immediate or mediate transferee of such a transferee; (44) 'railroad' means common carrier by railroad engaged in the transportation of individuals or property or owner of trackage facilities leased by such a common carrier; (45) 'relative' means individual related by affinity or consanguinity within the third degree as determined by the common law, or individual in a step or adoptive relationship within such third degree; (46) 'repo participant' means an entity that, on any day during the period beginning 90 days before the date of the filing of the petition, has an outstanding repurchase agreement with the debtor; (47) 'repurchase agreement' (which definition also applies to a reverse repurchase agreement) means an agreement, including related terms, which provides for the transfer of certificates of deposit, eligible bankers' acceptances, or securities that are direct obligations of, or that are fully guaranteed as to principal and interest by, the United States or any agency of the United States against the transfer of funds by the transferee of such certificates of deposit, eligible bankers' acceptances, or securities with a simultaneous agreement by such transferee to transfer to the transferor thereof certificates of deposit, eligible bankers' acceptances, or securities as described above, at a date certain not later than one year after such transfers or on demand, against the transfer of funds; (48) 'securities clearing agency' means person that is registered as a clearing agency under section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q-1) or whose business is confined to the performance of functions of a clearing agency with respect to exempted securities, as defined in section 3(a)(12) of such Act (15 U.S.C. 78c(12)) for the purposes of such section 17A; (49) 'security' - (A) includes - (i) note; (ii) stock; (iii) treasury stock; (iv) bond; (v) debenture; (vi) collateral trust certificate; (vii) pre-organization certificate or subscription; (viii) transferable share; (ix) voting-trust certificate; (x) certificate of deposit; (xi) certificate of deposit for security; (xii) investment contract or certificate of interest or participation in a profit-sharing agreement or in an oil, gas, or mineral royalty or lease, if such contract or interest is required to be the subject of a registration statement filed with the Securities and Exchange Commission under the provisions of the Securities Act of 1933 (15 U.S.C. 77a et seq.), or is exempt under section 3(b) of such Act (15 U.S.C. 77c(b)) from the requirement to file such a statement; (xiii) interest of a limited partner in a limited partnership; (xiv) other claim or interest commonly known as 'security'; and (xv) certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase or sell, a security; but (B) does not include - (i) currency, check, draft, bill of exchange, or bank letter of credit; (ii) leverage transaction, as defined in section 761(13) of this title; (iii) commodity futures contract or forward contract; (iv) option, warrant, or right to subscribe to or purchase or sell a commodity futures contract; (v) option to purchase or sell a commodity; (vi) contract or certificate of a kind specified in subparagraph (A)(xii) of this paragraph that is not required to be the subject of a registration statement filed with the Securities and Exchange Commission and is not exempt under section 3(b) of the Securities Act of 1933 (15 U.S.C. 77c(b)) from the requirement to file such a statement; or (vii) debt or evidence of indebtedness for goods sold and delivered or services rendered; (50) 'security agreement' means agreement that creates or provides for a security interest; (51) 'security interest' means lien created by an agreement; (52) 'State' includes the District of Columbia and Puerto Rico, except for the purpose of defining who may be a debtor under chapter 9 of this title; (53) 'statutory lien' means lien arising solely by force of a statute on specified circumstances or conditions, or lien of distress for rent, whether or not statutory, but does not include security interest or judicial lien, whether or not such interest or lien is provided by or is dependent on a statute and whether or not such interest or lien is made fully effective by statute; (54) (FOOTNOTE 3) 'stockbroker' means person - (FOOTNOTE 3) Another par. (54) follows first par. (57). (A) with respect to which there is a customer, as defined in section 741(2) of this title; and (B) that is engaged in the business of effecting transactions in securities - (i) for the account of others; or (ii) with members of the general public, from or for such person's own account; (55) (FOOTNOTE 4) 'swap agreement' means - (FOOTNOTE 4) Another par. (55) follows second par. (54). (A) an agreement (including terms and conditions incorporated by reference therein) which is a rate swap agreement, basis swap, forward rate agreement, commodity swap, interest rate option, forward foreign exchange agreement, rate cap agreement, rate floor agreement, rate collar agreement, currency swap agreement, cross-currency rate swap agreement, currency option, any other similar agreement (including any option to enter into any of the foregoing); (B) any combination of the foregoing; or (C) a master agreement for any of the foregoing together with all supplements; (56) (FOOTNOTE 5) 'swap participant' means an entity that, at any time before the filing of the petition, has an outstanding swap agreement with the debtor; (FOOTNOTE 5) Another par. (56) follows second par. (55). (57) (FOOTNOTE 6) 'timeshare plan' means and shall include that interest purchased in any arrangement, plan, scheme, or similar device, but not including exchange programs, whether by membership, agreement, tenancy in common, sale, lease, deed, rental agreement, license, right to use agreement, or by any other means, whereby a purchaser, in exchange for consideration, receives a right to use accommodations, facilities, or recreational sites, whether improved or unimproved, for a specific period of time less than a full year during any given year, but not necessarily for consecutive years, and which extends for a period of more than three years. A 'timeshare interest' is that interest purchased in a timeshare plan which grants the purchaser the right to use and occupy accommodations, facilities, or recreational sites, whether improved or unimproved, pursuant to a timeshare plan. (FOOTNOTE 7) (FOOTNOTE 6) Another par. (57) follows second par. (56). (FOOTNOTE 7) So in original. The period probably should be a semicolon. (54) (FOOTNOTE 8) 'transfer' means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or with an interest in property, including retention of title as a security interest and foreclosure of the debtor's equity of redemption; (FOOTNOTE 8) So in original. Probably should be '(58)'. (55) (FOOTNOTE 9) 'United States', when used in a geographical sense, includes all locations where the judicial jurisdiction of the United States extends, including territories and possessions of the United States; (FOOTNOTE 9) So in original. Probably should be '(59)'. (56) (FOOTNOTE 01) 'intellectual property' means - (FOOTNOTE 01) So in original. Probably should be '(60)'. (A) trade secret; (B) invention, process, design, or plant protected under title 35; (C) patent application; (D) plant variety; (E) work of authorship protected under title 17; or (F) mask work protected under chapter 9 of title 17; to the extent protected by applicable nonbankruptcy law; and (57) (FOOTNOTE 11) 'mask work' has the meaning given it in section 901(a)(2) of title 17. (FOOTNOTE 11) So in original. Probably should be '(61)'. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2549; Pub. L. 97-222, Sec. 1, July 27, 1982, 96 Stat. 235; Pub. L. 98-353, title III, Sec. 391, 401, 421, July 10, 1984, 98 Stat. 364, 366, 367; Pub. L. 99-554, title II, Sec. 201, 251, 283(a), Oct. 27, 1986, 100 Stat. 3097, 3104, 3116; Pub. L. 100-506, Sec. 1(a), Oct. 18, 1988, 102 Stat. 2538; Pub. L. 100-597, Sec. 1, Nov. 3, 1988, 102 Stat. 3028; Pub. L. 101-311, title I, Sec. 101, title II, Sec. 201, June 25, 1990, 104 Stat. 267, 268; Pub. L. 101-647, title XXV, Sec. 2522(e), Nov. 29, 1990, 104 Stat. 4867.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 101(2) defines 'affiliate.' The House amendment contains a provision that is a compromise between the definition in the House-passed version of H.R. 8200 and the Senate amendment in the nature of a substitute to H.R. 8200. Subparagraphs (A) and (B) are derived from the Senate amendment and subparagraph (D) is taken from the House bill, while subparagraph (C) represents a compromise, taking the House position with respect to a person whose business is operated under a lease or an operating agreement by the debtor and with respect to a person substantially all of whose property is operated under an operating agreement by the debtor and with respect to a person substantially all of whose property is operated under an operating agreement by the debtor and the Senate position on leased property. Thus, the definition of 'affiliate' excludes persons substantially all of whose property is operated under a lease agreement by a debtor, such as a small company which owns equipment all of which is leased to a larger nonrelated company. Section 101(4)(B) represents a modification of the House-passed bill to include the definition of 'claim' a right to an equitable remedy for breach of performance if such breach gives rise to a right to payment. This is intended to cause the liquidation or estimation of contingent rights of payment for which there may be an alternative equitable remedy with the result that the equitable remedy will be susceptible to being discharged in bankruptcy. For example, in some States, a judgment for specific performance may be satisfied by an alternative right to payment, in the event performance is refused; in that event, the creditor entitled to specific performance would have a 'claim' for purposes of a proceeding under title 11. On the other hand, rights to an equitable remedy for a breach of performance with respect to which such breach does not give rise to a right to payment are not 'claims' and would therefore not be susceptible to discharge in bankruptcy. In a case under chapter 9 to title 11, 'claim' does not include a right to payment under an industrial development bond issued by a municipality as a matter of convenience for a third party. Municipalities are authorized, under section 103(c) of the Internal Revenue Code of 1954, as amended (title 26), to issue tax-exempt industrial development revenue bonds to provide for the financing of certain projects for privately owned companies. The bonds are sold on the basis of the credit of the company on whose behalf they are issued, and the principal, interest, and premium, if any, are payable solely from payments made by the company to the trustee under the bond indenture and do not constitute claims on the tax revenues or other funds of the issuing municipalities. The municipality merely acts as the vehicle to enable the bonds to be issued on a tax-exempt basis. Claims that arise by virtue of these bonds are not among the claims defined by this paragraph and amounts owed by private companies to the holders of industrial development revenue bonds are not to be included among the assets of the municipality that would be affected by the plan. Section 101(6) defines 'community claim' as provided by the Senate amendment in order to indicate that a community claim exists whether or not there is community property in the estate as of the commencement of the case. Section 101(7) of the House amendment contains a definition of consumer debt identical to the definition in the House bill and Senate amendment. A consumer debt does not include a debt to any extent the debt is secured by real property. Section 101(9) of the Senate amendment contained a definition of 'court.' The House amendment deletes the provision as unnecessary in light of the pervasive jurisdiction of a bankruptcy court under all chapters of title 11 as indicated in title II of the House amendment to H.R. 8200. Section 101(11) defines 'debt' to mean liability on a claim, as was contained in the House-passed version of H.R. 8200. The Senate amendment contained language indicating that 'debt' does not include a policy loan made by a life insurance company to the debtor. That language is deleted in the House amendment as unnecessary since a life insurance company clearly has no right to have a policy loan repaid by the debtor, although such company does have a right of offset with respect to such policy loan. Clearly, then, a 'debt' does not include a policy loan made by a life insurance company. Inclusion of the language contained in the Senate amendment would have required elaboration of other legal relationships not arising by a liability on a claim. Further the language would have required clarification that interest on a policy loan made by a life insurance company is a debt, and that the insurance company does have right to payment to that interest. Section 101(14) adopts the definition of 'entity' contained in the Senate-passed version of H.R. 8200. Since the Senate amendment to H.R. 8200 deleted the U.S. trustee, a corresponding definitional change is made in chapter 15 of the House amendment for U.S. trustees under the pilot program. Adoption by the House amendment of a pilot program for U.S. trustees under chapter 15 requires insertion of 'United States trustee' in many sections. Several provisions in chapter 15 of the House amendment that relate to the U.S. trustee were not contained in the Senate amendment in the nature of a substitute. Section 101(17) defines 'farmer,' as in the Senate amendment with an income limitation percentage of 80 percent instead of 75 percent. Section 101(18) contains a new definition of 'farming operation' derived from present law and the definition of 'farmer' in the Senate amendment. This definition gives a broad construction to the term 'farming operation'. Section 101(20) contains a definition of 'foreign representative'. It clarifies the House bill and Senate amendment by indicating that a foreign representative must be duly selected in a foreign proceeding. Section 101(35) defines 'security' as contained in the Senate amendment. H.R. 8200 as adopted by the House excluded certain commercial notes from the definition of 'security', and that exclusion is deleted. Section 101(40) defines 'transfer' as in the Senate amendment. The definition contained in H.R. 8200 as passed by the House included 'setoff' in the definition of 'transfer'. Inclusion of 'setoff' is deleted. The effect is that a 'setoff' is not subject to being set aside as a preferential 'transfer' but will be subject to special rules. SENATE REPORT NO. 95-989 Section 101 of title 11 contains 40 definitions: Paragraph (1) defines 'accountant' as an accountant authorized under applicable law to practice accounting. The term includes a professional accounting association, corporation, or partnership if applicable law authorizes such a unit to practice accounting. Paragraph (2) defines 'affiliate.' An affiliate is an entity with a close relationship to the debtor. It includes a 20 percent parent or subsidiary of the debtor, whether a corporate, partnership, individual, or estate parent. The use of 'directly or indirectly' in subparagraphs (A) and (B) is intended to cover situations in which there is an opportunity to control, and where the existence of that opportunity operates as indirect control. 'Affiliate' is defined primarily for use in the definition of insider, infra, and for use in the chapter 11 reorganization cases. The definition of 'affiliate' does not include an entity acting in a fiduciary or agency capacity if the entity does not have the sole discretionary power to vote 20 percent of the voting securities but hold them solely as security and have not exercised the power to vote. This restriction applies to a corporate affiliate under subparagraph (B) of paragraph (2). Subsections (C) and (D) of paragraph (2) define affiliate also as those persons and entities whose business or substantially all of whose property is operated under a lease or operating agreement by a debtor and whose business or property is more than 50 percent under the control of the debtor. The definition of 'attorney' in paragraph (3) is similar to the definition of accountant. Paragraph (4) defines 'claim.' The effect of the definition is a significant departure from present law. Under present law, 'claim' is not defined in straight bankruptcy. Instead it is simply used, along with the concept of provability in section 63 of the Bankruptcy Act (section 103 of former title 11), to limit the kinds of obligations that are payable in a bankruptcy case. The term is defined in the debtor rehabilitation chapters of present law far more broadly. The definition in paragraph (4) adopts an even broader definition of claim than is found in the present debtor rehabilitation chapters. The definition is any right to payment, whether or not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured. The definition also includes as a claim an equitable right to performance that does not give rise to a right to payment. By this broadest possible definition and by the use of the term throughout the title 11, especially in subchapter I of chapter 5, the bill contemplates that all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case. It permits the broadest possible relief in the bankruptcy court. Paragraph (5) defines 'commodity broker' by reference to various terms used and defined in subchapter IV of chapter 7, Commodity Broker Liquidation. The terms are described in connection with section 761, infra. Paragraph (6) defines 'community claim' for those eight States that have community property laws. The definition is keyed to the liability of the debtor's property for a claim against either the debtor or the debtor's spouse. If the debtor's property is liable for a claim against either, that claim is a community claim. Paragraph (7) defines 'consumer debt'. The definition is adapted from the definition used in various consumer protection laws. It encompasses only a debt incurred by an individual primarily for a personal, family, or household purpose. The definition of 'corporation' in paragraph (8) is similar to the definition in current law, section 1(8) (section 1(8) of former title 11). The term encompasses any association having the power or privilege that a private corporation, but not an individual or partnership, has; partnership associations organized under a law that makes only the capital subscribed responsible for the debts of the partnership; joint-stock company; unincorporated company or association; and business trust. 'Unincorporated association' is intended specifically to include a labor union, as well as other bodies that come under that phrase as used under current law. The exclusion of limited partnerships is explicit, and not left to the case law. Paragraph (9) defines 'court' as the bankruptcy judge in the district in which the case is pending except in municipal adjustment and railroad reorganization cases, where 'court' means the Federal district judge. Paragraph (10) (now (9)) defines 'creditor' to include holders of prepetition claims against the debtor. However, it also encompasses certain holders of claims that are deemed to arise before the date of the filing of the petition, such as those injured by the rejection of an executory contract or unexpired lease, certain investment tax credit recapture claim holders, 'involuntary gap' creditors, and certain holders of the right of setoff. The term also includes the holder of a prepetition community claim. A guarantor of or surety for a claim against the debtor is also a creditor, because he holds a contingent claim against the debtor that becomes fixed when he pays the creditor whose claim he has guaranteed or insured. Paragraph (11) (now (10)) defines 'custodian.' There is no similar definition in current law. It is defined to facilitate drafting, and means a prepetition liquidator of the debtor's property, such as an assignee for the benefit of creditors, a receiver of the debtor's property, or administrator of the debtor's property. The definition of custodian to include a receiver or trustee is descriptive, and not meant to be limited to court officers with those titles. The definition is intended to include other officers of the court if their functions are substantially similar to those of a receiver or trustee. 'Debt' is defined in paragraph (12) (now (11)) as a liability on a claim. The terms 'debt' and 'claim' are coextensive: a creditor has a 'claim' against the debtor; the debtor owes a 'debt' to the creditor. This definition of 'debt' and the definition of 'claim' on which it is based, proposed 11 U.S.C. 101(4), does not include a transaction such as a policy loan on an insurance policy. Under that kind of transaction, the debtor is not liable to the insurance company for repayment; the amount owed is merely available to the company for setoff against any benefits that become payable under the policy. As such, the loan is not a claim (it is not a right to payment) that the company can assert against the estate; nor is the debtor's obligation a debt (a liability on a claim) that will be discharged under proposed 11 U.S.C. 523 or 524. Paragraph (13) (now (12)) defines 'debtor.' Debtor means person or municipality concerning which a case under title II has been commenced. This is a change in terminology from present law, which identifies the person by or against whom a petition is filed in a straight bankruptcy liquidation case as the 'bankrupt', and a person or municipality that is proceeding under a debtor rehabilitation chapter (chapters VIII through XIII of the Bankruptcy Act) (chapters 8 through 13 of former title 11) as a 'debtor.' The term 'debtor' is used for both kinds of cases in this bill, for ease of reference in chapters 1, 3, and 5 (which apply to straight bankruptcy and reorganization cases). Paragraph (14) (now (13)) defines 'disinterested person.' The definition is adapted from section 158 of chapter X of current law (section 558 of former title 11), though it is expanded and modified in some respects. A person is a disinterested person if the person is not a creditor, equity security holder, or insider; is not and was not an investment banker of the debtor for any outstanding security of the debtor (the change from underwriter in current law to investment banker is to make the term more descriptive and to avoid conflict with the definition of underwriter in section 2(11) of the Securities Act of 1933 (15 U.S.C. 77b(11)); has not been an investment banker for a security of the debtor within 3 years before the date of the filing of the petition (the change from five years to three years here conforms the definition with the statute of limitations in the Securities Act of 1933) (15 U.S.C. 77m), or an attorney for such an investment banker; is not an insider of the debtor or of such an investment banker; and does not have an interest materially adverse to the estate. 'Entity' is defined, for convenience, in paragraph (15) (now (14)), to include person, estate, trust, and governmental unit. It is the most inclusive of the various defined terms relating to bodies or units. Paragraph (16) defines 'equity security.' The term includes a share or stock in a corporation, a limited partner's interest in a limited partnership, and a warrant or right to subscribe to an equity security. The term does not include a security, such as a convertible debenture, that is convertible into equity security, but has not been converted. Paragraph (17) (now (15)) defines 'equity security holder' for convenience as the holder of an equity securing of the debtor. Paragraph (18) (now (17)) defines 'farmer'. It encompasses only those persons for whom farming operations contribute 75 percent or more of their total income. Paragraphs (19) and (20) define 'foreign proceeding' and 'foreign representative'. A foreign proceeding is a proceeding in another country in which the debtor has some substantial connection for the purpose of liquidating the estate of the debtor or the purpose of financial rehabilitation of the debtor. A foreign representative is the representative of the estate in a foreign proceeding, such as a trustee or administrator. Paragraph (21) defines 'governmental unit' in the broadest sense. The definition encompasses the United States, a State, Commonwealth, District, Territory, municipality, or foreign state, and a department, agency, or instrumentality of any of those entities. 'Department, agency, or instrumentality' does not include an entity that owes its existence to State action, such as the granting of a charter or a license but that has no other connection with a State or local government or the Federal Government. The relationship must be an active one in which the department, agency, or instrumentality is actually carrying out some governmental function. Paragraph (22) defines 'indenture.' It is similar to the definition of indenture in the Trust Indenture Act of 1939 (15 U.S.C. 77ccc(7)). An indenture is the instrument under which securities, either debt or equity, of the debtor are outstanding. Paragraph (23) defines 'indenture trustee' as the trustee under an indenture. Paragraph (24) defines 'individual with regular income.' The effect of this definition, and of its use in section 109(e), is to expand substantially the kinds of individuals that are eligible for relief under chapter 13, Adjustment of Debts of an Individual with Regular Income. Chapter XIII (chapter 13 of former title 11) is now available only for wage earners. The definition encompasses all individuals with incomes that are sufficiently stable and regular to enable them to make payments under a chapter 13 plan. Thus, individuals on welfare, social security, fixed pension incomes, or who live on investment incomes, will be able to work out repayment plans with their creditors rather than being forced into straight bankruptcy. Also, self-employed individuals will be eligible to use chapter 13 if they have regular incomes. However, the definition excludes certain stockbrokers and commodity brokers, in order to prohibit them from proceeding under chapter 13 and avoiding the customer protection provisions of chapter 7. 'Insider', defined in paragraph (25), is a new term. An insider is one who has a sufficiently close relationship with the debtor that his conduct is made subject to closer scrutiny than those dealing at arms length with the debtor. If the debtor is an individual, then a relative of the debtor, a partnership in which the debtor is a general partner, a general partner of the debtor, and a corporation controlled by the debtor are all insiders. If the debtor is a corporation, then a controlling person, a relative of a controlling person, a partnership in which the debtor is a general partner, and a general partner of the debtor are all insiders. If the debtor is a partnership, then a general partner of or in the debtor, a relative of a general partner in the debtor, and a person in control are all insiders. If the debtor is a municipality, then an elected official of the debtor is an insider. In addition, affiliates of the debtor and managing agents are insiders. The definition of 'insolvent' in paragraph (26) is adopted from section 1(19) of current law (section 1(19) of former title 11). An entity is insolvent if its debts are greater than its assets, at a fair valuation, exclusive of property exempted or fraudulently transferred. It is the traditional bankruptcy balance sheet test of insolvency. For a partnership, the definition is modified to account for the liability of a general partner for the partnership's debts. The difference in this definition from that in current law is in the exclusion of exempt property for all purposes in the definition of insolvent. Paragraph (27) defines 'judicial lien.' It is one of three kinds of liens defined in this section. A judicial lien is a lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding. Paragraph (28) defines 'lien.' The definition is new and is very broad. A lien is defined as a charge against or interest in property to secure payment of a debt or performance of an obligation. It includes inchoate liens. In general, the concept of lien is divided into three kinds of liens: judicial liens, security interests, and statutory liens. Those three categories are mutually exclusive and are exhaustive except for certain common law liens. Paragraph (29) defines 'municipality.' The definition is adapted from the terms used in the chapter IX (municipal bankruptcy) (chapter 9 of former title 11) amendment to the Bankruptcy Act enacted in 1976 (Pub. L. 94-260). That amendment spoke in terms of 'political subdivision or public agency or instrumentality of a State'. Bankruptcy Act Sec. 84 (section 404 of former title 11). The term municipality is defined by those three terms for convenience. It does not include the District of Columbia or any territories of the United States. 'Person' is defined in paragraph (30). The definition is a change in wording, but not in substance, from the definition in section 1(23) of the Bankruptcy Act (section 1(23) of former title 11). The definition is also similar to the one contained in 1 U.S.C. sec. 1, but is repeated here for convenience and ease of reference. Person includes individual partnership, and corporation. The exclusion of governmental units is made explicit in order to avoid any confusion that may arise if, for example, a municipality is incorporated and thus is legally a corporation as well as governmental unit. The definition does not include an estate or a trust, which are included only in the definition of 'entity' in proposed 11 U.S.C. 101(14). 'Petition' is defined for convenience in paragraph (31). Petition is a petition under section 301, 302, 303, or 304 of the bankruptcy code - that is, a petition that commences a case under title 11. Paragraph (32) defines purchaser as a transferee of a voluntary transfer, such as a sale or gift, and includes an immediate or mediate transferee of a purchaser. The definition of 'railroad' in paragraph (33) is derived from section 77 of the Bankruptcy Act (section 205 of former title 11). A railroad is a common carrier by railroad engaged in the transportation of individuals or property, or an owner of trackage facilities leased by such a common carrier. The effect of the definition and the use of the term in section 109(d) is to eliminate the limitation now found in section 77 of the Bankruptcy Act that only railroads engaged in interstate commerce may proceed under the railroad reorganization provisions. The limitation may have been inserted because of a doubt that the commerce power could not reach intrastate railroads. Be that as it may, this bill is enacted under the bankruptcy power. Paragraph (34) defines 'relative' as an individual related by affinity or consanguinity within the third degree as determined by the common law, and includes individuals in a step or adoptive relationship. The definition is similar to current law, but adds the latter phrase. This definition should be applied as of the time when the transaction that it concerns took place. Thus, a former spouse is not a relative, but if, for example, for purposes of the preference section, proposed 11 U.S.C. 547(b)(4)(B), the transferee was a spouse of the debtor at the time of the transfer sought to be avoided, then the transferee would be relative and subject to the insider rules, even if the transferee was no longer married to the debtor at the time of the commencement of the case or at the time of the commencement of the preference recovery proceeding. Paragraph (35) defines 'security.' The definition is new and is modeled on the most recent draft of the American Law Institute's proposed securities code, with some exceptions. The interest of a limited partner in a limited partnership is included in order to make sure that everything that is defined as an equity security is also a 'security.' The definition, as with the definition of 'entity', 'insider', and 'person', is open-ended because the term is not susceptible of precise specification. Thus the courts will be able to use the characterization provided in this definition to treat with new kinds of documents on a flexible basis. Paragraphs (36) and (37) defined 'security agreement' and 'security interest.' A security interest is one of the kinds of liens. It is a lien created by an agreement. Security agreement is defined as the agreement creating the security interest. Though these terms are similar to the same terms in the Uniform Commercial Code, article IX, they are broader. For example, the U.C.C. does not cover real property mortgages. Under this definition, such a mortgage is included, as are all other liens created by agreement, even though not covered by the U.C.C. All U.C.C. security interests and security agreements are, however, security interests and security agreements under this definition. Whether a consignment or a lease constitutes a security interest under the bankruptcy code will depend on whether it constitutes a security interest under applicable State or local law. Paragraph (38) defines another kind of lien, 'statutory lien.' The definition, derived from current law, states that a statutory lien is a lien arising solely by force of statute on specified circumstances or conditions and includes a lien of distress for rent (whether statutory, common law, or otherwise). The definition excludes judicial liens and security interests, whether or not they are provided for or are dependent on a statute, and whether or not they are made fully effective by statute. A statutory lien is only one that arises automatically, and is not based on an agreement to give a lien or on judicial action. Mechanics', materialmen's, and warehousemen's liens are examples. Tax liens are also included in the definition of statutory lien. 'Stockbroker' is defined in paragraph (39) as a person engaged in the business of effecting transactions in securities for the account of others or with members of the general public from or for such person's own account, if the person has a customer, as defined. Thus, the definition, derived from a combination of the definitions of 'broker' and 'dealer' in the Securities Exchange Act of 1934 (15 U.S.C. 78c), encompasses both brokers and dealers. The definition is used in section 109 and in subchapter III of chapter 7, Stockholder Liquidation. The term does not encompass an employee who acts for a principal that 'effects' transaction or deals with the public, because such an employee will not have a 'customer'. Paragraph (40) defines 'transfer.' It is derived and adapted, with stylistic changes, from section 1(30) of the Bankruptcy Act (section 1(30) of former title 11). A transfer is a disposition of an interest in property. The definition of transfer is as broad as possible. Many of the potentially limiting words in current law are deleted, and the language is simplified. Under this definition, any transfer of an interest in property is a transfer, including a transfer of possession, custody, or control even if there is no transfer of title, because possession, custody, and control are interests in property. A deposit in a bank account or similar account is a transfer. -REFTEXT- REFERENCES IN TEXT Section 3 of the Federal Deposit Insurance Act, referred to in pars. (3)(A), (33)(A), and (35)(A), is classified to section 1813 of Title 12, Banks and Banking. The Securities Act of 1933 (15 U.S.C. 77a et seq.), referred to in par. (49)(A)(xii), is act May 27, 1933, ch. 38, title I, 48 Stat. 74, as amended, which is classified generally to subchapter I (Sec. 77a et seq.) of chapter 2A of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 77a of Title 15 and Tables. -MISC2- AMENDMENTS 1990 - Par. (3). Pub. L. 101-647, Sec. 2522(e)(4), added par. (3). Former par. (3) redesignated (4). Pars. (4) to (23). Pub. L. 101-647, Sec. 2522(e)(3), redesignated pars. (3) to (22) as (4) to (23), respectively. Former par. (23) redesignated (24). Par. (24). Pub. L. 101-647, Sec. 2522(e)(3), redesignated par. (23) as (24). Former par. (24) redesignated (25). Pub. L. 101-311, Sec. 201(1), inserted 'as defined in section 761(8) of this title, or any similar good, article, service, right, or interest which is presently or in the future becomes the subject of dealing in the forward contract trade,' after 'transfer of commodity,' and ', including, but not limited to, a repurchase transaction, reverse repurchase transaction, consignment, lease, swap, hedge transaction, deposit, loan, option, allocated transaction, unallocated transaction, or any combination thereof or option thereon' after 'entered into'. Par. (25). Pub. L. 101-647, Sec. 2522(e)(3), redesignated par. (24) as (25). Former par. (25) redesignated (26). Pub. L. 101-311, Sec. 201(2), substituted 'a commodity, as defined in section 761(8) of this title, or any similar good, article, service, right, or interest which is presently or in the future becomes the subject of dealing in the forward contract trade' for 'commodities'. Pars. (26) to (32). Pub. L. 101-647, Sec. 2522(e)(3), redesignated pars. (25) to (31) as (26) to (32), respectively. Former par. (32) redesignated (36). Par. (33). Pub. L. 101-647, Sec. 2522(e)(2), added par. (33). Former par. (33) redesignated (37). Par. (34). Pub. L. 101-647, Sec. 2522(e)(2), added par. (34). Former par. (34) redesignated (38). Pub. L. 101-311, Sec. 201(4), added par. (34). Former par. (34) redesignated (36). Par. (35). Pub. L. 101-647, Sec. 2522(e)(2), added par. (35). Former par. (35) redesignated (39). Pub. L. 101-311, Sec. 201(4), added par. (35). Former par. (35) redesignated (37). Par. (36). Pub. L. 101-647, Sec. 2522(e)(1), redesignated par. (32) as (36). Former par. (36) redesignated (40). Pub. L. 101-311, Sec. 201(3), redesignated par. (34) as (36). Former par. (36) redesignated (38). Pars. (37) to (48). Pub. L. 101-647, Sec. 2522(e)(1), redesignated pars. (33) to (44) as (37) to (48), respectively. Former pars. (45) to (48) redesignated (49) to (52), respectively. Pub. L. 101-311, Sec. 201(3), redesignated pars. (35) to (46) as (37) to (48), respectively. Former pars. (47) and (48) redesignated (49) and (50), respectively. Pars. (49), (50). Pub. L. 101-647, Sec. 2522(e)(1), redesignated pars. (45) and (46) as (49) and (50), respectively. Former pars. (49) and (50) redesignated (53) and (54) defining 'stockbroker', respectively. Pub. L. 101-311, Sec. 201(3), redesignated pars. (47) and (48) as (49) and (50), respectively. Former pars. (49) and (50) redesignated (51) and (52), respectively. Pub. L. 101-311, Sec. 101(2), added pars. (49) and (50). Former pars. (49) and (50) redesignated (51) and (52), respectively. Par. (51). Pub. L. 101-647, Sec. 2522(e)(1), redesignated par. (47) as (51). Former par. (51) redesignated (55) defining 'swap agreement'. Pub. L. 101-311, Sec. 201(3), redesignated par. (49) as (51). Former par. (51) redesignated (53). Pub. L. 101-311, Sec. 101(1), redesignated par. (49) as (51). Former par. (51) redesignated (53). Par. (52). Pub. L. 101-647, Sec. 2522(e)(1), redesignated par. (48) as (52). Former par. (52) redesignated (56) defining 'swap participant'. Pub. L. 101-311, Sec. 201(3), redesignated par. (50) as (52). Former par. (52) redesignated (54) defining 'transfer'. Pub. L. 101-311, Sec. 101(1), redesignated par. (50) as (52). Former par. (52) redesignated (54). Par. (53). Pub. L. 101-647, Sec. 2522(e)(1), redesignated par. (49) as (53). Former par. (53) redesignated (57) defining 'timeshare plan'. Pub. L. 101-311, Sec. 201(3), redesignated par. (51) as (53). Former par. (53) redesignated (55) defining 'United States'. Pub. L. 101-311, Sec. 101(1), redesignated par. (51) as (53). Former par. (53) redesignated (55). Par. (54). Pub. L. 101-647, Sec. 2522(e)(1), redesignated par. (50) as (54) defining 'stockbroker'. Pub. L. 101-311, Sec. 201(3), redesignated par. (52) as (54) defining 'transfer'. Former par. (54) redesignated (56) defining 'intellectual property'. Pub. L. 101-311, Sec. 101(1), redesignated par. (52) as (54). Par. (55). Pub. L. 101-647, Sec. 2522(e)(1), redesignated par. (51) as (55) defining 'swap agreement'. Pub. L. 101-311, Sec. 201(3), redesignated par. (53) as (55) defining 'United States'. Former par. (55) redesignated (57) defining 'mask work'. Pub. L. 101-311, Sec. 101(1), redesignated par. (53) as (55). Par. (56). Pub. L. 101-647, Sec. 2522(e)(1), redesignated par. (52) as (56) defining 'swap participant'. Pub. L. 101-311, Sec. 201(3), redesignated par. (54) as (56) defining 'intellectual property'. Par. (57). Pub. L. 101-647, Sec. 2522(e)(1), redesignated par. (53) as (57) defining 'timeshare plan'. Pub. L. 101-311, Sec. 201(3), redesignated par. (55) as (57) defining 'mask work'. 1988 - Par. (31). Pub. L. 100-597 inserted 'and a municipality' after 'partnership' in subpar. (A) and added subpar. (C). Pars. (52), (53). Pub. L. 100-506 added pars. (52) and (53). 1986 - Par. (14). Pub. L. 99-554, Sec. 201(1), substituted 'governmental unit, and United States trustee' for 'and governmental unit'. Pars. (17), (18). Pub. L. 99-554, Sec. 251(2), (3), added pars. (17) and (18) and redesignated former pars. (17) and (18) as (19) and (20), respectively. Par. (19). Pub. L. 99-554, Sec. 251(1), (2), redesignated former par. (17) as (19) and inserted '(except when such term appears in the term 'family farmer')'. Former par. (19) redesignated (21). Pars. (20) to (25). Pub. L. 99-554, Sec. 251(2), redesignated former pars. (18) to (23) as (20) to (25), respectively. Former pars. (24) and (25) redesignated (26) and (27), respectively. Par. (26). Pub. L. 99-554, Sec. 201(2), inserted '(but not a United States trustee while serving as a trustee in a case under this title)'. Pub. L. 99-554, Sec. 251(2), redesignated former par. (24) as (26). Former par. (26) redesignated (28). Pars. (27) to (42). Pub. L. 99-554, Sec. 251(2), redesignated former pars. (25) to (40) as (27) to (42), respectively. Former pars. (41) and (42) redesignated (43) and (44), respectively. Par. (43). Pub. L. 99-554, Sec. 251(2), redesignated former par. (41) as (43). Former par. (43) redesignated (45). Par. (43)(A)(xv). Pub. L. 99-554, Sec. 283(a)(1), substituted 'security' for 'secuity'. Pars. (44) to (50). Pub. L. 99-554, Sec. 251(2), redesignated former pars. (42) to (48) as (44) to (50), respectively. Former par. (49) redesignated (51). Par. (51). Pub. L. 99-554, Sec. 283(a)(2), substituted a period for the semicolon at the end thereof. Pub. L. 99-554, Sec. 251(2), redesignated former par. (49) as (51). 1984 - Par. (2)(D). Pub. L. 98-353, Sec. 421(a), struck out 'or all' after 'business'. Par. (8)(B). Pub. L. 98-353, Sec. 421(b), substituted a semicolon for the colon at end of subpar. (B). Par. (9)(B). Pub. L. 98-353, Sec. 421(c), inserted reference to section 348(d). Par. (14). Pub. L. 98-353, Sec. 421(d), inserted 'and' after 'trust,'. Pars. (19) to (21). Pub. L. 98-353, Sec. 421(j)(3), (4), added par. (19) and redesignated former pars. (19), (20), and (21) as (20), (21), and (24), respectively. Pars. (22), (23). Pub. L. 98-353, Sec. 421(j)(2), (5), added pars. (22) and (23) and redesignated former pars. (22) and (23) as (25) and (26), respectively. Pars. (24) to (26). Pub. L. 98-353, Sec. 421(j)(2), redesignated former pars. (21) to (23) as (24) to (26), respectively. Former pars. (24) to (26) redesignated (27) to (29), respectively. Par. (27). Pub. L. 98-353, Sec. 421(e), (j)(2), redesignated former par. (24) as (27) and substituted 'stockbroker' for 'stock broker'. Former par. (27) redesignated (30). Par. (28). Pub. L. 98-353, Sec. 421(j)(2), redesignated former par. (25) as (28). Former par. (28) redesignated (31). Par. (29). Pub. L. 98-353, Sec. 421(f), (j)(2), redesignated former par. (26) as (29) and, in subpar. (B)(ii), substituted 'nonpartnership' and '(A)' for 'separate' and '(A)(ii)', respectively, wherever appearing. Former par. (29) redesignated (32). Pars. (30) to (32). Pub. L. 98-353, Sec. 421(j)(2), redesignated former pars. (27) to (29) as (30) to (32), respectively. Former pars. (30) to (32) redesignated (33) to (35), respectively. Par. (33). Pub. L. 98-353, Sec. 421(g), (j)(2), redesignated former par. (30) as (33) and amended definition of 'person' generally, thereby inserting proviso relating to consideration of certain governmental units as persons for purposes of section 1102 of this title. Former par. (33) redesignated (36). Par. (34). Pub. L. 98-353, Sec. 421(j)(2), redesignated former par. (31) as (34). Former par. (34) redesignated (37). Pars. (35), (36). Pub. L. 98-353, Sec. 421(j)(2), redesignated former pars. (32) and (33) as (35) and (36), respectively. Former pars. (35) and (36), as added by Pub. L. 98-353, Sec. 391(2), redesignated (38) and (39), respectively. Pub. L. 98-353, Sec. 391, added pars. (35) and (36), and redesignated former pars. (35) and (36) as (37) and (38) which were again redesignated as (40) and (41), respectively. Par. (37). Pub. L. 98-353, Sec. 421(j)(2), redesignated former par. (34) as (37). Former par. (37) redesignated successively as (39) and again as (42). Par. (38). Pub. L. 98-353, Sec. 391(2), 421(j)(2), added par. (35) and redesignated such par. (35) as (38). Former par. (38) redesignated successively as (40) and again as (43). Par. (39). Pub. L. 98-353, Sec. 391(2), 421(j)(2), added par. (36) and redesignated such par. (36) as (39). Former par. (39) redesignated successively as (41) and again as (45). Par. (40). Pub. L. 98-353, Sec. 391(1), 421(j)(2), redesignated successively former par. (35) as (37) and again as (40). Former par. (40) redesignated successively as (42) and again as (46). Par. (41). Pub. L. 98-353, Sec. 391(1), 401(1), 421(h), (j)(2), redesignated successively former par. (36) as (38) and again as (41), and, in subpar. (B)(vi), substituted 'certificate of a kind specified in subparagraph (A)(xii)' for 'certificate specified in clause (xii) of subparagraph (A)' and substituted 'required to be the subject of a registration statement' for 'the subject of such registration statement'. Former par. (41) redesignated successively as (43), again as (44), and again as (48). Par. (42). Pub. L. 98-353, Sec. 391(1), 421(j)(2), redesignated successively former par. (37) as (39) and again as (42). Par. (43). Pub. L. 98-353, Sec. 391(1), 421(j)(2), redesignated successively former par. (38) as (40) and again as (43). Pub. L. 98-353, Sec. 401, redesignated former par. (43), originally par. (41), as (44), and added another par. (43) which was redesignated (47). Par. (44). Pub. L. 98-353, Sec. 421(j)(6), added par. (44). Former par. (44) originally was par. (41) and was redesignated successively as (43), again as (44), and again as (48). Pars. (45), (46). Pub. L. 98-353, Sec. 391(1), 421(j)(1), redesignated successively former pars. (39) and (40) as (41) and (42), and again as (45) and (46), respectively. Par. (47). Pub. L. 98-353, Sec. 401(2), 421(j)(1), added par. (43) and redesignated such par. (43) as (47). Par. (48). Pub. L. 98-353, Sec. 391(1), 401(1), 421(i), (j)(1), redesignated successively former par. (41) as (43), again as (44), and again as (48), and substituted 'and foreclosure of the debtor's equity of redemption; and' for the period at the end. Par. (49). Pub. L. 98-353, Sec. 421(j)(7), added par. (49). 1982 - Par. (35). Pub. L. 97-222, Sec. 1(a)(2), added par. (35). Former par. (35) redesignated (36). Par. (36). Pub. L. 97-222, Sec. 1(a)(1), (b), (c), redesignated par. (35) as (36) and substituted 'is required to be the subject of a registration statement' for 'is the subject of a registration statement' in subpar. (A)(xii) and substituted 'forward contract' for 'forward commodity contract' in subpar. (B)(iii). Former par. (36) redesignated (37). Pars. (37) to (39). Pub. L. 97-222, Sec. 1(a)(1), redesignated pars. (36) to (38) as (37) to (39), respectively. Former par. (39) redesignated (40). Pars. (40), (41). Pub. L. 97-222, Sec. 1(a)(1), (d), redesignated former par. (39) as (40) and restructured its provisions by dividing the former introductory provisions into subpars. (A) and (B) and by redesignating former subpars. (A) and (B) as cls. (i) and (ii), respectively, of subpar. (B). Former par. (40) redesignated (41). EFFECTIVE DATE OF 1988 AMENDMENTS Section 12 of Pub. L. 100-597 provided that: '(a) Effective Date. - Except as provided in subsection (b), this Act and the amendments made by this Act (enacting sections 927 to 929 of this title, amending this section and sections 109, 901, 902, 922, 926, and 943 of this title, and renumbering section 927 of this title as 930) shall take effect on the date of the enactment of this Act (Nov. 3, 1988). '(b) Application of Amendments. - The amendments made by this Act shall not apply with respect to cases commenced under title 11 of the United States Code before the date of the enactment of this Act (Nov. 3, 1988).' Section 2 of Pub. L. 100-506 provided that: '(a) Effective Date. - Except as provided in subsection (b), this Act and the amendments made by this Act (amending this section and section 365 of this title) shall take effect on the date of the enactment of this Act (Oct. 18, 1988). '(b) Application of Amendments. - The amendments made by this Act shall not apply with respect to any case commenced under title 11 of the United States Code before the date of the enactment of this Act (Oct. 18, 1988).' EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by section 201 of Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 251 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554. Amendment by section 283 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Section 552, formerly Sec. 553, of title III (Sec. 301-553) of Pub. L. 98-353, as renumbered by Pub. L. 98-531, Sec. 1(2), Oct. 19, 1984, 98 Stat. 2704, provided that: '(a) Except as otherwise provided in this section the amendments made by this title (see Tables for classification) shall become effective to cases filed 90 days after the date of enactment of this Act (July 10, 1984). '(b) The amendments made by section 426(b) (amending section 303 of this title) shall become effective upon the date of enactment of this Act. '(c) The amendments made by subtitle J (enacting section 1113 of this title), shall become effective as provided in section 541(c) (set out as an Effective Date note under section 1113 of this title).' SHORT TITLE OF 1990 AMENDMENTS Pub. L. 101-581, Sec. 1, Nov. 15, 1990, 104 Stat. 2865, and section 3101 of title XXXI of Pub. L. 101-647, provided respectively that such Act and such title (amending sections 523 and 1328 of this title and enacting provisions set out as a note under section 523 of this title) may be cited as the 'Criminal Victims Protection Act of 1990'. SHORT TITLE OF 1988 AMENDMENT Pub. L. 100-334, Sec. 1, June 16, 1988, 102 Stat. 610, provided that: 'This Act (enacting section 1114 of this title, amending section 1129 of this title, enacting provisions set out as a note under section 1114 of this title, and amending and repealing provisions set out as notes under section 1106 of this title) may be cited as the 'Retiree Benefits Bankruptcy Protection Act of 1988'.' SHORT TITLE OF 1984 AMENDMENT Section 361 of subtitle C (Sec. 361-363) of title III of Pub. L. 98-353 provided that: 'This subtitle (amending sections 362, 365, and 541 of this title) may be cited as the 'Leasehold Management Bankruptcy Amendments Act of 1983'.' SEPARABILITY Section 551 of title III (Sec. 301-553) of Pub. L. 98-353 provided that: 'If any provision of this title or any amendment made by this title (see Tables for classification), or the application thereof to any person or circumstance is held invalid, the provisions of every other part, and their application shall not be affected thereby.' -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 362 of this title; title 12 sections 1787, 1821; title 15 sections 78eee, 78fff-1; title 28 section 1930. ------DocID 14673 Document 18 of 646------ -CITE- 11 USC Sec. 102 -EXPCITE- TITLE 11 CHAPTER 1 -HEAD- Sec. 102. Rules of construction -STATUTE- In this title - (1) 'after notice and a hearing', or a similar phrase - (A) means after such notice as is appropriate in the particular circumstances, and such opportunity for a hearing as is appropriate in the particular circumstances; but (B) authorizes an act without an actual hearing if such notice is given properly and if - (i) such a hearing is not requested timely by a party in interest; or (ii) there is insufficient time for a hearing to be commenced before such act must be done, and the court authorizes such act; (2) 'claim against the debtor' includes claim against property of the debtor; (3) 'includes' and 'including' are not limiting; (4) 'may not' is prohibitive, and not permissive; (5) 'or' is not exclusive; (6) 'order for relief' means entry of an order for relief; (7) the singular includes the plural; (8) a definition, contained in a section of this title that refers to another section of this title, does not, for the purpose of such reference, affect the meaning of a term used in such other section; and (9) 'United States trustee' includes a designee of the United States trustee. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2554; Pub. L. 98-353, title III, Sec. 422, July 10, 1984, 98 Stat. 369; Pub. L. 99-554, title II, Sec. 202, Oct. 27, 1986, 100 Stat. 3097.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 102 specifies various rules of construction but is not exclusive. Other rules of construction that are not set out in title 11 are nevertheless intended to be followed in construing the bankruptcy code. For example, the phrase 'on request of a party in interest' or a similar phrase, is used in connection with an action that the court may take in various sections of the Code. The phrase is intended to restrict the court from acting sua sponte. Rules of bankruptcy procedure or court decisions will determine who is a party in interest for the particular purposes of the provision in question, but the court will not be permitted to act on its own. Although 'property' is not construed in this section, it is used consistently throughout the code in its broadest sense, including cash, all interests in property, such as liens, and every kind of consideration including promises to act or forbear to act as in section 548(d). Section 102(1) expands on a rule of construction contained in H.R. 8200 as passed by the House and in the Senate amendment. The phrase 'after notice and a hearing', or a similar phrase, is intended to be construed according to the particular proceeding to mean after such notice as is appropriate in the particular circumstances, and such opportunity, if any, for a hearing as is appropriate in the particular circumstances. If a provision of title 11 authorizes an act to be taken 'after notice and a hearing' this means that if appropriate notice is given and no party to whom such notice is sent timely requests a hearing, then the act sought to be taken may be taken without an actual hearing. In very limited emergency circumstances, there will be insufficient time for a hearing to be commenced before an action must be taken. The action sought to be taken may be taken if authorized by the court at an ex parte hearing of which a record is made in open court. A full hearing after the fact will be available in such an instance. In some circumstances, such as under section 1128, the bill requires a hearing and the court may act only after a hearing is held. In those circumstances the judge will receive evidence before ruling. In other circumstances, the court may take action 'after notice and a hearing,' if no party in interest requests a hearing. In that event a court order authorizing the action to be taken is not necessary as the ultimate action taken by the court implies such an authorization. Section 102(8) is new. It contains a rule of construction indicating that a definition contained in a section in title 11 that refers to another section of title 11 does not, for the purposes of such reference, take the meaning of a term used in the other section. For example, section 522(a)(2) defines 'value' for the purposes of section 522. Section 548(d)(2) defines 'value' for purposes of section 548. When section 548 is incorporated by reference in section 522, this rule of construction makes clear that the definition of 'value' in section 548 governs its meaning in section 522 notwithstanding a different definition of 'value' in section 522(a)(2). SENATE REPORT NO. 95-989 Section 102 provides seven rules of construction. Some are derived from current law; others are derived from 1 U.S.C. 1; a few are new. They apply generally throughout proposed title 11. These are terms that are not appropriate for definition, but that require an explanation. Paragraph (1) defines the concept of 'after notice and a hearing.' The concept is central to the bill and to the separation of the administrative and judicial functions of bankruptcy judges. The phrase means after such notice as is appropriate in the particular circumstances (to be prescribed by either the Rules of Bankruptcy Procedure or by the court in individual circumstances that the Rules do not cover. In many cases, the Rules will provide for combined notice of several proceedings), and such opportunity for a hearing as is appropriate in the particular circumstances. Thus, a hearing will not be necessary in every instance. If there is no objection to the proposed action, the action may go ahead without court action. This is a significant change from present law, which requires the affirmative approval of the bankruptcy judge for almost every action. The change will permit the bankruptcy judge to stay removed from the administration of the bankruptcy or reorganization case, and to become involved only when there is a dispute about a proposed action, that is, only when there is an objection. The phrase 'such opportunity for a hearing as is appropriate in the particular circumstances' is designed to permit the Rules and the courts to expedite or dispense with hearings when speed is essential. The language 'or similar phrase' is intended to cover the few instances in the bill where 'after notice and a hearing' is interrupted by another phrase, such as 'after notice to the debtor and a hearing.' Paragraph (2) specifies that 'claim against the debtor' includes claim against property of the debtor. This paragraph is intended to cover nonrecourse loan agreements where the creditor's only rights are against property of the debtor, and not against the debtor personally. Thus, such an agreement would give rise to a claim that would be treated as a claim against the debtor personally, for the purposes of the bankruptcy code. Paragraph (3) is a codification of American Surety Co. v. Marotta, 287 U.S. 513 (1933). It specifies that 'includes' and 'including' are not limiting. Paragraph (4) specifies that 'may not' is prohibitive and not permissive (such as in 'might not'). Paragraph (5) specifies that 'or' is not exclusive. Thus, if a party 'may do (a) or (b)', then the party may do either or both. The party is not limited to a mutually exclusive choice between the two alternatives. Paragraph (6) makes clear that 'order for relief' means entry of an order for relief. If the court orally orders relief, but the order is not entered until a later time, then any time measurements in the bill are from entry, not from the oral order. In a voluntary case, the entry of the order for relief is the filing of the petition commencing the voluntary case. Paragraph (7) specifies that the singular includes the plural. The plural, however, generally does not include the singular. The bill uses only the singular, even when the item in question most often is found in plural quantities, in order to avoid the confusion possible if both rules of construction applied. When an item is specified in the plural, the plural is intended. AMENDMENTS 1986 - Par. (9). Pub. L. 99-554 added par. (9). 1984 - Par. (8). Pub. L. 98-353 substituted 'contained' for 'continued'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 14674 Document 19 of 646------ -CITE- 11 USC Sec. 103 -EXPCITE- TITLE 11 CHAPTER 1 -HEAD- Sec. 103. Applicability of chapters -STATUTE- (a) Except as provided in section 1161 of this title, chapters 1, 3, and 5 of this title apply in a case under chapter 7, 11, 12, or 13 of this title. (b) Subchapters I and II of chapter 7 of this title apply only in a case under such chapter. (c) Subchapter III of chapter 7 of this title applies only in a case under such chapter concerning a stockbroker. (d) Subchapter IV of chapter 7 of this title applies only in a case under such chapter concerning a commodity broker. (e) Except as provided in section 901 of this title, only chapters 1 and 9 of this title apply in a case under such chapter 9. (f) Except as provided in section 901 of this title, subchapters I, II, and III of chapter 11 of this title apply only in a case under such chapter. (g) Subchapter IV of chapter 11 of this title applies only in a case under such chapter concerning a railroad. (h) Chapter 13 of this title applies only in a case under such chapter. (i) Chapter 12 of this title applies only in a case under such chapter. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2555; Pub. L. 97-222, Sec. 2, July 27, 1982, 96 Stat. 235; Pub. L. 98-353, title III, Sec. 423, July 10, 1984, 98 Stat. 369; Pub. L. 99-554, title II, Sec. 252, Oct. 27, 1986, 100 Stat. 3104.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 103 prescribes which chapters of the proposed bankruptcy code apply in various cases. All cases, other than cases ancillary to foreign proceedings, are filed under chapter 7, 9, 11, or 13, the operative chapters of the proposed bankruptcy code. The general provisions that apply no matter which chapter a case is filed under are found in chapters 1, 3, and 5. Subsection (a) makes this explicit, with an exception for chapter 9. The other provisions, which are self-explanatory, provide the special rules for Stockbroker Liquidations, Commodity Broker Liquidations, Municipal Debt Adjustments, and Railroad Reorganizations. AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554, Sec. 252(1), inserted reference to chapter 12. Subsec. (i). Pub. L. 99-554, Sec. 252(2), added subsec. (i). 1984 - Subsec. (c). Pub. L. 98-353 substituted 'stockbroker' for 'stockholder'. 1982 - Subsec. (d). Pub. L. 97-222 struck out 'except with respect to section 746(c) which applies to margin payments made by any debtor to a commodity broker or forward contract merchant' after 'concerning a commodity broker'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 901, 902, 943 of this title. ------DocID 14675 Document 20 of 646------ -CITE- 11 USC Sec. 104 -EXPCITE- TITLE 11 CHAPTER 1 -HEAD- Sec. 104. Adjustment of dollar amounts -STATUTE- The Judicial Conference of the United States shall transmit to the Congress and to the President before May 1, 1985, and before May 1 of every sixth year after May 1, 1985, a recommendation for the uniform percentage adjustment of each dollar amount in this title and in section 1930 of title 28. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2555.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 104 represents a compromise between the House bill and the Senate amendment with respect to the adjustment of dollar amounts in title 11. The House amendment authorizes the Judicial Conference of the United States to transmit a recommendation for the uniform percentage of adjustment for each dollar amount in title 11 and in 28 U.S.C. 1930 to the Congress and to the President before May 1, 1985, and before May 1 of every sixth year thereafter. The requirement in the House bill that each such recommendation be based only on any change in the cost-of-living increase during the period immediately preceding the recommendation is deleted. SENATE REPORT NO. 95-989 This section requires that the Director of the Administrative Office of the U. S. Courts report to Congress and the President before Oct. 1, 1985, and before May 1 every 6 years thereafter a recommendation for adjustment in dollar amounts found in this title. The Committee feels that regular adjustment of the dollar amounts by the Director will conserve congressional time and yet assure that the relative dollar amounts used in the bill are maintained. Changes in the cost of living should be a significant, but not necessarily the only, factor considered by the Director. The fact that there has been an increase in the cost of living does not necessarily mean that an adjustment of dollar amounts would be needed or warranted. HOUSE REPORT NO. 95-595 This section requires the Judicial Conference to report to the Congress every four years after the effective date of the bankruptcy code any changes that have occurred in the cost of living during the preceding four years, and the appropriate adjustments to the dollar amounts in the bill. The dollar amounts are found primarily in the exemption section (11 U.S.C. 522), the wage priority (11 U.S.C. 507), and the eligibility for chapter 13 (11 U.S.C. 109). This section requires that the Conference recommend uniform percentage changes in these amounts based solely on cost of living changes. The dollar amounts in the bill would not change on that recommendation, absent Congressional veto. Instead, Congress is required to take affirmative action, by passing a law amending the appropriate section, if it wishes to accomplish the change. If the Judicial Conference has policy recommendations concerning the appropriate dollar amounts in the bankruptcy code based other than on cost of living considerations there are adequate channels through which it may communicate its views. This section is solely for the housekeeping function of maintaining the dollar amounts in the code at fairly constant real dollar levels. ------DocID 14676 Document 21 of 646------ -CITE- 11 USC Sec. 105 -EXPCITE- TITLE 11 CHAPTER 1 -HEAD- Sec. 105. Power of court -STATUTE- (a) The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process. (b) Notwithstanding subsection (a) of this section, a court may not appoint a receiver in a case under this title. (c) The ability of any district judge or other officer or employee of a district court to exercise any of the authority or responsibilities conferred upon the court under this title shall be determined by reference to the provisions relating to such judge, officer, or employee set forth in title 28. This subsection shall not be interpreted to exclude bankruptcy judges and other officers or employees appointed pursuant to chapter 6 of title 28 from its operation. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2555; Pub. L. 98-353, title I, Sec. 118, July 10, 1984, 98 Stat. 344; Pub. L. 99-554, title II, Sec. 203, Oct. 27, 1986, 100 Stat. 3097.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 105 is derived from section 2a (15) of present law (section 11(a)(15) of former title 11), with two changes. First, the limitation on the power of a bankruptcy judge (the power to enjoin a court being reserved to the district judge) is removed as inconsistent with the increased powers and jurisdiction of the new bankruptcy court. Second, the bankruptcy judge is prohibited from appointing a receiver in a case under title 11 under any circumstances. The bankruptcy code has ample provision for the appointment of a trustee when needed. Appointment of a receiver would simply circumvent the established procedures. This section is also an authorization, as required under 28 U.S.C. 2283, for a court of the United States to stay the action of a State court. As such, Toucey v. New York Life Insurance Company, 314 U.S. 118 (1941), is overruled. AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554 inserted at end 'No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.' 1984 - Subsecs. (a), (b). Pub. L. 98-353, Sec. 118(1), struck out 'bankruptcy' before 'court'. Subsec. (c). Pub. L. 98-353, Sec. 118(2), added subsec. (c). EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective July 10, 1984, see section 122(a) of Pub. L. 98-353, set out as an Effective Date note under section 151 of Title 28, Judiciary and Judicial Procedure. ------DocID 14677 Document 22 of 646------ -CITE- 11 USC Sec. 106 -EXPCITE- TITLE 11 CHAPTER 1 -HEAD- Sec. 106. Waiver of sovereign immunity -STATUTE- (a) A governmental unit is deemed to have waived sovereign immunity with respect to any claim against such governmental unit that is property of the estate and that arose out of the same transaction or occurrence out of which such governmental unit's claim arose. (b) There shall be offset against an allowed claim or interest of a governmental unit any claim against such governmental unit that is property of the estate. (c) Except as provided in subsections (a) and (b) of this section and notwithstanding any assertion of sovereign immunity - (1) a provision of this title that contains 'creditor', 'entity', or 'governmental unit' applies to governmental units; and (2) a determination by the court of an issue arising under such a provision binds governmental units. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2555.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 106(c) relating to sovereign immunity is new. The provision indicates that the use of the term 'creditor,' 'entity,' or 'governmental unit' in title 11 applies to governmental units notwithstanding any assertion of sovereign immunity and that an order of the court binds governmental units. The provision is included to comply with the requirement in case law that an express waiver of sovereign immunity is required in order to be effective. Section 106(c) codifies In re Gwilliam, 519 F.2d 407 (9th Cir., 1975), and In re Dolard, 519 F.2d 282 (9th Cir., 1975), permitting the bankruptcy court to determine the amount and dischargeability of tax liabilities owing by the debtor or the estate prior to or during a bankruptcy case whether or not the governmental unit to which such taxes are owed files a proof of claim. Except as provided in sections 106(a) and (b), subsection (c) is not limited to those issues, but permits the bankruptcy court to bind governmental units on other matters as well. For example, section 106(c) permits a trustee or debtor in possession to assert avoiding powers under title 11 against a governmental unit; contrary language in the House report to H.R. 8200 is thereby overruled. SENATE REPORT NO. 95-989 Section 106 provides for a limited waiver of sovereign immunity in bankruptcy cases. Though Congress has the power to waive sovereign immunity for the Federal government completely in bankruptcy cases, the policy followed here is designed to achieve approximately the same result that would prevail outside of bankruptcy. Congress does not, however, have the power to waive sovereign immunity completely with respect to claims of a bankrupt estate against a State, though it may exercise its bankruptcy power through the supremacy clause to prevent or prohibit State action that is contrary to bankruptcy policy. There is, however, a limited change from the result that would prevail in the absence of bankruptcy; the change is two-fold and is within Congress' power vis-a-vis both the Federal Government and the States. First, the filing of a proof of claim against the estate by a governmental unit is a waiver by that governmental unit of sovereign immunity with respect to compulsory counterclaims, as defined in the Federal Rules of Civil Procedure (title 28, appendix), that is, counterclaims arising out of the same transaction or occurrence. The governmental unit cannot receive a distribution from the estate without subjecting itself to any liability it has to the estate within the confines of a compulsory counterclaim rule. Any other result would be one-sided. The counterclaim by the estate against the governmental unit is without limit. Second, the estate may offset against the allowed claim of a governmental unit, up to the amount of the governmental unit's claim, any claim that the debtor, and thus the estate, has against the governmental unit, without regard to whether the estate's claim arose out of the same transaction or occurrence as the government's claim. Under this provision, the setoff permitted is only to the extent of the governmental unit's claim. No affirmative recovery is permitted. Subsection (a) governs affirmative recovery. Though this subsection creates a partial waiver of immunity when the governmental unit files a proof of claim, it does not waive immunity if the debtor or trustee, and not the governmental unit, files proof of a governmental unit's claim under proposed 11 U.S.C. 501(c). This section does not confer sovereign immunity on any governmental unit that does not already have immunity. It simply recognizes any immunity that exists and prescribes the proper treatment of claims by and against that sovereign. ------DocID 14678 Document 23 of 646------ -CITE- 11 USC Sec. 107 -EXPCITE- TITLE 11 CHAPTER 1 -HEAD- Sec. 107. Public access to papers -STATUTE- (a) Except as provided in subsection (b) of this section, a paper filed in a case under this title and the dockets of a bankruptcy court are public records and open to examination by an entity at reasonable times without charge. (b) On request of a party in interest, the bankruptcy court shall, and on the bankruptcy court's own motion, the bankruptcy court may - (1) protect an entity with respect to a trade secret or confidential research, development, or commercial information; or (2) protect a person with respect to scandalous or defamatory matter contained in a paper filed in a case under this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2556.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Subsection (a) of this section makes all papers filed in a bankruptcy case and the dockets of the bankruptcy court public and open to examination at reasonable times without charge. 'Docket' includes the claims docket, the proceedings docket, and all papers filed in a case. Subsection (b) permits the court, on its own motion, and requires the court, on the request of a party in interest, to protect trade secrets, confidential research, development, or commercial information, and to protect persons against scandalous or defamatory matter. ------DocID 14679 Document 24 of 646------ -CITE- 11 USC Sec. 108 -EXPCITE- TITLE 11 CHAPTER 1 -HEAD- Sec. 108. Extension of time -STATUTE- (a) If applicable nonbankruptcy law, an order entered in a nonbankruptcy proceeding, or an agreement fixes a period within which the debtor may commence an action, and such period has not expired before the date of the filing of the petition, the trustee may commence such action only before the later of - (1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or (2) two years after the order for relief. (b) Except as provided in subsection (a) of this section, if applicable nonbankruptcy law, an order entered in a nonbankruptcy proceeding, or an agreement fixes a period within which the debtor or an individual protected under section 1201 or 1301 of this title may file any pleading, demand, notice, or proof of claim or loss, cure a default, or perform any other similar act, and such period has not expired before the date of the filing of the petition, the trustee may only file, cure, or perform, as the case may be, before the later of - (1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or (2) 60 days after the order for relief. (c) Except as provided in section 524 of this title, if applicable nonbankruptcy law, an order entered in a nonbankruptcy proceeding, or an agreement fixes a period for commencing or continuing a civil action in a court other than a bankruptcy court on a claim against the debtor, or against an individual with respect to which such individual is protected under section 1201 or 1301 of this title, and such period has not expired before the date of the filing of the petition, then such period does not expire until the later of - (1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or (2) 30 days after notice of the termination or expiration of the stay under section 362, 922, 1201, or 1301 of this title, as the case may be, with respect to such claim. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2556; Pub. L. 98-353, title III, Sec. 424, July 10, 1984, 98 Stat. 369; Pub. L. 99-554, title II, Sec. 257(b), Oct. 27, 1986, 100 Stat. 3114.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Extension of time: The House amendment adopts section 108(c)(1) of the Senate amendment which expressly includes any special suspensions of statutes of limitation periods on collection outside bankruptcy when assets are under the authority of a court. For example, section 6503(b) of the Internal Revenue Code (title 26) suspends collection of tax liabilities while the debtor's assets are in the control or custody of a court, and for 6 months thereafter. By adopting the language of the Senate amendment, the House amendment insures not only that the period for collection of the taxes outside bankruptcy will not expire during the title 11 proceedings, but also that such period will not expire until at least 6 months thereafter, which is the minimum suspension period provided by the Internal Revenue Code (title 26). SENATE REPORT NO. 95-989 Subsections (a) and (b), derived from Bankruptcy Act section 11 (section 29 of former title 11), permit the trustee, when he steps into the shoes of the debtor, an extension of time for filing an action or doing some other act that is required to preserve the debtor's rights. Subsection (a) extends any statute of limitation for commencing or continuing an action by the debtor for two years after the date of the order for relief, unless it would expire later. Subsection (b) gives the trustee 60 days to take other actions not covered under subsection (a), such as filing a pleading, demand, notice, or proof of claim or loss (such as an insurance claim), unless the period for doing the relevant act expires later than 60 days after the date of the order for relief. Subsection (c) extends the statute of limitations for creditors. Thus, if a creditor is stayed from commencing or continuing an action against the debtor because of the bankruptcy case, then the creditor is permitted an additional 30 days after notice of the event by which the stay is terminated, whether that event be relief from the automatic stay under proposed 11 U.S.C. 362 or 1301, the closing of the bankruptcy case (which terminates the stay), or the exception from discharge of the debts on which the creditor claims. In the case of Federal tax liabilities, the Internal Revenue Code (title 26) suspends the statute of limitations on a tax liability of a taxpayer from running while his assets are in the control or custody of a court and for 6 months thereafter (sec. 6503(b) of the Code (title 26)). The amendment applies this rule in a title 11 proceeding. Accordingly, the statute of limitations on collection of a nondischargeable Federal tax liability of a debtor will resume running after 6 months following the end of the period during which the debtor's assets are in the control or custody of the bankruptcy court. This rule will provide the Internal Revenue Service adequate time to collect nondischargeable taxes following the end of the title 11 proceedings. AMENDMENTS 1986 - Subsec. (b). Pub. L. 99-554, Sec. 257(b)(1), inserted reference to section 1201 of this title. Subsec. (c). Pub. L. 99-554, Sec. 257(b)(2)(A), inserted reference to section 1201 of this title in provisions preceding par. (1). Subsec. (c)(2). Pub. L. 99-554, Sec. 257(b)(2)(B), which directed the amendment of subsec. (c) by inserting '1201,' after '722,' was executed to par. (2) by inserting '1201,' after '922,' as the probable intent of Congress. 1984 - Subsec. (a). Pub. L. 98-353, Sec. 424(b), inserted 'nonbankruptcy' after 'applicable' and 'entered in a' in provisions preceding par. (1). Subsec. (a)(1). Pub. L. 98-353, Sec. 424(a), substituted 'or' for 'and' after the semicolon. Subsec. (b). Pub. L. 98-353, Sec. 424(b), inserted 'nonbankruptcy' after 'applicable' and 'entered in a' in provisions preceding par. (1). Subsec. (b)(1). Pub. L. 98-353, Sec. 424(a), substituted 'or' for 'and' after the semicolon. Subsec. (c). Pub. L. 98-353, Sec. 424(b), inserted 'nonbankruptcy' after 'applicable' and 'entered in a' in provisions preceding par. (1). Subsec. (c)(1). Pub. L. 98-353, Sec. 424(a), substituted 'or' for 'and' after the semicolon. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 14680 Document 25 of 646------ -CITE- 11 USC Sec. 109 -EXPCITE- TITLE 11 CHAPTER 1 -HEAD- Sec. 109. Who may be a debtor -STATUTE- (a) Notwithstanding any other provision of this section, only a person that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under this title. (b) A person may be a debtor under chapter 7 of this title only if such person is not - (1) a railroad; (2) a domestic insurance company, bank, savings bank, cooperative bank, savings and loan association, building and loan association, homestead association, credit union, or industrial bank or similar institution which is an insured bank as defined in section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. 1813(h)); or (3) a foreign insurance company, bank, savings bank, cooperative bank, savings and loan association, building and loan association, homestead association, or credit union, engaged in such business in the United States. (c) An entity may be a debtor under chapter 9 of this title if and only if such entity - (1) is a municipality; (2) is generally authorized to be a debtor under such chapter by State law, or by a governmental officer or organization empowered by State law to authorize such entity to be a debtor under such chapter; (3) is insolvent; (4) desires to effect a plan to adjust such debts; and (5)(A) has obtained the agreement of creditors holding at least a majority in amount of the claims of each class that such entity intends to impair under a plan in a case under such chapter; (B) has negotiated in good faith with creditors and has failed to obtain the agreement of creditors holding at least a majority in amount of the claims of each class that such entity intends to impair under a plan in a case under such chapter; (C) is unable to negotiate with creditors because such negotiation is impracticable; or (D) reasonably believes that a creditor may attempt to obtain a transfer that is avoidable under section 547 of this title. (d) Only a person that may be a debtor under chapter 7 of this title, except a stockbroker or a commodity broker, and a railroad may be a debtor under chapter 11 of this title. (e) Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $100,000 and noncontingent, liquidated, secured debts of less than $350,000, or an individual with regular income and such individual's spouse, except a stockbroker or a commodity broker, that owe, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts that aggregate less than $100,000 and noncontingent, liquidated, secured debts of less than $350,000 may be a debtor under chapter 13 of this title. (f) Only a family farmer with regular annual income may be a debtor under chapter 12 of this title. (g) Notwithstanding any other provision of this section, no individual or family farmer may be a debtor under this title who has been a debtor in a case pending under this title at any time in the preceding 180 days if - (1) the case was dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case; or (2) the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay provided by section 362 of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2557; Pub. L. 97-320, title VII, Sec. 703(d), Oct. 15, 1982, 96 Stat. 1539; Pub. L. 98-353, title III, Sec. 301, 425, July 10, 1984, 98 Stat. 352, 369; Pub. L. 99-554, title II, Sec. 253, Oct. 27, 1986, 100 Stat. 3105; Pub. L. 100-597, Sec. 2, Nov. 3, 1988, 102 Stat. 3028.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 109(b) of the House amendment adopts a provision contained in H.R. 8200 as passed by the House. Railroad liquidations will occur under chapter 11, not chapter 7. Section 109(c) contains a provision which tracks the Senate amendment as to when a municipality may be a debtor under chapter 11 of title 11. As under the Bankruptcy Act (former title 11), State law authorization and prepetition negotiation efforts are required. Section 109(e) represents a compromise between H.R. 8200 as passed by the House and the Senate amendment relating to the dollar amounts restricting eligibility to be a debtor under chapter 13 of title 11. The House amendment adheres to the limit of $100,000 placed on unsecured debts in H.R. 8200 as passed by the House. It adopts a midpoint of $350,000 as a limit on secured claims, a compromise between the level of $500,000 in H.R. 8200 as passed by the House and $200,000 as contained in the Senate amendment. SENATE REPORT NO. 95-989 This section specifies eligibility to be a debtor under the bankruptcy laws. The first criterion, found in the current Bankruptcy Act section 2a(1) (section 11(a)(1) of former title 11) requires that the debtor reside or have a domicile, a place of business, or property in the United States. Subsection (b) defines eligibility for liquidation under chapter 7. All persons are eligible except insurance companies, and certain banking institutions. These exclusions are contained in current law. However, the banking institution exception is expanded in light of changes in various banking laws since the current law was last amended on this point. A change is also made to clarify that the bankruptcy laws cover foreign banks and insurance companies not engaged in the banking or insurance business in the United States but having assets in the United States. Banking institutions and insurance companies engaged in business in this country are excluded from liquidation under the bankruptcy laws because they are bodies for which alternate provision is made for their liquidation under various State or Federal regulatory laws. Conversely, when a foreign bank or insurance company is not engaged in the banking or insurance business in the United States, then those regulatory laws do not apply, and the bankruptcy laws are the only ones available for administration of any assets found in United States. The first clause of subsection (b) provides that a railroad is not a debtor except where the requirements of section 1174 are met. Subsection (c) (now (d)) provides that only a person who may be a debtor under chapter 7 and a railroad may also be a debtor under chapter 11, but a stockbroker or commodity broker is eligible for relief only under chapter 7. Subsection (d) (now (e)) establishes dollar limitations on the amount of indebtedness that an individual with regular income can incur and yet file under chapter 13. HOUSE REPORT NO. 95-595 Subsection (c) defines eligibility for chapter 9. Only a municipality that is unable to pay its debts as they mature, and that is not prohibited by State law from proceeding under chapter 9, is permitted to be a chapter 9 debtor. The subsection is derived from Bankruptcy Act Sec. 84 (section 404 of former title 11), with two changes. First, section 84 requires that the municipality be 'generally authorized to file a petition under this chapter by the legislature, or by a governmental officer or organization empowered by State law to authorize the filing of a petition.' The 'generally authorized' language is unclear, and has generated a problem for a Colorado Metropolitan District that attempted to use chapter IX (chapter 9 of former title 11) in 1976. The 'not prohibited' language provides flexibility for both the States and the municipalities involved, while protecting State sovereignty as required by Ashton v. Cameron County Water District No. 1, 298 U.S. 513 (1936) (56 S.Ct. 892, 80 L.Ed. 1309, 31 Am.Bankr.Rep.N.S. 96, rehearing denied 57 S.Ct. 5, 299 U.S. 619, 81 L.Ed. 457) and Bekins v. United States, 304 U.S. 27 (1938) (58 S.Ct. 811, 82 L.Ed. 1137, 36 Am.Bankr.Rep.N.S. 187, rehearing denied 58 S.Ct. 1043, 1044, 304 U.S. 589, 82 L.Ed. 1549). The second change deletes the four prerequisites to filing found in section 84 (section 404 of former title 11). The prerequisites require the municipality to have worked out a plan in advance, to have attempted to work out a plan without success, to fear that a creditor will attempt to obtain a preference, or to allege that prior negotiation is impracticable. The loopholes in those prerequisites are larger than the requirement itself. It was a compromise from pre-1976 chapter IX (chapter 9 of former title 11) under which a municipality could file only if it had worked out an adjustment plan in advance. In the meantime, chapter IX protection was unavailable. There was some controversy at the time of the enactment of current chapter IX concerning deletion of the pre-negotiation requirement. It was argued that deletion would lead to a rash of municipal bankruptcies. The prerequisites now contained in section 84 were inserted to assuage that fear. They are largely cosmetic and precatory, however, and do not offer any significant deterrent to use of chapter IX. Instead, other factors, such as a general reluctance on the part of any debtor, especially a municipality, to use the bankruptcy laws, operates as a much more effective deterrent against capricious use. Subsection (d) permits a person that may proceed under chapter 7 to be a debtor under chapter 11, Reorganization, with two exceptions. Railroads, which are excluded from chapter 7, are permitted to proceed under chapter 11. Stockbrokers and commodity brokers, which are permitted to be debtors under chapter 7, are excluded from chapter 11. The special rules for treatment of customer accounts that are the essence of stockbroker and commodity broker liquidations are available only in chapter 7. Customers would be unprotected under chapter 11. The special protective rules are unavailable in chapter 11 because their complexity would make reorganization very difficult at best, and unintelligible at worst. The variety of options available in reorganization cases make it extremely difficult to reorganize and continue to provide the special customer protection necessary in these cases. Subsection (e) specifies eligibility for chapter 13, Adjustment of Debts of an Individual with Regular Income. An individual with regular income, or an individual with regular income and the individual's spouse, may proceed under chapter 13. As noted in connection with the definition of the term 'individual with regular income', this represents a significant departure from current law. The change might have been too great, however, without some limitation. Thus, the debtor (or the debtor and spouse) must have unsecured debts that aggregate less than $100,000, and secured debts that aggregate less than $500,000. These figures will permit the small sole proprietor, for whom a chapter 11 reorganization is too cumbersome a procedure, to proceed under chapter 13. It does not create a presumption that any sole proprietor within that range is better off in chapter 13 than chapter 11. The conversion rules found in section 1307 will govern the appropriateness of the two chapters for any particular individual. The figures merely set maximum limits. Whether a small business operated by a husband and wife, the so-called 'mom and pop grocery store,' will be a partnership and thus excluded from chapter 13, or a business owned by an individual, will have to be determined on the facts of each case. Even if partnership papers have not been filed, for example, the issue will be whether the assets of the grocery store are for the benefit of all creditors of the debtor or only for business creditors, and whether such assets may be the subject of a chapter 13 proceeding. The intent of the section is to follow current law that a partnership by estoppel may be adjudicated in bankruptcy and therefore would not prevent a chapter 13 debtor from subjecting assets in such a partnership to the reach of all creditors in a chapter 13 case. However, if the partnership is found to be a partnership by agreement, even informal agreement, than a separate entity exists and the assets of that entity would be exempt from a case under chapter 13. AMENDMENTS 1988 - Subsec. (c)(3). Pub. L. 100-597 struck out 'or unable to meet such entity's debts as such debts mature' after 'insolvent'. 1986 - Subsec. (f). Pub. L. 99-554, Sec. 253(1)(B), (2), added subsec. (f) and redesignated former subsec. (f) as (g). Subsec. (g). Pub. L. 99-554, Sec. 253(1), redesignated former subsec. (f) as (g) and inserted reference to family farmer. 1984 - Subsec. (a). Pub. L. 98-353, Sec. 425(a), struck out 'in the United States,' after 'only a person that resides'. Subsec. (c)(5)(D). Pub. L. 98-353, Sec. 425(b), substituted 'transfer that is avoidable under section 547 of this title' for 'preference'. Subsec. (d). Pub. L. 98-353, Sec. 425(c), substituted 'stockbroker' for 'stockholder'. Subsec. (f). Pub. L. 98-353, Sec. 301, added subsec. (f). 1982 - Subsec. (b)(2). Pub. L. 97-320 inserted reference to industrial banks or similar institutions which are insured banks as defined in section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. 1813(h)). EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not applicable to any case commenced under this title before that date, see section 12 of Pub. L. 100-597, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 349, 921 of this title. ------DocID 14681 Document 26 of 646------ -CITE- 11 USC CHAPTER 3 -EXPCITE- TITLE 11 CHAPTER 3 -HEAD- CHAPTER 3 - CASE ADMINISTRATION -MISC1- SUBCHAPTER I - COMMENCEMENT OF A CASE Sec. 301. Voluntary cases. 302. Joint cases. 303. Involuntary cases. 304. Cases ancillary to foreign proceedings. 305. Abstention. 306. Limited appearance. 307. United States trustee. SUBCHAPTER II - OFFICERS 321. Eligibility to serve as trustee. 322. Qualification of trustee. 323. Role and capacity of trustee. 324. Removal of trustee or examiner. 325. Effect of vacancy. 326. Limitation on compensation of trustee. 327. Employment of professional persons. 328. Limitation on compensation of professional persons. 329. Debtor's transactions with attorneys. 330. Compensation of officers. 331. Interim compensation. SUBCHAPTER III - ADMINISTRATION 341. Meetings of creditors and equity security holders. 342. Notice. 343. Examination of the debtor. 344. Self-incrimination; immunity. 345. Money of estates. 346. Special tax provisions. 347. Unclaimed property. 348. Effect of conversion. 349. Effect of dismissal. 350. Closing and reopening cases. SUBCHAPTER IV - ADMINISTRATIVE POWERS 361. Adequate protection. 362. Automatic stay. 363. Use, sale, or lease of property. 364. Obtaining credit. 365. Executory contracts and unexpired leases. 366. Utility service. AMENDMENTS 1986 - Pub. L. 99-554, title II, Sec. 205(b), Oct. 27, 1986, 100 Stat. 3098, added item 307. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in section 103 of this title; title 15 section 78fff. ------DocID 14682 Document 27 of 646------ -CITE- 11 USC SUBCHAPTER I -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER I -HEAD- SUBCHAPTER I - COMMENCEMENT OF A CASE ------DocID 14683 Document 28 of 646------ -CITE- 11 USC Sec. 301 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER I -HEAD- Sec. 301. Voluntary cases -STATUTE- A voluntary case under a chapter of this title is commenced by the filing with the bankruptcy court of a petition under such chapter by an entity that may be a debtor under such chapter. The commencement of a voluntary case under a chapter of this title constitutes an order for relief under such chapter. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2558.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Sections 301, 302, 303, and 304 are all modified in the House amendment to adopt an idea contained in sections 301 and 303 of the Senate amendment requiring a petition commencing a case to be filed with the bankruptcy court. The exception contained in section 301 of the Senate bill relating to cases filed under chapter 9 is deleted. Chapter 9 cases will be handled by a bankruptcy court as are other title 11 cases. SENATE REPORT NO. 95-989 Section 301 specifies the manner in which a voluntary bankruptcy case is commenced. The debtor files a petition under this section under the particular operative chapter of the bankruptcy code under which he wishes to proceed. The filing of the petition constitutes an order for relief in the case under that chapter. The section contains no change from current law, except for the use of the phrase 'order for relief' instead of 'adjudication.' The term adjudication is replaced by a less pejorative phrase in light of the clear power of Congress to permit voluntary bankruptcy without the necessity for an adjudication, as under the 1898 act (former title 11), which was adopted when voluntary bankruptcy was a concept not thoroughly tested. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 101, 362, 522, 541, 901, 921 of this title. ------DocID 14684 Document 29 of 646------ -CITE- 11 USC Sec. 302 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER I -HEAD- Sec. 302. Joint cases -STATUTE- (a) A joint case under a chapter of this title is commenced by the filing with the bankruptcy court of a single petition under such chapter by an individual that may be a debtor under such chapter and such individual's spouse. The commencement of a joint case under a chapter of this title constitutes an order for relief under such chapter. (b) After the commencement of a joint case, the court shall determine the extent, if any, to which the debtors' estates shall be consolidated. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2558.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 A joint case is a voluntary bankruptcy case concerning a wife and husband. Under current law, there is no explicit provision for joint cases. Very often, however, in the consumer debtor context, a husband and wife are jointly liable on their debts, and jointly hold most of their property. A joint case will facilitate consolidation of their estates, to the benefit of both the debtors and their creditors, because the cost of administration will be reduced, and there will be only one filing fee. Section 302 specifies that a joint case is commenced by the filing of a petition under an appropriate chapter by an individual and that individual's spouse. Thus, one spouse cannot take the other into bankruptcy without the other's knowledge or consent. The filing of the petition constitutes an order for relief under the chapter selected. Subsection (b) requires the court to determine the extent, if any, to which the estates of the two debtors will be consolidated; that is, assets and liabilities combined in a single pool to pay creditors. Factors that will be relevant in the court's determination include the extent of jointly held property and the amount of jointly-owned debts. The section, of course, is not license to consolidate in order to avoid other provisions of the title to the detriment of either the debtors or their creditors. It is designed mainly for ease of administration. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 101, 362, 522, 541 of this title. ------DocID 14685 Document 30 of 646------ -CITE- 11 USC Sec. 303 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER I -HEAD- Sec. 303. Involuntary cases -STATUTE- (a) An involuntary case may be commenced only under chapter 7 or 11 of this title, and only against a person, except a farmer, family farmer, or a corporation that is not a moneyed, business, or commercial corporation, that may be a debtor under the chapter under which such case is commenced. (b) An involuntary case against a person is commenced by the filing with the bankruptcy court of a petition under chapter 7 or 11 of this title - (1) by three or more entities, each of which is either a holder of a claim against such person that is not contingent as to liability or the subject of a bona fide dispute, or an indenture trustee representing such a holder, if such claims aggregate at least $5,000 more than the value of any lien on property of the debtor securing such claims held by the holders of such claims; (2) if there are fewer than 12 such holders, excluding any employee or insider of such person and any transferee of a transfer that is voidable under section 544, 545, 547, 548, 549, or 724(a) of this title, by one or more of such holders that hold in the aggregate at least $5,000 of such claims; (3) if such person is a partnership - (A) by fewer than all of the general partners in such partnership; or (B) if relief has been ordered under this title with respect to all of the general partners in such partnership, by a general partner in such partnership, the trustee of such a general partner, or a holder of a claim against such partnership; or (4) by a foreign representative of the estate in a foreign proceeding concerning such person. (c) After the filing of a petition under this section but before the case is dismissed or relief is ordered, a creditor holding an unsecured claim that is not contingent, other than a creditor filing under subsection (b) of this section, may join in the petition with the same effect as if such joining creditor were a petitioning creditor under subsection (b) of this section. (d) The debtor, or a general partner in a partnership debtor that did not join in the petition, may file an answer to a petition under this section. (e) After notice and a hearing, and for cause, the court may require the petitioners under this section to file a bond to indemnify the debtor for such amounts as the court may later allow under subsection (i) of this section. (f) Notwithstanding section 363 of this title, except to the extent that the court orders otherwise, and until an order for relief in the case, any business of the debtor may continue to operate, and the debtor may continue to use, acquire, or dispose of property as if an involuntary case concerning the debtor had not been commenced. (g) At any time after the commencement of an involuntary case under chapter 7 of this title but before an order for relief in the case, the court, on request of a party in interest, after notice to the debtor and a hearing, and if necessary to preserve the property of the estate or to prevent loss to the estate, may order the United States trustee to appoint an interim trustee under section 701 of this title to take possession of the property of the estate and to operate any business of the debtor. Before an order for relief, the debtor may regain possession of property in the possession of a trustee ordered appointed under this subsection if the debtor files such bond as the court requires, conditioned on the debtor's accounting for and delivering to the trustee, if there is an order for relief in the case, such property, or the value, as of the date the debtor regains possession, of such property. (h) If the petition is not timely controverted, the court shall order relief against the debtor in an involuntary case under the chapter under which the petition was filed. Otherwise, after trial, the court shall order relief against the debtor in an involuntary case under the chapter under which the petition was filed, only if - (1) the debtor is generally not paying such debtor's debts as such debts become due unless such debts are the subject of a bona fide dispute; or (2) within 120 days before the date of the filing of the petition, a custodian, other than a trustee, receiver, or agent appointed or authorized to take charge of less than substantially all of the property of the debtor for the purpose of enforcing a lien against such property, was appointed or took possession. (i) If the court dismisses a petition under this section other than on consent of all petitioners and the debtor, and if the debtor does not waive the right to judgment under this subsection, the court may grant judgment - (1) against the petitioners and in favor of the debtor for - (A) costs; or (B) a reasonable attorney's fee; or (2) against any petitioner that filed the petition in bad faith, for - (A) any damages proximately caused by such filing; or (B) punitive damages. (j) Only after notice to all creditors and a hearing may the court dismiss a petition filed under this section - (1) on the motion of a petitioner; (2) on consent of all petitioners and the debtor; or (3) for want of prosecution. (k) Notwithstanding subsection (a) of this section, an involuntary case may be commenced against a foreign bank that is not engaged in such business in the United States only under chapter 7 of this title and only if a foreign proceeding concerning such bank is pending. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2559; Pub. L. 98-353, title III, Sec. 426, 427, July 10, 1984, 98 Stat. 369; Pub. L. 99-554, title II, Sec. 204, 254, 283(b), Oct. 27, 1986, 100 Stat. 3097, 3105, 3116.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 303(b)(1) is modified to make clear that unsecured claims against the debtor must be determined by taking into account liens securing property held by third parties. Section 303(b)(3) adopts a provision contained in the Senate amendment indicating that an involuntary petition may be commenced against a partnership by fewer than all of the general partners in such partnership. Such action may be taken by fewer than all of the general partners notwithstanding a contrary agreement between the partners or State or local law. Section 303(h)(1) in the House amendment is a compromise of standards found in H.R. 8200 as passed by the House and the Senate amendment pertaining to the standards that must be met in order to obtain an order for relief in an involuntary case under title 11. The language specifies that the court will order such relief only if the debtor is generally not paying debtor's debts as they become due. Section 303(h)(2) reflects a compromise pertaining to section 543 of title 11 relating to turnover of property by a custodian. It provides an alternative test to support an order for relief in an involuntary case. If a custodian, other than a trustee, receiver, or agent appointed or authorized to take charge of less than substantially all of the property of the debtor for the purpose of enforcing a lien against such property, was appointed or took possession within 120 days before the date of the filing of the petition, then the court may order relief in the involuntary case. The test under section 303(h)(2) differs from section 3a(5) of the Bankruptcy Act (section 21(a)(5) of former title 11), which requires an involuntary case to be commenced before the earlier of time such custodian was appointed or took possession. The test in section 303(h)(2) authorizes an order for relief to be entered in an involuntary case from the later date on which the custodian was appointed or took possession. SENATE REPORT NO. 95-989 Section 303 governs the commencement of involuntary cases under title 11. An involuntary case may be commenced only under chapter 7, Liquidation, or chapter 11, Reorganization. Involuntary cases are not permitted for municipalities, because to do so may constitute an invasion of State sovereignty contrary to the 10th amendment, and would constitute bad policy, by permitting the fate of a municipality, governed by officials elected by the people of the municipality, to be determined by a small number of creditors of the municipality. Involuntary chapter 13 cases are not permitted either. To do so would constitute bad policy, because chapter 13 only works when there is a willing debtor that wants to repay his creditors. Short of involuntary servitude, it is difficult to keep a debtor working for his creditors when he does not want to pay them back. See chapter 3, supra. The exceptions contained in current law that prohibit involuntary cases against farmers, ranchers and eleemosynary institutions are continued. Farmers and ranchers are excepted because of the cyclical nature of their business. One drought year or one year of low prices, as a result of which a farmer is temporarily unable to pay his creditors, should not subject him to involuntary bankruptcy. Eleemosynary institutions, such as churches, schools, and charitable organizations and foundations, likewise are exempt from involuntary bankruptcy. The provisions for involuntary chapter 11 cases is a slight change from present law, based on the proposed consolidation of the reorganization chapters. Currently, involuntary cases are permitted under chapters X and XII (chapters 10 and 12 of former title 11) but not under chapter XI (chapter 11 of former title 11). The consolidation requires a single rule for all kinds of reorganization proceedings. Because the assets of an insolvent debtor belong equitably to his creditors, the bill permits involuntary cases in order that creditors may realize on their assets through reorganization as well as through liquidation. Subsection (b) of the section specifies who may file an involuntary petition. As under current law, if the debtor has more than 12 creditors, three creditors must join in the involuntary petition. The dollar amount limitation is changed from current law to $5,000. The new amount applies both to liquidation and reorganization cases in order that there not be an artificial difference between the two chapters that would provide an incentive for one or the other. Subsection (b)(1) makes explicit the right of an indenture trustee to be one of the three petitioning creditors on behalf of the creditors the trustee represents under the indenture. If all of the general partners in a partnership are in bankruptcy, then the trustee of a single general partner may file an involuntary petition against the partnership. Finally, a foreign representative may file an involuntary case concerning the debtor in the foreign proceeding, in order to administer assets in this country. This subsection is not intended to overrule Bankruptcy Rule 104(d), which places certain restrictions on the transfer of claims for the purpose of commencing an involuntary case. That Rule will be continued under section 405(d) of this bill. Subsection (c) permits creditors other than the original petitioning creditors to join in the petition with the same effect as if the joining creditor had been one of the original petitioning creditors. Thus, if the claim of one of the original petitioning creditors is disallowed, the case will not be dismissed for want of three creditors or want of $5,000 in petitioning claims if the joining creditor suffices to fulfill the statutory requirements. Subsection (d) permits the debtor to file an answer to an involuntary petition. The subsection also permits a general partner in a partnership debtor to answer an involuntary petition against the partnership if he did not join in the petition. Thus, a partnership petition by less than all of the general partners is treated as an involuntary, not a voluntary, petition. The court may, under subsection (e), require the petitioners to file a bond to indemnify the debtor for such amounts as the court may later allow under subsection (i). Subsection (i) provides for costs, attorneys fees, and damages in certain circumstances. The bonding requirement will discourage frivolous petitions as well as spiteful petitions based on a desire to embarrass the debtor (who may be a competitor of a petitioning creditor) or to put the debtor out of business without good cause. An involuntary petition may put a debtor out of business even if it is without foundation and is later dismissed. Subsection (f) is both a clarification and a change from existing law. It permits the debtor to continue to operate any business of the debtor and to dispose of property as if the case had not been commenced. The court is permitted, however, to control the debtor's powers under this subsection by appropriate orders, such as where there is a fear that the debtor may attempt to abscond with assets, dispose of them at less than their fair value, or dismantle his business, all to the detriment of the debtor's creditors. The court may also, under subsection (g), appoint an interim trustee to take possession of the debtor's property and to operate any business of the debtor, pending trial on the involuntary petition. The court may make such an order only on the request of a party in interest, and after notice to the debtor and a hearing. There must be a showing that a trustee is necessary to preserve the property of the estate or to prevent loss to the estate. The debtor may regain possession by posting a sufficient bond. Subsection (h) provides the standard for an order for relief on an involuntary petition. If the petition is not timely controverted (the Rules of Bankruptcy Procedure will fix time limits), the court orders relief after a trial, only if the debtor is generally unable to pay its debts as they mature, or if the debtor has failed to pay a major portion of his debts as they become due, or if a custodian was appointed during the 90-day period preceding the filing of the petition. The first two tests are variations of the equity insolvency test. They represent the most significant departure from present law concerning the grounds for involuntary bankruptcy, which requires an act of bankruptcy. Proof of the commission of an act of bankruptcy has frequently required a showing that the debtor was insolvent on a 'balance-sheet' test when the act was committed. This bill abolishes the concept of acts of bankruptcy. The equity insolvency test has been in equity jurisprudence for hundreds of years, and though it is new in the bankruptcy context (except in chapter X (chapter 10 of former title 11)), the bankruptcy courts should have no difficulty in applying it. The third test, appointment of a custodian within ninety days before the petition, is provided for simplicity. It is not a partial re-enactment of acts of bankruptcy. If a custodian of all or substantially all of the property of the debtor has been appointed, this paragraph creates an irrebuttable presumption that the debtor is unable to pay its debts as they mature. Moreover, once a proceeding to liquidate assets has been commenced, the debtor's creditors have an absolute right to have the liquidation (or reorganization) proceed in the bankruptcy court and under the bankruptcy laws with all of the appropriate creditor and debtor protections that those laws provide. Ninety days gives creditors ample time in which to seek bankruptcy liquidation after the appointment of a custodian. If they wait beyond the ninety day period, they are not precluded from filing an involuntary petition. They are simply required to prove equity insolvency rather than the more easily provable custodian test. Subsection (i) permits the court to award costs, reasonable attorney's fees, or damages if an involuntary petition is dismissed other than by consent of all petitioning creditors and the debtor. The damages that the court may award are those that may be caused by the taking of possession of the debtor's property under subsection (g) or section 1104 of the bankruptcy code. In addition, if a petitioning creditor filed the petition in bad faith, the court may award the debtor any damages proximately caused by the filing of the petition. These damages may include such items as loss of business during and after the pendency of the case, and so on. 'Or' is not exclusive in this paragraph. The court may grant any or all of the damages provided for under the provision. Dismissal in the best interests of credits under section 305(a)(1) would not give rise to a damages claim. Under subsection (j), the court may dismiss the petition by consent only after giving notice to all creditors. The purpose of the subsection is to prevent collusive settlements among the debtor and the petitioning creditors while other creditors, that wish to see relief ordered with respect to the debtor but that did not participate in the case, are left without sufficient protection. Subsection (k) governs involuntary cases against foreign banks that are not engaged in business in the United States but that have assets located here. The subsection prevents a foreign bank from being placed into bankruptcy in this country unless a foreign proceeding against the bank is pending. The special protection afforded by this section is needed to prevent creditors from effectively closing down a foreign bank by the commencement of an involuntary bankruptcy case in this country unless that bank is involved in a proceeding under foreign law. An involuntary case commenced under this subsection gives the foreign representative an alternative to commencing a case ancillary to a foreign proceeding under section 304. AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554, Sec. 254, inserted reference to family farmer. Subsec. (b). Pub. L. 99-554, Sec. 283(b)(1), substituted 'subject of' for 'subject on'. Subsec. (g). Pub. L. 99-554, Sec. 204(1), substituted 'may order the United States trustee to appoint' for 'may appoint'. Subsec. (h)(1). Pub. L. 99-554, Sec. 283(b)(2), substituted 'are the' for 'that are the'. Subsec. (i)(1). Pub. L. 99-554, Sec. 204(2), inserted 'or' at end of subpar. (A) and struck out subpar. (C) which read as follows: 'any damages proximately caused by the taking of possession of the debtor's property by a trustee appointed under subsection (g) of this section or section 1104 of this title; or'. 1984 - Subsec. (b). Pub. L. 98-353, Sec. 426(a), inserted 'against a person' after 'involuntary case'. Subsec. (b)(1). Pub. L. 98-353, Sec. 426(b)(1), inserted 'or the subject on a bona fide dispute,'. Subsec. (h)(1). Pub. L. 98-353, Sec. 426(b)(2), inserted 'unless such debts that are the subject of a bona fide dispute'. Subsec. (j)(2). Pub. L. 98-353, Sec. 427, substituted 'debtor' for 'debtors'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by section 204 of Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 254 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554. Amendment by section 283 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by sections 426(a) and 427 of Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, and amendment by section 426(b) of Pub. L. 98-353 effective July 10, 1984, see section 552(a), (b) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 101, 306, 362, 503, 504, 522, 541, 549 of this title; title 28 sections 1411, 1480. ------DocID 14686 Document 31 of 646------ -CITE- 11 USC Sec. 304 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER I -HEAD- Sec. 304. Cases ancillary to foreign proceedings -STATUTE- (a) A case ancillary to a foreign proceeding is commenced by the filing with the bankruptcy court of a petition under this section by a foreign representative. (b) Subject to the provisions of subsection (c) of this section, if a party in interest does not timely controvert the petition, or after trial, the court may - (1) enjoin the commencement or continuation of - (A) any action against - (i) a debtor with respect to property involved in such foreign proceeding; or (ii) such property; or (B) the enforcement of any judgment against the debtor with respect to such property, or any act or the commencement or continuation of any judicial proceeding to create or enforce a lien against the property of such estate; (2) order turnover of the property of such estate, or the proceeds of such property, to such foreign representative; or (3) order other appropriate relief. (c) In determining whether to grant relief under subsection (b) of this section, the court shall be guided by what will best assure an economical and expeditious administration of such estate, consistent with - (1) just treatment of all holders of claims against or interests in such estate; (2) protection of claim holders in the United States against prejudice and inconvenience in the processing of claims in such foreign proceeding; (3) prevention of preferential or fraudulent dispositions of property of such estate; (4) distribution of proceeds of such estate substantially in accordance with the order prescribed by this title; (5) comity; and (6) if appropriate, the provision of an opportunity for a fresh start for the individual that such foreign proceeding concerns. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2560.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 304(b) adopts a provision contained in the Senate amendment with modifications. The provision indicates that if a party in interest does not timely controvert the petition in a case ancillary to a foreign proceeding, or after trial on the merits, the court may take various actions, including enjoining the commencement or continuation of any action against the debtor with respect to property involved in the proceeding, or against the property itself; enjoining the enforcement of any judgment against the debtor or the debtor's property; or the commencement or continuation of any judicial proceeding to create or enforce a lien against the property of the debtor or the estate. Section 304(c) is modified to indicate that the court shall be guided by considerations of comity in addition to the other factors specified therein. SENATE REPORT NO. 95-989 This section governs cases filed in the bankruptcy courts that are ancillary to foreign proceedings. That is, where a foreign bankruptcy case is pending concerning a particular debtor and that debtor has assets in this country, the foreign representative may file a petition under this section, which does not commence a full bankruptcy case, in order to administer assets located in this country, to prevent dismemberment by local creditors of assets located here, or for other appropriate relief. The debtor is given the opportunity to controvert the petition. Subsection (c) requires the court to consider several factors in determining what relief, if any, to grant. The court is to be guided by what will best assure an economical and expeditious administration of the estate, consistent with just treatment of all creditors and equity security holders; protection of local creditors and equity security holders against prejudice and inconvenience in processing claims and interests in the foreign proceeding; prevention of preferential or fraudulent disposition of property of the estate; distribution of the proceeds of the estate substantially in conformity with the distribution provisions of the bankruptcy code; and, if the debtor is an individual, the provision of an opportunity for a fresh start. These guidelines are designed to give the court the maximum flexibility in handling ancillary cases. Principles of international comity and respect for the judgments and laws of other nations suggest that the court be permitted to make the appropriate orders under all of the circumstances of each case, rather than being provided with inflexible rules. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 101, 305, 306 of this title; title 28 section 1410. ------DocID 14687 Document 32 of 646------ -CITE- 11 USC Sec. 305 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER I -HEAD- Sec. 305. Abstention -STATUTE- (a) The court, after notice and a hearing, may dismiss a case under this title, or may suspend all proceedings in a case under this title, at any time if - (1) the interests of creditors and the debtor would be better served by such dismissal or suspension; or (2)(A) there is pending a foreign proceeding; and (B) the factors specified in section 304(c) of this title warrant such dismissal or suspension. (b) A foreign representative may seek dismissal or suspension under subsection (a)(2) of this section. (c) An order under subsection (a) of this section dismissing a case or suspending all proceedings in a case, or a decision not so to dismiss or suspend, is not reviewable by appeal or otherwise by the court of appeals under section 158(d), 1291, or 1292 of this title (FOOTNOTE 1) or by the Supreme Court of the United States under section 1254 of this title. (FOOTNOTE 1) (FOOTNOTE 1) So in original. Words 'of this title' probably should be 'of title 28'. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2561; Pub. L. 101-650, title III, Sec. 309(a), Dec. 1, 1990, 104 Stat. 5113.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 A principle of the common law requires a court with jurisdiction over a particular matter to take jurisdiction. This section recognizes that there are cases in which it would be appropriate for the court to decline jurisdiction. Abstention under this section, however, is of jurisdiction over the entire case. Abstention from jurisdiction over a particular proceeding in a case is governed by proposed 28 U.S.C. 1471(c). Thus, the court is permitted, if the interests of creditors and the debtor would be better served by dismissal of the case or suspension of all proceedings in the case, to so order. The court may dismiss or suspend under the first paragraph, for example, if an arrangement is being worked out by creditors and the debtor out of court, there is no prejudice to the results of creditors in that arrangement, and an involuntary case has been commenced by a few recalcitrant creditors to provide a basis for future threats to extract full payment. The less expensive out-of-court workout may better serve the interests in the case. Likewise, if there is pending a foreign proceeding concerning the debtor and the factors specified in proposed 11 U.S.C. 304(c) warrant dismissal or suspension, the court may so act. Subsection (b) gives a foreign representative authority to appear in the bankruptcy court to request dismissal or suspension. Subsection (c) makes the dismissal or suspension order nonreviewable by appeal or otherwise. The bankruptcy court, based on its experience and discretion is vested with the power of decision. AMENDMENTS 1990 - Subsec. (c). Pub. L. 101-650 inserted before period at end 'by the court of appeals under section 158(d), 1291, or 1292 of this title or by the Supreme Court of the United States under section 1254 of this title'. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 306 of this title. ------DocID 14688 Document 33 of 646------ -CITE- 11 USC Sec. 306 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER I -HEAD- Sec. 306. Limited appearance -STATUTE- An appearance in a bankruptcy court by a foreign representative in connection with a petition or request under section 303, 304, or 305 of this title does not submit such foreign representative to the jurisdiction of any court in the United States for any other purpose, but the bankruptcy court may condition any order under section 303, 304, or 305 of this title on compliance by such foreign representative with the orders of such bankruptcy court. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2561.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 306 permits a foreign representative that is seeking dismissal or suspension under section 305 of an ancillary case or that is appearing in connection with a petition under section 303 or 304 to appear without subjecting himself to the jurisdiction of any other court in the United States, including State courts. The protection is necessary to allow the foreign representative to present his case and the case of the foreign estate, without waiving the normal jurisdictional rules of the foreign country. That is, creditors in this country will still have to seek redress against the foreign estate according to the host country's jurisdictional rules. Any other result would permit local creditors to obtain unfair advantage by filing an involuntary case, thus requiring the foreign representative to appear, and then obtaining local jurisdiction over the representative in connection with his appearance in this country. That kind of bankruptcy law would legalize an ambush technique that has frequently been rejected by the common law in other contexts. However, the bankruptcy court is permitted under section 306 to condition any relief under section 303, 304, or 305 on the compliance by the foreign representative with the orders of the bankruptcy court. The last provision is not carte blanche to the bankruptcy court to require the foreign representative to submit to jurisdiction in other courts contrary to the general policy of the section. It is designed to enable the bankruptcy court to enforce its own orders that are necessary to the appropriate relief granted under section 303, 304, or 305. ------DocID 14689 Document 34 of 646------ -CITE- 11 USC Sec. 307 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER I -HEAD- Sec. 307. United States trustee -STATUTE- The United States trustee may raise and may appear and be heard on any issue in any case or proceeding under this title but may not file a plan pursuant to section 1121(c) of this title. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 205(a), Oct. 27, 1986, 100 Stat. 3098.) -MISC1- EFFECTIVE DATE Effective date and applicability of section dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. STANDING AND AUTHORITY OF BANKRUPTCY ADMINISTRATOR Pub. L. 101-650, title III, Sec. 317(b), Dec. 1, 1990, 104 Stat. 5115, provided that: 'A bankruptcy administrator may raise and may appear and be heard on any issue in any case under title 11, United States Code, but may not file a plan pursuant to section 1121(c) of such title.' ------DocID 14690 Document 35 of 646------ -CITE- 11 USC SUBCHAPTER II -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER II -HEAD- SUBCHAPTER II - OFFICERS ------DocID 14691 Document 36 of 646------ -CITE- 11 USC Sec. 321 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER II -HEAD- Sec. 321. Eligibility to serve as trustee -STATUTE- (a) A person may serve as trustee in a case under this title only if such person is - (1) an individual that is competent to perform the duties of trustee and, in a case under chapter 7, 12, or 13 of this title, resides or has an office in the judicial district within which the case is pending, or in any judicial district adjacent to such district; or (2) a corporation authorized by such corporation's charter or bylaws to act as trustee, and, in a case under chapter 7, 12, or 13 of this title, having an office in at least one of such districts. (b) A person that has served as an examiner in the case may not serve as trustee in the case. (c) The United States trustee for the judicial district in which the case is pending is eligible to serve as trustee in the case if necessary. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2561; Pub. L. 98-353, title III, Sec. 428, July 10, 1984, 98 Stat. 369; Pub. L. 99-554, title II, Sec. 206, 257(c), Oct. 27, 1986, 100 Stat. 3098, 3114.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 321 indicates that an examiner may not serve as a trustee in the case. SENATE REPORT NO. 95-989 Section 321 is adapted from current Bankruptcy Act Sec. 45 (section 73 of former title 11) and Bankruptcy Rule 209. Subsection (a) specifies that an individual may serve as trustee in a bankruptcy case only if he is competent to perform the duties of trustee and resides or has an office in the judicial district within which the case is pending, or in an adjacent judicial district. A corporation must be authorized by its charter or bylaws to act as trustee, and, for chapter 7 or 13 cases, must have an office in any of the above mentioned judicial districts. AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554, Sec. 257(c), inserted reference to chapter 12 in two places. Subsec. (c). Pub. L. 99-554, Sec. 206, added subsec. (c). 1984 - Subsec. (b). Pub. L. 98-353 substituted 'the case' for 'a case' after 'an examiner in'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by section 206 of Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 14692 Document 37 of 646------ -CITE- 11 USC Sec. 322 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER II -HEAD- Sec. 322. Qualification of trustee -STATUTE- (a) Except as provided in subsection (b)(1), a person selected under section 701, 702, 703, 1104, 1163, 1302, or 1202 of this title to serve as trustee in a case under this title qualifies if before five days after such selection, and before beginning official duties, such person has filed with the court a bond in favor of the United States conditioned on the faithful performance of such official duties. (b)(1) The United States trustee qualifies wherever such trustee serves as trustee in a case under this title. (2) The United States trustee shall determine - (A) the amount of a bond required to be filed under subsection (a) of this section; and (B) the sufficiency of the surety on such bond. (c) A trustee is not liable personally or on such trustee's bond in favor of the United States for any penalty or forfeiture incurred by the debtor. (d) A proceeding on a trustee's bond may not be commenced after two years after the date on which such trustee was discharged. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2562; Pub. L. 98-353, title III, Sec. 429, July 10, 1984, 98 Stat. 369; Pub. L. 99-554, title II, Sec. 207, 257(d), Oct. 27, 1986, 100 Stat. 3098, 3114.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 322(a) is modified to include a trustee serving in a railroad reorganization under subchapter IV of chapter 11. SENATE REPORT NO. 95-989 A trustee qualifies in a case by filing, within five days after selection, a bond in favor of the United States, conditioned on the faithful performance of his official duties. This section is derived from the Bankruptcy Act section 50b (section 78(b) of former title 11). The court is required to determine the amount of the bond and the sufficiency of the surety on the bond. Subsection (c), derived from Bankruptcy Act section 50i (section 78(i) of former title 11), relieves the trustee from personal liability and from liability on his bond for any penalty or forfeiture incurred by the debtor. Subsection (d), derived from section 50m (section 78(m) of former title 11), fixes a two-year statute of limitations on any action on a trustee's bond. Finally, subsection (e) dispenses with the bonding requirement for the United States trustee. AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554, Sec. 257(d), inserted reference to section 1202 of this title. Pub. L. 99-554, Sec. 207(1), substituted 'Except as provided in subsection (b)(1), a person' for 'A person'. Subsec. (b). Pub. L. 99-554, Sec. 207(2), amended subsec. (b) generally, adding par. (1), designating existing provisions as par. (2), substituting 'The United States trustee' for 'The court', '(A) the amount' for '(1) the amount', and '(B) the sufficiency' for '(2) the sufficiency'. 1984 - Subsec. (b)(1). Pub. L. 98-353 inserted 'required to be'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by section 207 of Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 701, 703, 746, 1101, 1104, 1202, 1302 of this title; title 15 section 78eee. ------DocID 14693 Document 38 of 646------ -CITE- 11 USC Sec. 323 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER II -HEAD- Sec. 323. Role and capacity of trustee -STATUTE- (a) The trustee in a case under this title is the representative of the estate. (b) The trustee in a case under this title has capacity to sue and be sued. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2562.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Subsection (a) of this section makes the trustee the representative of the estate. Subsection (b) grants the trustee the capacity to sue and to be sued. If the debtor remains in possession in a chapter 11 case, section 1107 gives the debtor in possession these rights of the trustee: the debtor in possession becomes the representative of the estate, and may sue and be sued. The same applies in a chapter 13 case. ------DocID 14694 Document 39 of 646------ -CITE- 11 USC Sec. 324 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER II -HEAD- Sec. 324. Removal of trustee or examiner -STATUTE- (a) The court, after notice and a hearing, may remove a trustee, other than the United States trustee, or an examiner, for cause. (b) Whenever the court removes a trustee or examiner under subsection (a) in a case under this title, such trustee or examiner shall thereby be removed in all other cases under this title in which such trustee or examiner is then serving unless the court orders otherwise. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2562; Pub. L. 99-554, title II, Sec. 208, Oct. 27, 1986, 100 Stat. 3098.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 This section permits the court, after notice and a hearing, to remove a trustee for cause. AMENDMENTS 1986 - Pub. L. 99-554 amended section generally, designating existing provisions as subsec. (a), substituting 'a trustee, other than the United States trustee, or an examiner' for 'a trustee or an examiner', and adding subsec. (b). EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 703, 1104 of this title. ------DocID 14695 Document 40 of 646------ -CITE- 11 USC Sec. 325 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER II -HEAD- Sec. 325. Effect of vacancy -STATUTE- A vacancy in the office of trustee during a case does not abate any pending action or proceeding, and the successor trustee shall be substituted as a party in such action or proceeding. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2562.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 325, derived from Bankruptcy Act section 46 (section 74 of former title 11) and Bankruptcy Rule 221(b), specifies that a vacancy in the office of trustee during a case does not abate any pending action or proceeding. The successor trustee, when selected and qualified, is substituted as a party in any pending action or proceeding. ------DocID 14696 Document 41 of 646------ -CITE- 11 USC Sec. 326 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER II -HEAD- Sec. 326. Limitation on compensation of trustee -STATUTE- (a) In a case under chapter 7 or 11, the court may allow reasonable compensation under section 330 of this title of the trustee for the trustee's services, payable after the trustee renders such services, not to exceed fifteen percent on the first $1,000 or less, six percent on any amount in excess of $1,000 but not in excess of $3,000, and three percent on any amount in excess of $3,000, upon all moneys disbursed or turned over in the case by the trustee to parties in interest, excluding the debtor, but including holders of secured claims. (b) In a case under chapter 12 or 13 of this title, the court may not allow compensation for services or reimbursement of expenses of the United States trustee or of a standing trustee appointed under section 586(b) of title 28, but may allow reasonable compensation under section 330 of this title of a trustee appointed under section 1202(a) or 1302(a) of this title for the trustee's services, payable after the trustee renders such services, not to exceed five percent upon all payments under the plan. (c) If more than one person serves as trustee in the case, the aggregate compensation of such persons for such service may not exceed the maximum compensation prescribed for a single trustee by subsection (a) or (b) of this section, as the case may be. (d) The court may deny allowance of compensation for services or reimbursement of expenses of the trustee if the trustee failed to make diligent inquiry into facts that would permit denial of allowance under section 328(c) of this title or, with knowledge of such facts, employed a professional person under section 327 of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2562; Pub. L. 98-353, title III, Sec. 430(a), (b), July 10, 1984, 98 Stat. 369; Pub. L. 99-554, title II, Sec. 209, Oct. 27, 1986, 100 Stat. 3098.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 326(a) of the House amendment modifies a provision as contained in H.R. 8200 as passed by the House. The percentage limitation on the fees of a trustee contained in the House bill is retained, but no additional percentage is specified for cases in which a trustee operates the business of the debtor. Section 326(b) of the Senate amendment is deleted as an unnecessary restatement of the limitation contained in section 326(a) as modified. The provision contained in section 326(a) of the Senate amendment authorizing a trustee to receive a maximum fee of $150 regardless of the availability of assets in the estate is deleted. It will not be necessary in view of the increase in section 326(a) and the doubling of the minimum fee as provided in section 330(b). Section 326(b) of the House amendment derives from section 326(c) of H.R. 8200 as passed by the House. It is a conforming amendment to indicate a change with respect to the selection of a trustee in a chapter 13 case under section 1302(a) of title 11. SENATE REPORT NO. 95-989 This section is derived in part from section 48c of the Bankruptcy Act (section 76(c) of former title 11). It must be emphasized that this section does not authorize compensation of trustees. This section simply fixes the maximum compensation of a trustee. Proposed 11 U.S.C. 330 authorizes and fixes the standard of compensation. Under section 48c of current law, the maximum limits have tended to become minimums in many cases. This section is not intended to be so interpreted. The limits in this section, together with the limitations found in section 330, are to be applied as outer limits, and not as grants or entitlements to the maximum fees specified. The maximum fee schedule is derived from section 48c(1) of the present act (section 76(c)(1) of former title 11), but with a change relating to the bases on which the percentage maxima are computed. The maximum fee schedule is based on decreasing percentages of increasing amounts. The amounts are the amounts of money distributed by the trustee to parties in interest, excluding the debtor, but including secured creditors. These amounts were last amended in 1952. Since then, the cost of living has approximately doubled. Thus, the bases were doubled. It should be noted that the bases on which the maximum fee is computed includes moneys turned over to secured creditors, to cover the situation where the trustee liquidates property subject to a lien and distributes the proceeds. It does not cover cases in which the trustee simply turns over the property to the secured creditor, nor where the trustee abandons the property and the secured creditor is permitted to foreclose. The provision is also subject to the rights of the secured creditor generally under proposed section 506, especially 506(c). The $150 discretionary fee provision of current law is retained. Subsection (b) of this section entitles an operating trustee to a reasonable fee, without any limitation based on the maximum provided for a liquidating trustee as in current law, Bankruptcy Act Sec. 48c(2) (section 76(c)(2) of former title 11). Subsection (c) (now (b)) permits a maximum fee of five percent on all payments to creditors under a chapter 13 plan to the trustee appointed in the case. Subsection (d) (now (c)) provides a limitation not found in current law. Even if more than one trustee serves in the case, the maximum fee payable to all trustees does not change. For example, if an interim trustee is appointed and an elected trustee replaces him, the combined total of the fees payable to the interim trustee and the permanent trustee may not exceed the amount specified in this section. Under current law, very often a receiver receives a full fee and a subsequent trustee also receives a full fee. The resultant 'double-dipping', especially in cases in which the receiver and the trustee are the same individual, is detrimental to the interests of creditors, by needlessly increasing the cost of administering bankruptcy estates. Subsection (e) (now (d)) permits the court to deny compensation to a trustee if the trustee has been derelict in his duty by employing counsel, who is not disinterested. AMENDMENTS 1986 - Subsec. (b). Pub. L. 99-554 amended subsec. (b) generally, substituting 'under chapter 12 or 13 of this title' for 'under chapter 13 of this title', 'expenses of the United States trustee or of a standing trustee appointed under section 586(b) of title 28' for 'expenses of a standing trustee appointed under section 1302(d) of this title', and 'under section 1202(a) or 1302(a) of this title' for 'under section 1302(a) of this title'. 1984 - Subsec. (a). Pub. L. 98-353, Sec. 430(a), substituted 'and three percent on any amount in excess of $3000' for 'three percent on any amount in excess of $3,000 but not in excess of $20,000, two percent on any amount in excess of $20,000 but not in excess of $50,000, and one percent on any amount in excess of $50,000'. Subsec. (d). Pub. L. 98-353, Sec. 430(b), amended subsec. (d) generally. Prior to amendment, subsec. (d) read as follows: 'The court may deny allowance of compensation for services and reimbursement of expenses of the trustee if the trustee - '(1) failed to make diligent inquiry into facts that would permit denial of allowance under section 328(c) of this title; or '(2) with knowledge of such facts, employed a professional person under section 327 of this title.' EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. REFERENCES IN SUBSECTION (B) TEMPORARILY DEEMED TO INCLUDE ADDITIONAL REFERENCES Until the amendments made by subtitle A (Sec. 201 to 231) of title II of Pub. L. 99-554 become effective in a district and apply to a case, for purposes of such case any reference in subsec. (b) of this section - (1) to chapter 13 of this title is deemed to be a reference to chapter 12 or 13 of this title, (2) to section 1302(d) of this title is deemed to be a reference to section 1302(d) of this title or section 586(b) of Title 28, Judiciary and Judicial Procedure, and (3) to section 1302(a) of this title is deemed to be a reference to section 1202(a) or 1302(a) of this title, see section 302(c)(3)(A), (d), (e) of Pub. L. 99-554, set out as an Effective Date note under section 581 of Title 28. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 330, 557 of this title. ------DocID 14697 Document 42 of 646------ -CITE- 11 USC Sec. 327 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER II -HEAD- Sec. 327. Employment of professional persons -STATUTE- (a) Except as otherwise provided in this section, the trustee, with the court's approval, may employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in carrying out the trustee's duties under this title. (b) If the trustee is authorized to operate the business of the debtor under section 721, 1202, or 1108 of this title, and if the debtor has regularly employed attorneys, accountants, or other professional persons on salary, the trustee may retain or replace such professional persons if necessary in the operation of such business. (c) In a case under chapter 7, 12, or 11 of this title, a person is not disqualified for employment under this section solely because of such person's employment by or representation of a creditor, unless there is objection by another creditor or the United States trustee, in which case the court shall disapprove such employment if there is an actual conflict of interest. (d) The court may authorize the trustee to act as attorney or accountant for the estate if such authorization is in the best interest of the estate. (e) The trustee, with the court's approval, may employ, for a specified special purpose, other than to represent the trustee in conducting the case, an attorney that has represented the debtor, if in the best interest of the estate, and if such attorney does not represent or hold any interest adverse to the debtor or to the estate with respect to the matter on which such attorney is to be employed. (f) The trustee may not employ a person that has served as an examiner in the case. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2563; Pub. L. 98-353, title III, Sec. 430(c), July 10, 1984, 98 Stat. 370; Pub. L. 99-554, title II, Sec. 210, 257(e), Oct. 27, 1986, 100 Stat. 3099, 3114.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 327(a) of the House amendment contains a technical amendment indicating that attorneys, and perhaps other officers enumerated therein, represent, rather than assist, the trustee in carrying out the trustee's duties. Section 327(c) represents a compromise between H.R. 8200 as passed by the House and the Senate amendment. The provision states that former representation of a creditor, whether secured or unsecured, will not automatically disqualify a person from being employed by a trustee, but if such person is employed by the trustee, the person may no longer represent the creditor in connection with the case. Section 327(f) prevents an examiner from being employed by the trustee. SENATE REPORT NO. 95-989 This section authorizes the trustee, subject to the court's approval, to employ professional persons, such as attorneys, accountants, appraisers, and auctioneers, to represent or perform services for the estate. The trustee may employ only disinterested persons that do not hold or represent an interest adverse to the estate. Subsection (b) is an exception, and authorizes the trustee to retain or replace professional persons that the debtor has employed if necessary in the operation of the debtor's business. Subsection (c) provides a professional person is not disqualified for employment solely because of the person's prior employment by or representation of a secured or unsecured creditor. Subsection (d) permits the court to authorize the trustee, if qualified to act as his own counsel or accountant. Subsection (e) permits the trustee, subject to the court's approval, to employ for a specified special purpose an attorney that has represented the debtor, if such employment is in the best interest of the estate and if the attorney does not hold or represent an interest adverse to the debtor of the estate with respect to the matter on which he is to be employed. This subsection does not authorize the employment of the debtor's attorney to represent the estate generally or to represent the trustee in the conduct of the bankruptcy case. The subsection will most likely be used when the debtor is involved in complex litigation, and changing attorneys in the middle of the case after the bankruptcy case has commenced would be detrimental to the progress of that other litigation. HOUSE REPORT NO. 95-595 Subsection (c) is an additional exception. The trustee may employ as his counsel a nondisinterested person if the only reason that the attorney is not disinterested is because of his representation of an unsecured creditor. AMENDMENTS 1986 - Subsec. (b). Pub. L. 99-554, Sec. 257(e)(1), which directed the insertion of ', 1202,' after 'section 721,' was executed by making the insertion after 'section 721' to reflect the probable intent of Congress. Subsec. (c). Pub. L. 99-554, Sec. 257(e)(2), which directed the insertion of ', 12,' after 'section 7,' was executed by making the insertion after 'chapter 7' to reflect the probable intent of Congress. Pub. L. 99-554, Sec. 210, inserted 'or the United States trustee' after 'another creditor'. 1984 - Subsec. (c). Pub. L. 98-353 substituted 'In a case under chapter 7 or 11 of this title, a person is not disqualified for employment under this section solely because of such person's employment by or representation of a creditor, unless there is objection by another creditor, in which case the court shall disapprove such employment if there is an actual conflict of interest.' for 'In a case under chapter 7 or 11 of this title, a person is not disqualified for employment under this section solely because of such person's employment by or representation of a creditor, but may not, while employed by the trustee, represent, in connection with the case, a creditor.' EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by section 210 of Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 326, 328, 330, 331, 1107 of this title; title 28 section 586. ------DocID 14698 Document 43 of 646------ -CITE- 11 USC Sec. 328 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER II -HEAD- Sec. 328. Limitation on compensation of professional persons -STATUTE- (a) The trustee, or a committee appointed under section 1102 of this title, with the court's approval, may employ or authorize the employment of a professional person under section 327 or 1103 of this title, as the case may be, on any reasonable terms and conditions of employment, including on a retainer, on an hourly basis, or on a contingent fee basis. Notwithstanding such terms and conditions, the court may allow compensation different from the compensation provided under such terms and conditions after the conclusion of such employment, if such terms and conditions prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of such terms and conditions. (b) If the court has authorized a trustee to serve as an attorney or accountant for the estate under section 327(d) of this title, the court may allow compensation for the trustee's services as such attorney or accountant only to the extent that the trustee performed services as attorney or accountant for the estate and not for performance of any of the trustee's duties that are generally performed by a trustee without the assistance of an attorney or accountant for the estate. (c) Except as provided in section 327(c), 327(e), or 1107(b) of this title, the court may deny allowance of compensation for services and reimbursement of expenses of a professional person employed under section 327 or 1103 of this title if, at any time during such professional person's employment under section 327 or 1103 of this title, such professional person is not a disinterested person, or represents or holds an interest adverse to the interest of the estate with respect to the matter on which such professional person is employed. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2563; Pub. L. 98-353, title III, Sec. 431, July 10, 1984, 98 Stat. 370.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 328(c) adopts a technical amendment contained in the Senate amendment indicating that an attorney for the debtor in possession is not disqualified for compensation for services and reimbursement of expenses simply because of prior representation of the debtor. SENATE REPORT NO. 95-989 This section, which is parallel to section 326, fixes the maximum compensation allowable to a professional person employed under section 327. It authorizes the trustee, with the court's approval, to employ professional persons on any reasonable terms, including on a retainer, on an hourly or on a contingent fee basis. Subsection (a) further permits the court to allow compensation different from the compensation provided under the trustee's agreement if the prior agreement proves to have been improvident in light of development unanticipatable at the time of the agreement. The court's power includes the power to increase as well as decrease the agreed upon compensation. This provision is permissive, not mandatory, and should not be used by the court if to do so would violate the code of ethics of the professional involved. Subsection (b) limits a trustee that has been authorized to serve as his own counsel to only one fee for each service. The purpose of permitting the trustee to serve as his own counsel is to reduce costs. It is not included to provide the trustee with a bonus by permitting him to receive two fees for the same service or to avoid the maxima fixed in section 326. Thus, this subsection requires the court to differentiate between the trustee's services as trustee, and his services as trustee's counsel, and to fix compensation accordingly. Services that a trustee normally performs for an estate without assistance of counsel are to be compensated under the limits fixed in section 326. Only services that he performs that are normally performed by trustee's counsel may be compensated under the maxima imposed by this section. Subsection (c) permits the court to deny compensation for services and reimbursement of expenses if the professional person is not disinterested or if he represents or holds an interest adverse to the estate on the matter on which he is employed. The subsection provides a penalty for conflicts of interest. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353 substituted 'not capable of being anticipated' for 'unanticipatable'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 326, 330 of this title. ------DocID 14699 Document 44 of 646------ -CITE- 11 USC Sec. 329 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER II -HEAD- Sec. 329. Debtor's transactions with attorneys -STATUTE- (a) Any attorney representing a debtor in a case under this title, or in connection with such a case, whether or not such attorney applies for compensation under this title, shall file with the court a statement of the compensation paid or agreed to be paid, if such payment or agreement was made after one year before the date of the filing of the petition, for services rendered or to be rendered in contemplation of or in connection with the case by such attorney, and the source of such compensation. (b) If such compensation exceeds the reasonable value of any such services, the court may cancel any such agreement, or order the return of any such payment, to the extent excessive, to - (1) the estate, if the property transferred - (A) would have been property of the estate; or (B) was to be paid by or on behalf of the debtor under a plan under chapter 11, 12, or 13 of this title; or (2) the entity that made such payment. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2564; Pub. L. 98-353, title III, Sec. 432, July 10, 1984, 98 Stat. 370; Pub. L. 99-554, title II, Sec. 257(c), Oct. 27, 1986, 100 Stat. 3114.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 This section, derived in large part from current Bankruptcy Act section 60d (section 96(d) of former title 11), requires the debtor's attorney to file with the court a statement of the compensation paid or agreed to be paid to the attorney for services in contemplation of and in connection with the case, and the source of the compensation. Payments to a debtor's attorney provide serious potential for evasion of creditor protection provisions of the bankruptcy laws, and serious potential for overreaching by the debtor's attorney, and should be subject to careful scrutiny. Subsection (b) permits the court to deny compensation to the attorney, to cancel an agreement to pay compensation, or to order the return of compensation paid, if the compensation exceeds the reasonable value of the services provided. The return of payments already made are generally to the trustee for the benefit of the estate. However, if the property would not have come into the estate in any event, the court will order it returned to the entity that made the payment. The Bankruptcy Commission recommended a provision similar to this that would have also permitted an examination of the debtor's transactions with insiders. S. 236, 94th Cong., 1st sess, sec. 4-311(b) (1975). Its exclusion here is to permit it to be dealt with by the Rules of Bankruptcy Procedure. It is not intended that the provision be deleted entirely, only that the flexibility of the rules is more appropriate for such evidentiary matters. AMENDMENTS 1986 - Subsec. (b)(1)(B). Pub. L. 99-554 inserted reference to chapter 12. 1984 - Subsec. (a). Pub. L. 98-353, Sec. 432(a), substituted 'or' for 'and' after 'in contemplation of'. Subsec. (b)(1). Pub. L. 98-353, Sec. 432(b), substituted 'estate' for 'trustee'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 330, 541 of this title. ------DocID 14700 Document 45 of 646------ -CITE- 11 USC Sec. 330 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER II -HEAD- Sec. 330. Compensation of officers -STATUTE- (a) After notice to any parties in interest and to the United States trustee and a hearing, and subject to sections 326, 328, and 329 of this title, the court may award to a trustee, to an examiner, to a professional person employed under section 327 or 1103 of this title, or to the debtor's attorney - (1) reasonable compensation for actual, necessary services rendered by such trustee, examiner, professional person, or attorney, as the case may be, and by any paraprofessional persons employed by such trustee, professional person, or attorney, as the case may be, based on the nature, the extent, and the value of such services, the time spent on such services, and the cost of comparable services other than in a case under this title; and (2) reimbursement for actual, necessary expenses. (b) There shall be paid from the filing fee in a case under chapter 7 of this title $45 to the trustee serving in such case, after such trustee's services are rendered. (c) Unless the court orders otherwise, in a case under chapter 12 or 13 of this title the compensation paid to the trustee serving in the case shall not be less than $5 per month from any distribution under the plan during the administration of the plan. (d) In a case in which the United States trustee serves as trustee, the compensation of the trustee under this section shall be paid to the clerk of the bankruptcy court and deposited by the clerk into the United States Trustee System Fund established by section 589a of title 28. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2564; Pub. L. 98-353, title III, Sec. 433, 434, July 10, 1984, 98 Stat. 370; Pub. L. 99-554, title II, Sec. 211, 257(f), Oct. 27, 1986, 100 Stat. 3099, 3114.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 330(a) contains the standard of compensation adopted in H.R. 8200 as passed by the House rather than the contrary standard contained in the Senate amendment. Attorneys' fees in bankruptcy cases can be quite large and should be closely examined by the court. However bankruptcy legal services are entitled to command the same competency of counsel as other cases. In that light, the policy of this section is to compensate attorneys and other professionals serving in a case under title 11 at the same rate as the attorney or other professional would be compensated for performing comparable services other than in a case under title 11. Contrary language in the Senate report accompanying S. 2266 is rejected, and Massachusetts Mutual Life Insurance Company v. Brock, 405 F.2d 429, 432 (5th Cir. 1968) is overruled. Notions of economy of the estate in fixing fees are outdated and have no place in a bankruptcy code. Section 330(a)(2) of the Senate amendment is deleted although the Securities and Exchange Commission retains a right to file an advisory report under section 1109. Section 330(b) of the Senate amendment is deleted as unnecessary, as the limitations contained therein are covered by section 328(c) of H.R. 8200 as passed by the House and contained in the House amendment. Section 330(c) of the Senate amendment providing for a trustee to receive a fee of $20 for each estate from the filing fee paid to the clerk is retained as section 330(b) of the House amendment. The section will encourage private trustees to serve in cases under title 11 and in pilot districts will place less of a burden on the U.S. trustee to serve in no-asset cases. Section 330(b) of H.R. 8200 as passed by the House is retained by the House amendment as section 330(c) (section 15330). SENATE REPORT NO. 95-989 Section 330 authorizes the court to award compensation for services and reimbursement of expenses of officers of the estate, and other professionals. The compensation is to be reasonable, for economy in administration is the basic objective. Compensation is to be for actual necessary services, based on the time spent, the nature, the extent and the value of the services rendered, and the cost of comparable services in nonbankruptcy cases. There are the criteria that have been applied by the courts as analytic aids in defining 'reasonable' compensation. The reference to 'the cost of comparable services' in a nonbankruptcy case is not intended as a change of existing law. In a bankruptcy case fees are not a matter for private agreement. There is inherent a 'public interest' that 'must be considered in awarding fees,' Massachusetts Mutual Life Insurance Co. v. Brock, 405 F.2d 429, 432 (C.A.5, 1968), cert. denied, 395 U.S. 906 (1969). An allowance is the result of a balance struck between moderation in the interest of the estate and its security holders and the need to be 'generous enough to encourage' lawyers and others to render the necessary and exacting services that bankruptcy cases often require. In re Yale Express System, Inc., 366 F.Supp. 1376, 1381 (S.D.N.Y. 1973). The rates for similar kinds of services in private employment is one element, among others, in that balance. Compensation in private employment noted in subsection (a) is a point of reference, not a controlling determinant of what shall be allowed in bankruptcy cases. One of the major reforms in 1938, especially for reorganization cases, was centralized control over fees in the bankruptcy courts. See Brown v. Gerdes, 321 U.S. 178, 182-184 (1944); Leiman v. Guttman, 336 U.S. 1, 4-9 (1949). It was intended to guard against a recurrence of 'the many sordid chapters' in 'the history of fees in corporate reorganizations.' Dickinson Industrial Site, Inc. v. Cowan, 309 U.S. 382, 388 (1940). In the years since then the bankruptcy bar has flourished and prospered, and persons of merit and quality have not eschewed public service in bankruptcy cases merely because bankruptcy courts, in the interest of economy in administration, have not allowed them compensation that may be earned in the private economy of business or the professions. There is no reason to believe that, in generations to come, their successors will be less persuaded by the need to serve in the public interest because of stronger allures of private gain elsewhere. Subsection (a) provides for compensation of paraprofessionals in order to reduce the cost of administering bankruptcy cases. Paraprofessionals can be employed to perform duties which do not require the full range of skills of a qualified professional. Some courts have not hesitated to recognize paraprofessional services as compensable under existing law. An explicit provision to that effect is useful and constructive. The last sentence of subsection (a) provides that in the case of a public company - defined in section 1101(3) - the court shall refer, after a hearing, all applications to the Securities and Exchange Commission for a report, which shall be advisory only. In Chapter X cases in which the Commission has appeared, it generally filed reports on fee applications. Usually, courts have accorded the SEC's views substantial weight, as representing the opinion of a disinterested agency skilled and experienced in reorganization affairs. The last sentence intends for the advisory assistance of the Commission to be sought only in case of a public company in reorganization under chapter 11. Subsection (b) reenacts section 249 of Chapter X of the Bankruptcy Act ((former) 11 U.S.C. 649). It is a codification of equitable principles designed to prevent fiduciaries in the case from engaging in the specified transactions since they are in a position to gain inside information or to shape or influence the course of the reorganization. Wolf v. Weinstein, 372 U.S. 633 (1963). The statutory bar of compensation and reimbursement is based on the principle that such transactions involve conflicts of interest. Private gain undoubtedly prompts the purchase or sale of claims or stock interests, while the fiduciary's obligation is to render loyal and disinterested service which his position of trust has imposed upon him. Subsection (b) extends to a trustee, his attorney, committees and their attorneys, or any other persons 'acting in the case in a representative or fiduciary capacity.' It bars compensation to any of the foregoing, who after assuming to act in such capacity has purchased or sold, directly or indirectly, claims against, or stock in the debtor. The bar is absolute. It makes no difference whether the transaction brought a gain or loss, or neither, and the court is not authorized to approve a purchase or sale, before or after the transaction. The exception is for an acquisition or transfer 'otherwise' than by a voluntary purchase or sale, such as an acquisition by bequest. See Otis & Co. v. Insurance Bldg. Corp., 110 F.2d 333, 335 (C.A.1, 1940). Subsection (c) (now (b)) is intended for no asset liquidation cases where minimal compensation for trustees is needed. The sum of $20 will be allowed in each case, which is double the amount provided under current law. HOUSE REPORT NO. 95-595 Section 330 authorizes compensation for services and reimbursement of expenses of officers of the estate. It also prescribes the standards on which the amount of compensation is to be determined. As noted above, the compensation allowable under this section is subject to the maxima set out in sections 326, 328, and 329. The compensation is to be reasonable, for actual necessary services rendered, based on the time, the nature, the extent, and the value of the services rendered, and on the cost of comparable services other than in a case under the bankruptcy code. The effect of the last provision is to overrule In re Beverly Crest Convalescent Hospital, Inc., 548 F.2d 817 (9th Cir. 1976, as amended 1977), which set an arbitrary limit on fees payable based on the amount of a district judge's salary, and other, similar cases that require fees to be determined based on notions of conservation of the estate and economy of administration. If that case were allowed to stand, attorneys that could earn much higher incomes in other fields would leave the bankruptcy arena. Bankruptcy specialists, who enable the system to operate smoothly, efficiently, and expeditiously, would be driven elsewhere, and the bankruptcy field would be occupied by those who could not find other work and those who practice bankruptcy law only occasionally almost as a public service. Bankruptcy fees that are lower than fees in other areas of the legal profession may operate properly when the attorneys appearing in bankruptcy cases do so intermittently, because a low fee in a small segment of a practice can be absorbed by other work. Bankruptcy specialists, however, if required to accept fees in all of their cases that are consistently lower than fees they could receive elsewhere, will not remain in the bankruptcy field. This subsection provides for reimbursement of actual, necessary expenses. It further provides for compensation of paraprofessionals employed by professional persons employed by the estate of the debtor. The provision is included to reduce the cost of administering bankruptcy cases. In nonbankruptcy areas, attorneys are able to charge for a paraprofessional's time on an hourly basis, and not include it in overhead. If a similar practice does not pertain in bankruptcy cases then the attorney will be less inclined to use paraprofessionals even where the work involved could easily be handled by an attorney's assistant, at much lower cost to the estate. This provision is designed to encourage attorneys to use paraprofessional assistance where possible, and to insure that the estate, not the attorney, will bear the cost, to the benefit of both the estate and the attorneys involved. AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554, Sec. 211(1), inserted 'to any parties in interest and to the United States trustee' after 'notice'. Subsec. (c). Pub. L. 99-554, Sec. 257(f), inserted reference to chapter 12. Subsec. (d). Pub. L. 99-554, Sec. 211(2), added subsec. (d). 1984 - Subsec. (a). Pub. L. 98-353, Sec. 433(1), struck out 'to any parties in interest and to the United States trustee' after 'After notice'. Subsec. (a)(1). Pub. L. 98-353, Sec. 433(2), substituted 'nature, the extent, and the value of such services, the time spent on such services' for 'time, the nature, the extent, and the value of such services'. Subsec. (b). Pub. L. 98-353, Sec. 434(a), substituted '$45' for '$20'. Subsec. (c). Pub. L. 98-353, Sec. 434(b), added subsec. (c). EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by section 211 of Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 326, 331, 503, 1107, 1203 of this title; title 28 sections 586, 589a. ------DocID 14701 Document 46 of 646------ -CITE- 11 USC Sec. 331 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER II -HEAD- Sec. 331. Interim compensation -STATUTE- A trustee, an examiner, a debtor's attorney, or any professional person employed under section 327 or 1103 of this title may apply to the court not more than once every 120 days after an order for relief in a case under this title, or more often if the court permits, for such compensation for services rendered before the date of such an application or reimbursement for expenses incurred before such date as is provided under section 330 of this title. After notice and a hearing, the court may allow and disburse to such applicant such compensation or reimbursement. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2564.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 331 permits trustees and professional persons to apply to the court not more than once every 120 days for interim compensation and reimbursement payments. The court may permit more frequent applications if the circumstances warrant, such as in very large cases where the legal work is extensive and merits more frequent payments. The court is authorized to allow and order disbursement to the applicant of compensation and reimbursement that is otherwise allowable under section 330. The only effect of this section is to remove any doubt that officers of the estate may apply for, and the court may approve, compensation and reimbursement during the case, instead of being required to wait until the end of the case, which in some instances, may be years. The practice of interim compensation is followed in some courts today, but has been subject to some question. This section explicitly authorizes it. This section will apply to professionals such as auctioneers and appraisers only if they are not paid on a per job basis. ------DocID 14702 Document 47 of 646------ -CITE- 11 USC SUBCHAPTER III -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER III -HEAD- SUBCHAPTER III - ADMINISTRATION ------DocID 14703 Document 48 of 646------ -CITE- 11 USC Sec. 341 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER III -HEAD- Sec. 341. Meetings of creditors and equity security holders -STATUTE- (a) Within a reasonable time after the order for relief in a case under this title, the United States trustee shall convene and preside at a meeting of creditors. (b) The United States trustee may convene a meeting of any equity security holders. (c) The court may not preside at, and may not attend, any meeting under this section including any final meeting of creditors. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2564; Pub. L. 99-554, title II, Sec. 212, Oct. 27, 1986, 100 Stat. 3099.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 341(c) of the Senate amendment is deleted and a contrary provision is added indicating that the bankruptcy judge will not preside at or attend the first meeting of creditors or equity security holders but a discharge hearing for all individuals will be held at which the judge will preside. SENATE REPORT NO. 95-989 Section (Subsection) (a) of this section requires that there be a meeting of creditors within a reasonable time after the order for relief in the case. The Bankruptcy Act (former title 11) and the current Rules of Bankruptcy Procedure provide for a meeting of creditors, and specify the time and manner of the meeting, and the business to be conducted. This bill leaves those matters to the rules. Under section 405(d) of the bill, the present rules will continue to govern until new rules are promulgated. Thus, pending the adoption of different rules, the present procedure for the meeting will continue. Subsection (b) authorizes the court to order a meeting of equity security holders in cases where such a meeting would be beneficial or useful, for example, in a chapter 11 reorganization case where it may be necessary for the equity security holders to organize in order to be able to participate in the negotiation of a plan of reorganization. Subsection (c) makes clear that the bankruptcy judge is to preside at the meeting of creditors. AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554, Sec. 212(1), substituted 'the United States trustee shall convene and preside at a meeting of creditors' for 'there shall be a meeting of creditors'. Subsec. (b). Pub. L. 99-554, Sec. 212(2), substituted 'United States trustee may convene' for 'court may order'. Subsec. (c). Pub. L. 99-554, Sec. 212(3), inserted 'including any final meeting of creditors'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 343, 702, 705, 1161 of this title. ------DocID 14704 Document 49 of 646------ -CITE- 11 USC Sec. 342 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER III -HEAD- Sec. 342. Notice -STATUTE- (a) There shall be given such notice as is appropriate, including notice to any holder of a community claim, of an order for relief in a case under this title. (b) Prior to the commencement of a case under this title by an individual whose debts are primarily consumer debts, the clerk shall give written notice to such individual that indicates each chapter of this title under which such individual may proceed. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2565; Pub. L. 98-353, title III, Sec. 302, 435, July 10, 1984, 98 Stat. 352, 370.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 342(b) and (c) of the Senate amendment are adopted in principle but moved to section 549(c), in lieu of section 342(b) of H.R. 8200 as passed by the House. Section 342(c) of H.R. 8200 as passed by the House is deleted as a matter to be left to the Rules of Bankruptcy Procedure. SENATE REPORT NO. 95-989 Subsection (a) of section 342 requires the clerk of the bankruptcy court to give notice of the order for relief. The rules will prescribe to whom the notice should be sent and in what manner notice will be given. The rules already prescribe such things, and they will continue to govern unless changed as provided in section 404(a) of the bill. Due process will certainly require notice to all creditors and equity security holders. State and Federal governmental representatives responsible for collecting taxes will also receive notice. In cases where the debtor is subject to regulation, the regulatory agency with jurisdiction will receive notice. In order to insure maximum notice to all parties in interest, the Rules will include notice by publication in appropriate cases and for appropriate issues. Other notices will be given as appropriate. Subsections (b) and (c) (now section 549(c)) are derived from section 21g of the Bankruptcy Act (section 44(g) of former title 11). They specify that the trustee may file notice of the commencement of the case in land recording offices in order to give notice of the pendency of the case to potential transferees of the debtor's real property. Such filing is unnecessary in the county in which the bankruptcy case is commenced. If notice is properly filed, a subsequent purchaser of the property will not be a bona fide purchaser. Otherwise, a purchaser, including a purchaser at a judicial sale, that has no knowledge of the case, is not prevented from obtaining the status of a bona fide purchaser by the mere commencement of the case. 'County' is defined in title 1 of the United States Code to include other political subdivisions where counties are not used. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353, Sec. 435, amended subsec. (a) generally, inserting requirement respecting notice to any holder of a community claim. Pub. L. 98-353, Sec. 302(1), designated existing provisions as subsec. (a). Subsec. (b). Pub. L. 98-353, Sec. 302(2), added subsec. (b). EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 348, 741, 743, 762, 765 of this title. ------DocID 14705 Document 50 of 646------ -CITE- 11 USC Sec. 343 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER III -HEAD- Sec. 343. Examination of the debtor -STATUTE- The debtor shall appear and submit to examination under oath at the meeting of creditors under section 341(a) of this title. Creditors, any indenture trustee, any trustee or examiner in the case, or the United States trustee may examine the debtor. The United States trustee may administer the oath required under this section. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2565; Pub. L. 98-353, title III, Sec. 436, July 10, 1984, 98 Stat. 370; Pub. L. 99-554, title II, Sec. 213, Oct. 27, 1986, 100 Stat. 3099.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 This section, derived from section 21a of the Bankruptcy Act (section 44(a) of former title 11), requires the debtor to appear at the meeting of creditors and submit to examination under oath. The purpose of the examination is to enable creditors and the trustee to determine if assets have improperly been disposed of or concealed or if there are grounds for objection to discharge. The scope of the examination under this section will be governed by the Rules of Bankruptcy Procedure, as it is today. See rules 205(d), 10-213(c), and 11-26. It is expected that the scope prescribed by these rules for liquidation cases, that is, 'only the debtor's acts, conduct, or property, or any matter that may affect the administration of the estate, or the debtor's right to discharge' will remain substantially unchanged. In reorganization cases, the examination would be broader, including inquiry into the liabilities and financial condition of the debtor, the operation of his business, and the desirability of the continuance thereof, and other matters relevant to the case and to the formulation of the plan. Examination of other persons in connection with the bankruptcy case is left completely to the rules, just as examination of witnesses in civil cases is governed by the Federal Rules of Civil Procedure. AMENDMENTS 1986 - Pub. L. 99-554 amended section generally. Prior to amendment, section read as follows: 'The debtor shall appear and submit to examination under oath at the meeting of creditors under section 341(a) of this title. Creditors, any indenture trustee, or any trustee or examiner in the case may examine the debtor.' 1984 - Pub. L. 98-353 substituted 'examine' for 'examiner'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1161 of this title. ------DocID 14706 Document 51 of 646------ -CITE- 11 USC Sec. 344 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER III -HEAD- Sec. 344. Self-incrimination; immunity -STATUTE- Immunity for persons required to submit to examination, to testify, or to provide information in a case under this title may be granted under part V of title 18. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2565.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Part V (Sec. 6001 et seq.) of title 18 of the United States Code governs the granting of immunity to witnesses before Federal tribunals. The immunity provided under part V is only use immunity, not transactional immunity. Part V applies to all proceedings before Federal courts, before Federal grand juries, before administrative agencies, and before Congressional committees. It requires the Attorney General or the U. S. attorney to request or to approve any grant of immunity, whether before a court, grand jury, agency, or congressional committee. This section carries part V over into bankruptcy cases. Thus, for a witness to be ordered to testify before a bankruptcy court in spite of a claim of privilege, the U. S. attorney for the district in which the court sits would have to request from the district court for that district the immunity order. The rule would apply to both debtors, creditors, and any other witnesses in a bankruptcy case. If the immunity were granted, the witness would be required to testify. If not, he could claim the privilege against self-incrimination. Part V is a significant departure from current law. Under section 7a(10) of the Bankruptcy Act (section 25(a)(10) of former title 11), a debtor is required to testify in all circumstances, but any testimony he gives may not be used against him in any criminal proceeding, except testimony given in any hearing on objections to discharge. With that exception, section 7a(10) amounts to a blanket grant of use immunity to all debtors. Immunity for other witnesses in bankruptcy courts today is governed by part V of title 18. The consequences of a claim of privileges by a debtor under proposed law and under current law differ as well. Under section 14c(6) of current law (section 32(c)(6) of former title 11), any refusal to answer a material question approved by the court will result in the denial of a discharge, even if the refusal is based on the privilege against self incrimination. Thus, the debtor is confronted with the choice between losing his discharge and opening himself up to possible criminal prosecution. Under section 727(a)(6) of the proposed title 11, a debtor is only denied a discharge if he refuses to testify after having been granted immunity. If the debtor claims the privilege and the U. S. attorney does not request immunity from the district courts, then the debtor may refuse to testify and still retain his right to a discharge. It removes the Scylla and Charibdis choice for debtors that exists under the Bankruptcy Act (former title 11). -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 521, 901 of this title. ------DocID 14707 Document 52 of 646------ -CITE- 11 USC Sec. 345 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER III -HEAD- Sec. 345. Money of estates -STATUTE- (a) A trustee in a case under this title may make such deposit or investment of the money of the estate for which such trustee serves as will yield the maximum reasonable net return on such money, taking into account the safety of such deposit or investment. (b) Except with respect to a deposit or investment that is insured or guaranteed by the United States or by a department, agency, or instrumentality of the United States or backed by the full faith and credit of the United States, the trustee shall require from an entity with which such money is deposited or invested - (1) a bond - (A) in favor of the United States; (B) secured by the undertaking of a corporate surety approved by the United States trustee for the district in which the case is pending; and (C) conditioned on - (i) a proper accounting for all money so deposited or invested and for any return on such money; (ii) prompt repayment of such money and return; and (iii) faithful performance of duties as a depository; or (2) the deposit of securities of the kind specified in section 9303 of title 31. (c) An entity with which such moneys are deposited or invested is authorized to deposit or invest such moneys as may be required under this section. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2565; Pub. L. 97-258, Sec. 3(c), Sept. 13, 1982, 96 Stat. 1064; Pub. L. 98-353, title III, Sec. 437, July 10, 1984, 98 Stat. 370; Pub. L. 99-554, title II, Sec. 214, Oct. 27, 1986, 100 Stat. 3099.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS The House amendment moves section 345(c) of the House bill to chapter 15 as part of the pilot program for the U.S. trustees. The bond required by section 345(b) may be a blanket bond posted by the financial depository sufficient to cover deposits by trustees in several cases, as is done under current law. SENATE REPORT NO. 95-989 This section is a significant departure from section 61 of the Bankruptcy Act (section 101 of former title 11). It permits a trustee in a bankruptcy case to make such deposit of investment of the money of the estate for which he serves as will yield the maximum reasonable net return on the money, taking into account the safety of such deposit or investment. Under current law, the trustee is permitted to deposit money only with banking institutions. Thus, the trustee is generally unable to secure a high rate of return on money of estates pending distribution, to the detriment of creditors. Under this section, the trustee may make deposits in savings and loans, may purchase government bonds, or make such other deposit or investment as is appropriate. Under proposed 11 U.S.C. 541(a)(6), and except as provided in subsection (c) of this section, any interest or gain realized on the deposit or investment of funds under this section will become property of the estate, and will thus enhance the recovery of creditors. In order to protect the creditors, subsection (b) requires certain precautions against loss of the money so deposited or invested. The trustee must require from a person with which he deposits or invests money of an estate a bond in favor of the United States secured by approved corporate surety and conditioned on a proper accounting for all money deposited or invested and for any return on such money. Alternately, the trustee may require the deposit of securities of the kind specified in section 15 of title 6 of the United States Code (31 U.S.C. 9303), which governs the posting of security by banks that receive public moneys on deposit. These bonding requirements do not apply to deposits or investments that are insured or guaranteed the United States or a department, agency, or instrumentality of the United States, or that are backed by the full faith and credit of the United States. These provisions do not address the question of aggregation of funds by a private chapter 13 trustee and are not to be construed as excluding such possibility. The Rules of Bankruptcy Procedure may provide for aggregation under appropriate circumstances and adequate safeguards in cases where there is a significant need, such as in districts in which there is a standing chapter 13 trustee. In such case, the interest or return on the funds would help defray the cost of administering the cases in which the standing trustee serves. AMENDMENTS 1986 - Subsec. (b). Pub. L. 99-554 amended subsec. (b) generally, substituting 'approved by the United States trustee for the district' for 'approved by the court for the district' in par. (1)(B). 1984 - Subsec. (c). Pub. L. 98-353 added subsec. (c). 1982 - Subsec. (b)(2). Pub. L. 97-258 substituted 'section 9303 of title 31' for 'section 15 of title 6'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in title 28 section 586. ------DocID 14708 Document 53 of 646------ -CITE- 11 USC Sec. 346 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER III -HEAD- Sec. 346. Special tax provisions -STATUTE- (a) Except to the extent otherwise provided in this section, subsections (b), (c), (d), (e), (g), (h), (i), and (j) of this section apply notwithstanding any State or local law imposing a tax, but subject to the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.). (b)(1) In a case under chapter 7, 12, or 11 of this title concerning an individual, any income of the estate may be taxed under a State or local law imposing a tax on or measured by income only to the estate, and may not be taxed to such individual. Except as provided in section 728 of this title, if such individual is a partner in a partnership, any gain or loss resulting from a distribution of property from such partnership, or any distributive share of income, gain, loss, deduction, or credit of such individual that is distributed, or considered distributed, from such partnership, after the commencement of the case is gain, loss, income, deduction, or credit, as the case may be, of the estate. (2) Except as otherwise provided in this section and in section 728 of this title, any income of the estate in such a case, and any State or local tax on or measured by such income, shall be computed in the same manner as the income and the tax of an estate. (3) The estate in such a case shall use the same accounting method as the debtor used immediately before the commencement of the case. (c)(1) The commencement of a case under this title concerning a corporation or a partnership does not effect a change in the status of such corporation or partnership for the purposes of any State or local law imposing a tax on or measured by income. Except as otherwise provided in this section and in section 728 of this title, any income of the estate in such case may be taxed only as though such case had not been commenced. (2) In such a case, except as provided in section 728 of this title, the trustee shall make any tax return otherwise required by State or local law to be filed by or on behalf of such corporation or partnership in the same manner and form as such corporation or partnership, as the case may be, is required to make such return. (d) In a case under chapter 13 of this title, any income of the estate or the debtor may be taxed under a State or local law imposing a tax on or measured by income only to the debtor, and may not be taxed to the estate. (e) A claim allowed under section 502(f) or 503 of this title, other than a claim for a tax that is not otherwise deductible or a capital expenditure that is not otherwise deductible, is deductible by the entity to which income of the estate is taxed unless such claim was deducted by another entity, and a deduction for such a claim is deemed to be a deduction attributable to a business. (f) The trustee shall withhold from any payment of claims for wages, salaries, commissions, dividends, interest, or other payments, or collect, any amount required to be withheld or collected under applicable State or local tax law, and shall pay such withheld or collected amount to the appropriate governmental unit at the time and in the manner required by such tax law, and with the same priority as the claim from which such amount was withheld was paid. (g)(1) Neither gain nor loss shall be recognized on a transfer - (A) by operation of law, of property to the estate; (B) other than a sale, of property from the estate to the debtor; or (C) in a case under chapter 11 or 12 of this title concerning a corporation, of property from the estate to a corporation that is an affiliate participating in a joint plan with the debtor, or that is a successor to the debtor under the plan, except that gain or loss may be recognized to the same extent that such transfer results in the recognition of gain or loss under section 371 of the Internal Revenue Code of 1986 (26 U.S.C. 371). (FOOTNOTE 1) (FOOTNOTE 1) See Reference in Text note below. (2) The transferee of a transfer of a kind specified in this subsection shall take the property transferred with the same character, and with the transferor's basis, as adjusted under subsection (j)(5) of this section, and holding period. (h) Notwithstanding sections 728(a) and 1146(a) of this title, for the purpose of determining the number of taxable periods during which the debtor or the estate may use a loss carryover or a loss carryback, the taxable period of the debtor during which the case is commenced is deemed not to have been terminated by such commencement. (i)(1) In a case under chapter 7, 12, or 11 of this title concerning an individual, the estate shall succeed to the debtor's tax attributes, including - (A) any investment credit carryover; (B) any recovery exclusion; (C) any loss carryover; (D) any foreign tax credit carryover; (E) any capital loss carryover; and (F) any claim of right. (2) After such a case is closed or dismissed, the debtor shall succeed to any tax attribute to which the estate succeeded under paragraph (1) of this subsection but that was not utilized by the estate. The debtor may utilize such tax attributes as though any applicable time limitations on such utilization by the debtor were suspended during the time during which the case was pending. (3) In such a case, the estate may carry back any loss of the estate to a taxable period of the debtor that ended before the order for relief under such chapter the same as the debtor could have carried back such loss had the debtor incurred such loss and the case under this title had not been commenced, but the debtor may not carry back any loss of the debtor from a taxable period that ends after such order to any taxable period of the debtor that ended before such order until after the case is closed. (j)(1) Except as otherwise provided in this subsection, income is not realized by the estate, the debtor, or a successor to the debtor by reason of forgiveness or discharge of indebtedness in a case under this title. (2) For the purposes of any State or local law imposing a tax on or measured by income, a deduction with respect to a liability may not be allowed for any taxable period during or after which such liability is forgiven or discharged under this title. In this paragraph, 'a deduction with respect to a liability' includes a capital loss incurred on the disposition of a capital asset with respect to a liability that was incurred in connection with the acquisition of such asset. (3) Except as provided in paragraph (4) of this subsection, for the purpose of any State or local law imposing a tax on or measured by income, any net operating loss of an individual or corporate debtor, including a net operating loss carryover to such debtor, shall be reduced by the amount of indebtedness forgiven or discharged in a case under this title, except to the extent that such forgiveness or discharge resulted in a disallowance under paragraph (2) of this subsection. (4) A reduction of a net operating loss or a net operating loss carryover under paragraph (3) of this subsection or of basis under paragraph (5) of this subsection is not required to the extent that the indebtedness of an individual or corporate debtor forgiven or discharged - (A) consisted of items of a deductible nature that were not deducted by such debtor; or (B) resulted in an expired net operating loss carryover or other deduction that - (i) did not offset income for any taxable period; and (ii) did not contribute to a net operating loss in or a net operating loss carryover to the taxable period during or after which such indebtedness was discharged. (5) For the purposes of a State or local law imposing a tax on or measured by income, the basis of the debtor's property or of property transferred to an entity required to use the debtor's basis in whole or in part shall be reduced by the lesser of - (A)(i) the amount by which the indebtedness of the debtor has been forgiven or discharged in a case under this title; minus (ii) the total amount of adjustments made under paragraphs (2) and (3) of this subsection; and (B) the amount by which the total basis of the debtor's assets that were property of the estate before such forgiveness or discharge exceeds the debtor's total liabilities that were liabilities both before and after such forgiveness or discharge. (6) Notwithstanding paragraph (5) of this subsection, basis is not required to be reduced to the extent that the debtor elects to treat as taxable income, of the taxable period in which indebtedness is forgiven or discharged, the amount of indebtedness forgiven or discharged that otherwise would be applied in reduction of basis under paragraph (5) of this subsection. (7) For the purposes of this subsection, indebtedness with respect to which an equity security, other than an interest of a limited partner in a limited partnership, is issued to the creditor to whom such indebtedness was owed, or that is forgiven as a contribution to capital by an equity security holder other than a limited partner in the debtor, is not forgiven or discharged in a case under this title - (A) to any extent that such indebtedness did not consist of items of a deductible nature; or (B) if the issuance of such equity security has the same consequences under a law imposing a tax on or measured by income to such creditor as a payment in cash to such creditor in an amount equal to the fair market value of such equity security, then to the lesser of - (i) the extent that such issuance has the same such consequences; and (ii) the extent of such fair market value. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2565; Pub. L. 98-353, title III, Sec. 438, July 10, 1984, 98 Stat. 370; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095; Pub. L. 99-554, title II, Sec. 257(g), 283(c), Oct. 27, 1986, 100 Stat. 3114, 3116.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 346 of the House amendment, together with sections 728 and 1146, represent special tax provisions applicable in bankruptcy. The policy contained in those sections reflects the policy that should be applied in Federal, State, and local taxes in the view of the House Committee on the Judiciary. The House Ways and Means Committee and the Senate Finance Committee did not have time to process a bankruptcy tax bill during the 95th Congress. It is anticipated that early in the 96th Congress, and before the effective date of the bankruptcy code (Oct. 1, 1979), the tax committees of Congress will have an opportunity to consider action with respect to amendments to the Internal Revenue Code (title 26) and the special tax provisions in title 11. Since the special tax provisions are likely to be amended during the first part of the 96th Congress, it is anticipated that the bench and bar will also study and comment on these special tax provisions prior to their revision. Special tax provisions: State and local rules. This section provides special tax provisions dealing with the treatment, under State or local, but not Federal, tax law, of the method of taxing bankruptcy estates of individuals, partnerships, and corporations; survival and allocation of tax attributes between the bankrupt and the estate; return filing requirements; and the tax treatment of income from discharge of indebtedness. The Senate bill removed these rules pending adoption of Federal rules on these issues in the next Congress. The House amendment returns the State and local tax rules to section 346 so that they may be studied by the bankruptcy and tax bars who may wish to submit comments to Congress. Withholding rules: Both the House bill and Senate amendment provide that the trustee is required to comply with the normal withholding rules applicable to the payment of wages and other payments. The House amendment retains this rule for State and local taxes only. The treatment of withholding of Federal taxes will be considered in the next Congress. Section 726 of the Senate amendment provides that the rule requiring pro rata payment of all expenses within a priority category does not apply to the payment of amounts withheld by a bankruptcy trustee. The purpose of this rule was to insure that the trustee pay the full amount of the withheld taxes to the appropriate governmental tax authority. The House amendment deletes this rule as unnecessary because the existing practice conforms essentially to that rule. If the trustee fails to pay over in full amounts that he withheld, it is a violation of his trustee's duties which would permit the taxing authority to sue the trustee on his bond. When taxes considered 'incurred': The Senate amendment contained rules of general application dealing with when a tax is 'incurred' for purposes of the various tax collection rules affecting the debtor and the estate. The House amendment adopts the substance of these rules and transfers them to section 507 of title 11. Penalty for failure to pay tax: The Senate amendment contains a rule which relieves the debtor and the trustee from certain tax penalties for failure to make timely payment of a tax to the extent that the bankruptcy rules prevent the trustee or the debtor from paying the tax on time. Since most of these penalties relate to Federal taxes, the House amendment deletes these rules pending consideration of Federal tax rules affecting bankruptcy in the next Congress. SENATE REPORT NO. 95-989 Subsection (a) indicates that subsections (b), (c), (d), (e), (g), (h), (i), and (j) apply notwithstanding any State or local tax law, but are subject to Federal tax law. Subsection (b)(1) provides that in a case concerning an individual under chapter 7 or 11 of title 11, income of the estate is taxable only to the estate and not to the debtor. The second sentence of the paragraph provides that if such individual is a partner, the tax attributes of the partnership are distributable to the partner's estate rather than to the partner, except to the extent that section 728 of title 11 provides otherwise. Subsection (b)(2) states a general rule that the estate of an individual is to be taxed as an estate. The paragraph is made subject to the remainder of section 346 and section 728 of title 11. Subsection (b)(3) requires the accounting method, but not necessarily the accounting period, of the estate to be the same as the method used by the individual debtor. Subsection (c)(1) states a general rule that the estate of a partnership or a corporated debtor is not a separate entity for tax purposes. The income of the debtor is to be taxed as if the case were not commenced, except as provided in the remainder of section 346 and section 728. Subsection (c)(2) requires the trustee, except as provided in section 728 of title 11, to file all tax returns on behalf of the partnership or corporation during the case. Subsection (d) indicates that the estate in a chapter 13 case is not a separate taxable entity and that all income of the estate is to be taxed to the debtor. Subsection (e) establishes a business deduction consisting of allowed expenses of administration except for tax or capital expenses that are not otherwise deductible. The deduction may be used by the estate when it is a separate taxable entity or by the entity to which the income of the estate is taxed when it is not. Subsection (f) imposes a duty on the trustee to comply with any Federal, State, or local tax law requiring withholding or collection of taxes from any payment of wages, salaries, commissions, dividends, interest, or other payments. Any amount withheld is to be paid to the taxing authority at the same time and with the same priority as the claim from which such amount withheld was paid. Subsection (g)(1)(A) indicates that neither gain nor loss is recognized on the transfer by law of property from the debtor or a creditor to the estate. Subparagraph (B) provides a similar policy if the property of the estate is returned from the estate to the debtor other than by a sale of property to debtor. Subparagraph (C) also provides for nonrecognition of gain or loss in a case under chapter 11 if a corporate debtor transfers property to a successor corporation or to an affiliate under a joint plan. An exception is made to enable a taxing authority to cause recognition of gain or loss to the extent provided in IRC (title 26) section 371 (as amended by section 109 of this bill). Subsection (g)(2) provides that any of the three kinds of transferees specified in paragraph (1) take the property with the same character, holding period, and basis in the hands of the transferor at the time of such transfer. The transferor's basis may be adjusted under section 346(j)(5) even if the discharge of indebtedness occurs after the transfer of property. Of course, no adjustment will occur if the transfer is from the debtor to the estate or if the transfer is from an entity that is not discharged. Subsection (h) provides that the creation of the estate of an individual under chapter 7 or 11 of title 11 as a separate taxable entity does not affect the number of taxable years for purposes of computing loss carryovers or carrybacks. The section applies with respect to carryovers or carrybacks of the debtor transferred into the estate under section 346(i)(1) of title 11 or back to the debtor under section 346(i)(2) of title 11. Subsection (i)(1) states a general rule that an estate that is a separate taxable entity nevertheless succeeds to all tax attributes of the debtor. The six enumerated attributes are illustrative and not exhaustive. Subsection (i)(2) indicates that attributes passing from the debtor into an estate that is a separate taxable entity will return to the debtor if unused by the estate. The debtor is permitted to use any such attribute as though the case had not been commenced. Subsection (i)(3) permits an estate that is a separate taxable entity to carryback losses of the estate to a taxable period of the debtor that ended before the case was filed. The estate is treated as if it were the debtor with respect to time limitations and other restrictions. The section makes clear that the debtor may not carryback any loss of his own from a tax year during the pendency of the case to such a period until the case is closed. No tolling of any period of limitation is provided with respect to carrybacks by the debtor of post-petition losses. Subsection (j) sets forth seven special rules treating with the tax effects of forgiveness or discharge of indebtedness. The terms 'forgiveness' and 'discharge' are redundant, but are used to clarify that 'discharge' in the context of a special tax provision in title 11 includes forgiveness of indebtedness whether or not such indebtedness is 'discharged' in the bankruptcy sense. Paragraph (1) states the general rule that forgiveness of indebtedness is not taxable except as otherwise provided in paragraphs (2)-(7). The paragraph is patterned after sections 268, 395, and 520 of the Bankruptcy Act (sections 668, 795, and 920 of former title 11). Paragraph (2) disallows deductions for liabilities of a deductible nature in any year during or after the year of cancellation of such liabilities. For the purposes of this paragraph, 'a deduction with respect to a liability' includes a capital loss incurred on the disposition of a capital asset with respect to a liability that was incurred in connection with the acquisition of such asset. Paragraph (3) causes any net operating loss of a debtor that is an individual or corporation to be reduced by any discharge of indebtedness except as provided in paragraphs (2) or (4). If a deduction is disallowed under paragraph (2), then no double counting occurs. Thus, paragraph (3) will reflect the reduction of losses by liabilities that have been forgiven, including deductible liabilities or nondeductible liabilities such as repayment of principal on borrowed funds. Paragraph (4) specifically excludes two kinds of indebtedness from reduction of net operating losses under paragraph (3) or from reduction of basis under paragraph (5). Subparagraph (A) excludes items of a deductible nature that were not deducted or that could not be deducted such as gambling losses or liabilities for interest owed to a relative of the debtor. Subparagraph (B) excludes indebtedness of a debtor that is an individual or corporation that resulted in deductions which did not offset income and that did not contribute to an unexpired net operating loss or loss carryover. In these situations, the debtor has derived no tax benefit so there is no need to incur an offsetting reduction. Paragraph (5) provides a two-point test for reduction of basis. The paragraph replaces sections 270, 396, and 522 of the Bankruptcy Act (sections 670, 796, and 922 of former title 11). Subparagraph (A) sets out the maximum amount by which basis may be reduced - the total indebtedness forgiven less adjustments made under paragraphs (2) and (3). This avoids double counting. If a deduction is disallowed under paragraph (2) or a carryover is reduced under paragraph (3) then the tax benefit is neutralized, and there is no need to reduce basis. Subparagraph (B) reduces basis to the extent the debtor's total basis of assets before the discharge exceeds total preexisting liabilities still remaining after discharge of indebtedness. This is a 'basis solvency' limitation which differs from the usual test of solvency because it measures against the remaining liabilities the benefit aspect of assets, their basis, rather than their value. Paragraph (5) applies so that any transferee of the debtor's property who is required to use the debtor's basis takes the debtor's basis reduced by the lesser of (A) and (B). Thus, basis will be reduced, but never below a level equal to undischarged liabilities. Paragraph (6) specifies that basis need not be reduced under paragraph (5) to the extent the debtor treats discharged indebtedness as taxable income. This permits the debtor to elect whether to recognize income, which may be advantageous if the debtor anticipates subsequent net operating losses, rather than to reduce basis. Paragraph (7) establishes two rules excluding from the category of discharged indebtedness certain indebtedness that is exchanged for an equity security issued under a plan or that is forgiven as a contribution to capital by an equity security holder. Subparagraph (A) creates the first exclusion to the extent indebtedness consisting of items not of a deductible nature is exchanged for an equity security, other than the interests of a limited partner in a limited partnership, issued by the debtor or is forgiven as a contribution to capital by an equity security holder. Subparagraph (B) excludes indebtedness consisting of items of a deductible nature, if the exchange of stock for debts has the same effect as a cash payment equal to the value of the equity security, in the amount of the fair market value of the equity security or, if less, the extent to which such exchange has such effect. The two provisions treat the debtor as if it had originally issued stock instead of debt. Subparagraph (B) rectifies the inequity under current law between a cash basis and accrual basis debtor concerning the issuance of stock in exchange for previous services rendered that were of a greater value than the stock. Subparagraph (B) also changes current law by taxing forgiveness of indebtedness to the extent that stock is exchanged for the accrued interest component of a security, because the recipient of such stock would not be regarded as having received money under the Carman doctrine. -REFTEXT- REFERENCES IN TEXT The Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.), referred to in subsec. (a), is classified generally to Title 26, Internal Revenue Code. Section 371 of the Internal Revenue Code of 1986 (26 U.S.C. 371), referred to in subsec. (g)(1)(C), was repealed by Pub. L. 101-508, title XI, Sec. 11801(a)(19), Nov. 5, 1990, 104 Stat. 1388-521. -MISC2- AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-514 substituted 'Internal Revenue Code of 1986' for 'Internal Revenue Code of 1954'. Subsec. (b)(1). Pub. L. 99-554, Sec. 257(g)(1), inserted reference to chapter 12. Subsec. (g)(1)(C). Pub. L. 99-554, Sec. 257(g)(2), inserted reference to chapter 12. Pub. L. 99-514 substituted 'Internal Revenue Code of 1986' for 'Internal Revenue Code of 1954'. Subsec. (i)(1). Pub. L. 99-554, Sec. 257(g)(3), inserted reference to chapter 12. Subsec. (j)(7). Pub. L. 99-554, Sec. 283(c), substituted 'owed' for 'owned'. 1984 - Subsec. (c)(2). Pub. L. 98-353 substituted 'corporation' for 'operation'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 283 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1146, 1231 of this title. ------DocID 14709 Document 54 of 646------ -CITE- 11 USC Sec. 347 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER III -HEAD- Sec. 347. Unclaimed property -STATUTE- (a) Ninety days after the final distribution under section 726, 1226, or 1326 of this title in a case under chapter 7, 12, or 13 of this title, as the case may be, the trustee shall stop payment on any check remaining unpaid, and any remaining property of the estate shall be paid into the court and disposed of under chapter 129 of title 28. (b) Any security, money, or other property remaining unclaimed at the expiration of the time allowed in a case under chapter 9, 11, or 12 of this title for the presentation of a security or the performance of any other act as a condition to participation in the distribution under any plan confirmed under section 943(b), 1129, 1173, or 1225 of this title, as the case may be, becomes the property of the debtor or of the entity acquiring the assets of the debtor under the plan, as the case may be. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2568; Pub. L. 99-554, title II, Sec. 257(h), Oct. 27, 1986, 100 Stat. 3114.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 347(a) of the House amendment adopts a comparable provision contained in the Senate amendment instructing the trustee to stop payment on any check remaining unpaid more than 90 days after the final distribution in a case under Chapter 7 or 13. Technical changes are made in section 347(b) to cover distributions in a railroad reorganization. SENATE REPORT NO. 95-989 Section 347 is derived from Bankruptcy Act Sec. 66 (section 106 of former title 11). Subsection (a) requires the trustee to stop payment on any distribution check that is unpaid 90 days after the final distribution in a case under chapter 7 or 13. The unclaimed funds, and any other property of the estate are paid into the court and disposed of under chapter 129 (Sec. 2041 et seq.) of title 28, which requires the clerk of court to hold the funds for their owner for 5 years, after which they escheat to the Treasury. Subsection (b) specifies that any property remaining unclaimed at the expiration of the time allowed in a chapter 9 or 11 case for presentation (exchange) of securities or the performance of any other act as a condition to participation in the plan reverts to the debtor or the entity acquiring the assets of the debtor under the plan. Conditions to participation under a plan include such acts as cashing a check, surrendering securities for cancellation, and so on. Similar provisions are found in sections 96(d) and 205 of current law (sections 416(d) and 605 of former title 11). AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554, Sec. 257(h)(1), inserted references to section 1226 and chapter 12 of this title. Subsec. (b). Pub. L. 99-554, Sec. 257(h)(2), inserted references to chapter 12 and section 1225 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 901 of this title. ------DocID 14710 Document 55 of 646------ -CITE- 11 USC Sec. 348 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER III -HEAD- Sec. 348. Effect of conversion -STATUTE- (a) Conversion of a case from a case under one chapter of this title to a case under another chapter of this title constitutes an order for relief under the chapter to which the case is converted, but, except as provided in subsections (b) and (c) of this section, does not effect a change in the date of the filing of the petition, the commencement of the case, or the order for relief. (b) Unless the court for cause orders otherwise, in sections 701(a), 727(a)(10), 727(b), 728(a), 728(b), 1102(a), 1110(a)(1), 1121(b), 1121(c), 1141(d)(4), 1146(a), 1146(b), 1301(a), 1305(a), 1201(a), 1221, and 1228(a) of this title, 'the order for relief under this chapter' in a chapter to which a case has been converted under section 706, 1112, 1307, or 1208 of this title means the conversion of such case to such chapter. (c) Sections 342 and 365(d) of this title apply in a case that has been converted under section 706, 1112, 1307, or 1208 of this title, as if the conversion order were the order for relief. (d) A claim against the estate or the debtor that arises after the order for relief but before conversion in a case that is converted under section 1112, 1307, or 1208 of this title, other than a claim specified in section 503(b) of this title, shall be treated for all purposes as if such claim had arisen immediately before the date of the filing of the petition. (e) Conversion of a case under section 706, 1112, 1307, or 1208 of this title terminates the service of any trustee or examiner that is serving in the case before such conversion. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2568; Pub. L. 99-554, title II, Sec. 257(i), Oct. 27, 1986, 100 Stat. 3115.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS The House amendment adopts section 348(b) of the Senate amendment with slight modifications, as more accurately reflecting sections to which this particular effect of conversion should apply. Section 348(e) of the House amendment is a stylistic revision of similar provisions contained in H.R. 8200 as passed by the House and in the Senate amendment. Termination of services is expanded to cover any examiner serving in the case before conversion, as done in H.R. 8200 as passed by the House. SENATE REPORT NO. 95-989 This section governs the effect of the conversion of a case from one chapter of the bankruptcy code to another chapter. Subsection (a) specifies that the date of the filing of the petition, the commencement of the case, or the order for relief are unaffected by conversion, with some exceptions specified in subsections (b) and (c). Subsection (b) lists certain sections in the operative chapters of the bankruptcy code in which there is a reference to 'the order for relief under this chapter.' In those sections, the reference is to be read as a reference to the conversion order if the case has been converted into the particular chapter. Subsection (c) specifies that notice is to be given of the conversion order the same as notice was given of the order for relief, and that the time the trustee (or debtor in possession) has for assuming or rejecting executory contracts recommences, thus giving an opportunity for a newly appointed trustee to familiarize himself with the case. Subsection (d) provides for special treatment of claims that arise during chapter 11 or 13 cases before the case is converted to a liquidation case. With the exception of claims specified in proposed 11 U.S.C. 503(b) (administrative expenses), preconversion claims are treated the same as prepetition claims. Subsection (e) provides that conversion of a case terminates the service of any trustee serving in the case prior to conversion. AMENDMENTS 1986 - Subsec. (b). Pub. L. 99-554, Sec. 257(i)(1), substituted references to sections 1201(a), 1221, and 1228(a) of this title for reference to section 1328(a) of this title, and inserted reference to section 1208 of this title. Subsecs. (c) to (e). Pub. L. 99-554, Sec. 257(i)(2), (3), inserted reference to section 1208 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 101 of this title. ------DocID 14711 Document 56 of 646------ -CITE- 11 USC Sec. 349 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER III -HEAD- Sec. 349. Effect of dismissal -STATUTE- (a) Unless the court, for cause, orders otherwise, the dismissal of a case under this title does not bar the discharge, in a later case under this title, of debts that were dischargeable in the case dismissed; nor does the dismissal of a case under this title prejudice the debtor with regard to the filing of a subsequent petition under this title, except as provided in section 109(f) (FOOTNOTE 1) of this title. (FOOTNOTE 1) So in original. See References in Text note below. (b) Unless the court, for cause, orders otherwise, a dismissal of a case other than under section 742 of this title - (1) reinstates - (A) any proceeding or custodianship superseded under section 543 of this title; (B) any transfer avoided under section 522, 544, 545, 547, 548, 549, or 724(a) of this title, or preserved under section 510(c)(2), 522(i)(2), or 551 of this title; and (C) any lien voided under section 506(d) of this title; (2) vacates any order, judgment, or transfer ordered, under section 522(i)(1), 542, 550, or 553 of this title; and (3) revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case under this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2569; Pub. L. 98-353, title III, Sec. 303, July 10, 1984, 98 Stat. 352.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 349(b)(2) of the House amendment adds a cross reference to section 553 to reflect the new right of recovery of setoffs created under that section. Corresponding changes are made throughout the House amendment. SENATE REPORT NO. 95-989 Subsection (a) specifies that unless the court for cause orders otherwise, the dismissal of a case is without prejudice. The debtor is not barred from receiving a discharge in a later case of debts that were dischargeable in the case dismissed. Of course, this subsection refers only to pre-discharge dismissals. If the debtor has already received a discharge and it is not revoked, then the debtor would be barred under section 727(a) from receiving a discharge in a subsequent liquidation case for six years. Dismissal of an involuntary on the merits will generally not give rise to adequate cause so as to bar the debtor from further relief. Subsection (b) specifies that the dismissal reinstates proceedings or custodianships that were superseded by the bankruptcy case, reinstates avoided transfers, reinstates voided liens, vacates any order, judgment, or transfer ordered as a result of the avoidance of a transfer, and revests the property of the estate in the entity in which the property was vested at the commencement of the case. The court is permitted to order a different result for cause. The basic purpose of the subsection is to undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which they were found at the commencement of the case. This does not necessarily encompass undoing sales of property from the estate to a good faith purchaser. Where there is a question over the scope of the subsection, the court will make the appropriate orders to protect rights acquired in reliance on the bankruptcy case. -REFTEXT- REFERENCES IN TEXT Section 109(f) of this title, referred to in subsec. (a), was redesignated section 109(g) of this title by section 253(1)(A) of Pub. L. 99-554. -MISC2- AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353 inserted '; nor does the dismissal of a case under this title prejudice the debtor with regard to the filing of a subsequent petition under this title, except as provided in section 109(f) of this title'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 901 of this title. ------DocID 14712 Document 57 of 646------ -CITE- 11 USC Sec. 350 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER III -HEAD- Sec. 350. Closing and reopening cases -STATUTE- (a) After an estate is fully administered and the court has discharged the trustee, the court shall close the case. (b) A case may be reopened in the court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2569; Pub. L. 98-353, title III, Sec. 439, July 10, 1984, 98 Stat. 370.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Subsection (a) requires the court to close a bankruptcy case after the estate is fully administered and the trustee discharged. The Rules of Bankruptcy Procedure will provide the procedure for case closing. Subsection (b) permits reopening of the case to administer assets, to accord relief to the debtor, or for other cause. Though the court may permit reopening of a case so that the trustee may exercise an avoiding power, laches may constitute a bar to an action that has been delayed too long. The case may be reopened in the court in which it was closed. The rules will prescribe the procedure by which a case is reopened and how it will be conducted after reopening. AMENDMENTS 1984 - Subsec. (b). Pub. L. 98-353 substituted 'A' for 'a'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 554, 703, 901 of this title. ------DocID 14713 Document 58 of 646------ -CITE- 11 USC SUBCHAPTER IV -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER IV -HEAD- SUBCHAPTER IV - ADMINISTRATIVE POWERS ------DocID 14714 Document 59 of 646------ -CITE- 11 USC Sec. 361 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER IV -HEAD- Sec. 361. Adequate protection -STATUTE- When adequate protection is required under section 362, 363, or 364 of this title of an interest of an entity in property, such adequate protection may be provided by - (1) requiring the trustee to make a cash payment or periodic cash payments to such entity, to the extent that the stay under section 362 of this title, use, sale, or lease under section 363 of this title, or any grant of a lien under section 364 of this title results in a decrease in the value of such entity's interest in such property; (2) providing to such entity an additional or replacement lien to the extent that such stay, use, sale, lease, or grant results in a decrease in the value of such entity's interest in such property; or (3) granting such other relief, other than entitling such entity to compensation allowable under section 503(b)(1) of this title as an administrative expense, as will result in the realization by such entity of the indubitable equivalent of such entity's interest in such property. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2569; Pub. L. 98-353, title III, Sec. 440, July 10, 1984, 98 Stat. 370.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 361 of the House amendment represents a compromise between H.R. 8200 as passed by the House and the Senate amendment regarding the issue of 'adequate protection' of a secured party. The House amendment deletes the provision found in section 361(3) of H.R. 8200 as passed by the House. It would have permitted adequate protection to be provided by giving the secured party an administrative expense regarding any decrease in the value of such party's collateral. In every case there is the uncertainty that the estate will have sufficient property to pay administrative expenses in full. Section 361(4) of H.R. 8200 as passed by the House is modified in section 361(3) of the House amendment to indicate that the court may grant other forms of adequate protection, other than an administrative expense, which will result in the realization by the secured creditor of the indubitable equivalent of the creditor's interest in property. In the special instance where there is a reserve fund maintained under the security agreement, such as in the typical bondholder case, indubitable equivalent means that the bondholders would be entitled to be protected as to the reserve fund, in addition to the regular payments needed to service the debt. Adequate protection of an interest of an entity in property is intended to protect a creditor's allowed secured claim. To the extent the protection proves to be inadequate after the fact, the creditor is entitled to a first priority administrative expense under section 503(b). In the special case of a creditor who has elected application of creditor making an election under section 1111(b)(2), that creditor is entitled to adequate protection of the creditor's interest in property to the extent of the value of the collateral not to the extent of the creditor's allowed secured claim, which is inflated to cover a deficiency as a result of such election. SENATE REPORT NO. 95-989 Sections 362, 363, and 364 require, in certain circumstances, that the court determine in noticed hearings whether the interest of a secured creditor or co-owner of property with the debtor is adequately protected in connection with the sale or use of property. The interests of which the court may provide protection in the ways described in this section include equitable as well as legal interests. For example, a right to enforce a pledge and a right to recover property delivered to a debtor under a consignment agreement or an agreement of sale or return are interests that may be entitled to protection. This section specifies means by which adequate protection may be provided but, to avoid placing the court in an administrative role, does not require the court to provide it. Instead, the trustee or debtor in possession or the creditor will provide or propose a protection method. If the party that is affected by the proposed action objects, the court will determine whether the protection provided is adequate. The purpose of this section is to illustrate means by which it may be provided and to define the limits of the concept. The concept of adequate protection is derived from the fifth amendment protection of property interests as enunciated by the Supreme Court. See Wright v. Union Central Life Ins. Co., 311 U.S. 273 (1940); Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555 (1935). The automatic stay also provides creditor protection. Without it, certain creditors would be able to pursue their own remedies against the debtor's property. Those who acted first would obtain payment of the claims in preference to and to the detriment of other creditors. Bankruptcy is designed to provide an orderly liquidation procedure under which all creditors are treated equally. A race of diligence by creditors for the debtor's assets prevents that. Subsection (a) defines the scope of the automatic stay, by listing the acts that are stayed by the commencement of the case. The commencement or continuation, including the issuance of process, of a judicial, administrative or other proceeding against the debtor that was or could have been commenced before the commencement of the bankruptcy case is stayed under paragraph (1). The scope of this paragraph is broad. All proceedings are stayed, including arbitration, administrative, and judicial proceedings. Proceeding in this sense encompasses civil actions and all proceedings even if they are not before governmental tribunals. The stay is not permanent. There is adequate provision for relief from the stay elsewhere in the section. However, it is important that the trustee have an opportunity to inventory the debtor's position before proceeding with the administration of the case. Undoubtedly the court will lift the stay for proceedings before specialized or nongovernmental tribunals to allow those proceedings to come to a conclusion. Any party desiring to enforce an order in such a proceeding would thereafter have to come before the bankruptcy court to collect assets. Nevertheless, it will often be more appropriate to permit proceedings to continue in their place of origin, when no great prejudice to the bankruptcy estate would result, in order to leave the parties to their chosen forum and to relieve the bankruptcy court from many duties that may be handled elsewhere. Paragraph (2) stays the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the bankruptcy case. Thus, execution and levy against the debtors' prepetition property are stayed, and attempts to collect a judgment from the debtor personally are stayed. Paragraph (3) stays any act to obtain possession of property of the estate (that is, property of the debtor as of the date of the filing of the petition) or property from the estate (property over which the estate has control or possession). The purpose of this provision is to prevent dismemberment of the estate. Liquidation must proceed in an orderly fashion. Any distribution of property must be by the trustee after he has had an opportunity to familiarize himself with the various rights and interests involved and with the property available for distribution. Paragraph (4) stays lien creation against property of the estate. Thus, taking possession to perfect a lien or obtaining court process is prohibited. To permit lien creation after bankruptcy would give certain creditors preferential treatment by making them secured instead of unsecured. Paragraph (5) stays any act to create or enforce a lien against property of the debtor, that is, most property that is acquired after the date of the filing of the petition, property that is exempted, or property that does not pass to the estate, to the extent that the lien secures a prepetition claim. Again, to permit postbankruptcy lien creation or enforcement would permit certain creditors to receive preferential treatment. It may also circumvent the debtors' discharge. Paragraph (6) prevents creditors from attempting in any way to collect a prepetition debt. Creditors in consumer cases occasionally telephone debtors to encourage repayment in spite of bankruptcy. Inexperienced, frightened, or ill-counseled debtors may succumb to suggestions to repay notwithstanding their bankruptcy. This provision prevents evasion of the purpose of the bankruptcy laws by sophisticated creditors. Paragraph (7) stays setoffs of mutual debts and credits between the debtor and creditors. As with all other paragraphs of subsection (a), this paragraph does not affect the right of creditors. It simply stays its enforcement pending an orderly examination of the debtor's and creditors' rights. Subsection (b) lists seven exceptions to the automatic stay. The effect of an exception is not to make the action immune from injunction. The court has ample other powers to stay actions not covered by the automatic stay. Section 105, of proposed title 11, derived from Bankruptcy Act Sec. 2a(15) (section 11(a)(15) of former title 11), grants the power to issue orders necessary or appropriate to carry out the provisions of title 11. The district court and the bankruptcy court as its adjunct have all the traditional injunctive powers of a court of equity, 28 U.S.C. Sec. 151 and 164 as proposed in S. 2266, Sec. 201, and 28 U.S.C. Sec. 1334, as proposed in S. 2266, Sec. 216. Stays or injunctions issued under these other sections will not be automatic upon the commencement of the case, but will be granted or issued under the usual rules for the issuance of injunctions. By excepting an act or action from the automatic stay, the bill simply requires that the trustee move the court into action, rather than requiring the stayed party to request relief from the stay. There are some actions, enumerated in the exceptions, that generally should not be stayed automatically upon the commencement of the case, for reasons of either policy or practicality. Thus, the court will have to determine on a case-by-case basis whether a particular action which may be harming the estate should be stayed. With respect to stays issued under other powers, or the application of the automatic stay, to governmental actions, this section and the other sections mentioned are intended to be an express waiver of sovereign immunity of the Federal Government, and an assertion of the bankruptcy power over State governments under the supremacy clause notwithstanding a State's sovereign immunity. The first exception is of criminal proceedings against the debtor. The bankruptcy laws are not a haven for criminal offenders, but are designed to give relief from financial overextension. Thus, criminal actions and proceedings may proceed in spite of bankruptcy. Paragraph (2) excepts from the stay the collection of alimony, maintenance or support from property that is not property of the estate. This will include property acquired after the commencement of the case, exempted property, and property that does not pass to the estate. The automatic stay is one means of protecting the debtor's discharge. Alimony, maintenance and support obligations are excepted from discharge. Staying collection of them, when not to the detriment of other creditors (because the collection effort is against property that is not property of the estate) does not further that goal. Moreover, it could lead to hardship on the part of the protected spouse or children. Paragraph (3) excepts any act to perfect an interest in property to the extent that the trustee's rights and powers are limited under section 546(a) of the bankruptcy code. That section permits postpetition perfection of certain liens to be effective against the trustee. If the act of perfection, such as filing, were stayed, the section would be nullified. Paragraph (4) excepts commencement or continuation of actions and proceedings by governmental units to enforce police or regulatory powers. Thus, where a governmental unit is suing a debtor to prevent or stop violation of fraud, environmental protection, consumer protection, safety, or similar police or regulatory laws, or attempting to fix damages for violation of such a law, the action or proceeding is not stayed under the automatic stay. Paragraph (5) makes clear that the exception extends to permit an injunction and enforcement of an injunction, and to permit the entry of a money judgment, but does not extend to permit enforcement of a money judgment. Since the assets of the debtor are in the possession and control of the bankruptcy court, and since they constitute a fund out of which all creditors are entitled to share, enforcement by a governmental unit of a money judgment would give it preferential treatment to the detriment of all other creditors. Paragraph (6) excepts the setoff of any mutual debt and claim for commodity transactions. Paragraph (7) excepts actions by the Secretary of Housing and Urban Development to foreclose or take possession in a case of a loan insured under the National Housing Act (12 U.S.C. 1701 et seq.). A general exception for such loans is found in current sections 263 and 517 (sections 663 and 917 of former title 11), the exception allowed by this paragraph is much more limited. Subsection (c) of section 362 specifies the duration of the automatic stay. Paragraph (1) terminates a stay of an act against property of the estate when the property ceases to be property of the estate, such as by sale, abandonment, or exemption. It does not terminate the stay against property of the debtor if the property leaves the estate and goes to the debtor. Paragraph (2) terminates the stay of any other act on the earliest of the time the case is closed, the time the case is dismissed, or the time a discharge is granted or denied (unless the debtor is a corporation or partnership in a chapter 7 case). Subsection (c) governs automatic termination of the stay. Subsections (d) through (g) govern termination of the stay by the court on the request of a party in interest. Subsection (d) requires the court, upon motion of a party in interest, to grant relief from the stay for cause, such as by terminating, annulling, modifying, or conditioning the stay. The lack of adequate protection of an interest in property is one cause for relief, but is not the only cause. Other causes might include the lack of any connection with or interference with the pending bankruptcy case. Generally, proceedings in which the debtor is a fiduciary, or involving postpetition activities of the debtor, need not be stayed because they bear no relationship to the purpose of the automatic stay, which is protection of the debtor and his estate from his creditors. Upon the court's finding that the debtor has no equity in the property subject to the stay and that the property is not necessary to an effective reorganization of the debtor, the subsection requires the court grant relief from the stay. To aid in this determination, guidelines are established where the property subject to the stay is real property. An exception to 'the necessary to an effective reorganization' requirement is made for real property on which no business is being conducted other than operating the real property and activities incident thereto. The intent of this exception is to reach the single-asset apartment type cases which involve primarily tax-shelter investments and for which the bankruptcy laws have provided a too facile method to relay conditions, but not the operating shopping center and hotel cases where attempts at reorganization should be permitted. Property in which the debtor has equity but which is not necessary to an effective reorganization of the debtor should be sold under section 363. Hearings under this subsection are given calendar priority to ensure that court congestion will not unduly prejudice the rights of creditors who may be obviously entitled to relief from the operation of the automatic stay. Subsection (e) provides protection that is not always available under present law. The subsection sets a time certain within which the bankruptcy court must rule on the adequacy of protection provided for the secured creditor's interest. If the court does not rule within 30 days from a request by motion for relief from the stay, the stay is automatically terminated with respect to the property in question. To accommodate more complex cases, the subsection permits the court to make a preliminary ruling after a preliminary hearing. After a preliminary hearing, the court may continue the stay only if there is a reasonable likelihood that the party opposing relief from the stay will prevail at the final hearing. Because the stay is essentially an injunction, the three stages of the stay may be analogized to the three stages of an injunction. The filing of the petition which gives rise to the automatic stay is similar to a temporary restraining order. The preliminary hearing is similar to the hearing on a preliminary injunction, and the final hearing and order are similar to the hearing and issuance or denial of a permanent injunction. The main difference lies in which party must bring the issue before the court. While in the injunction setting, the party seeking the injunction must prosecute the action, in proceeding for relief from the automatic stay, the enjoined party must move. The difference does not, however, shift the burden of proof. Subsection (g) leaves that burden on the party opposing relief from the stay (that is, on the party seeking continuance of the injunction) on the issue of adequate protection and existence of an equity. It is not, however, intended to be confined strictly to the constitutional requirement. This section and the concept of adequate protection are based as much on policy grounds as on constitutional grounds. Secured creditors should not be deprived of the benefit of their bargain. There may be situations in bankruptcy where giving a secured creditor an absolute right to his bargain may be impossible or seriously detrimental to the policy of the bankruptcy laws. Thus, this section recognizes the availability of alternate means of protecting a secured creditor's interest where such steps are a necessary part of the rehabilitative process. Though the creditor might not be able to retain his lien upon the specific collateral held at the time of filing, the purpose of the section is to insure that the secured creditor receives the value for which he bargained. The section specifies two exclusive means of providing adequate protection, both of which may require an approximate determination of the value of the protected entity's interest in the property involved. The section does not specify how value is to be determined, nor does it specify when it is to be determined. These matters are left to case-by-case interpretation and development. In light of the restrictive approach of the section to the availability of means of providing adequate protection, this flexibility is important to permit the courts to adapt to varying circumstances and changing modes of financing. Neither is it expected that the courts will construe the term value to mean, in every case, forced sale liquidation value or full going concern value. There is wide latitude between those two extremes although forced sale liquidation value will be a minimum. In any particular case, especially a reorganization case, the determination of which entity should be entitled to the difference between the going concern value and the liquidation value must be based on equitable considerations arising from the facts of the case. Finally, the determination of value is binding only for the purposes of the specific hearing and is not to have a res judicata effect. The first method of adequate protection outlined is the making of cash payments to compensate for the expected decrease in value of the opposing entity's interest. This provision is derived from In re Bermec Corporation, 445 F.2d 367 (2d Cir. 1971), though in that case it is not clear whether the payments offered were adequate to compensate the secured creditors for their loss. The use of periodic payments may be appropriate where, for example, the property in question is depreciating at a relatively fixed rate. The periodic payments would be to compensate for the depreciation and might, but need not necessarily, be in the same amount as payments due on the secured obligation. The second method is the fixing of an additional or replacement lien on other property of the debtor to the extent of the decrease in value or actual consumption of the property involved. The purpose of this method is to provide the protected entity with an alternative means of realizing the value of the original property, if it should decline during the case, by granting an interest in additional property from whose value the entity may realize its loss. This is consistent with the view expressed in Wright v. Union Central Life Ins. Co., 311 U.S. 273 (1940), where the Court suggested that it was the value of the secured creditor's collateral, and not necessarily his rights in specific collateral, that was entitled to protection. The section makes no provision for the granting of an administrative priority as a method of providing adequate protection to an entity as was suggested in In re Yale Express System, Inc., 384 F.2d 990 (2d Cir. 1967), because such protection is too uncertain to be meaningful. HOUSE REPORT NO. 95-595 The section specifies four means of providing adequate protection. They are neither exclusive nor exhaustive. They all rely, however, on the value of the protected entity's interest in the property involved. The section does not specify how value is to be determined, nor does it specify when it is to be determined. These matters are left to case-by-case interpretation and development. It is expected that the courts will apply the concept in light of facts of each case and general equitable principles. It is not intended that the courts will develop a hard and fast rule that will apply in every case. The time and method of valuation is not specified precisely, in order to avoid that result. There are an infinite number of variations possible in dealings between debtors and creditors, the law is continually developing, and new ideas are continually being implemented in this field. The flexibility is important to permit the courts to adapt to varying circumstances and changing modes of financing. Neither is it expected that the courts will construe the term value to mean, in every case, forced sale liquidation value or full going concern value. There is wide latitude between those two extremes. In any particular case, especially a reorganization case, the determination of which entity should be entitled to the difference between the going concern value and the liquidation value must be based on equitable considerations based on the facts of the case. It will frequently be based on negotiation between the parties. Only if they cannot agree will the court become involved. The first method of adequate protection specified is periodic cash payments by the estate, to the extent of a decrease in value of the opposing entity's interest in the property involved. This provision is derived from In re Yale Express, Inc., 384 F.2d 990 (2d Cir. 1967) (though in that case it is not clear whether the payments required were adequate to compensate the secured creditors for their loss). The use of periodic payments may be appropriate, where for example, the property in question is depreciating at a relatively fixed rate. The periodic payments would be to compensate for the depreciation. The second method is the provision of an additional or replacement lien on other property to the extent of the decrease in value of the property involved. The purpose of this method is to provide the protected entity with a means of realizing the value of the original property, if it should decline during the case, by granting an interest in additional property from whose value the entity may realize its loss. The third method is the granting of an administrative expense priority to the protected entity to the extent of his loss. This method, more than the others, requires a prediction as to whether the unencumbered assets that will remain if the case if converted from reorganization to liquidation will be sufficient to pay the protected entity in full. It is clearly the most risky, from the entity's perspective, and should be used only when there is relative certainty that administrative expenses will be able to be paid in full in the event of liquidation. The fourth (now third) method gives the parties and the courts flexibility by allowing such other relief as will result in the realization by the protected entity of the value of its interest in the property involved. Under this provision, the courts will be able to adapt to new methods of financing and to formulate protection that is appropriate to the circumstances of the case if none of the other methods would accomplish the desired result. For example, another form of adequate protection might be the guarantee by a third party outside the judicial process of compensation for any loss incurred in the case. Adequate protection might also, in some circumstances, be provided by permitting a secured creditor to bid in his claim at the sale of the property and to offset the claim against the price bid in. The paragraph also defines, more clearly than the others, the general concept of adequate protection, by requiring such relief as will result in the realization of value. It is the general category, and as such, is defined by the concept involved rather than any particular method of adequate protection. AMENDMENTS 1984 - Par. (1). Pub. L. 98-353 inserted 'a cash payment or' after 'make'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 901, 1205 of this title. ------DocID 14715 Document 60 of 646------ -CITE- 11 USC Sec. 362 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER IV -HEAD- Sec. 362. Automatic stay -STATUTE- (a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78eee(a)(3)), operates as a stay, applicable to all entities, of - (1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title; (2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title; (3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate; (4) any act to create, perfect, or enforce any lien against property of the estate; (5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title; (6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title; (7) the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor; and (8) the commencement or continuation of a proceeding before the United States Tax Court concerning the debtor. (b) The filing of a petition under section 301, 302, or 303 of this title, or of an application under section 5(a)(3) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78eee(a)(3)), does not operate as a stay - (1) under subsection (a) of this section, of the commencement or continuation of a criminal action or proceeding against the debtor; (2) under subsection (a) of this section, of the collection of alimony, maintenance, or support from property that is not property of the estate; (3) under subsection (a) of this section, of any act to perfect an interest in property to the extent that the trustee's rights and powers are subject to such perfection under section 546(b) of this title or to the extent that such act is accomplished within the period provided under section 547(e)(2)(A) of this title; (4) under subsection (a)(1) of this section, of the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power; (5) under subsection (a)(2) of this section, of the enforcement of a judgment, other than a money judgment, obtained in an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power; (6) under subsection (a) of this section, of the setoff by a commodity broker, forward contract merchant, stockbroker, financial institutions, or securities clearing agency of any mutual debt and claim under or in connection with commodity contracts, as defined in section 761(4) of this title, forward contracts, or securities contracts, as defined in section 741(7) of this title, that constitutes the setoff of a claim against the debtor for a margin payment, as defined in section 101(34), 741(5), or 761(15) of this title, or settlement payment, as defined in section 101(35) or 741(8) of this title, arising out of commodity contracts, forward contracts, or securities contracts against cash, securities, or other property held by or due from such commodity broker, forward contract merchant, stockbroker, financial institutions, or securities clearing agency to margin, guarantee, secure, or settle commodity contracts, forward contracts, or securities contracts; (7) under subsection (a) of this section, of the setoff by a repo participant, of any mutual debt and claim under or in connection with repurchase agreements that constitutes the setoff of a claim against the debtor for a margin payment, as defined in section 741(5) or 761(15) of this title, or settlement payment, as defined in section 741(8) of this title, arising out of repurchase agreements against cash, securities, or other property held by or due from such repo participant to margin, guarantee, secure or settle repurchase agreements; (8) under subsection (a) of this section, of the commencement of any action by the Secretary of Housing and Urban Development to foreclose a mortgage or deed of trust in any case in which the mortgage or deed of trust held by the Secretary is insured or was formerly insured under the National Housing Act and covers property, or combinations of property, consisting of five or more living units; (9) under subsection (a) of this section, of the issuance to the debtor by a governmental unit of a notice of tax deficiency; (10) under subsection (a) of this section, of any act by a lessor to the debtor under a lease of nonresidential real property that has terminated by the expiration of the stated term of the lease before the commencement of or during a case under this title to obtain possession of such property; or (FOOTNOTE 1) (FOOTNOTE 1) So in original. The word 'or' probably should not appear. (11) under subsection (a) of this section, of the presentment of a negotiable instrument and the giving of notice of and protesting dishonor of such an instrument; (12) under subsection (a) of this section, after the date which is 90 days after the filing of such petition, of the commencement or continuation, and conclusion to the entry of final judgment, of an action which involves a debtor subject to reorganization pursuant to chapter 11 of this title and which was brought by the Secretary of Transportation under the Ship Mortgage Act, 1920 (FOOTNOTE 2) (46 App. U.S.C. 911 et seq.) (including distribution of any proceeds of sale) to foreclose a preferred ship or fleet mortgage, or a security interest in or relating to a vessel or vessel under construction, held by the Secretary of Transportation under section 207 or title XI of the Merchant Marine Act, 1936 (46 App. U.S.C. 1117 and 1271 et seq., respectively), or under applicable State law; (FOOTNOTE 2) See References in Text note below. (13) under subsection (a) of this section, after the date which is 90 days after the filing of such petition, of the commencement or continuation, and conclusion to the entry of final judgment, of an action which involves a debtor subject to reorganization pursuant to chapter 11 of this title and which was brought by the Secretary of Commerce under the Ship Mortgage Act, 1920 (FOOTNOTE 2) (46 App. U.S.C. 911 et seq.) (including distribution of any proceeds of sale) to foreclose a preferred ship or fleet mortgage in a vessel or a mortgage, deed of trust, or other security interest in a fishing facility held by the Secretary of Commerce under section 207 or title XI of the Merchant Marine Act, 1936 (46 App. U.S.C. 1117 and 1271 et seq., respectively); or (FOOTNOTE 3) (FOOTNOTE 3) So in original. The word 'or' probably should not appear. (14) (FOOTNOTE 4) under subsection (a) of this section, of the setoff by a swap participant, of any mutual debt and claim under or in connection with any swap agreement that constitutes the setoff of a claim against the debtor for any payment due from the debtor under or in connection with any swap agreement against any payment due to the debtor from the swap participant under or in connection with any swap agreement or against cash, securities, or other property of the debtor held by or due from such swap participant to guarantee, secure or settle any swap agreement. (FOOTNOTE 5) (FOOTNOTE 4) So in original. Two pars. (14) have been enacted. See 1990 Amendments notes below. (FOOTNOTE 5) So in original. The period probably should be a semicolon. (14) (FOOTNOTE 4) under subsection (a) of this section, of any action by an accrediting agency regarding the accreditation status of the debtor as an educational institution; (15) under subsection (a) of this section, of any action by a State licensing body regarding the licensure of the debtor as an educational institution; or (16) under subsection (a) of this section, of any action by a guaranty agency, as defined in section 435(j) of the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) or the Secretary of Education regarding the eligibility of the debtor to participate in programs authorized under such Act. The provisions of paragraphs (12) and (13) of this subsection shall apply with respect to any such petition filed on or before December 31, 1989. (c) Except as provided in subsections (d), (e), and (f) of this section - (1) the stay of an act against property of the estate under subsection (a) of this section continues until such property is no longer property of the estate; and (2) the stay of any other act under subsection (a) of this section continues until the earliest of - (A) the time the case is closed; (B) the time the case is dismissed; or (C) if the case is a case under chapter 7 of this title concerning an individual or a case under chapter 9, 11, 12, or 13 of this title, the time a discharge is granted or denied. (d) On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay - (1) for cause, including the lack of adequate protection of an interest in property of such party in interest; or (2) with respect to a stay of an act against property under subsection (a) of this section, if - (A) the debtor does not have an equity in such property; and (B) such property is not necessary to an effective reorganization. (e) Thirty days after a request under subsection (d) of this section for relief from the stay of any act against property of the estate under subsection (a) of this section, such stay is terminated with respect to the party in interest making such request, unless the court, after notice and a hearing, orders such stay continued in effect pending the conclusion of, or as a result of, a final hearing and determination under subsection (d) of this section. A hearing under this subsection may be a preliminary hearing, or may be consolidated with the final hearing under subsection (d) of this section. The court shall order such stay continued in effect pending the conclusion of the final hearing under subsection (d) of this section if there is a reasonable likelihood that the party opposing relief from such stay will prevail at the conclusion of such final hearing. If the hearing under this subsection is a preliminary hearing, then such final hearing shall be commenced not later than thirty days after the conclusion of such preliminary hearing. (f) Upon request of a party in interest, the court, with or without a hearing, shall grant such relief from the stay provided under subsection (a) of this section as is necessary to prevent irreparable damage to the interest of an entity in property, if such interest will suffer such damage before there is an opportunity for notice and a hearing under subsection (d) or (e) of this section. (g) In any hearing under subsection (d) or (e) of this section concerning relief from the stay of any act under subsection (a) of this section - (1) the party requesting such relief has the burden of proof on the issue of the debtor's equity in property; and (2) the party opposing such relief has the burden of proof on all other issues. (h) An individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2570; Pub. L. 97-222, Sec. 3, July 27, 1982, 96 Stat. 235; Pub. L. 98-353, title III, Sec. 304, 363(b), 392, 441, July 10, 1984, 98 Stat. 352, 363, 365, 371; Pub. L. 99-509, title V, Sec. 5001(a), Oct. 21, 1986, 100 Stat. 1911; Pub. L. 99-554, title II, Sec. 257(j), 283(d), Oct. 27, 1986, 100 Stat. 3115, 3116; Pub. L. 101-311, title I, Sec. 102, title II, Sec. 202, June 25, 1990, 104 Stat. 267, 269; Pub. L. 101-508, title III, Sec. 3007(a)(1), Nov. 5, 1990, 104 Stat. 1388-28.) -STATAMEND- AMENDMENT OF SECTION For termination of amendment by section 3008 of Pub. L. 101-508, see Effective and Termination Dates of 1990 Amendment note below. -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 362(a)(1) of the House amendment adopts the provision contained in the Senate amendment enjoining the commencement or continuation of a judicial, administrative, or other proceeding to recover a claim against the debtor that arose before the commencement of the case. The provision is beneficial and interacts with section 362(a)(6), which also covers assessment, to prevent harassment of the debtor with respect to pre-petition claims. Section 362(a)(7) contains a provision contained in H.R. 8200 as passed by the House. The differing provision in the Senate amendment was rejected. It is not possible that a debt owing to the debtor may be offset against an interest in the debtor. Section 362(a)(8) is new. The provision stays the commencement or continuation of any proceeding concerning the debtor before the U.S. Tax Court. Section 362(b)(4) indicates that the stay under section 362(a)(1) does not apply to affect the commencement or continuation of an action or proceeding by a governmental unit to enforce the governmental unit's police or regulatory power. This section is intended to be given a narrow construction in order to permit governmental units to pursue actions to protect the public health and safety and not to apply to actions by a governmental unit to protect a pecuniary interest in property of the debtor or property of the estate. Section 362(b)(6) of the House amendment adopts a provision contained in the Senate amendment restricting the exception to the automatic stay with respect to setoffs to permit only the setoff of mutual debts and claims. Traditionally, the right of setoff has been limited to mutual debts and claims and the lack of the clarifying term 'mutual' in H.R. 8200 as passed by the House created an unintentional ambiguity. Section 362(b)(7) of the House amendment permits the issuance of a notice of tax deficiency. The House amendment rejects section 362(b)(7) in the Senate amendment. It would have permitted a particular governmental unit to obtain a pecuniary advantage without a hearing on the merits contrary to the exceptions contained in sections 362(b)(4) and (5). Section 362(d) of the House amendment represents a compromise between comparable provisions in the House bill and Senate amendment. Under section 362(d)(1) of the House amendment, the court may terminate, annul, modify, or condition the automatic stay for cause, including lack of adequate protection of an interest in property of a secured party. It is anticipated that the Rules of Bankruptcy Procedure will provide that those hearings will receive priority on the calendar. Under section 362(d)(2) the court may alternatively terminate, annul, modify, or condition the automatic stay for cause including inadequate protection for the creditor. The court shall grant relief from the stay if there is no equity and it is not necessary to an effective reorganization of the debtor. The latter requirement is contained in section 362(d)(2). This section is intended to solve the problem of real property mortgage foreclosures of property where the bankruptcy petition is filed on the eve of foreclosure. The section is not intended to apply if the business of the debtor is managing or leasing real property, such as a hotel operation, even though the debtor has no equity if the property is necessary to an effective reorganization of the debtor. Similarly, if the debtor does have an equity in the property, there is no requirement that the property be sold under section 363 of title 11 as would have been required by the Senate amendment. Section 362(e) of the House amendment represents a modification of provisions in H.R. 8200 as passed by the House and the Senate amendment to make clear that a final hearing must be commenced within 30 days after a preliminary hearing is held to determine whether a creditor will be entitled to relief from the automatic stay. In order to insure that those hearings will in fact occur within such 30-day period, it is anticipated that the rules of bankruptcy procedure provide that such final hearings receive priority on the court calendar. Section 362(g) places the burden of proof on the issue of the debtor's equity in collateral on the party requesting relief from the automatic stay and the burden on other issues on the debtor. An amendment has been made to section 362(b) to permit the Secretary of the Department of Housing and Urban Development to commence an action to foreclose a mortgage or deed of trust. The commencement of such an action is necessary for tax purposes. The section is not intended to permit the continuation of such an action after it is commenced nor is the section to be construed to entitle the Secretary to take possession in lieu of foreclosure. Automatic stay: Sections 362(b)(8) and (9) contained in the Senate amendment are largely deleted in the House amendment. Those provisions add to the list of actions not stayed (a) jeopardy assessments, (b) other assessments, and (c) the issuance of deficiency notices. In the House amendment, jeopardy assessments against property which ceases to be property of the estate is already authorized by section 362(c)(1). Other assessments are specifically stayed under section 362(a)(6), while the issuance of a deficiency notice is specifically permitted. Stay of the assessment and the permission to issue a statutory notice of a tax deficiency will permit the debtor to take his personal tax case to the Tax Court, if the bankruptcy judge authorizes him to do so (as explained more fully in the discussion of section 505). SENATE REPORT NO. 95-989 The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy. The action commenced by the party seeking relief from the stay is referred to as a motion to make it clear that at the expedited hearing under subsection (e), and at hearings on relief from the stay, the only issue will be the lack of adequate protection, the debtor's equity in the property, and the necessity of the property to an effective reorganization of the debtor, or the existence of other cause for relief from the stay. This hearing will not be the appropriate time at which to bring in other issues, such as counterclaims against the creditor, which, although relevant to the question of the amount of the debt, concern largely collateral or unrelated matters. This approach is consistent with that taken in cases such as In re Essex Properties, Ltd., 430 F.Supp. 1112 (N.D.Cal.1977), that an action seeking relief from the stay is not the assertion of a claim which would give rise to the right or obligation to assert counterclaims. Those counterclaims are not to be handled in the summary fashion that the preliminary hearing under this provision will be. Rather, they will be the subject of more complete proceedings by the trustee to recover property of the estate or to object to the allowance of a claim. However, this would not preclude the party seeking continuance of the stay from presenting evidence on the existence of claims which the court may consider in exercising its discretion. What is precluded is a determination of such collateral claims on the merits at the hearing. HOUSE REPORT NO. 95-595 Paragraph (7) (of subsec. (a)) stays setoffs of mutual debts and credits between the debtor and creditors. As with all other paragraphs of subsection (a), this paragraph does not affect the right of creditors. It simply stays its enforcement pending an orderly examination of the debtor's and creditors' rights. Subsection (c) governs automatic termination of the stay. Subsections (d) through (g) govern termination of the stay by the court on the request of a party in interest. Subsection (d) requires the court, on request of a party in interest, to grant relief from the stay, such as by terminating, annulling, modifying, or conditioning the stay, for cause. The lack of adequate protection of an interest in property of the party requesting relief from the stay is one cause for relief, but is not the only cause. As noted above, a desire to permit an action to proceed to completion in another tribunal may provide another cause. Other causes might include the lack of any connection with or interference with the pending bankruptcy case. For example, a divorce or child custody proceeding involving the debtor may bear no relation to the bankruptcy case. In that case, it should not be stayed. A probate proceeding in which the debtor is the executor or administrator of another's estate usually will not be related to the bankruptcy case, and should not be stayed. Generally, proceedings in which the debtor is a fiduciary, or involving postpetition activities of the debtor, need not be stayed because they bear no relationship to the purpose of the automatic stay, which is debtor protection from his creditors. The facts of each request will determine whether relief is appropriate under the circumstances. Subsection (e) provides a protection for secured creditors that is not available under present law. The subsection sets a time certain within which the bankruptcy court must rule on the adequacy of protection provided of the secured creditor's interest. If the court does not rule within 30 days from a request for relief from the stay, the stay is automatically terminated with respect to the property in question. In order to accommodate more complex cases, the subsection permits the court to make a preliminary ruling after a preliminary hearing. After a preliminary hearing, the court may continue the stay only if there is a reasonable likelihood that the party opposing relief from the stay will prevail at the final hearing. Because the stay is essentially an injunction, the three stages of the stay may be analogized to the three stages of an injunction. The filing of the petition which gives rise to the automatic stay is similar to a temporary restraining order. The preliminary hearing is similar to the hearing on a preliminary injunction, and the final hearing and order is similar to a permanent injunction. The main difference lies in which party must bring the issue before the court. While in the injunction setting, the party seeking the injunction must prosecute the action, in proceedings for relief from the automatic stay, the enjoined party must move. The difference does not, however, shift the burden of proof. Subsection (g) leaves that burden on the party opposing relief from the stay (that is, on the party seeking continuance of the injunction) on the issue of adequate protection. At the expedited hearing under subsection (e), and at all hearings on relief from the stay, the only issue will be the claim of the creditor and the lack of adequate protection or existence of other cause for relief from the stay. This hearing will not be the appropriate time at which to bring in other issues, such as counterclaims against the creditor on largely unrelated matters. Those counterclaims are not to be handled in the summary fashion that the preliminary hearing under this provision will be. Rather, they will be the subject of more complete proceedings by the trustees to recover property of the estate or to object to the allowance of a claim. -REFTEXT- REFERENCES IN TEXT The National Housing Act, referred in subsec. (b)(8), is act June 27, 1934, ch. 847, 48 Stat. 1246, as amended, which is classified principally to chapter 13 (Sec. 1701 et seq.) of Title 12, Banks and Banking. For complete classification of this Act to the Code, see section 1701 of Title 12 and Tables. The Ship Mortgage Act, 1920, referred to in subsec. (b)(12), (13), is section 30 of act June 5, 1920, ch. 250, 41 Stat. 1000, as amended, which was classified generally to chapter 25 (Sec. 911 et seq.) of former Title 46, Shipping, and was repealed by Pub. L. 100-710, title I, Sec. 106(b)(2), Nov. 23, 1988, 102 Stat. 4752, and reenacted by section 102(c) thereof as chapters 301 and 313 of Title 46, Shipping. The Merchant Marine Act, 1936, referred to in subsec. (b)(12), (13), is act June 29, 1936, ch. 858, 49 Stat. 1985, as amended. Title XI of the Merchant Marine Act, 1936 is classified generally to subchapter XI (Sec. 1271 et seq.) of chapter 27 of Title 46, Appendix. For complete classification of this Act to the Code, see section 1245 of Title 46, Appendix, and Tables. The Higher Education Act of 1965, referred to in subsec. (b)(16), is Pub. L. 89-329, Nov. 8, 1965, 79 Stat. 1219, as amended, which is classified principally to chapter 28 (Sec. 1001 et seq.) of Title 20, Education. Section 435(j) of the Act is classified to section 1085(j) of Title 20. For complete classification of this Act to the Code, see Short Title note set out under section 1001 of Title 20 and Tables. -MISC2- AMENDMENTS 1990 - Subsec. (b)(6). Pub. L. 101-311, Sec. 202, inserted reference to sections 101(34) and 101(35) of this title. Subsec. (b)(12). Pub. L. 101-508, Sec. 3007(a)(1)(A), 3008, which temporarily directed the striking of 'or' after 'State law;', could not be executed because of a prior amendment by Pub. L. 101-311. See below. See also Effective and Termination Dates of 1990 Amendment note below. Pub. L. 101-311, Sec. 102(1), struck out 'or' after 'State law;'. Subsec. (b)(13). Pub. L. 101-508, Sec. 3007(a)(1)(B), 3008, which temporarily directed the substitution of a semicolon for a period at end thereof, could not be executed because of a prior amendment by Pub. L. 101-311. See below. See also Effective and Termination Dates of 1990 Amendment note below. Pub. L. 101-311, Sec. 102(2), substituted '; or' for period at end. Subsec. (b)(14) to (16). Pub. L. 101-508, Sec. 3007(a)(1)(C), 3008, temporarily added pars. (14) to (16). Notwithstanding directory language adding pars. (14) to (16) immediately following par. (13), pars. (14) to (16) were added after par. (14), as added by Pub. L. 101-311, to reflect the probable intent of Congress. See Effective and Termination Dates of 1990 Amendment note below. Pub. L. 101-311, Sec. 102(3), added par. (14) relating to the setoff by a swap participant of any mutual debt and claim under or in connection with a swap agreement. Notwithstanding directory language adding par. (14) at end of subsec. (b), par. (14) was added after par. (13) to reflect the probable intent of Congress. 1986 - Subsec. (b). Pub. L. 99-509 inserted sentence at end. Subsec. (b)(6). Pub. L. 99-554, Sec. 283(d)(1), substituted ', financial institutions' for 'financial institution,' in two places. Subsec. (b)(9). Pub. L. 99-554, Sec. 283(d)(2), (3), struck out 'or' at end of first par. (9) and redesignated as par. (10) the second par. (9) relating to leases of nonresidential property, which was added by section 363(b) of Pub. L. 98-353. Subsec. (b)(10). Pub. L. 99-554, Sec. 283(d)(3), (4), redesignated as par. (10) the second par. (9) relating to leases of nonresidential property, added by section 363(b) of Pub. L. 99-353, and substituted 'property; or' for 'property.'. Former par. (10) redesignated (11). Subsec. (b)(11). Pub. L. 99-554, Sec. 283(d)(3), redesignated former par. (10) as (11). Subsec. (b)(12), (13). Pub. L. 99-509 added pars. (12) and (13). Subsec. (c)(2)(C). Pub. L. 99-554, Sec. 257(j), inserted reference to chapter 12 of this title. 1984 - Subsec. (a)(1). Pub. L. 98-353, Sec. 441(a)(1), inserted 'action or' after 'other'. Subsec. (a)(3). Pub. L. 98-353, Sec. 441(a)(2), inserted 'or to exercise control over property of the estate'. Subsec. (b)(3). Pub. L. 98-353, Sec. 441(b)(1), inserted 'or to the extent that such act is accomplished within the period provided under section 547(e)(2)(A) of this title'. Subsec. (b)(6). Pub. L. 98-353, Sec. 441(b)(2), inserted 'or due from' after 'held by' and 'financial institution,' after 'stockbroker' in two places, and substituted 'secure, or settle commodity contracts' for 'or secure commodity contracts'. Subsec. (b)(7) to (9). Pub. L. 98-353, Sec. 441(b)(3), (4), in par. (8) as redesignated by Pub. L. 98-353, Sec. 392, substituted 'the' for 'said' and struck out 'or' the last place it appeared which probably meant 'or' after 'units;' that was struck out by Pub. L. 98-353, Sec. 363(b)(1); and, in par. (9), relating to notices of deficiencies, as redesignated by Pub. L. 98-353, Sec. 392, substituted a semicolon for the period. Pub. L. 98-353, Sec. 392, added par. (7) and redesignated former pars. (7) and (8) as (8) and (9), respectively. Pub. L. 98-353, Sec. 363(b), struck out 'or' at end of par. (7), substituted '; or' for the period at end of par. (8), and added par. (9) relating to leases of nonresidential property. Subsec. (b)(10). Pub. L. 98-353, Sec. 441(b)(5), added par. (10). Subsec. (c)(2)(B). Pub. L. 98-353, Sec. 441(c), substituted 'or' for 'and'. Subsec. (d)(2). Pub. L. 98-353, Sec. 441(d), inserted 'under subsection (a) of this section' after 'property'. Subsec. (e). Pub. L. 98-353, Sec. 441(e), inserted 'the conclusion of' after 'pending' and substituted 'The court shall order such stay continued in effect pending the conclusion of the final hearing under subsection (d) of this section if there is a reasonable likelihood that the party opposing relief from such stay will prevail at the conclusion of such final hearing. If the hearing under this subsection is a preliminary hearing, then such final hearing shall be commenced not later than thirty days after the conclusion of such preliminary hearing.' for 'If the hearing under this subsection is a preliminary hearing - '(1) the court shall order such stay so continued if there is a reasonable likelihood that the party opposing relief from such stay will prevail at the final hearing under subsection (d) of this section; and '(2) such final hearing shall be commenced within thirty days after such preliminary hearing.' Subsec. (f). Pub. L. 98-353, Sec. 441(f), substituted 'Upon request of a party in interest, the court, with or' for 'The court,'. Subsec. (h). Pub. L. 98-353, Sec. 304, added subsec. (h). 1982 - Subsec. (a). Pub. L. 97-222, Sec. 3(a), inserted ', or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78eee(a)(3)),' after 'this title' in provisions preceding par. (1). Subsec. (b). Pub. L. 97-222, Sec. 3(b), inserted ', or of an application under section 5(a)(3) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78eee(a)(3)),' after 'this title' in provisions preceding par. (1). Subsec. (b)(6). Pub. L. 97-222, Sec. 3(c), substituted provisions that the filing of a bankruptcy petition would not operate as a stay, under subsec. (a) of this section, of the setoff by a commodity broker, forward contract merchant, stockbroker, or securities clearing agency of any mutual debt and claim under or in connection with commodity, forward, or securities contracts that constitutes the setoff of a claim against the debtor for a margin or settlement payment arising out of commodity, forward, or securities contracts against cash, securities, or other property held by any of the above agents to margin, guarantee, or secure commodity, forward, or securities contracts, for provisions that such filing would not operate as a stay under subsection (a)(7) of this section, of the setoff of any mutual debt and claim that are commodity futures contracts, forward commodity contracts, leverage transactions, options, warrants, rights to purchase or sell commodity futures contracts or securities, or options to purchase or sell commodities or securities. EFFECTIVE AND TERMINATION DATES OF 1990 AMENDMENT Section 3007(a)(3) of Pub. L. 101-508 provided that: 'The amendments made by this subsection (amending this section and section 541 of this title) shall be effective upon date of enactment of this Act (Nov. 5, 1990).' Section 3008 of Pub. L. 101-508 provided that: 'The amendments made by this subtitle (subtitle A (Sec. 3001-3008) of title III of Pub. L. 101-508, amending this section, sections 541 and 1328 of this title, and sections 1078, 1078-1, 1078-7, 1085, 1088, and 1091 of Title 20, Education, and provisions set out as a note under section 1078-1 of Title 20) shall cease (to) be effective on October 1, 1996.' EFFECTIVE DATE OF 1986 AMENDMENTS Amendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 283 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554. Section 5001(b) of Pub. L. 99-509 provided that: 'The amendments made by subsection (a) of this section (amending this section) shall apply only to petitions filed under section 362 of title 11, United States Code, which are made after August 1, 1986.' EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. REPORT TO CONGRESSIONAL COMMITTEES Section 5001(a) of Pub. L. 99-509 provided in part that: 'Before July 1, 1989, the Secretary of Transportation and the Secretary of Commerce each shall submit a report to the Committees on Merchant Marine and Fisheries, and the Judiciary of the House of Representatives and the Committees on Commerce, Science, and Transportation, and the Judiciary of the Senate on the effects of this subsection (amending this section) together with any recommendations for legislation.' -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 108, 109, 361, 363, 365, 505, 507, 542, 553, 557, 742, 901, 922, 1110, 1168, 1205 of this title; title 28 section 1334; title 46 section 31308. ------DocID 14716 Document 61 of 646------ -CITE- 11 USC Sec. 363 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER IV -HEAD- Sec. 363. Use, sale, or lease of property -STATUTE- (a) In this section, 'cash collateral' means cash, negotiable instruments, documents of title, securities, deposit accounts, or other cash equivalents whenever acquired in which the estate and an entity other than the estate have an interest and includes the proceeds, products, offspring, rents, or profits of property subject to a security interest as provided in section 552(b) of this title, whether existing before or after the commencement of a case under this title. (b)(1) The trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate. (2) If notification is required under subsection (a) of section 7A of the Clayton Act (15 U.S.C. 18a) in the case of a transaction under this subsection, then - (A) notwithstanding subsection (a) of such section, such notification shall be given by the trustee; and (B) notwithstanding subsection (b) of such section, the required waiting period shall end on the tenth day after the date of the receipt of such notification, unless the court, after notice and hearing, orders otherwise. (c)(1) If the business of the debtor is authorized to be operated under section 721, 1108, 1304, 1203, or 1204 of this title and unless the court orders otherwise, the trustee may enter into transactions, including the sale or lease of property of the estate, in the ordinary course of business, without notice or a hearing, and may use property of the estate in the ordinary course of business without notice or a hearing. (2) The trustee may not use, sell, or lease cash collateral under paragraph (1) of this subsection unless - (A) each entity that has an interest in such cash collateral consents; or (B) the court, after notice and a hearing, authorizes such use, sale, or lease in accordance with the provisions of this section. (3) Any hearing under paragraph (2)(B) of this subsection may be a preliminary hearing or may be consolidated with a hearing under subsection (e) of this section, but shall be scheduled in accordance with the needs of the debtor. If the hearing under paragraph (2)(B) of this subsection is a preliminary hearing, the court may authorize such use, sale, or lease only if there is a reasonable likelihood that the trustee will prevail at the final hearing under subsection (e) of this section. The court shall act promptly on any request for authorization under paragraph (2)(B) of this subsection. (4) Except as provided in paragraph (2) of this subsection, the trustee shall segregate and account for any cash collateral in the trustee's possession, custody, or control. (d) The trustee may use, sell, or lease property under subsection (b) or (c) of this section only to the extent not inconsistent with any relief granted under section 362(c), 362(d), 362(e), or 362(f) of this title. (e) Notwithstanding any other provision of this section, at any time, on request of an entity that has an interest in property used, sold, or leased, or proposed to be used, sold, or leased, by the trustee, the court, with or without a hearing, shall prohibit or condition such use, sale, or lease as is necessary to provide adequate protection of such interest. (f) The trustee may sell property under subsection (b) or (c) of this section free and clear of any interest in such property of an entity other than the estate, only if - (1) applicable nonbankruptcy law permits sale of such property free and clear of such interest; (2) such entity consents; (3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property; (4) such interest is in bona fide dispute; or (5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest. (g) Notwithstanding subsection (f) of this section, the trustee may sell property under subsection (b) or (c) of this section free and clear of any vested or contingent right in the nature of dower or curtesy. (h) Notwithstanding subsection (f) of this section, the trustee may sell both the estate's interest, under subsection (b) or (c) of this section, and the interest of any co-owner in property in which the debtor had, at the time of the commencement of the case, an undivided interest as a tenant in common, joint tenant, or tenant by the entirety, only if - (1) partition in kind of such property among the estate and such co-owners is impracticable; (2) sale of the estate's undivided interest in such property would realize significantly less for the estate than sale of such property free of the interests of such co-owners; (3) the benefit to the estate of a sale of such property free of the interests of co-owners outweighs the detriment, if any, to such co-owners; and (4) such property is not used in the production, transmission, or distribution, for sale, of electric energy or of natural or synthetic gas for heat, light, or power. (i) Before the consummation of a sale of property to which subsection (g) or (h) of this section applies, or of property of the estate that was community property of the debtor and the debtor's spouse immediately before the commencement of the case, the debtor's spouse, or a co-owner of such property, as the case may be, may purchase such property at the price at which such sale is to be consummated. (j) After a sale of property to which subsection (g) or (h) of this section applies, the trustee shall distribute to the debtor's spouse or the co-owners of such property, as the case may be, and to the estate, the proceeds of such sale, less the costs and expenses, not including any compensation of the trustee, of such sale, according to the interests of such spouse or co-owners, and of the estate. (k) At a sale under subsection (b) of this section of property that is subject to a lien that secures an allowed claim, unless the court for cause orders otherwise the holder of such claim may bid at such sale, and, if the holder of such claim purchases such property, such holder may offset such claim against the purchase price of such property. (l) Subject to the provisions of section 365, trustee may use, sell, or lease property under subsection (b) or (c) of this section, or a plan under chapter 11, 12, or 13 of this title may provide for the use, sale, or lease of property, notwithstanding any provision in a contract, a lease, or applicable law that is conditioned on the insolvency or financial condition of the debtor, on the commencement of a case under this title concerning the debtor, or on the appointment of or the taking possession by a trustee in a case under this title or a custodian, and that effects, or gives an option to effect, a forfeiture, modification, or termination of the debtor's interest in such property. (m) The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal. (n) The trustee may avoid a sale under this section if the sale price was controlled by an agreement among potential bidders at such sale, or may recover from a party to such agreement any amount by which the value of the property sold exceeds the price at which such sale was consummated, and may recover any costs, attorneys' fees, or expenses incurred in avoiding such sale or recovering such amount. In addition to any recovery under the preceding sentence, the court may grant judgment for punitive damages in favor of the estate and against any such party that entered into such an agreement in willful disregard of this subsection. (o) In any hearing under this section - (1) the trustee has the burden of proof on the issue of adequate protection; and (2) the entity asserting an interest in property has the burden of proof on the issue of the validity, priority, or extent of such interest. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2572; Pub. L. 98-353, title III, Sec. 442, July 10, 1984, 98 Stat. 371; Pub. L. 99-554, title II, Sec. 257(k), Oct. 27, 1986, 100 Stat. 3115.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 363(a) of the House amendment defines 'cash collateral' as defined in the Senate amendment. The broader definition of 'soft collateral' contained in H.R. 8200 as passed by the House is deleted to remove limitations that were placed on the use, lease, or sale of inventory, accounts, contract rights, general intangibles, and chattel paper by the trustee or debtor in possession. Section 363(c)(2) of the House amendment is derived from the Senate amendment. Similarly, sections 363(c)(3) and (4) are derived from comparable provisions in the Senate amendment in lieu of the contrary procedure contained in section 363(c) as passed by the House. The policy of the House amendment will generally require the court to schedule a preliminary hearing in accordance with the needs of the debtor to authorize the trustee or debtor in possession to use, sell, or lease cash collateral. The trustee or debtor in possession may use, sell, or lease cash collateral in the ordinary course of business only 'after notice and a hearing.' Section 363(f) of the House amendment adopts an identical provision contained in the House bill, as opposed to an alternative provision contained in the Senate amendment. Section 363(h) of the House amendment adopts a new paragraph (4) representing a compromise between the House bill and Senate amendment. The provision adds a limitation indicating that a trustee or debtor in possession sell jointly owned property only if the property is not used in the production, transmission, or distribution for sale, of electric energy or of natural or synthetic gas for heat, light, or power. This limitation is intended to protect public utilities from being deprived of power sources because of the bankruptcy of a joint owner. Section 363(k) of the House amendment is derived from the third sentence of section 363(e) of the Senate amendment. The provision indicates that a secured creditor may bid in the full amount of the creditor's allowed claim, including the secured portion and any unsecured portion thereof in the event the creditor is undersecured, with respect to property that is subject to a lien that secures the allowed claim of the sale of the property. SENATE REPORT NO. 95-989 This section defines the right and powers of the trustee with respect to the use, sale or lease of property and the rights of other parties that have interests in the property involved. It applies in both liquidation and reorganization cases. Subsection (a) defines 'cash collateral' as cash, negotiable instruments, documents of title, securities, deposit accounts, or other cash equivalents in which the estate and an entity other than the estate have an interest, such as a lien or a co-ownership interest. The definition is not restricted to property of the estate that is cash collateral on the date of the filing of the petition. Thus, if 'non-cash' collateral is disposed of and the proceeds come within the definition of 'cash collateral' as set forth in this subsection, the proceeds would be cash collateral as long as they remain subject to the original lien on the 'non-cash' collateral under section 552(b). To illustrate, rents received from real property before or after the commencement of the case would be cash collateral to the extent that they are subject to a lien. Subsection (b) permits the trustees to use, sell, or lease, other than in the ordinary course of business, property of the estate upon notice and opportunity for objections and hearing thereon. Subsection (c) governs use, sale, or lease in the ordinary course of business. If the business of the debtor is authorized to be operated under Sec. 721, 1108, or 1304 of the bankruptcy code, then the trustee may use, sell, or lease property in the ordinary course of business or enter into ordinary course transactions without need for notice and hearing. This power is subject to several limitations. First, the court may restrict the trustee's powers in the order authorizing operation of the business. Second, with respect to cash collateral, the trustee may not use, sell, or lease cash collateral except upon court authorization after notice and a hearing, or with the consent of each entity that has an interest in such cash collateral. The same preliminary hearing procedure in the automatic stay section applies to a hearing under this subsection. In addition, the trustee is required to segregate and account for any cash collateral in the trustee's possession, custody, or control. Under subsections (d) and (e), the use, sale, or lease of property is further limited by the concept of adequate protection. Sale, use, or lease of property in which an entity other than the estate has an interest may be effected only to the extent not inconsistent with any relief from the stay granted to that interest's holder. Moreover, the court may prohibit or condition the use, sale, or lease as is necessary to provide adequate protection of that interest. Again, the trustee has the burden of proof on the issue of adequate protection. Subsection (e) also provides that where a sale of the property is proposed, an entity that has an interest in such property may bid at the sale thereof and set off against the purchase price up to the amount of such entity's claim. No prior valuation under section 506(a) would limit this bidding right, since the bid at the sale would be determinative of value. Subsection (f) permits sale of property free and clear of any interest in the property of an entity other than the estate. The trustee may sell free and clear if applicable nonbankruptcy law permits it, if the other entity consents, if the interest is a lien and the sale price of the property is greater than the amount secured by the lien, if the interest is in bona fide dispute, or if the other entity could be compelled to accept a money satisfaction of the interest in a legal or equitable proceeding. Sale under this subsection is subject to the adequate protection requirement. Most often, adequate protection in connection with a sale free and clear of other interests will be to have those interests attach to the proceeds of the sale. At a sale free and clear of other interests, any holder of any interest in the property being sold will be permitted to bid. If that holder is the high bidder, he will be permitted to offset the value of his interest against the purchase price of the property. Thus, in the most common situation, a holder of a lien on property being sold may bid at the sale and, if successful, may offset the amount owed to him that is secured by the lien on the property (but may not offset other amounts owed to him) against the purchase price, and be liable to the trustee for the balance of the sale price, if any. Subsection (g) permits the trustee to sell free and clear of any vested or contingent right in the nature of dower or curtesy. Subsection (h) permits sale of a co-owner's interest in property in which the debtor had an undivided ownership interest such as a joint tenancy, a tenancy in common, or a tenancy by the entirety. Such a sale is permissible only if partition is impracticable, if sale of the estate's interest would realize significantly less for the estate that sale of the property free of the interests of the co-owners, and if the benefit to the estate of such a sale outweighs any detriment to the co-owners. This subsection does not apply to a co-owner's interest in a public utility when a disruption of the utilities services could result. Subsection (i) provides protections for co-owners and spouses with dower, curtesy, or community property rights. It gives a right of first refusal to the co-owner or spouse at the price at which the sale is to be consummated. Subsection (j) requires the trustee to distribute to the spouse or co-owner the appropriate portion of the proceeds of the sale, less certain administrative expenses. Subsection (k) (now (l)) permits the trustee to use, sell, or lease property notwithstanding certain bankruptcy or ipso facto clauses that terminate the debtor's interest in the property or that work a forfeiture or modification of that interest. This subsection is not as broad as the anti-ipso facto provision in proposed 11 U.S.C. 541(c)(1). Subsection (l) (now (m)) protects good faith purchasers of property sold under this section from a reversal on appeal of the sale authorization, unless the authorization for the sale and the sale itself were stayed pending appeal. The purchaser's knowledge of the appeal is irrelevant to the issue of good faith. Subsection (m) (now (n)) is directed at collusive bidding on property sold under this section. It permits the trustee to void a sale if the price of the sale was controlled by an agreement among potential bidders. The trustees may also recover the excess of the value of the property over the purchase price, and may recover any costs, attorney's fees, or expenses incurred in voiding the sale or recovering the difference. In addition, the court is authorized to grant judgment in favor of the estate and against the collusive bidder if the agreement controlling the sale price was entered into in willful disregard of this subsection. The subsection does not specify the precise measure of damages, but simply provides for punitive damages, to be fixed in light of the circumstances. AMENDMENTS 1986 - Subsec. (c)(1). Pub. L. 99-554, Sec. 257(k)(1), inserted reference to sections 1203 and 1204 of this title. Subsec. (l). Pub. L. 99-554, Sec. 257(k)(2), inserted reference to chapter 12. 1984 - Subsec. (a). Pub. L. 98-353, Sec. 442(a), inserted 'whenever acquired' after 'equivalents' and 'and includes the proceeds, products, offspring, rents, or profits of property subject to a security interest as provided in section 552(b) of this title, whether existing before or after the commencement of a case under this title' after 'interest'. Subsec. (b). Pub. L. 98-353, Sec. 442(b), designated existing provisions as par. (1) and added par. (2). Subsec. (e). Pub. L. 98-353, Sec. 442(c), inserted ', with or without a hearing,' after 'court' and struck out 'In any hearing under this section, the trustee has the burden of proof on the issue of adequate protection'. Subsec. (f)(3). Pub. L. 98-353, Sec. 442(d), substituted 'all liens on such property' for 'such interest'. Subsec. (h). Pub. L. 98-353, Sec. 442(e), substituted 'at the time of' for 'immediately before'. Subsec. (j). Pub. L. 98-353, Sec. 442(f), substituted 'compensation' for 'compenation'. Subsec. (k). Pub. L. 98-353, Sec. 442(g), substituted 'unless the court for cause orders otherwise the holder of such claim may bid at such sale, and, if the holder' for 'if the holder'. Subsec. (l). Pub. L. 98-353, Sec. 442(h), substituted 'Subject to the provisions of section 365, the trustee' for 'The trustee', 'condition' for 'conditions', 'or the taking' for 'a taking', and 'interest' for 'interests'. Subsec. (n). Pub. L. 98-353, Sec. 442(i), substituted 'avoid' for 'void', 'avoiding' for 'voiding', and 'In addition to any recovery under the preceding sentence, the court may grant judgment for punitive damages in favor of the estate and against any such party that entered into such an agreement in willful disregard of this subsection' for 'The court may grant judgment in favor of the estate and against any such party that entered into such agreement in willful disregard of this subsection for punitive damages in addition to any recovery under the preceding sentence'. Subsec. (o). Pub. L. 98-353, Sec. 442(j), added subsec. (o). EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 303, 361, 507, 541, 542, 552, 553, 557, 1110, 1111, 1129, 1168, 1205, 1206, 1303, 1304 of this title. ------DocID 14717 Document 62 of 646------ -CITE- 11 USC Sec. 364 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER IV -HEAD- Sec. 364. Obtaining credit -STATUTE- (a) If the trustee is authorized to operate the business of the debtor under section 721, 1108, 1304, 1203, or 1204 of this title, unless the court orders otherwise, the trustee may obtain unsecured credit and incur unsecured debt in the ordinary course of business allowable under section 503(b)(1) of this title as an administrative expense. (b) The court, after notice and a hearing, may authorize the trustee to obtain unsecured credit or to incur unsecured debt other than under subsection (a) of this section, allowable under section 503(b)(1) of this title as an administrative expense. (c) If the trustee is unable to obtain unsecured credit allowable under section 503(b)(1) of this title as an administrative expense, the court, after notice and a hearing, may authorize the obtaining of credit or the incurring of debt - (1) with priority over any or all administrative expenses of the kind specified in section 503(b) or 507(b) of this title; (2) secured by a lien on property of the estate that is not otherwise subject to a lien; or (3) secured by a junior lien on property of the estate that is subject to a lien. (d)(1) The court, after notice and a hearing, may authorize the obtaining of credit or the incurring of debt secured by a senior or equal lien on property of the estate that is subject to a lien only if - (A) the trustee is unable to obtain such credit otherwise; and (B) there is adequate protection of the interest of the holder of the lien on the property of the estate on which such senior or equal lien is proposed to be granted. (2) In any hearing under this subsection, the trustee has the burden of proof on the issue of adequate protection. (e) The reversal or modification on appeal of an authorization under this section to obtain credit or incur debt, or of a grant under this section of a priority or a lien, does not affect the validity of any debt so incurred, or any priority or lien so granted, to an entity that extended such credit in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and the incurring of such debt, or the granting of such priority or lien, were stayed pending appeal. (f) Except with respect to an entity that is an underwriter as defined in section 1145(b) of this title, section 5 of the Securities Act of 1933 (15 U.S.C. 77e), the Trust Indenture Act of 1939 (15 U.S.C. 77aaa et seq.), and any State or local law requiring registration for offer or sale of a security or registration or licensing of an issuer of, underwriter of, or broker or dealer in, a security does not apply to the offer or sale under this section of a security that is not an equity security. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2574; Pub. L. 99-554, title II, Sec. 257(l), Oct. 27, 1986, 100 Stat. 3115.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 364(f) of the House amendment is new. This provision continues the exemption found in section 3(a)(7) of the Securities Act of 1933 (15 U.S.C. 77c(a)(7)) for certificates of indebtedness issued by a trustee in bankruptcy. The exemption applies to any debt security issued under section 364 of title 11. The section does not intend to change present law which exempts such securities from the Trust Indenture Act, 15 U.S.C. 77aaa, et seq. (1976). SENATE REPORT NO. 95-989 This section is derived from provisions in current law governing certificates of indebtedness, but is much broader. It governs all obtaining of credit and incurring of debt by the estate. Subsection (a) authorizes the obtaining of unsecured credit and the incurring of unsecured debt in the ordinary course of business if the business of the debtor is authorized to be operated under section 721, 1108, or 1304. The debts so incurred are allowable as administrative expenses under section 503(b)(1). The court may limit the estate's ability to incur debt under this subsection. Subsection (b) permits the court to authorize the trustee to obtain unsecured credit and incur unsecured debts other than in the ordinary course of business, such as in order to wind up a liquidation case, or to obtain a substantial loan in an operating case. Debt incurred under this subsection is allowable as an administrative expense under section 503(b)(1). Subsection (c) is closer to the concept of certificates of indebtedness in current law. It authorizes the obtaining of credit and the incurring of debt with some special priority, if the trustee is unable to obtain unsecured credit under subsection (a) or (b). The various priorities are (1) with priority over any or all administrative expenses: (2) secured by a lien on unencumbered property of the estate; or (3) secured by a junior lien on encumbered property. The priorities granted under this subsection do not interfere with existing property rights. Subsection (d) grants the court the authority to authorize the obtaining of credit and the incurring of debt with a superiority, that is a lien on encumbered property that is senior or equal to the existing lien on the property. The court may authorize such a superpriority only if the trustee is otherwise unable to obtain credit, and if there is adequate protection of the original lien holder's interest. Again, the trustee has the burden of proof on the issue of adequate protection. Subsection (e) provides the same protection for credit extenders pending an appeal of an authorization to incur debt as is provided under section 363(l) for purchasers: the credit is not affected on appeal by reversal of the authorization and the incurring of the debt were stayed pending appeal. The protection runs to a good faith lender, whether or not he knew of the pendency of the appeal. A claim arising as a result of lending or borrowing under this section will be a priority claim, as defined in proposed section 507(a)(1), even if the claim is granted a super-priority over administrative expenses and is to be paid in advance of other first priority claims. -REFTEXT- REFERENCES IN TEXT The Trust Indenture Act of 1939, referred to in subsec. (f), is title III of act May 27, 1933, ch. 38, as added Aug. 3, 1939, ch. 411, 53 Stat. 1149, as amended, which is classified generally to subchapter III (Sec. 77aaa et seq.) of chapter 2A of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 77aaa of Title 15 and Tables. -MISC2- AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554 inserted reference to sections 1203 and 1204 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 361, 507, 901, 921, 922, 1205, 1304 of this title. ------DocID 14718 Document 63 of 646------ -CITE- 11 USC Sec. 365 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER IV -HEAD- Sec. 365. Executory contracts and unexpired leases -STATUTE- (a) Except as provided in sections 765 and 766 of this title and in subsections (b), (c), and (d) of this section, the trustee, subject to the court's approval, may assume or reject any executory contract or unexpired lease of the debtor. (b)(1) If there has been a default in an executory contract or unexpired lease of the debtor, the trustee may not assume such contract or lease unless, at the time of assumption of such contract or lease, the trustee - (A) cures, or provides adequate assurance that the trustee will promptly cure, such default; (B) compensates, or provides adequate assurance that the trustee will promptly compensate, a party other than the debtor to such contract or lease, for any actual pecuniary loss to such party resulting from such default; and (C) provides adequate assurance of future performance under such contract or lease. (2) Paragraph (1) of this subsection does not apply to a default that is a breach of a provision relating to - (A) the insolvency or financial condition of the debtor at any time before the closing of the case; (B) the commencement of a case under this title; or (C) the appointment of or taking possession by a trustee in a case under this title or a custodian before such commencement. (3) For the purposes of paragraph (1) of this subsection and paragraph (2)(B) of subsection (f), adequate assurance of future performance of a lease of real property in a shopping center includes adequate assurance - (A) of the source of rent and other consideration due under such lease, and in the case of an assignment, that the financial condition and operating performance of the proposed assignee and its guarantors, if any, shall be similar to the financial condition and operating performance of the debtor and its guarantors, if any, as of the time the debtor became the lessee under the lease; (B) that any percentage rent due under such lease will not decline substantially; (C) that assumption or assignment of such lease is subject to all the provisions thereof, including (but not limited to) provisions such as a radius, location, use, or exclusivity provision, and will not breach any such provision contained in any other lease, financing agreement, or master agreement relating to such shopping center; and (D) that assumption or assignment of such lease will not disrupt any tenant mix or balance in such shopping center. (4) Notwithstanding any other provision of this section, if there has been a default in an unexpired lease of the debtor, other than a default of a kind specified in paragraph (2) of this subsection, the trustee may not require a lessor to provide services or supplies incidental to such lease before assumption of such lease unless the lessor is compensated under the terms of such lease for any services and supplies provided under such lease before assumption of such lease. (c) The trustee may not assume or assign any executory contract or unexpired lease of the debtor, whether or not such contract or lease prohibits or restricts assignment of rights or delegation of duties, if - (1)(A) applicable law excuses a party, other than the debtor, to such contract or lease from accepting performance from or rendering performance to an entity other than the debtor or the debtor in possession, whether or not such contract or lease prohibits or restricts assignment of rights or delegation of duties; and (B) such party does not consent to such assumption or assignment; or (2) such contract is a contract to make a loan, or extend other debt financing or financial accommodations, to or for the benefit of the debtor, or to issue a security of the debtor; or (3) such lease is of nonresidential real property and has been terminated under applicable nonbankruptcy law prior to the order for relief. (d)(1) In a case under chapter 7 of this title, if the trustee does not assume or reject an executory contract or unexpired lease of residential real property or of personal property of the debtor within 60 days after the order for relief, or within such additional time as the court, for cause, within such 60-day period, fixes, then such contract or lease is deemed rejected. (2) In a case under chapter 9, 11, 12, or 13 of this title, the trustee may assume or reject an executory contract or unexpired lease of residential real property or of personal property of the debtor at any time before the confirmation of a plan but the court, on the request of any party to such contract or lease, may order the trustee to determine within a specified period of time whether to assume or reject such contract or lease. (3) The trustee shall timely perform all the obligations of the debtor, except those specified in section 365(b)(2), arising from and after the order for relief under any unexpired lease of nonresidential real property, until such lease is assumed or rejected, notwithstanding section 503(b)(1) of this title. The court may extend, for cause, the time for performance of any such obligation that arises within 60 days after the date of the order for relief, but the time for performance shall not be extended beyond such 60-day period. This subsection shall not be deemed to affect the trustee's obligations under the provisions of subsection (b) or (f) of this section. Acceptance of any such performance does not constitute waiver or relinquishment of the lessor's rights under such lease or under this title. (4) Notwithstanding paragraphs (1) and (2), in a case under any chapter of this title, if the trustee does not assume or reject an unexpired lease of nonresidential real property under which the debtor is the lessee within 60 days after the date of the order for relief, or within such additional time as the court, for cause, within such 60-day period, fixes, then such lease is deemed rejected, and the trustee shall immediately surrender such nonresidential real property to the lessor. (e)(1) Notwithstanding a provision in an executory contract or unexpired lease, or in applicable law, an executory contract or unexpired lease of the debtor may not be terminated or modified, and any right or obligation under such contract or lease may not be terminated or modified, at any time after the commencement of the case solely because of a provision in such contract or lease that is conditioned on - (A) the insolvency or financial condition of the debtor at any time before the closing of the case; (B) the commencement of a case under this title; or (C) the appointment of or taking possession by a trustee in a case under this title or a custodian before such commencement. (2) Paragraph (1) of this subsection does not apply to an executory contract or unexpired lease of the debtor, whether or not such contract or lease prohibits or restricts assignment of rights or delegation of duties, if - (A)(i) applicable law excuses a party, other than the debtor, to such contract or lease from accepting performance from or rendering performance to the trustee or to an assignee of such contract or lease, whether or not such contract or lease prohibits or restricts assignment of rights or delegation of duties; and (ii) such party does not consent to such assumption or assignment; or (B) such contract is a contract to make a loan, or extend other debt financing or financial accommodations, to or for the benefit of the debtor, or to issue a security of the debtor. (f)(1) Except as provided in subsection (c) of this section, notwithstanding a provision in an executory contract or unexpired lease of the debtor, or in applicable law, that prohibits, restricts, or conditions the assignment of such contract or lease, the trustee may assign such contract or lease under paragraph (2) of this subsection. (2) The trustee may assign an executory contract or unexpired lease of the debtor only if - (A) the trustee assumes such contract or lease in accordance with the provisions of this section; and (B) adequate assurance of future performance by the assignee of such contract or lease is provided, whether or not there has been a default in such contract or lease. (3) Notwithstanding a provision in an executory contract or unexpired lease of the debtor, or in applicable law that terminates or modifies, or permits a party other than the debtor to terminate or modify, such contract or lease or a right or obligation under such contract or lease on account of an assignment of such contract or lease, such contract, lease, right, or obligation may not be terminated or modified under such provision because of the assumption or assignment of such contract or lease by the trustee. (g) Except as provided in subsections (h)(2) and (i)(2) of this section, the rejection of an executory contract or unexpired lease of the debtor constitutes a breach of such contract or lease - (1) if such contract or lease has not been assumed under this section or under a plan confirmed under chapter 9, 11, 12, or 13 of this title, immediately before the date of the filing of the petition; or (2) if such contract or lease has been assumed under this section or under a plan confirmed under chapter 9, 11, 12, or 13 of this title - (A) if before such rejection the case has not been converted under section 1112, 1307, or 1208 of this title, at the time of such rejection; or (B) if before such rejection the case has been converted under section 1112, 1307, or 1208 of this title - (i) immediately before the date of such conversion, if such contract or lease was assumed before such conversion; or (ii) at the time of such rejection, if such contract or lease was assumed after such conversion. (h)(1) If the trustee rejects an unexpired lease of real property of the debtor under which the debtor is the lessor, or a timeshare interest under a timeshare plan under which the debtor is the timeshare interest seller, the lessee or timeshare interest purchaser under such lease or timeshare plan may treat such lease or timeshare plan as terminated by such rejection, where the disaffirmance by the trustee amounts to such a breach as would entitle the lessee or timeshare interest purchaser to treat such lease or timeshare plan as terminated by virtue of its own terms, applicable nonbankruptcy law, or other agreements the lessee or timeshare interest purchaser has made with other parties; or, in the alternative, the lessee or timeshare interest purchaser may remain in possession of the leasehold or timeshare interest under any lease or timeshare plan the term of which has commenced for the balance of such term and for any renewal or extension of such term that is enforceable by such lessee or timeshare interest purchaser under applicable nonbankruptcy law. (2) If such lessee or timeshare interest purchaser remains in possession as provided in paragraph (1) of this subsection, such lessee or timeshare interest purchaser may offset against the rent reserved under such lease or moneys due for such timeshare interest for the balance of the term after the date of the rejection of such lease or timeshare interest, and any such renewal or extension thereof, any damages occurring after such date caused by the nonperformance of any obligation of the debtor under such lease or timeshare plan after such date, but such lessee or timeshare interest purchaser does not have any rights against the estate on account of any damages arising after such date from such rejection, other than such offset. (i)(1) If the trustee rejects an executory contract of the debtor for the sale of real property or for the sale of a timeshare interest under a timeshare plan, under which the purchaser is in possession, such purchaser may treat such contract as terminated, or, in the alternative, may remain in possession of such real property or timeshare interest. (2) If such purchaser remains in possession - (A) such purchaser shall continue to make all payments due under such contract, but may, offset against such payments any damages occurring after the date of the rejection of such contract caused by the nonperformance of any obligation of the debtor after such date, but such purchaser does not have any rights against the estate on account of any damages arising after such date from such rejection, other than such offset; and (B) the trustee shall deliver title to such purchaser in accordance with the provisions of such contract, but is relieved of all other obligations to perform under such contract. (j) A purchaser that treats an executory contract as terminated under subsection (i) of this section, or a party whose executory contract to purchase real property from the debtor is rejected and under which such party is not in possession, has a lien on the interest of the debtor in such property for the recovery of any portion of the purchase price that such purchaser or party has paid. (k) Assignment by the trustee to an entity of a contract or lease assumed under this section relieves the trustee and the estate from any liability for any breach of such contract or lease occurring after such assignment. (l) If an unexpired lease under which the debtor is the lessee is assigned pursuant to this section, the lessor of the property may require a deposit or other security for the performance of the debtor's obligations under the lease substantially the same as would have been required by the landlord upon the initial leasing to a similar tenant. (m) For purposes of this section 365 and sections 541(b)(2) and 362(b)(10), leases of real property shall include any rental agreement to use real property. (n)(1) If the trustee rejects an executory contract under which the debtor is a licensor of a right to intellectual property, the licensee under such contract may elect - (A) to treat such contract as terminated by such rejection if such rejection by the trustee amounts to such a breach as would entitle the licensee to treat such contract as terminated by virtue of its own terms, applicable nonbankruptcy law, or an agreement made by the licensee with another entity; or (B) to retain its rights (including a right to to (FOOTNOTE 1) enforce any exclusivity provision of such contract, but excluding any other right under applicable nonbankruptcy law to specific performance of such contract) under such contract and under any agreement supplementary to such contract, to such intellectual property (including any embodiment of such intellectual property to the extent protected by applicable nonbankruptcy law), as such rights existed immediately before the case commenced, for - (FOOTNOTE 1) So in original. (i) the duration of such contract; and (ii) any period for which such contract may be extended by the licensee as of right under applicable nonbankruptcy law. (2) If the licensee elects to retain its rights, as described in paragraph (1)(B) of this subsection, under such contract - (A) the trustee shall allow the licensee to exercise such rights; (B) the licensee shall make all royalty payments due under such contract for the duration of such contract and for any period described in paragraph (1)(B) of this subsection for which the licensee extends such contract; and (C) the licensee shall be deemed to waive - (i) any right of setoff it may have with respect to such contract under this title or applicable nonbankruptcy law; and (ii) any claim allowable under section 503(b) of this title arising from the performance of such contract. (3) If the licensee elects to retain its rights, as described in paragraph (1)(B) of this subsection, then on the written request of the licensee the trustee shall - (A) to the extent provided in such contract, or any agreement supplementary to such contract, provide to the licensee any intellectual property (including such embodiment) held by the trustee; and (B) not interfere with the rights of the licensee as provided in such contract, or any agreement supplementary to such contract, to such intellectual property (including such embodiment) including any right to obtain such intellectual property (or such embodiment) from another entity. (4) Unless and until the trustee rejects such contract, on the written request of the licensee the trustee shall - (A) to the extent provided in such contract or any agreement supplementary to such contract - (i) perform such contract; or (ii) provide to the licensee such intellectual property (including any embodiment of such intellectual property to the extent protected by applicable nonbankruptcy law) held by the trustee; and (B) not interfere with the rights of the licensee as provided in such contract, or any agreement supplementary to such contract, to such intellectual property (including such embodiment), including any right to obtain such intellectual property (or such embodiment) from another entity. (o) In a case under chapter 11 of this title, the trustee shall be deemed to have assumed (consistent with the debtor's other obligations under section 507), and shall immediately cure any deficit under, any commitment by the debtor to the Federal Deposit Insurance Corporation, the Resolution Trust Corporation, the Director of the Office of Thrift Supervision, the Comptroller of the Currency, or the Board of Governors of the Federal Reserve System, or its predecessors or successors, to maintain the capital of an insured depository institution, and any claim for a subsequent breach of the obligations thereunder shall be entitled to priority under section 507. This subsection shall not extend any commitment that would otherwise be terminated by any act of such an agency. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2574; Pub. L. 98-353, title III, Sec. 362, 402-404, July 10, 1984, 98 Stat. 361, 367; Pub. L. 99-554, title II, Sec. 257(j), (m), 283(e), Oct. 27, 1986, 100 Stat. 3115, 3117; Pub. L. 100-506, Sec. 1(b), Oct. 18, 1988, 102 Stat. 2538; Pub. L. 101-647, title XXV, Sec. 2522(c), Nov. 29, 1990, 104 Stat. 4866.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 365(b)(3) represents a compromise between H.R. 8200 as passed by the House and the Senate amendment. The provision adopts standards contained in section 365(b)(5) of the Senate amendment to define adequate assurance of future performance of a lease of real property in a shopping center. Section 365(b)(4) of the House amendment indicates that after default the trustee may not require a lessor to supply services or materials without assumption unless the lessor is compensated as provided in the lease. Section 365(c)(2) and (3) likewise represent a compromise between H.R. 8200 as passed by the House and the Senate amendment. Section 365(c)(2) is derived from section 365(b)(4) of the Senate amendment but does not apply to a contract to deliver equipment as provided in the Senate amendment. As contained in the House amendment, the provision prohibits a trustee or debtor in possession from assuming or assigning an executory contract of the debtor to make a loan, or extend other debt financing or financial accommodations, to or for the benefit of the debtor, or the issuance of a security of the debtor. Section 365(e) is a refinement of comparable provisions contained in the House bill and Senate amendment. Sections 365(e)(1) and (2)(A) restate section 365(e) of H.R. 8200 as passed by the House. Sections 365(e)(2)(B) expands the section to permit termination of an executory contract or unexpired lease of the debtor if such contract is a contract to make a loan, or extend other debt financing or financial accommodations, to or for the benefit of the debtor, or for the issuance of a security of the debtor. Characterization of contracts to make a loan, or extend other debt financing or financial accommodations, is limited to the extension of cash or a line of credit and is not intended to embrace ordinary leases or contracts to provide goods or services with payments to be made over time. Section 365(f) is derived from H.R. 8200 as passed by the House. Deletion of language in section 365(f)(3) of the Senate amendment is done as a matter of style. Restrictions with respect to assignment of an executory contract or unexpired lease are superfluous since the debtor may assign an executory contract or unexpired lease of the debtor only if such contract is first assumed under section 364(f)(2)(A) of the House amendment. Section 363(h) of the House amendment represents a modification of section 365(h) of the Senate amendment. The House amendment makes clear that in the case of a bankrupt lessor, a lessee may remain in possession for the balance of the term of a lease and any renewal or extension of the term only to the extent that such renewal or extension may be obtained by the lessee without the permission of the landlord or some third party under applicable non-bankruptcy law. SENATE REPORT NO. 95-989 Subsection (a) of this section authorizes the trustee, subject to the court's approval, to assume or reject an executory contract or unexpired lease. Though there is no precise definition of what contracts are executory, it generally includes contracts on which performance remains due to some extent on both sides. A note is not usually an executory contract if the only performance that remains is repayment. Performance on one side of the contract would have been completed and the contract is no longer executory. Because of the volatile nature of the commodities markets and the special provisions governing commodity broker liquidations in subchapter IV of chapter 7, the provisions governing distribution in section 765(a) will govern if any conflict between those provisions and the provisions of this section arise. Subsections (b), (c), and (d) provide limitations on the trustee's powers. Subsection (b) requires the trustee to cure any default in the contract or lease and to provide adequate assurance of future performance if there has been a default, before he may assume. This provision does not apply to defaults under ipso facto or bankruptcy clauses, which is a significant departure from present law. Subsection (b)(3) permits termination of leases entered into prior to the effective date of this title in liquidation cases if certain other conditions are met. Subsection (b)(4) (now (c)(2)) prohibits the trustee's assumption of an executory contract requiring the other party to make a loan or deliver equipment to or to issue a security of the debtor. The purpose of this subsection is to make it clear that a party to a transaction which is based upon the financial strength of a debtor should not be required to extend new credit to the debtor whether in the form of loans, lease financing, or the purchase or discount of notes. Subsection (b)(5) provides that in lease situations common to shopping centers, protections must be provided for the lessor if the trustee assumes the lease, including protection against decline in percentage rents, breach of agreements with other tenants, and preservation of the tenant mix. Protection for tenant mix will not be required in the office building situation. Subsection (c) prohibits the trustee from assuming or assigning a contract or lease if applicable nonbankruptcy law excuses the other party from performance to someone other than the debtor, unless the other party consents. This prohibition applies only in the situation in which applicable law excuses the other party from performance independent of any restrictive language in the contract or lease itself. Subsection (d) places time limits on assumption and rejection. In a liquidation case, the trustee must assume within 60 days (or within an additional 60 days, if the court, for cause, extends the time). If not assumed, the contract or lease is deemed rejected. In a rehabilitation case, the time limit is not fixed in the bill. However, if the other party to the contract or lease requests the court to fix a time, the court may specify a time within which the trustee must act. This provision will prevent parties in contractual or lease relationships with the debtor from being left in doubt concerning their status vis-a-vis the estate. Subsection (e) invalidates ipso facto or bankruptcy clauses. These clauses, protected under present law, automatically terminate the contract or lease, or permit the other contracting party to terminate the contract or lease, in the event of bankruptcy. This frequently hampers rehabilitation efforts. If the trustee may assume or assign the contract under the limitations imposed by the remainder of the section, the contract or lease may be utilized to assist in the debtor's rehabilitation or liquidation. The unenforcibility of ipso facto or bankruptcy clauses proposed under this section will require the courts to be sensitive to the rights of the nondebtor party to executory contracts and unexpired leases. If the trustee is to assume a contract or lease, the court will have to insure that the trustee's performance under the contract or lease gives the other contracting party the full benefit of his bargain. This subsection does not limit the application of an ipso facto or bankruptcy clause if a new insolvency or receivership occurs after the bankruptcy case is closed. That is, the clause is not invalidated in toto, but merely made inapplicable during the case for the purposes of disposition of the executory contract or unexpired lease. Subsection (f) partially invalidates restrictions on assignment of contracts or leases by the trustee to a third party. The subsection imposes two restrictions on the trustee: he must first assume the contract or lease, subject to all the restrictions on assumption found in the section, and adequate assurance of future performance must be provided to the other contracting party. Paragraph (3) of the subsection invalidates contractual provisions that permit termination or modification in the event of an assignment, as contrary to the policy of this subsection. Subsection (g) defines the time as of which a rejection of an executory contract or unexpired lease constitutes a breach of the contract or lease. Generally, the breach is as of the date immediately preceding the date of the petition. The purpose is to treat rejection claims as prepetition claims. The remainder of the subsection specifies different times for cases that are converted from one chapter to another. The provisions of this subsection are not a substantive authorization to breach or reject an assumed contract. Rather, they prescribe the rules for the allowance of claims in case an assumed contract is breached, or if a case under chapter 11 in which a contract has been assumed is converted to a case under chapter 7 in which the contract is rejected. Subsection (h) protects real property lessees of the debtor if the trustee rejects an unexpired lease under which the debtor is the lessor (or sublessor). The subsection permits the lessee to remain in possession of the leased property or to treat the lease as terminated by the rejection. The balance of the term of the lease referred to in paragraph (1) will include any renewal terms that are enforceable by the tenant, but not renewal terms if the landlord had an option to terminate. Thus, the tenant will not be deprived of his estate for the term for which he bargained. If the lessee remains in possession, he may offset the rent reserved under the lease against damages caused by the rejection, but does not have any affirmative rights against the estate for any damages after the rejection that result from the rejection. Subsection (i) gives a purchaser of real property under a land installment sales contract similar protection. The purchaser, if the contract is rejected, may remain in possession or may treat the contract as terminated. If the purchaser remains in possession, he is required to continue to make the payments due, but may offset damages that occur after rejection. The trustee is required to deliver title, but is relieved of all other obligations to perform. A purchaser that treats the contract as terminated is granted a lien on the property to the extent of the purchase price paid. A party with a contract to purchase land from the debtor has a lien on the property to secure the price already paid, if the contract is rejected and the purchaser is not yet in possession. Subsection (k) relieves the trustee and the estate of liability for a breach of an assigned contract or lease that occurs after the assignment. HOUSE REPORT NO. 95-595 Subsection (c) prohibits the trustee from assuming or assigning a contract or lease if applicable nonbankruptcy law excuses the other party from performance to someone other than the debtor, unless the other party consents. This prohibition applies only in the situation in which applicable law excuses the other party from performance independent of any restrictive language in the contract or lease itself. The purpose of this subsection, at least in part, is to prevent the trustee from requiring new advances of money or other property. The section permits the trustee to continue to use and pay for property already advanced, but is not designed to permit the trustee to demand new loans or additional transfers of property under lease commitments. Thus, under this provision, contracts such as loan commitments and letters of credit are nonassignable, and may not be assumed by the trustee. Subsection (e) invalidates ipso facto or bankruptcy clauses. These clauses, protected under present law, automatically terminate the contract or lease, or permit the other contracting party to terminate the contract or lease, in the event of bankruptcy. This frequently hampers rehabilitation efforts. If the trustee may assume or assign the contract under the limitations imposed by the remainder of the section, then the contract or lease may be utilized to assist in the debtor's rehabilitation or liquidation. The unenforceability of ipso facto or bankruptcy clauses proposed under this section will require the courts to be sensitive to the rights of the nondebtor party to executory contracts and unexpired leases. If the trustee is to assume a contract or lease, the courts will have to insure that the trustee's performance under the contract or lease gives the other contracting party the full benefit of his bargain. An example of the complexity that may arise in these situations and the need for a determination of all aspects of a particular executory contract or unexpired lease is the shopping center lease under which the debtor is a tenant in a shopping center. A shopping center is often a carefully planned enterprise, and though it consists of numerous individual tenants, the center is planned as a single unit, often subject to a master lease or financing agreement. Under these agreements, the tenant mix in a shopping center may be as important to the lessor as the actual promised rental payments, because certain mixes will attract higher patronage of the stores in the center, and thus a higher rental for the landlord from those stores that are subject to a percentage of gross receipts rental agreement. Thus, in order to assure a landlord of his bargained for exchange, the court would have to consider such factors as the nature of the business to be conducted by the trustee or his assignee, whether that business complies with the requirements of any master agreement, whether the kind of business proposed will generate gross sales in an amount such that the percentage rent specified in the lease is substantially the same as what would have been provided by the debtor, and whether the business proposed to be conducted would result in a breach of other clauses in master agreements relating, for example, to tenant mix and location. This subsection does not limit the application of an ipso facto or bankruptcy clause to a new insolvency or receivership after the bankruptcy case is closed. That is, the clause is not invalidated in toto, but merely made inapplicable during the case for the purpose of disposition of the executory contract or unexpired lease. AMENDMENTS 1990 - Subsec. (o). Pub. L. 101-647 added subsec. (o). 1988 - Subsec. (n). Pub. L. 100-506 added subsec. (n). 1986 - Subsec. (c)(1)(A). Pub. L. 99-554, Sec. 283(e)(1), struck out 'or an assignee of such contract or lease' after 'debtor in possession'. Subsec. (c)(3). Pub. L. 99-554, Sec. 283(e)(2), inserted 'is' after 'lease' and 'and' after 'property'. Subsecs. (d)(2), (g)(1). Pub. L. 99-554, Sec. 257(j), (m)(1), inserted reference to chapter 12. Subsec. (g)(2). Pub. L. 99-554, Sec. 257(m)(2), inserted references to chapter 12 and section 1208 of this title. Subsec. (h)(1). Pub. L. 99-554, Sec. 283(e)(2), inserted 'or timeshare plan' after 'to treat such lease'. Subsec. (m). Pub. L. 99-554, Sec. 283(e)(3), substituted '362(b)(10)' for '362(b)(9)'. 1984 - Subsec. (a). Pub. L. 98-353, Sec. 362(a), amended subsec. (a) generally, making minor changes. Subsec. (b). Pub. L. 98-353, Sec. 362(a), amended subsec. (b) generally, inserting in par. (3) reference to par. (2)(B) of subsec. (f) of this section, in par. (3)(A) inserting provisions relating to financial condition and operating performance in the case of an assignment, and in par. (3)(C) substituting 'that assumption or assignment of such lease is subject to all the provisions thereof, including (but not limited to) provisions such as a radius, location, use, or exclusivity provision, and will not breach any such provision contained in any other lease, financing agreement, or master agreement relating to such shopping center' for 'that assumption or assignment of such lease will not breach substantially any provision, such as a radius, location, use, or exclusivity provision, in any other lease, financing agreement, or master agreement relating to such shopping center'. Subsec. (c). Pub. L. 98-353, Sec. 362(a), amended subsec. (c) generally, substituting in par. (1)(A) 'applicable law excuses a party, other than the debtor, to such contract or lease from accepting performance from or rendering performance to an entity other than the debtor or the debtor in possession or an assignee of such contract or lease, whether or not such contract or lease prohibits or restricts assignment of rights or delegation of duties' for 'applicable law excuses a party, other than the debtor, to such contract or lease from accepting performance from or rendering performance to the trustee or an assignee of such contract or lease, whether or not such contract or lease prohibits or restricts assignment of rights or delegation of duties' and adding par. (3). Subsec. (d). Pub. L. 98-353, Sec. 362(a), amended subsec. (d) generally, inserting in par. (1) reference to residential real property or personal property of the debtor, inserting in par. (2) reference to residential real property or personal property of the debtor, and adding pars. (3) and (4). Subsec. (h)(1). Pub. L. 98-353, Sec. 402, amended par. (1) generally. Prior to amendment, par. (1) read as follows: 'If the trustee rejects an unexpired lease of real property of the debtor under which the debtor is the lessor, the lessee under such lease may treat the lease as terminated by such rejection, or, in the alternative, may remain in possession for the balance of the term of such lease and any renewal or extension of such term that is enforceable by such lessee under applicable nonbankruptcy law.' Subsec. (h)(2). Pub. L. 98-353, Sec. 403, amended par. (2) generally. Prior to amendment, par. (2) read as follows: 'If such lessee remains in possession, such lessee may offset against the rent reserved under such lease for the balance of the term after the date of the rejection of such lease, and any such renewal or extension, any damages occurring after such date caused by the nonperformance of any obligation of the debtor after such date, but such lessee does not have any rights against the estate on account of any damages arising after such date from such rejection, other than such offset.' Subsec. (i)(1). Pub. L. 98-353, Sec. 404, amended par. (1) generally, inserting provisions relating to timeshare interests under timeshare plans. Subsecs. (l), (m). Pub. L. 98-353, Sec. 362(b), added subsecs. (l) and (m). EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100-506 effective Oct. 18, 1988, but not applicable to any case commenced under this title before such date, see section 2 of Pub. L. 100-506, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 283 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 348, 363, 502, 553, 555, 556, 557, 559, 560, 744, 901, 929, 1110, 1123, 1124, 1167, 1168, 1169, 1222, 1322 of this title. ------DocID 14719 Document 64 of 646------ -CITE- 11 USC Sec. 366 -EXPCITE- TITLE 11 CHAPTER 3 SUBCHAPTER IV -HEAD- Sec. 366. Utility service -STATUTE- (a) Except as provided in subsection (b) of this section, a utility may not alter, refuse, or discontinue service to, or discriminate against, the trustee or the debtor solely on the basis of the commencement of a case under this title or that a debt owed by the debtor to such utility for service rendered before the order for relief was not paid when due. (b) Such utility may alter, refuse, or discontinue service if neither the trustee nor the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after such date. On request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance of payment. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2578; Pub. L. 98-353, title III, Sec. 443, July 10, 1984, 98 Stat. 373.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 366 of the House amendment represents a compromise between comparable provisions contained in H.R. 8200 as passed by the House and the Senate amendment. Subsection (a) is modified so that the applicable date is the date of the order for relief rather than the date of the filing of the petition. Subsection (b) contains a similar change but is otherwise derived from section 366(b) of the Senate amendment, with the exception that a time period for continued service of 20 days rather than 10 days is adopted. SENATE REPORT NO. 95-989 This section gives debtors protection from a cut-off of service by a utility because of the filing of a bankruptcy case. This section is intended to cover utilities that have some special position with respect to the debtor, such as an electric company, gas supplier, or telephone company that is a monopoly in the area so that the debtor cannot easily obtain comparable service from another utility. The utility may not alter, refuse, or discontinue service because of the nonpayment of a bill that would be discharged in the bankruptcy case. Subsection (b) protects the utility company by requiring the trustee or the debtor to provide, within ten days, adequate assurance of payment for service provided after the date of the petition. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353 inserted 'of the commencement of a case under this title or' after 'basis'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 901 of this title. ------DocID 14720 Document 65 of 646------ -CITE- 11 USC CHAPTER 5 -EXPCITE- TITLE 11 CHAPTER 5 -HEAD- CHAPTER 5 - CREDITORS, THE DEBTOR, AND THE ESTATE -MISC1- SUBCHAPTER I - CREDITORS AND CLAIMS Sec. 501. Filing of proofs of claims or interests. 502. Allowance of claims or interests. 503. Allowance of administrative expenses. 504. Sharing of compensation. 505. Determination of tax liability. 506. Determination of secured status. 507. Priorities. 508. Effect of distribution other than under this title. 509. Claims of codebtors. 510. Subordination. SUBCHAPTER II - DEBTOR'S DUTIES AND BENEFITS 521. Debtor's duties. 522. Exemptions. 523. Exceptions to discharge. 524. Effect of discharge. 525. Protection against discriminatory treatment. SUBCHAPTER III - THE ESTATE 541. Property of the estate. 542. Turnover of property to the estate. 543. Turnover of property by a custodian. 544. Trustee as lien creditor and as successor to certain creditors and purchasers. 545. Statutory liens. 546. Limitations on avoiding powers. 547. Preferences. 548. Fraudulent transfers and obligations. 549. Postpetition transactions. 550. Liability of transferee of avoided transfer. 551. Automatic preservation of avoided transfer. 552. Postpetition effect of security interest. 553. Setoff. 554. Abandonment of property of the estate. 555. Contractual right to liquidate a securities contract. 556. Contractual right to liquidate a commodity contract or forward contract. 557. Expedited determination of interests in, and abandonment or other disposition of grain assets. 558. Defenses of the estate. 559. Contractual right to liquidate a repurchase agreement. 560. Contractual right to terminate a swap agreement. AMENDMENTS 1990 - Pub. L. 101-311, title I, Sec. 106(b), June 25, 1990, 104 Stat. 268, added item 560. 1986 - Pub. L. 99-554, title II, Sec. 283(q), Oct. 27, 1986, 100 Stat. 3118, amended items 557 to 559 generally, substituting 'interests in, and abandonment or other disposition of grain assets' for 'in and disposition of grain' in item 557. 1984 - Pub. L. 98-353, title III, Sec. 352(b), 396(b), 470(b), July 10, 1984, 98 Stat. 361, 366, 380, added items 557, 558, and 559. 1982 - Pub. L. 97-222, Sec. 6(b), July 27, 1982, 96 Stat. 237, added items 555 and 556. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in section 103 of this title; title 15 section 78fff. ------DocID 14721 Document 66 of 646------ -CITE- 11 USC SUBCHAPTER I -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER I -HEAD- SUBCHAPTER I - CREDITORS AND CLAIMS ------DocID 14722 Document 67 of 646------ -CITE- 11 USC Sec. 501 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER I -HEAD- Sec. 501. Filing of proofs of claims or interests -STATUTE- (a) A creditor or an indenture trustee may file a proof of claim. An equity security holder may file a proof of interest. (b) If a creditor does not timely file a proof of such creditor's claim, an entity that is liable to such creditor with the debtor, or that has secured such creditor, may file a proof of such claim. (c) If a creditor does not timely file a proof of such creditor's claim, the debtor or the trustee may file a proof of such claim. (d) A claim of a kind specified in section 502(e)(2), 502(f), 502(g), 502(h) or 502(i) of this title may be filed under subsection (a), (b), or (c) of this section the same as if such claim were a claim against the debtor and had arisen before the date of the filing of the petition. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2578; Pub. L. 98-353, title III, Sec. 444, July 10, 1984, 98 Stat. 373.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS The House amendment adopts section 501(b) of the Senate amendment leaving the Rules of Bankruptcy Procedure free to determine where a proof of claim must be filed. Section 501(c) expands language contained in section 501(c) of the House bill and Senate amendment to permit the debtor to file a proof of claim if a creditor does not timely file a proof of the creditor's claim in a case under title 11. The House amendment deletes section 501(e) of the Senate amendment as a matter to be left to the rules of bankruptcy procedure. It is anticipated that the rules will enable governmental units, like other creditors, to have a reasonable time to file proofs of claim in bankruptcy cases. For purposes of section 501, a proof of 'interest' includes the interest of a general or limited partner in a partnership, the interest of a proprietor in a sole proprietorship, or the interest of a common or preferred stockholder in a corporation. SENATE REPORT NO. 95-989 This section governs the means by which creditors and equity security holders present their claims or interests to the court. Subsection (a) permits a creditor to file a proof of claim or interest. An indenture trustee representing creditors may file a proof of claim on behalf of the creditors he represents. This subsection is permissive only, and does not require filing of a proof of claim by any creditor. It permits filing where some purpose would be served, such as where a claim that appears on a list filed under proposed 11 U.S.C. 924 or 1111 was incorrectly stated or listed as disputed, contingent, or unliquidated, where a creditor with a lien is undersecured and asserts a claim for the balance of the debt owed him (his unsecured claim, as determined under proposed 11 U.S.C. 506(a)), or in a liquidation case where there will be a distribution of assets to the holders of allowed claims. In other instances, such as in no-asset liquidation cases, in situations where a secured creditor does not assert any claim against the estate and a determination of his claim is not made under proposed 11 U.S.C. 506, or in situations where the claim asserted would be subordinated and the creditor would not recover from the estate in any event, filing of a proof of claim may simply not be necessary. The Rules of Bankruptcy Procedure and practice under the law will guide creditors as to when filing is necessary and when it may be dispensed with. In general, however, unless a claim is listed in a chapter 9 or chapter 11 case and allowed as a result of the list, a proof of claim will be a prerequisite to allowance for unsecured claims, including priority claims and the unsecured portion of a claim asserted by the holder of a lien. The Rules of Bankruptcy Procedure will set the time limits, the form, and the procedure for filing, which will determine whether claims are timely or tardily filed. The rules governing time limits for filing proofs of claims will continue to apply under section 405(d) of the bill. These provide a 6-month-bar date for the filing of tax claims. Subsection (b) permits a codebtor, surety, or guarantor to file a proof of claim on behalf of the creditor to which he is liable if the creditor does not timely file a proof of claim. In liquidation and individual repayment plan cases, the trustee or the debtor may file a proof of claim under subsection (c) if the creditor does not timely file. The purpose of this subsection is mainly to protect the debtor if the creditor's claim is nondischargeable. If the creditor does not file, there would be no distribution on the claim, and the debtor would have a greater debt to repay after the case is closed than if the claim were paid in part or in full in the case or under the plan. Subsection (d) governs the filing of claims of the kind specified in subsections (f), (g), (h), (i), or (j) of proposed 11 U.S.C. 502. The separation of this provision from the other claim-filing provisions in this section is intended to indicate that claims of the kind specified, which do not become fixed or do not arise until after the commencement of the case, must be treated differently for filing purposes such as the bar date for filing claims. The rules will provide for later filing of claims of these kinds. Subsection (e) gives governmental units (including tax authorities) at least six months following the date for the first meeting of creditors in a chapter 7 or chapter 13 case within which to file proof of claims. AMENDMENTS 1984 - Subsec. (d). Pub. L. 98-353 inserted '502(e)(2),'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 502, 506, 726, 727, 901, 925, 944, 1111, 1141 of this title. ------DocID 14723 Document 68 of 646------ -CITE- 11 USC Sec. 502 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER I -HEAD- Sec. 502. Allowance of claims or interests -STATUTE- (a) A claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest, including a creditor of a general partner in a partnership that is a debtor in a case under chapter 7 of this title, objects. (b) Except as provided in subsections (e)(2), (f), (g), (h) and (i) of this section, if such objection to a claim is made, the court, after notice and a hearing, shall determine the amount of such claim in lawful currency of the United States as of the date of the filing of the petition, and shall allow such claim in such amount, except to the extent that - (1) such claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured; (2) such claim is for unmatured interest; (3) if such claim is for a tax assessed against property of the estate, such claim exceeds the value of the interest of the estate in such property; (4) if such claim is for services of an insider or attorney of the debtor, such claim exceeds the reasonable value of such services; (5) such claim is for a debt that is unmatured on the date of the filing of the petition and that is excepted from discharge under section 523(a)(5) of this title; (6) if such claim is the claim of a lessor for damages resulting from the termination of a lease of real property, such claim exceeds - (A) the rent reserved by such lease, without acceleration, for the greater of one year, or 15 percent, not to exceed three years, of the remaining term of such lease, following the earlier of - (i) the date of the filing of the petition; and (ii) the date on which such lessor repossessed, or the lessee surrendered, the leased property; plus (B) any unpaid rent due under such lease, without acceleration, on the earlier of such dates; (7) if such claim is the claim of an employee for damages resulting from the termination of an employment contract, such claim exceeds - (A) the compensation provided by such contract, without acceleration, for one year following the earlier of - (i) the date of the filing of the petition; or (ii) the date on which the employer directed the employee to terminate, or such employee terminated, performance under such contract; plus (B) any unpaid compensation due under such contract, without acceleration, on the earlier of such dates; or (8) such claim results from a reduction, due to late payment, in the amount of an otherwise applicable credit available to the debtor in connection with an employment tax on wages, salaries, or commissions earned from the debtor. (c) There shall be estimated for purpose of allowance under this section - (1) any contingent or unliquidated claim, the fixing or liquidation of which, as the case may be, would unduly delay the administration of the case; or (2) any right to payment arising from a right to an equitable remedy for breach of performance. (d) Notwithstanding subsections (a) and (b) of this section, the court shall disallow any claim of any entity from which property is recoverable under section 542, 543, 550, or 553 of this title or that is a transferee of a transfer avoidable under section 522(f), 522(h), 544, 545, 547, 548, 549, or 724(a) of this title, unless such entity or transferee has paid the amount, or turned over any such property, for which such entity or transferee is liable under section 522(i), 542, 543, 550, or 553 of this title. (e)(1) Notwithstanding subsections (a), (b), and (c) of this section and paragraph (2) of this subsection, the court shall disallow any claim for reimbursement or contribution of an entity that is liable with the debtor on or has secured the claim of a creditor, to the extent that - (A) such creditor's claim against the estate is disallowed; (B) such claim for reimbursement or contribution is contingent as of the time of allowance or disallowance of such claim for reimbursement or contribution; or (C) such entity asserts a right of subrogation to the rights of such creditor under section 509 of this title. (2) A claim for reimbursement or contribution of such an entity that becomes fixed after the commencement of the case shall be determined, and shall be allowed under subsection (a), (b), or (c) of this section, or disallowed under subsection (d) of this section, the same as if such claim had become fixed before the date of the filing of the petition. (f) In an involuntary case, a claim arising in the ordinary course of the debtor's business or financial affairs after the commencement of the case but before the earlier of the appointment of a trustee and the order for relief shall be determined as of the date such claim arises, and shall be allowed under subsection (a), (b), or (c) of this section or disallowed under subsection (d) or (e) of this section, the same as if such claim had arisen before the date of the filing of the petition. (g) A claim arising from the rejection, under section 365 of this title or under a plan under chapter 9, 11, 12, or 13 of this title, of an executory contract or unexpired lease of the debtor that has not been assumed shall be determined, and shall be allowed under subsection (a), (b), or (c) of this section or disallowed under subsection (d) or (e) of this section, the same as if such claim had arisen before the date of the filing of the petition. (h) A claim arising from the recovery of property under section 522, 550, or 553 of this title shall be determined, and shall be allowed under subsection (a), (b), or (c) of this section, or disallowed under subsection (d) or (e) of this section, the same as if such claim had arisen before the date of the filing of the petition. (i) A claim that does not arise until after the commencement of the case for a tax entitled to priority under section 507(a)(7) of this title shall be determined, and shall be allowed under subsection (a), (b), or (c) of this section, or disallowed under subsection (d) or (e) of this section, the same as if such claim had arisen before the date of the filing of the petition. (j) A claim that has been allowed or disallowed may be reconsidered for cause. A reconsidered claim may be allowed or disallowed according to the equities of the case. Reconsideration of a claim under this subsection does not affect the validity of any payment or transfer from the estate made to a holder of an allowed claim on account of such allowed claim that is not reconsidered, but if a reconsidered claim is allowed and is of the same class as such holder's claim, such holder may not receive any additional payment or transfer from the estate on account of such holder's allowed claim until the holder of such reconsidered and allowed claim receives payment on account of such claim proportionate in value to that already received by such other holder. This subsection does not alter or modify the trustee's right to recover from a creditor any excess payment or transfer made to such creditor. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2579; Pub. L. 98-353, title III, Sec. 445, July 10, 1984, 98 Stat. 373; Pub. L. 99-554, title II, Sec. 257(j), 283(f), Oct. 27, 1986, 100 Stat. 3115, 3117.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS The House amendment adopts a compromise position in section 502(a) between H.R. 8200, as passed by the House, and the Senate amendment. Section 502(a) has been modified to make clear that a party in interest includes a creditor of a partner in a partnership that is a debtor under chapter 7. Since the trustee of the partnership is given an absolute claim against the estate of each general partner under section 723(c), creditors of the partner must have standing to object to claims against the partnership at the partnership level because no opportunity will be afforded at the partner's level for such objection. The House amendment contains a provision in section 502(b)(1) that requires disallowance of a claim to the extent that such claim is unenforceable against the debtor and unenforceable against property of the debtor. This is intended to result in the disallowance of any claim for deficiency by an undersecured creditor on a non-recourse loan or under a State antideficiency law, special provision for which is made in section 1111, since neither the debtor personally, nor the property of the debtor is liable for such a deficiency. Similarly claims for usurious interest or which could be barred by an agreement between the creditor and the debtor would be disallowed. Section 502(b)(7)(A) represents a compromise between the House bill and the Senate amendment. The House amendment takes the provision in H.R. 8200 as passed by the House of Representatives but increases the percentage from 10 to 15 percent. As used in section 502(b)(7), the phrase 'lease of real property' applies only to a 'true' or 'bona fide' lease and does not apply to financing leases of real property or interests therein, or to leases of such property which are intended as security. Historically, the limitation on allowable claims of lessors of real property was based on two considerations. First, the amount of the lessor's damages on breach of a real estate lease was considered contingent and difficult to prove. Partly for this reason, claims of a lessor of real estate were not provable prior to the 1934 amendments, to the Bankruptcy Act (former title 11). Second, in a true lease of real property, the lessor retains all risks and benefits as to the value of the real estate at the termination of the lease. Historically, it was, therefore, considered equitable to limit the claims of real estate lessor. However, these considerations are not present in 'lease financing' transactions where, in substance, the 'lease' involves a sale of the real estate and the rental payments are in substance the payment of principal and interest on a secured loan or sale. In a financing lease the lessor is essentially a secured or unsecured creditor (depending upon whether his interest is perfected or not) of the debtor, and the lessor's claim should not be subject to the 502(b)(7) limitation. Financing 'leases' are in substance installment sales or loans. The 'lessors' are essentially sellers or lenders and should be treated as such for purposes of the bankruptcy law. Whether a 'lease' is true or bona fide lease or, in the alterntive a financing 'lease' or a lease intended as security, depends upon the circumstances of each case. The distinction between a true lease and a financing transaction is based upon the economic substance of the transaction and not, for example, upon the locus of title, the form of the transaction or the fact that the transaction is denominated as a 'lease.' The fact that the lessee, upon compliance with the terms of the lease, becomes or has the option to become the owner of the leased property for no additional consideration or for nominal consideration indicates that the transaction is a financing lease or lease intended as security. In such cases, the lessor has no substantial interest in the leased property at the expiration of the lease term. In addition, the fact that the lessee assumes and discharges substantially all the risks and obligations ordinarily attributed to the outright ownership of the property is more indicative of a financing transaction than of a true lease. The rental payments in such cases are in substance payments of principal and interest either on a loan secured by the leased real property or on the purchase of the leased real property. See, e.g., Financial Accounting Standards Board Statement No. 13 and SEC Reg. S-X, 17 C.F.R. sec. 210.3-16(q) (1977); cf. First National Bank of Chicago v. Irving Trust Co., 74 F.2d 263 (2nd Cir. 1934); and Albenda and Lief, 'Net Lease Financing Transactions Under the Proposed Bankruptcy Act of 1973,' 30 Business Lawyer, 713 (1975). Section 502(c) of the House amendment presents a compromise between similar provisions contained in the House bill and the Senate amendment. The compromise language is consistent with an amendment to the definition of 'claim' in section 104(4)(B) of the House amendment and requires estimation of any right to an equitable remedy for breach of performance if such breach gives rise to a right to payment. To the extent language in the House and Senate reports indicate otherwise, such language is expressly overruled. Section 502(e) of the House amendment contains language modifying a similar section in the House bill and Senate amendment. Section 502(e)(1) states the general rule requiring the court to disallow any claim for reimbursement or contribution of an entity that is liable with the debtor on, or that has secured, the claim of a creditor to any extent that the creditor's claim against the estate is disallowed. This adopts a policy that a surety's claim for reimbursement or contribution is entitled to no better status than the claim of the creditor assured by such surety. Section 502(e)(1)(B) alternatively disallows any claim for reimbursement or contribution by a surety to the extent such claim is contingent as of the time of allowance. Section 502(e)(2) is clear that to the extent a claim for reimbursement or contribution becomes fixed after the commencement of the case that it is to be considered a prepetition claim for purposes of allowance. The combined effect of sections 502(e)(1)(B) and 502(e)(2) is that a surety or codebtor is generally permitted a claim for reimbursement or contribution to the extent the surety or codebtor has paid the assured party at the time of allowance. Section 502(e)(1)(C) alternatively indicates that a claim for reimbursement or contribution of a surety or codebtor is disallowed to the extent the surety or codebtor requests subrogation under section 509 with respect to the rights of the assured party. Thus, the surety or codebtor has a choice; to the extent a claim for contribution or reimbursement would be advantageous, such as in the case where such a claim is secured, a surety or codebtor may opt for reimbursement or contribution under section 502(e). On the other hand, to the extent the claim for such surety or codebtor by way of subrogation is more advantageous, such as where such claim is secured, the surety may elect subrogation under section 509. The section changes current law by making the election identical in all other respects. To the extent a creditor's claim is satisfied by a surety or codebtor, other creditors should not benefit by the surety's inability to file a claim against the estate merely because such surety or codebtor has failed to pay such creditor's claim in full. On the other hand, to the extent the creditor's claim against the estate is otherwise disallowed, the surety or codebtor should not be entitled to increased rights by way of reimbursement or contribution, to the detriment of competing claims of other unsecured creditors, than would be realized by way of subrogation. While the foregoing scheme is equitable with respect to other unsecured creditors of the debtor, it is desirable to preserve present law to the extent that a surety or codebtor is not permitted to compete with the creditor he has assured until the assured party's claim has paid in full. Accordingly, section 509(c) of the House amendment subordinates both a claim by way of subrogation or a claim for reimbursement or contribution of a surety or codebtor to the claim of the assured party until the assured party's claim is paid in full. Section 502(h) of the House amendment expands similar provisions contained in the House bill and the Senate amendment to indicate that any claim arising from the recovery of property under section 522(i), 550, or 553 shall be determined as though it were a prepetition claim. Section 502(i) of the House amendment adopts a provision contained in section 502(j) of H.R. 8200 as passed by the House but that was not contained in the Senate amendment. Section 502(i) of H.R. 8200 as passed by the House, but was not included in the Senate amendment, is deleted as a matter to be left to the bankruptcy tax bill next year. The House amendment deletes section 502(i) of the Senate bill but adopts the policy of that section to a limited extent for confirmation of a plan of reorganization in section 1111(b) of the House amendment. Section 502(j) of the House amendment is new. The provision codifies section 57k of the Bankruptcy Act (section 93(k) of former title 11). Allowance of Claims or Interest: The House amendment adopts section 502(b)(9) of the House bill which disallows any tax claim resulting from a reduction of the Federal Unemployment Tax Act (FUTA) credit (sec. 3302 of the Internal Revenue Code (26 U.S.C. 3302)) on account of a tardy contribution to a State unemployment fund if the contribution is attributable to ways or other compensation paid by the debtor before bankruptcy. The Senate amendment allowed this reduction, but would have subordinated it to other claims in the distribution of the estate's assets by treating it as a punitive (nonpecuniary loss) penalty. The House amendment would also not bar reduction of the FUTA credit on account of a trustee's late payment of a contribution to a State unemployment fund if the contribution was attributable to a trustee's payment of compensation earned from the estate. Section 511 of the Senate amendment is deleted. Its substance is adopted in section 502(b)(9) of the House amendment which reflects an identical provision contained in H.R. 8200 as passed by the House. SENATE REPORT NO. 95-989 A proof of claim or interest is prima facie evidence of the claim or interest. Thus, it is allowed under subsection (a) unless a party in interest objects. The rules and case law will determine who is a party in interest for purposes of objection to allowance. The case law is well developed on this subject today. As a result of the change in the liability of a general partner's estate for the debts of this partnership, see proposed 11 U.S.C. 723, the category of persons that are parties in interest in the partnership case will be expanded to include a creditor of a partner against whose estate the trustee of the partnership estate may proceed under proposed 11 U.S.C. 723(c). Subsection (b) prescribes the grounds on which a claim may be disallowed. The court will apply these standards if there is an objection to a proof of claim. The burden of proof on the issue of allowance is left to the Rules of Bankruptcy Procedure. Under the current chapter XIII rules, a creditor is required to prove that his claim is free from usury, rule 13-301. It is expected that the rules will make similar provision for both liquidation and individual repayment plan cases. See Bankruptcy Act Sec. 656(b) (section 1056(b) of former title 11); H.R. 31, 94th Cong., 1st sess., sec. 6-104(a) (1975). Paragraph (1) requires disallowance if the claim is unenforceable against the debtor for any reason (such as usury, unconscionability, or failure of consideration) other than because it is contingent or unmatured. All such contingent or unmatured claims are to be liquidated by the bankruptcy court in order to afford the debtor complete bankruptcy relief; these claims are generally not provable under present law. Paragraph (2) requires disallowance to the extent that the claim is for unmatured interest as of the date of the petition. Whether interest is matured or unmatured on the date of bankruptcy is to be determined without reference to any ipso facto or bankruptcy clause in the agreement creating the claim. Interest disallowed under this paragraph includes postpetition interest that is not yet due and payable, and any portion of prepaid interest that represents an original discounting of the claim, yet that would not have been earned on the date of bankruptcy. For example, a claim on a $1,000 note issued the day before bankruptcy would only be allowed to the extent of the cash actually advanced. If the original discount was 10 percent so that the cash advanced was only $900, then notwithstanding the face amount of note, only $900 would be allowed. If $900 was advanced under the note some time before bankruptcy, the interest component of the note would have to be prorated and disallowed to the extent it was for interest after the commencement of the case. Section 502(b) thus contains two principles of present law. First, interest stops accruing at the date of the filing of the petition, because any claim for unmatured interest is disallowed under this paragraph. Second, bankruptcy operates as the acceleration of the principal amount of all claims against the debtor. One unarticulated reason for this is that the discounting factor for claims after the commencement of the case is equivalent to contractual interest rate on the claim. Thus, this paragraph does not cause disallowance of claims that have not been discounted to a present value because of the irrebuttable presumption that the discounting rate and the contractual interest rate (even a zero interest rate) are equivalent. Paragraph (3) requires disallowance of a claim to the extent that the creditor may offset the claim against a debt owing to the debtor. This will prevent double recovery, and permit the claim to be filed only for the balance due. This follows section 68 of the Bankruptcy Act (section 108 of former title 11). Paragraph (4) requires disallowance of a property tax claim to the extent that the tax due exceeds the value of the property. This too follows current law to the extent the property tax is ad valorem. Paragraph (5) prevents overreaching by the debtor's attorneys and concealing of assets by debtors. It permits the court to examine the claim of a debtor's attorney independently of any other provision of this subsection, and to disallow it to the extent that it exceeds the reasonable value of the attorneys' services. Postpetition alimony, maintenance or support claims are disallowed under paragraph (6). They are to be paid from the debtor's postpetition property, because the claims are nondischargeable. Paragraph (7), derived from current law, limits the damages allowable to a landlord of the debtor. The history of this provision is set out at length in Oldden v. Tonto Realty Co., 143 F.2d 916 (2d Cir. 1944). It is designed to compensate the landlord for his loss while not permitting a claim so large (based on a long-term lease) as to prevent other general unsecured creditors from recovering a dividend from the estate. The damages a landlord may assert from termination of a lease are limited to the rent reserved for the greater of one year or ten percent of the remaining lease term, not to exceed three years, after the earlier of the date of the filing of the petition and the date of surrender or repossession in a chapter 7 case and 3 years lease payments in a chapter 9, 11, or 13 case. The sliding scale formula for chapter 7 cases is new and designed to protect the long-term lessor. This subsection does not apply to limit administrative expense claims for use of the leased premises to which the landlord is otherwise entitled. This paragraph will not overrule Oldden, or the proposition for which it has been read to stand: To the extent that a landlord has a security deposit in excess of the amount of his claim allowed under this paragraph, the excess comes into the estate. Moreover, his allowed claim is for his total damages, as limited by this paragraph. By virtue of proposed 11 U.S.C. 506(a) and 506(d), the claim will be divided into a secured portion and an unsecured portion in those cases in which the deposit that the landlord holds is less than his damages. As under Oldden, he will not be permitted to offset his actual damages against his security deposit and then claim for the balance under this paragraph. Rather, his security deposit will be applied in satisfaction of the claim that is allowed under this paragraph. As used in section 502(b)(7), the phrase 'lease of real property' applies only to a 'true' or 'bona fide' lease and does not apply to financing leases of real property or interests therein, or to leases of such property which are intended as security. Historically, the limitation on allowable claims of lessors of real property was based on two considerations. First, the amount of the lessors damages on breach of a real estate lease was considered contingent and difficult to prove. Partly for this reason, claims of a lessor of real estate were not provable prior to the 1934 amendments to the Bankruptcy Act (former title 11). Second, in a true lease of real property, the lessor retains all risk and benefits as to the value of the real estate at the termination of the lease. Historically, it was, therefore, considered equitable to limit the claims of a real estate lessor. However, these considerations are not present in 'lease financing' transactions where, in substance, the 'lease' involves a sale of the real estate and the rental payments are in substance the payment of principal and interest on a secured loan or sale. In a financing lease the lessor is essentially a secured or unsecured creditor (depending upon whether his interest is perfected or not) of the debtor, and the lessor's claim should not be subject to the 502(b)(7) limitation. Financing 'leases' are in substance installment sales or loans. The 'lessors' are essentially sellers or lenders and should be treated as such for purposes of the bankruptcy law. Whether a 'lease' is true or bona fide lease or, in the alternative, a financing 'lease' or a lease intended as security, depends upon the circumstances of each case. The distinction between a true lease and a financing transaction is based upon the economic substance of the transaction and not, for example, upon the locus of title, the form of the transaction or the fact that the transaction is denominated as a 'lease'. The fact that the lessee, upon compliance with the terms of the lease, becomes or has the option to become the owner of the leased property for no additional consideration or for nominal consideration indicates that the transaction is a financing lease or lease intended as security. In such cases, the lessor has no substantial interest in the leased property at the expiration of the lease term. In addition, the fact that the lessee assumes and discharges substantially all the risks and obligations ordinarily attributed to the outright ownership of the property is more indicative of a financing transaction than of a true lease. The rental payments in such cases are in substance payments of principal and interest either on a loan secured by the leased real property or on the purchase of the leased real property. See, e. g., Financial Accounting Standards Board Statement No. 13 and SEC Reg. S-X, 17 C.F.R. sec. 210.3-16(q) (1977); cf. First National Bank of Chicago v. Irving Trust Co., 74 F.2d 263 (2nd Cir. 1934); and Albenda and Lief, 'Net Lease Financing Transactions Under the Proposed Bankruptcy Act of 1973,' 30 Business Lawyer, 713 (1975). Paragraph (8) is new. It tracks the landlord limitation on damages provision in paragraph (7) for damages resulting from the breach by the debtor of an employment contract, but limits the recovery to the compensation reserved under an employment contract for the year following the earlier of the date of the petition and the termination of employment. Subsection (c) requires the estimation of any claim liquidation of which would unduly delay the closing of the estate, such as a contingent claim, or any claim for which applicable law provides only an equitable remedy, such as specific performance. This subsection requires that all claims against the debtor be converted into dollar amounts. Subsection (d) is derived from present law. It requires disallowance of a claim of a transferee of a voidable transfer in toto if the transferee has not paid the amount or turned over the property received as required under the sections under which the transferee's liability arises. Subsection (e) also derived from present law, requires disallowance of the claim for reimbursement or contribution of a codebtor, surety or guarantor of an obligation of the debtor, unless the claim of the creditor on such obligation has been paid in full. The provision prevents competition between a creditor and his guarantor for the limited proceeds in the estate. Subsection (f) specifies that 'involuntary gap' creditors receive the same treatment as prepetition creditors. Under the allowance provisions of this subsection, knowledge of the commencement of the case will be irrelevant. The claim is to be allowed 'the same as if such claim had arisen before the date of the filing of the petition.' Under voluntary petition, proposed 11 U.S.C. 303(f), creditors must be permitted to deal with the debtor and be assured that their claims will be paid. For purposes of this subsection, 'creditors' include governmental units holding claims for tax liabilities incurred during the period after the petition is filed and before the earlier of the order for relief or appointment of a trustee. Subsection (g) gives entities injured by the rejection of an executory contract or unexpired lease, either under section 365 or under a plan or reorganization, a prepetition claim for any resulting damages, and requires that the injured entity be treated as a prepetition creditor with respect to that claim. Subsection (h) gives a transferee of a setoff that is recovered by one trustee a prepetition claim for the amount recovered. Subsection (i) answers the nonrecourse loan problem and gives the creditor an unsecured claim for the difference between the value of the collateral and the debt in response to the decision in Great National Life Ins. Co. v. Pine Gate Associates, Ltd., Bankruptcy Case No. B75-4345A (N.D.Ga. Sept. 16, 1977). The bill, as reported, deletes a provision in the bill as originally introduced (former sec. 502(i)) requiring a tax authority to file a proof of claim for recapture of an investment credit where, during title 11 proceedings, the trustee sells or otherwise disposes of property before the title 11 case began. The tax authority should not be required to submit a formal claim for a taxable event (a sale or other disposition of the asset) of whose occurrence the trustee necessarily knows better than the taxing authority. For procedural purposes, the recapture of investment credit is to be treated as an administrative expense, as to which only a request for payment is required. HOUSE REPORT NO. 95-595 Paragraph (9) (of subsec. (b)) requires disallowance of certain employment tax claims. These relate to a Federal tax credit for State unemployment insurance taxes which is disallowed if the State tax is paid late. This paragraph disallows the Federal claim for the tax the same as if the credit had been allowed in full on the Federal return. AMENDMENTS 1986 - Subsec. (b)(6)(A)(ii). Pub. L. 99-554, Sec. 283(f)(1), substituted 'repossessed' for 'reposessed'. Subsec. (g). Pub. L. 99-554, Sec. 257(j), inserted reference to chapter 12. Subsec. (i). Pub. L. 99-554, Sec. 283(f)(2), substituted '507(a)(7)' for '507(a)(6)'. 1984 - Subsec. (a). Pub. L. 98-353, Sec. 445(a), inserted 'general' before 'partner'. Subsec. (b). Pub. L. 98-353, Sec. 445(b)(1), (2), in provisions preceding par. (1), inserted '(e)(2),' after 'subsections' and 'in lawful currency of the United States' after 'claim'. Subsec. (b)(1). Pub. L. 98-353, Sec. 445(b)(3), substituted 'and' for ', and unenforceable against'. Subsec. (b)(3). Pub. L. 98-353, Sec. 445(b)(5), inserted 'the' after 'exceeds'. Pub. L. 98-353, Sec. 445(b)(4), struck out par. (3) 'such claim may be offset under section 553 of this title against a debt owing to the debtor;', and redesignated par. (4) as (3). Subsec. (b)(4). Pub. L. 98-353, Sec. 445(b)(4), redesignated par. (5) as (4). Former par. (4) redesignated (3). Subsec. (b)(5). Pub. L. 98-353, Sec. 445(b)(6), substituted 'such claim' for 'the claim' and struck out the comma after 'petition'. Pub. L. 98-353, Sec. 445(b)(4), redesignated par. (6) as (5). Former par. (5) redesignated (4). Subsec. (b)(6). Pub. L. 98-353, Sec. 445(b)(4), redesignated par. (7) as (6). Former par. (6) redesignated (5). Subsec. (b)(7). Pub. L. 98-353, Sec. 445(b)(7)(A), inserted 'the claim of an employee' before 'for damages'. Pub. L. 98-353, Sec. 445(b)(4), redesignated par. (8) as (7). Former par. (7) redesignated (6). Subsec. (b)(7)(A)(i). Pub. L. 98-353, Sec. 445(b)(7)(B), substituted 'or' for 'and'. Subsec. (b)(7)(B). Pub. L. 98-353, Sec. 445(b)(7)(C), (D), substituted 'any' for 'the' and inserted a comma after 'such contract'. Subsec. (b)(8), (9). Pub. L. 98-353, Sec. 445(b)(4), redesignated par. (9) as (8). Former par. (8) redesignated (7). Subsec. (c)(1). Pub. L. 98-353, Sec. 445(c)(1), inserted 'the' before 'fixing' and substituted 'administration' for 'closing'. Subsec. (c)(2). Pub. L. 98-353, Sec. 445(c)(2), inserted 'right to payment arising from a' after 'any' and struck out 'if such breach gives rise to a right to payment' after 'breach of performance'. Subsec. (e)(1). Pub. L. 98-353, Sec. 445(d)(1), (2), in provisions preceding subpar. (A) substituted ', (b), and (c)' for 'and (b)' and substituted 'or has secured' for ', or has secured,'. Subsec. (e)(1)(B). Pub. L. 98-353, Sec. 445(d)(3), inserted 'or disallowance' after 'allowance'. Subsec. (e)(1)(C). Pub. L. 98-353, Sec. 445(d)(4), substituted 'asserts a right of subrogation to the rights of such creditor' for 'requests subrogation' and struck out 'to the rights of such creditor' after 'of this title'. Subsec. (h). Pub. L. 98-353, Sec. 445(e), substituted '522' for '522(i)'. Subsec. (j). Pub. L. 98-353, Sec. 445(f), amended subsec. (j) generally, inserting provisions relating to reconsideration of a disallowed claim, and provisions relating to reconsideration of a claim under this subsection. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 283 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 101, 346, 501, 503, 506, 507, 509, 510, 522, 544, 553, 723, 727, 901, 929, 944, 1111, 1114, 1126, 1141, 1228, 1305, 1328 of this title. ------DocID 14724 Document 69 of 646------ -CITE- 11 USC Sec. 503 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER I -HEAD- Sec. 503. Allowance of administrative expenses -STATUTE- (a) An entity may file a request for payment of an administrative expense. (b) After notice and a hearing, there shall be allowed administrative expenses, other than claims allowed under section 502(f) of this title, including - (1)(A) the actual, necessary costs and expenses of preserving the estate, including wages, salaries, or commissions for services rendered after the commencement of the case; (B) any tax - (i) incurred by the estate, except a tax of a kind specified in section 507(a)(7) of this title; or (ii) attributable to an excessive allowance of a tentative carryback adjustment that the estate received, whether the taxable year to which such adjustment relates ended before or after the commencement of the case; and (C) any fine, penalty, or reduction in credit relating to a tax of a kind specified in subparagraph (B) of this paragraph; (2) compensation and reimbursement awarded under section 330(a) of this title; (3) the actual, necessary expenses, other than compensation and reimbursement specified in paragraph (4) of this subsection, incurred by - (A) a creditor that files a petition under section 303 of this title; (B) a creditor that recovers, after the court's approval, for the benefit of the estate any property transferred or concealed by the debtor; (C) a creditor in connection with the prosecution of a criminal offense relating to the case or to the business or property of the debtor; (D) a creditor, an indenture trustee, an equity security holder, or a committee representing creditors or equity security holders other than a committee appointed under section 1102 of this title, in making a substantial contribution in a case under chapter 9 or 11 of this title; or (E) a custodian superseded under section 543 of this title, and compensation for the services of such custodian; (4) reasonable compensation for professional services rendered by an attorney or an accountant of an entity whose expense is allowable under paragraph (3) of this subsection, based on the time, the nature, the extent, and the value of such services, and the cost of comparable services other than in a case under this title, and reimbursement for actual, necessary expenses incurred by such attorney or accountant; (5) reasonable compensation for services rendered by an indenture trustee in making a substantial contribution in a case under chapter 9 or 11 of this title, based on the time, the nature, the extent, and the value of such services, and the cost of comparable services other than in a case under this title; and (6) the fees and mileage payable under chapter 119 of title 28. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2581; Pub. L. 98-353, title III, Sec. 446, July 10, 1984, 98 Stat. 374; Pub. L. 99-554, title II, Sec. 283(g), Oct. 27, 1986, 100 Stat. 3117.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 503(a) of the House amendment represents a compromise between similar provisions in the House bill and the Senate amendment by leaving to the Rules of Bankruptcy Procedure the determination of the location at which a request for payment of an administrative expense may be filed. The preamble to section 503(b) of the House bill makes a similar change with respect to the allowance of administrative expenses. Section 503(b)(1) adopts the approach taken in the House bill as modified by some provisions contained in the Senate amendment. The preamble to section 503(b) makes clear that none of the paragraphs of section 503(b) apply to claims or expenses of the kind specified in section 502(f) that arise in the ordinary course of the debtor's business or financial affairs and that arise during the gap between the commencement of an involuntary case and the appointment of a trustee or the order for relief, whichever first occurs. The remainder of section 503(b) represents a compromise between H.R. 8200 as passed by the House and the Senate amendments. Section 503(b)(3)(E) codifies present law in cases such as Randolph v. Scruggs, 190 U.S. 533, which accords administrative expense status to services rendered by a prepetition custodian or other party to the extent such services actually benefit the estate. Section 503(b)(4) of the House amendment conforms to the provision contained in H.R. 8200 as passed by the House and deletes language contained in the Senate amendment providing a different standard of compensation under section 330 of that amendment. SENATE REPORT NO. 95-989 Subsection (a) of this section permits administrative expense claimants to file with the court a request for payment of an administrative expense. The Rules of Bankruptcy Procedure will specify the time, the form, and the method of such a filing. Subsection (b) specifies the kinds of administrative expenses that are allowable in a case under the bankruptcy code. The subsection is derived mainly from section 64a(1) of the Bankruptcy Act (section 104(a)(1) of former title 11), with some changes. The actual, necessary costs and expenses of preserving the estate, including wages, salaries, or commissions for services rendered after the order for relief, and any taxes on, measured by, or withheld from such wages, salaries, or commissions, are allowable as administrative expenses. In general, administrative expenses include taxes which the trustee incurs in administering the debtor's estate, including taxes on capital gains from sales of property by the trustee and taxes on income earned by the estate during the case. Interest on tax liabilities and certain tax penalties incurred by the trustee are also included in this first priority. Taxes which the Internal Revenue Service may find due after giving the trustee a so-called 'quickie' tax refund and later doing an audit of the refund are also payable as administrative expenses. The tax code (title 26) permits the trustee of an estate which suffers a net operating loss to carry back the loss against an earlier profit year of the estate or of the debtor and to obtain a tentative refund for the earlier year, subject, however, to a later full audit of the loss which led to the refund. The bill, in effect, requires the Internal Revenue Service to issue a tentative refund to the trustee (whether the refund was applied for by the debtor or by the trustee), but if the refund later proves to have been erroneous in amount, the Service can request that the tax attributable to the erroneous refund be payable by the estate as an administrative expense. Postpetition payments to an individual debtor for services rendered to the estate are administrative expenses, and are not property of the estate when received by the debtor. This situation would most likely arise when the individual was a sole proprietor and was employed by the estate to run the business after the commencement of the case. An individual debtor in possession would be so employed, for example. See Local Loan v. Hunt, 292 U.S. 234, 243 (1943). Compensation and reimbursement awarded officers of the estate under section 330 are allowable as administrative expenses. Actual, necessary expenses, other than compensation of a professional person, incurred by a creditor that files an involuntary petition, by a creditor that recovers property for the benefit of the estate, by a creditor that acts in connection with the prosecution of a criminal offense relating to the case, by a creditor, indenture, trustee, equity security holder, or committee of creditors or equity security holders (other than official committees) that makes a substantial contribution to a reorganization or municipal debt adjustment case, or by a superseded custodian, are all allowable administrative expenses. The phrase 'substantial contribution in the case' is derived from Bankruptcy Act Sec. 242 and 243 (sections 642 and 643 of former title 11). It does not require a contribution that leads to confirmation of a plan, for in many cases, it will be a substantial contribution if the person involved uncovers facts that would lead to a denial of confirmation, such as fraud in connection with the case. Paragraph (4) permits reasonable compensation for professional services rendered by an attorney or an accountant of an equity whose expense is compensable under the previous paragraph. Paragraph (5) permits reasonable compensation for an indenture trustee in making a substantial contribution in a reorganization or municipal debt adjustment case. Finally, paragraph (6) permits witness fees and mileage as prescribed under chapter 119 (Sec. 2041 et seq.) of title 28. AMENDMENTS 1986 - Subsec. (b)(1)(B)(i). Pub. L. 99-554, Sec. 283(g)(1), substituted '507(a)(7)' for '507(a)(6)'. Subsec. (b)(5). Pub. L. 99-554, Sec. 283(g)(2), inserted 'and' after 'title;'. Subsec. (b)(6). Pub. L. 99-554, Sec. 283(g)(3), substituted a period for '; and'. 1984 - Subsec. (b). Pub. L. 98-353, Sec. 446(1), struck out the comma after 'be allowed' in provisions preceding par. (1). Subsec. (b)(1)(C). Pub. L. 98-353, Sec. 446(2), struck out the comma after 'credit'. Subsec. (b)(2). Pub. L. 98-353, Sec. 446(3), inserted '(a)' after '330'. Subsec. (b)(3). Pub. L. 98-353, Sec. 446(4), inserted a comma after 'paragraph (4) of this subsection'. Subsec. (b)(3)(C). Pub. L. 98-353, Sec. 446(5), struck out the comma after 'case'. Subsec. (b)(5). Pub. L. 98-353, Sec. 446(6), struck out 'and' after 'title;'. Subsec. (b)(6). Pub. L. 98-353, Sec. 446(7), substituted '; and' for period at end. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 346, 348, 361, 364, 365, 504, 507, 557, 726, 901, 922, 1114, 1205, 1226, 1228, 1326 of this title; title 26 section 1398. ------DocID 14725 Document 70 of 646------ -CITE- 11 USC Sec. 504 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER I -HEAD- Sec. 504. Sharing of compensation -STATUTE- (a) Except as provided in subsection (b) of this section, a person receiving compensation or reimbursement under section 503(b)(2) or 503(b)(4) of this title may not share or agree to share - (1) any such compensation or reimbursement with another person; or (2) any compensation or reimbursement received by another person under such sections. (b)(1) A member, partner, or regular associate in a professional association, corporation, or partnership may share compensation or reimbursement received under section 503(b)(2) or 503(b)(4) of this title with another member, partner, or regular associate in such association, corporation, or partnership, and may share in any compensation or reimbursement received under such sections by another member, partner, or regular associate in such association, corporation, or partnership. (2) An attorney for a creditor that files a petition under section 303 of this title may share compensation and reimbursement received under section 503(b)(4) of this title with any other attorney contributing to the services rendered or expenses incurred by such creditor's attorney. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2582.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 504 prohibits the sharing of compensation, or fee splitting, among attorneys, other professionals, or trustees. The section provides only two exceptions: partners or associates in the same professional association, partnership, or corporation may share compensation inter se; and attorneys for petitioning creditors that join in a petition commencing an involuntary case may share compensation. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 901 of this title; title 15 section 78fff. ------DocID 14726 Document 71 of 646------ -CITE- 11 USC Sec. 505 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER I -HEAD- Sec. 505. Determination of tax liability -STATUTE- (a)(1) Except as provided in paragraph (2) of this subsection, the court may determine the amount or legality of any tax, any fine or penalty relating to a tax, or any addition to tax, whether or not previously assessed, whether or not paid, and whether or not contested before and adjudicated by a judicial or administrative tribunal of competent jurisdiction. (2) The court may not so determine - (A) the amount or legality of a tax, fine, penalty, or addition to tax if such amount or legality was contested before and adjudicated by a judicial or administrative tribunal of competent jurisdiction before the commencement of the case under this title; or (B) any right of the estate to a tax refund, before the earlier of - (i) 120 days after the trustee properly requests such refund from the governmental unit from which such refund is claimed; or (ii) a determination by such governmental unit of such request. (b) A trustee may request a determination of any unpaid liability of the estate for any tax incurred during the administration of the case by submitting a tax return for such tax and a request for such a determination to the governmental unit charged with responsibility for collection or determination of such tax. Unless such return is fraudulent, or contains a material misrepresentation, the trustee, the debtor, and any successor to the debtor are discharged from any liability for such tax - (1) upon payment of the tax shown on such return, if - (A) such governmental unit does not notify the trustee, within 60 days after such request, that such return has been selected for examination; or (B) such governmental unit does not complete such an examination and notify the trustee of any tax due, within 180 days after such request or within such additional time as the court, for cause, permits; (2) upon payment of the tax determined by the court, after notice and a hearing, after completion by such governmental unit of such examination; or (3) upon payment of the tax determined by such governmental unit to be due. (c) Notwithstanding section 362 of this title, after determination by the court of a tax under this section, the governmental unit charged with responsibility for collection of such tax may assess such tax against the estate, the debtor, or a successor to the debtor, as the case may be, subject to any otherwise applicable law. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2582; Pub. L. 98-353, title III, Sec. 447, July 10, 1984, 98 Stat. 374.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 505 of the House amendment adopts a compromise position with respect to the determination of tax liability from the position taken in H.R. 8200 as passed by the House and in the Senate amendment. Determinations of tax liability: Authority of bankruptcy court to rule on merits of tax claims. - The House amendment authorizes the bankruptcy court to rule on the merits of any tax claim involving an unpaid tax, fine, or penalty relating to a tax, or any addition to a tax, of the debtor or the estate. This authority applies, in general, whether or not the tax, penalty, fine, or addition to tax had been previously assessed or paid. However, the bankruptcy court will not have jurisdiction to rule on the merits of any tax claim which has been previously adjudicated, in a contested proceeding, before a court of competent jurisdiction. For this purpose, a proceeding in the U.S. Tax Court is to be considered 'contested' if the debtor filed a petition in the Tax Court by the commencement of the case and the Internal Revenue Service had filed an answer to the petition. Therefore, if a petition and answer were filed in the Tax Court before the title II petition was filed, and if the debtor later defaults in the Tax Court, then, under res judicata principles, the bankruptcy court could not then rule on the debtor's or the estate's liability for the same taxes. The House amendment adopts the rule of the Senate bill that the bankruptcy court can, under certain conditions, determine the amount of tax refund claim by the trustee. Under the House amendment, if the refund results from an offset or counterclaim to a claim or request for payment by the Internal Revenue Service, or other tax authority, the trustee would not first have to file an administrative claim for refund with the tax authority. However, if the trustee requests a refund in other situations, he would first have to submit an administrative claim for the refund. Under the House amendment, if the Internal Revenue Service, or other tax authority does not rule on the refund claim within 120 days, then the bankruptcy court may rule on the merits of the refund claim. Under the Internal Revenue Code (title 26), a suit for refund of Federal taxes cannot be filed until 6 months after a claim for refund is filed with the Internal Revenue Service (sec. 6532(a) (title 26)). Because of the bankruptcy aim to close the estate as expeditiously as possible, the House amendment shortens to 120 days the period for the Internal Revenue Service to decide the refund claim. The House amendment also adopts the substance of the Senate bill rule permitting the bankruptcy court to determine the amount of any penalty, whether punitive or pecuniary in nature, relating to taxes over which it has jurisdiction. Jurisdiction of the tax court in bankruptcy cases: The Senate amendment provided a detailed series of rules concerning the jurisdiction of the U.S. Tax Court, or similar State or local administrative tribunal to determine personal tax liabilities of an individual debtor. The House amendment deletes these specific rules and relies on procedures to be derived from broad general powers of the bankruptcy court. Under the House amendment, as under present law, a corporation seeking reorganization under chapter 11 is considered to be personally before the bankruptcy court for purposes of giving that court jurisdiction over the debtor's personal liability for a nondischargeable tax. The rules are more complex where the debtor is an individual under chapter 7, 11, or 13. An individual debtor or the tax authority can, as under section 17c of the present Bankruptcy Act (section 35(c) of former title 11), file a request that the bankruptcy court determine the debtor's personal liability for the balance of any nondischargeable tax not satisfied from assets of the estate. The House amendment intends to retain these procedures and also adds a rule staying commencement or continuation of any proceeding in the Tax Court after the bankruptcy petition is filed, unless and until that stay is lifted by the bankruptcy judge under section 362(a)(8). The House amendment also stays assessment as well as collection of a prepetition claim against the debtor (sec. 362(a)(6)). A tax authority would not, however, be stayed from issuing a deficiency notice during the bankruptcy case (sec. (b)(7)) (sec. 362(b)(8)). The Senate amendment repealed the existing authority of the Internal Revenue Service to make an immediate assessment of taxes upon bankruptcy (sec. 6871(a) of the code (title 26). See section 321 of the Senate bill. As indicated, the substance of that provision, also affecting State and local taxes, is contained in section 362(a)(6) of the House amendment. The statute of limitations is tolled under the House amendment while the bankruptcy case is pending. Where no proceeding in the Tax Court is pending at the commencement of the bankruptcy case, the tax authority can, under the House amendment, file a claim against the estate for a prepetition tax liability and may also file a request that the bankruptcy court hear arguments and decide the merits of an individual debtor's personal liability for the balance of any nondischargeable tax liability not satisfied from assets of the estate. Bankruptcy terminology refers to the latter type of request as a creditor's complaint to determine the dischargeability of a debt. Where such a complaint is filed, the bankruptcy court will have personal jurisdiction over an individual debtor, and the debtor himself would have no access to the Tax Court, or to any other court, to determine his personal liability for nondischargeable taxes. If a tax authority decides not to file a claim for taxes which would typically occur where there are few, if any, assets in the estate, normally the tax authority would also not request the bankruptcy court to rule on the debtor's personal liability for a nondischargeable tax. Under the House amendment, the tax authority would then have to follow normal procedures in order to collect a nondischargeable tax. For example, in the case of nondischargeable Federal income taxes, the Internal Revenue Service would be required to issue a deficiency notice to an individual debtor, and the debtor could then file a petition in the Tax Court - or a refund suit in a district court - as the forum in which to litigate his personal liability for a nondischargeable tax. Under the House amendment, as under present law, an individual debtor can also file a complaint to determine dischargeability. Consequently, where the tax authority does not file a claim or a request that the bankruptcy court determine dischargeability of a specific tax liability, the debtor could file such a request on his own behalf, so that the bankruptcy court would then determine both the validity of the claim against assets in the estate and also the personal liability of the debtor for any nondischargeable tax. Where a proceeding is pending in the Tax Court at the commencement of the bankruptcy case, the commencement of the bankruptcy case automatically stays further action in the Tax Court case unless and until the stay is lifted by the bankruptcy court. The Senate amendment repealed a provision of the Internal Revenue case barring a debtor from filing a petition in the Tax Court after commencement of a bankruptcy case (sec. 6871(b) of the code (26 U.S.C. 6871(b))). See section 321 of the Senate bill. As indicated earlier, the equivalent of the code amendment is embodied in section 362(a)(8) of the House amendment, which automatically stays commencement or continuation of any proceeding in the Tax Court until the stay is lifted or the case is terminated. The stay will permit sufficient time for the bankruptcy trustee to determine if he desires to join the Tax Court proceeding on behalf of the estate. Where the trustee chooses to join the Tax Court proceeding, it is expected that he will seek permission to intervene in the Tax Court case and then request that the stay on the Tax Court proceeding be lifted. In such a case, the merits of the tax liability will be determined by the Tax Court, and its decision will bind both the individual debtor as to any taxes which are nondischargeable and the trustee as to the tax claim against the estate. Where the trustee does not want to intervene in the Tax Court, but an individual debtor wants to have the Tax Court determine the amount of his personal liability for nondischargeable taxes, the debtor can request the bankruptcy court to lift the automatic stay on existing Tax Court proceedings. If the stay is lifted and the Tax Court reaches its decision before the bankruptcy court's decision on the tax claim against the estate, the decision of the Tax Court would bind the bankruptcy court under principles of res judicata because the decision of the Tax Court affected the personal liability of the debtor. If the trustee does not wish to subject the estate to the decision of the Tax Court if the latter court decides the issues before the bankruptcy court rules, the trustee could resist the lifting of the stay on the existing Tax Court proceeding. If the Internal Revenue Service had issued a deficiency notice to the debtor before the bankruptcy case began, but as of the filing of the bankruptcy petition the 90-day period for filing in the Tax Court was still running, the debtor would be automatically stayed from filing a petition in the Tax Court. If either the debtor or the Internal Revenue Service then files a complaint to determine dischargeability in the bankruptcy court, the decision of the bankruptcy court would bind both the debtor and the Internal Revenue Service. The bankruptcy judge could, however, lift the stay on the debtor to allow him to petition the Tax Court, while reserving the right to rule on the tax authority's claim against assets of the estate. The bankruptcy court could also, upon request by the trustee, authorize the trustee to intervene in the Tax Court for purposes of having the estate also governed by the decision of the Tax Court. In essence, under the House amendment, the bankruptcy judge will have authority to determine which court will determine the merits of the tax claim both as to claims against the estate and claims against the debtor concerning his personal liability for nondischargeable taxes. Thus, if the Internal Revenue Service, or a State or local tax authority, files a petition to determine dischargeability, the bankruptcy judge can either rule on the merits of the claim and continue the stay on any pending Tax Court proceeding or lift the stay on the Tax Court and hold the dischargeability complaint in abeyance. If he rules on the merits of the complaint before the decision of the Tax Court is reached, the bankruptcy court's decision would bind the debtor as to nondischargeable taxes and the Tax Court would be governed by that decision under principles of res judicata. If the bankruptcy judge does not rule on the merits of the complaint before the decision of the Tax Court is reached, the bankruptcy court will be bound by the decision of the Tax Court as it affects the amount of any claim against the debtor's estate. If the Internal Revenue Service does not file a complaint to determine dischargeability and the automatic stay on a pending Tax Court proceeding is not lifted, the bankruptcy court could determine the merits of any tax claim against the estate. That decision will not bind the debtor personally because he would not have been personally before the bankruptcy court unless the debtor himself asks the bankruptcy court to rule on his personal liability. In any such situation where no party filed a dischargeability petition, the debtor would have access to the Tax Court to determine his personal liability for a nondischargeable tax debt. While the Tax Court in such a situation could take into account the ruling of the bankruptcy court on claims against the estate in deciding the debtor's personal liability, the bankruptcy court's ruling would not bind the Tax Court under principles of res judicata, because the debtor, in that situation, would not have been personally before the bankruptcy court. If neither the debtor nor the Internal Revenue Service files a claim against the estate or a request to rule on the debtor's personal liability, any pending tax court proceeding would be stayed until the closing of the bankruptcy case, at which time the stay on the tax court would cease and the tax court case could continue for purposes of deciding the merits of the debtor's personal liability for nondischargeable taxes. Audit of trustee's returns: Under both bills, the bankruptcy court could determine the amount of any administrative period taxes. The Senate amendment, however, provided for an expedited audit procedure, which was mandatory in some cases. The House amendment (sec. 505(b)), adopts the provision of the House bill allowing the trustee discretion in all cases whether to ask the Internal Revenue Service, or State or local tax authority for a prompt audit of his returns on behalf of the estate. The House amendment, however, adopts the provision of the Senate bill permitting a prompt audit only on the basis of tax returns filed by the trustee for completed taxable periods. Procedures for a prompt audit set forth in the Senate bill are also adopted in modified form. Under the procedure, before the case can be closed, the trustee may request a tax audit by the local, State or Federal tax authority of all tax returns filed by the trustee. The taxing authority would have to notify the trustee and the bankruptcy court within 60 days whether it accepts returns or desires to audit the returns more fully. If an audit is conducted, the taxing authority would have to notify the trustee of tax deficiency within 180 days after the original request, subject to extensions of time if the bankruptcy court approves. If the trustee does not agree with the results of the audit, the trustee could ask the bankruptcy court to resolve the dispute. Once the trustee's tax liability for administration period taxes has thus been determined, the legal effect in a case under chapter 7 or 11 would be to discharge the trustee and any predecessor of the trustee, and also the debtor, from any further liability for these taxes. The prompt audit procedure would not be available with respect to any tax liability as to which any return required to be filed on behalf of the estate is not filed with the proper tax authority. The House amendment also specifies that a discharge of the trustee or the debtor which would otherwise occur will not be granted, or will be void if the return filed on behalf of the estate reflects fraud or material misrepresentation of facts. For purposes of the above prompt audit procedures, it is intended that the tax authority with which the request for audit is to be filed is, as the Federal taxes, the office of the District Director in the district where the bankruptcy case is pending. Under the House amendment, if the trustee does not request a prompt audit, the debtor would not be discharged from possible transferee liability if any assets are returned to the debtor. Assessment after decision: As indicated above, the commencement of a bankruptcy case automatically stays assessment of any tax (sec. 362(a)(6)). However, the House amendment provides (sec. 505(c)) that if the bankruptcy court renders a final judgment with regard to any tax (under the rules discussed above), the tax authority may then make an assessment (if permitted to do so under otherwise applicable tax law) without waiting for termination of the case or confirmation of a reorganization plan. Trustee's authority to appeal tax cases: The equivalent provision in the House bill (sec. 505(b)) and in the Senate bill (sec. 362(h)) authorizing the trustee to prosecute an appeal or review of a tax case are deleted as unnecessary. Section 541(a) of the House amendment provides that property of the estate is to include all legal or equitable interests of the debtor. These interests include the debtor's causes of action, so that the specific provisions of the House and Senate bills are not needed. SENATE REPORT NO. 95-989 Subsections (a) and (b) are derived, with only stylistic changes, from section 2a(2A) of the Bankruptcy Act (section 11(a)(2A) of former title 11). They permit determination by the bankruptcy court of any unpaid tax liability of the debtor that has not been contested before or adjudicated by a judicial or administrative tribunal of competent jurisdiction before the bankruptcy case, and the prosecution by the trustee of an appeal from an order of such a body if the time for review or appeal has not expired before the commencement of the bankruptcy case. As under current Bankruptcy Act Sec. 2a (2A), Arkansas Corporation Commissioner v. Thompson, 313 U.S. 132 (1941), remains good law to permit abstention where uniformity of assessment is of significant importance. Section (c) deals with procedures for obtaining a prompt audit of tax returns filed by the trustee in a liquidation or reorganization case. Under the bill as originally introduced, a trustee who is 'in doubt' concerning tax liabilities of the estate incurred during a title 11 proceeding could obtain a discharge from personal liability for himself and the debtor (but not for the debtor or the debtor's successor in a reorganization), provided that certain administrative procedures were followed. The trustee could request a prompt tax audit by the local, State, or Federal governmental unit. The taxing authority would have to notify the trustee and the court within sixty days whether it accepted the return or desired to audit the returns more fully. If an audit were conducted, the tax office would have to notify the trustee of any tax deficiency within 4 months (subject to an extension of time if the court approved). These procedures would apply only to tax years completed on or before the case was closed and for which the trustee had filed a tax return. The committee bill eliminates the 'in doubt' rule and makes mandatory (rather than optional) the trustee's request for a prompt audit of the estate's tax returns. In many cases, the trustee could not be certain that his returns raised no doubt about possible tax issues. In addition, it is desirable not to create a situation where the taxing authority asserts a tax liability against the debtor (as transferee of surplus assets, if any, return to him) after the case is over; in any such situation, the debtor would be called on to defend a tax return which he did not prepare. Under the amendment, all disputes concerning these returns are to be resolved by the bankruptcy court, and both the trustee and the debtor himself do not then face potential post-bankruptcy tax liabilities based on these returns. This result would occur as to the debtor, however, only in a liquidation case. In a reorganization in which the debtor or a successor to the debtor continues in existence, the trustee could obtain a discharge from personal liability through the prompt audit procedure, but the Treasury could still claim a deficiency against the debtor (or his successor) for additional taxes due on returns filed during the title 11 proceedings. HOUSE REPORT NO. 95-595 Subsection (c) is new. It codifies in part the referee's decision in In re Statmaster Corp., 465 F.2d 987 (5th Cir. 1972). Its purpose is to protect the trustee from personal liability for a tax falling on the estate that is not assessed until after the case is closed. If necessary to permit expeditious closing of the case, the court, on request of the trustee, must order the governmental unit charged with the responsibility for collection or determination of the tax to audit the trustee's return or be barred from attempting later collection. The court will be required to permit sufficient time to perform an audit, if the taxing authority requests it. The final order of the court and the payment of the tax determined in that order discharges the trustee, the debtor, and any successor to the debtor from any further liability for the tax. See Plumb, The Tax Recommendations of the Commission on the Bankruptcy Laws: Tax Procedures, 88 Harv. L. Rev. 1360, 1423-42 (1975). AMENDMENTS 1984 - Subsec. (a)(2)(B)(i). Pub. L. 98-353 substituted 'or' for 'and'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in title 26 sections 6212, 6512, 6532, 7434; title 28 section 2201. ------DocID 14727 Document 72 of 646------ -CITE- 11 USC Sec. 506 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER I -HEAD- Sec. 506. Determination of secured status -STATUTE- (a) An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor's interest or the amount so subject to setoff is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor's interest. (b) To the extent that an allowed secured claim is secured by property the value of which, after any recovery under subsection (c) of this section, is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement under which such claim arose. (c) The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim. (d) To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless - (1) such claim was disallowed only under section 502(b)(5) or 502(e) of this title; or (2) such claim is not an allowed secured claim due only to the failure of any entity to file a proof of such claim under section 501 of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2583; Pub. L. 98-353, title III, Sec. 448, July 10, 1984, 98 Stat. 374.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 506(a) of the House amendment adopts the provision contained in the Senate amendment and rejects a contrary provision as contained in H.R. 8200 as passed by the House. The provision contained in the Senate amendment and adopted by the House amendment recognizes that an amount subject to set-off is sufficient to recognize a secured status in the holder of such right. Additionally a determination of what portion of an allowed claim is secured and what portion is unsecured is binding only for the purpose for which the determination is made. Thus determinations for purposes of adequate protection is not binding for purposes of 'cram down' on confirmation in a case under chapter 11. Section 506(b) of the House amendment adopts language contained in the Senate amendment and rejects language contained in H.R. 8200 as passed by the House. If the security agreement between the parties provides for attorneys' fees, it will be enforceable under title 11, notwithstanding contrary law, and is recoverable from the collateral after any recovery under section 506(c). Section 506(c) of the House amendment was contained in H.R. 8200 as passed by the House and adopted, verbatim, in the Senate amendment. Any time the trustee or debtor in possession expends money to provide for the reasonable and necessary cost and expenses of preserving or disposing of a secured creditor's collateral, the trustee or debtor in possession is entitled to recover such expenses from the secured party or from the property securing an allowed secured claim held by such party. Section 506(d) of the House amendment is derived from H.R. 8200 as passed by the House and is adopted in lieu of the alternative test provided in section 506(d) of the Senate amendment. For purposes of section 506(d) of the House amendment, the debtor is a party in interest. Determination of Secured Status: The House amendment deletes section 506(d)(3) of the Senate amendment, which insures that a tax lien securing a nondischargeable tax claim is not voided because a tax authority with notice or knowledge of the bankruptcy case fails to file a claim for the liability (as it may elect not to do, if it is clear there are insufficient assets to pay the liability). Since the House amendment retains section 506(d) of the House bill that a lien is not voided unless a party in interest has requested that the court determine and allow or disallow the claim, provision of the Senate amendment is not necessary. SENATE REPORT NO. 95-989 Subsection (a) of this section separates an undersecured creditor's claim into two parts: He has a secured claim to the extent of the value of his collateral; and he has an unsecured claim for the balance of his claim. The subsection also provides for the valuation of claims which involve setoffs under section 553. While courts will have to determine value on a case-by-case basis, the subsection makes it clear that valuation is to be determined in light of the purpose of the valuation and the proposed disposition or use of the subject property. This determination shall be made in conjunction with any hearing on such disposition or use of property or on a plan affecting the creditor's interest. To illustrate, a valuation early in the case in a proceeding under sections 361-363 would not be binding upon the debtor or creditor at the time of confirmation of the plan. Throughout the bill, references to secured claims are only to the claim determined to be secured under this subsection, and not to the full amount of the creditor's claim. This provision abolishes the use of the terms 'secured creditor' and 'unsecured creditor' and substitutes in their places the terms 'secured claim' and 'unsecured claim.' Subsection (b) codifies current law by entitling a creditor with an oversecured claim to any reasonable fees (including attorney's fees), costs, or charges provided under the agreement under which the claim arose. These fees, costs, and charges are secured claims to the extent that the value of the collateral exceeds the amount of the underlying claim. Subsection (c) also codifies current law by permitting the trustee to recover from property the value of which is greater than the sum of the claims secured by a lien on that property the reasonable, necessary costs and expenses of preserving, or disposing of, the property. The recovery is limited to the extent of any benefit to the holder of such claim. Subsection (d) provides that to the extent a secured claim is not allowed, its lien is void unless the holder had neither actual notice nor knowledge of the case, the lien was not listed by the debtor in a chapter 9 or 11 case or such claim was disallowed only under section 502(e). HOUSE REPORT NO. 95-595 Subsection (d) permits liens to pass through the bankruptcy case unaffected. However, if a party in interest requests the court to determine and allow or disallow the claim secured by the lien under section 502 and the claim is not allowed, then the lien is void to the extent that the claim is not allowed. The voiding provision does not apply to claims disallowed only under section 502(e), which requires disallowance of certain claims against the debtor by a codebtor, surety, or guarantor for contribution or reimbursement. AMENDMENTS 1984 - Subsec. (b). Pub. L. 98-353, Sec. 448(a), inserted 'for' after 'provided'. Subsec. (d)(1). Pub. L. 98-353, Sec. 448(b), substituted 'such claim was disallowed only under section 502(b)(5) or 502(e) of this title' for 'a party in interest has not requested that the court determine and allow or disallow such claim under section 502 of this title'. Subsec. (d)(2). Pub. L. 98-353, Sec. 448(b), substituted 'such claim is not an allowed secured claim due only to the failure of any entity to file a proof of such claim under section 501 of this title' for 'such claim was disallowed only under section 502(e) of this title'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 349, 522, 551, 552, 901, 1111 of this title. ------DocID 14728 Document 73 of 646------ -CITE- 11 USC Sec. 507 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER I -HEAD- Sec. 507. Priorities -STATUTE- (a) The following expenses and claims have priority in the following order: (1) First, administrative expenses allowed under section 503(b) of this title, and any fees and charges assessed against the estate under chapter 123 of title 28. (2) Second, unsecured claims allowed under section 502(f) of this title. (3) Third, allowed unsecured claims for wages, salaries, or commissions, including vacation, severance, and sick leave pay - (A) earned by an individual within 90 days before the date of the filing of the petition or the date of the cessation of the debtor's business, whichever occurs first; but only (B) to the extent of $2,000 for each such individual. (4) Fourth, allowed unsecured claims for contributions to an employee benefit plan - (A) arising from services rendered within 180 days before the date of the filing of the petition or the date of the cessation of the debtor's business, whichever occurs first; but only (B) for each such plan, to the extent of - (i) the number of employees covered by each such plan multiplied by $2,000; less (ii) the aggregate amount paid to such employees under paragraph (3) of this subsection, plus the aggregate amount paid by the estate on behalf of such employees to any other employee benefit plan. (5) Fifth, allowed unsecured claims of persons - (A) engaged in the production or raising of grain, as defined in section 557(b)(1) of this title, against a debtor who owns or operates a grain storage facility, as defined in section 557(b)(2) of this title, for grain or the proceeds of grain, or (B) engaged as a United States fisherman against a debtor who has acquired fish or fish produce from a fisherman through a sale or conversion, and who is engaged in operating a fish produce storage or processing facility - but only to the extent of $2,000 for each such individual. (6) Sixth, allowed unsecured claims of individuals, to the extent of $900 for each such individual, arising from the deposit, before the commencement of the case, of money in connection with the purchase, lease, or rental of property, or the purchase of services, for the personal, family, or household use of such individuals, that were not delivered or provided. (7) Seventh, allowed unsecured claims of governmental units, only to the extent that such claims are for - (A) a tax on or measured by income or gross receipts - (i) for a taxable year ending on or before the date of the filing of the petition for which a return, if required, is last due, including extensions, after three years before the date of the filing of the petition; (ii) assessed within 240 days, plus any time plus 30 days during which an offer in compromise with respect to such tax that was made within 240 days after such assessment was pending, before the date of the filing of the petition; or (iii) other than a tax of a kind specified in section 523(a)(1)(B) or 523(a)(1)(C) of this title, not assessed before, but assessable, under applicable law or by agreement, after, the commencement of the case; (B) a property tax assessed before the commencement of the case and last payable without penalty after one year before the date of the filing of the petition; (C) a tax required to be collected or withheld and for which the debtor is liable in whatever capacity; (D) an employment tax on a wage, salary, or commission of a kind specified in paragraph (3) of this subsection earned from the debtor before the date of the filing of the petition, whether or not actually paid before such date, for which a return is last due, under applicable law or under any extension, after three years before the date of the filing of the petition; (E) an excise tax on - (i) a transaction occurring before the date of the filing of the petition for which a return, if required, is last due, under applicable law or under any extension, after three years before the date of the filing of the petition; or (ii) if a return is not required, a transaction occurring during the three years immediately preceding the date of the filing of the petition; (F) a customs duty arising out of the importation of merchandise - (i) entered for consumption within one year before the date of the filing of the petition; (ii) covered by an entry liquidated or reliquidated within one year before the date of the filing of the petition; or (iii) entered for consumption within four years before the date of the filing of the petition but unliquidated on such date, if the Secretary of the Treasury certifies that failure to liquidate such entry was due to an investigation pending on such date into assessment of antidumping or countervailing duties or fraud, or if information needed for the proper appraisement or classification of such merchandise was not available to the appropriate customs officer before such date; or (G) a penalty related to a claim of a kind specified in this paragraph and in compensation for actual pecuniary loss. (8) Eighth, allowed unsecured claims based upon any commitment by the debtor to the Federal Deposit Insurance Corporation, the Resolution Trust Corporation, the Director of the Office of Thrift Supervision, the Comptroller of the Currency, or the Board of Governors of the Federal Reserve System, or their predecessors or successors, to maintain the capital of an insured depository institution. (b) If the trustee, under section 362, 363, or 364 of this title, provides adequate protection of the interest of a holder of a claim secured by a lien on property of the debtor and if, notwithstanding such protection, such creditor has a claim allowable under subsection (a)(1) of this section arising from the stay of action against such property under section 362 of this title, from the use, sale, or lease of such property under section 363 of this title, or from the granting of a lien under section 364(d) of this title, then such creditor's claim under such subsection shall have priority over every other claim allowable under such subsection. (c) For the purpose of subsection (a) of this section, a claim of a governmental unit arising from an erroneous refund or credit of a tax has the same priority as a claim for the tax to which such refund or credit relates. (d) An entity that is subrogated to the rights of a holder of a claim of a kind specified in subsection (a)(3), (a)(4), (a)(5), (FOOTNOTE 1) or (a)(6) (FOOTNOTE 1) of this section is not subrogated to the right of the holder of such claim to priority under such subsection. (FOOTNOTE 1) See References in Text note below. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2583; Pub. L. 98-353, title III, Sec. 350, 449, July 10, 1984, 98 Stat. 358, 374; Pub. L. 101-647, title XXV, Sec. 2522(d), Nov. 29, 1990, 104 Stat. 4867.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 507(a)(3) of the House amendment represents a compromise dollar amount and date for the priority between similar provisions contained in H.R. 8200 as passed by the House and the Senate amendments. A similar compromise is contained in section 507(a)(4). Section 507(a)(5) represents a compromise on amount between the priority as contained in H.R. 8200 as passed by the House and the Senate amendment. The Senate provision for limiting the priority to consumers having less than a fixed gross income is deleted. Section 507(a)(6) of the House amendment represents a compromise between similar provisions contained in H.R. 8200 as passed by the House and the Senate amendment. Section 507(b) of the House amendment is new and is derived from the compromise contained in the House amendment with respect to adequate protection under section 361. Subsection (b) provides that to the extent adequate protection of the interest of a holder of a claim proves to be inadequate, then the creditor's claim is given priority over every other allowable claim entitled to distribution under section 507(a). Section 507(b) of the Senate amendment is deleted. Section 507(c) of the House amendment is new. Section 507(d) of the House amendment prevents subrogation with respect to priority for certain priority claims. Subrogation with respect to priority is intended to be permitted for administrative claims and claims arising during the gap period. Priorities: Under the House amendment, taxes receive priority as follows: First. Administration expenses: The amendment generally follows the Senate amendment in providing expressly that taxes incurred during the administration of the estate share the first priority given to administrative expenses generally. Among the taxes which receives first priority, as defined in section 503, are the employees' and the employer's shares of employment taxes on wages earned and paid after the petition is filed. Section 503(b)(1) also includes in administration expenses a tax liability arising from an excessive allowance by a tax authority of a 'quickie refund' to the estate. (In the case of Federal taxes, such refunds are allowed under special rules based on net operating loss carrybacks (sec. 6411 of the Internal Revenue Code (title 26)). An exception is made to first priority treatment for taxes incurred by the estate with regard to the employer's share of employment taxes on wages earned from the debtor before the petition but paid from the estate after the petition has been filed. In this situation, the employer's tax receives either sixth priority or general claim treatment. The House amendment also adopts the provisions of the Senate amendment which include in the definition of administrative expenses under section 503 any fine, penalty (including 'additions to tax' under applicable tax laws) or reduction in credit imposed on the estate. Second. 'Involuntary gap' claims: 'Involuntary gap' creditors are granted second priority by paragraph (2) of section 507(a). This priority includes tax claims arising in the ordinary course of the debtor's business or financial affairs after he has been placed involuntarily in bankruptcy but before a trustee is appointed or before the order for relief. Third. Certain taxes on prepetition wages: Wage claims entitled to third priority are for compensation which does not exceed $2,000 and was earned during the 90 days before the filing of the bankruptcy petition or the cessation of the debtor's business. Certain employment taxes receive third priority in payment from the estate along with the payment of wages to which the taxes relate. In the case of wages earned before the filing of the petition, but paid by the trustee (rather than by the debtor) after the filing of the petition, claims or the employees' share of the employment taxes (withheld income taxes and the employees' share of the social security or railroad retirement tax) receive third priority to the extent the wage claims themselves are entitled to this priority. In the case of wages earned from and paid by the debtor before the filing of the petition, the employer's share of the employment taxes on these wages paid by the debtor receives sixth priority or, if not entitled to that priority, are treated only as general claims. Under the House amendment, the employer's share of employment taxes on wages earned by employees of the debtor, but paid by the trustee after the filing of the bankruptcy petition, will also receive sixth priority to the extent that claims for the wages receive third priority. To the extent the claims for wages do not receive third priority, but instead are treated only as general claims, claims for the employer's share of the employment taxes attributable to those wages will also be treated as general claims. In calculating the amounts payable as general wage claims, the trustee must pay the employer's share of employment taxes on such wages. Sixth priority. The House amendment modifies the provisions of both the House bill and Senate amendment in the case of sixth priority taxes. Under the amendment, the following Federal, State and local taxes are included in the sixth priority: First. Income and gross receipts taxes incurred before the date of the petition for which the last due date of the return, including all extensions of time granted to file the return, occurred within 3 years before the date on which the petition was filed, or after the petition date. Under this rule, the due date of the return, rather than the date on which the taxes were assessed, determines the priority. Second. Income and gross receipts taxes assessed at any time within 240 days before the petition date. Under this rule, the date on which the governmental unit assesses the tax, rather than the due date of the return, determines the priority. If, following assessment of a tax, the debtor submits an offer in compromise to the governmental unit, the House amendment provides that the 240-day period is to be suspended for the duration of the offer and will resume running after the offer is withdrawn or rejected by the governmental unit, but the tax liability will receive priority if the title 11 petition is filed during the balance of the 240-day period or during a minimum of 30 days after the offer is withdrawn or rejected. This rule modifies a provision of the Senate amendment dealing specifically with offers in compromise. Under the modified rule, if, after the assessment, an offer in compromise is submitted by the debtor and is still pending (without having been accepted or rejected) at the date on which a title 11 petition is filed, the underlying liability will receive sixth priority. However, if an assessment of a tax liability is made but the tax is not collected within 240 days, the tax will not receive priority under section 507(a)(6)(A)(i) and the debtor cannot revive a priority for that tax by submitting an offer in compromise. Third. Income and gross receipts taxes not assessed before the petition date but still permitted, under otherwise applicable tax laws, to be assessed. Thus, for example, a prepetition tax liability is to receive sixth priority under this rule if, under the applicable statute of limitations, the tax liability can still be assessed by the tax authority. This rule also covers situations referred to in section 507(a)(6)(B)(ii) of the Senate amendment where the assessment or collection of a tax was prohibited before the petition pending exhaustion of judicial or administrative remedies, except that the House amendment eliminates the 300-day limitation of the Senate bill. So, for example, if before the petition a debtor was engaged in litigation in the Tax Court, during which the Internal Revenue Code (title 26) bars the Internal Revenue Service from assessing or collecting the tax, and if the tax court decision is made in favor of the Service before the petition under title 11 is filed, thereby lifting the restrictions on assessment and collection, the tax liability will receive sixth priority even if the tax authority does not make an assessment within 300 days before the petition (provided, of course, that the statute of limitations on assessment has not expired by the petition date). In light of the above categories of the sixth priority, and tax liability of the debtor (under the Internal Revenue Code (title 26) or State or local law) as a transferee of property from another person will receive sixth priority without the limitations contained in the Senate amendment so long as the transferee liability had not been assessed by the tax authority by the petition date but could still have been assessed by that date under the applicable tax statute of limitations or, if the transferee liability had been assessed before the petition, the assessment was made no more than 240 days before the petition date. Also in light of the above categories, the treatment of prepetition tax liabilities arising from an excessive allowance to the debtor of a tentative carryback adjustment, such as a 'quickie refund' under section 6411 of the Internal Revenue Code (title 26) is revised as follows: If the tax authority has assessed the additional tax before the petition, the tax liability will receive priority if the date of assessment was within 240 days before the petition date. If the tax authority had not assessed the additional tax by the petition, the tax liability will still receive priority so long as, on the petition date, assessment of the liability is not barred by the statute of limitations. Fourth. Any property tax assessed before the commencement of the case and last payable without penalty within 1 year before the petition, or thereafter. Fifth. Taxes which the debtor was required by law to withhold or collect from others and for which he is liable in any capacity, regardless of the age of the tax claims. This category covers the so-called 'trust fund' taxes, that is, income taxes which an employer is required to withhold from the pay of his employees, and the employees' share of social security taxes. In addition, this category includes the liability of a responsible officer under the Internal Revenue Code (sec. 6672) (title 26) for income taxes or for the employees' share of social security taxes which that officer was responsible for withholding from the wages of employees and paying to the Treasury, although he was not himself the employer. This priority will operate when a person found to be a responsible officer has himself filed in title 11, and the priority will cover the debtor's responsible officer liability regardless of the age of the tax year to which the tax relates. The U.S. Supreme Court has interpreted present law to require the same result as will be reached under this rule. U.S. v. Sotelo, 436 U.S. 268 (1978) (98 S.Ct. 1795, 56 L.Ed.2d 275, rehearing denied 98 S.Ct. 3126, 438 U.S. 907, 57 L.Ed.2d 1150). This category also includes the liability under section 3505 of the Internal Revenue Code (26 U.S.C. 3505) of a taxpayer who loans money for the payment of wages or other compensation. Sixth. The employer's share of employment taxes on wages paid before the petition and on third-priority wages paid postpetition by the estate. The priority rules under the House amendment governing employment taxes can thus be summarized as follows: Claims for the employees' shares of employment taxes attributable to wages both earned and paid before the filing of the petition are to receive sixth priority. In the case of employee wages earned, but not paid, before the filing of the bankruptcy petition, claims for the employees' share of employment taxes receive third priority to the extent the wages themselves receive third priority. Claims which relate to wages earned before the petition, but not paid before the petition (and which are not entitled to the third priority under the rule set out above), will be paid as general claims. Since the related wages will receive no priority, the related employment taxes would also be paid as nonpriority general claims. The employer's share of the employment taxes on wages earned and paid before the bankruptcy petition will receive sixth priority to the extent the return for these taxes was last due (including extensions of time) within 3 years before the filing of the petition, or was due after the petition was filed. Older tax claims of this nature will be payable as general claims. In the case of wages earned by employees before the petition, but actually paid by the trustee (as claims against the estate) after the title 11 case commenced, the employer's share of the employment taxes on third priority wages will be payable as sixth priority claims and the employer's taxes on prepetition wages which are treated only as general claims will be payable only as general claims. In calculating the amounts payable as general wage claims, the trustee must pay the employer's share of employment taxes on such wages. The House amendment thus deletes the provision of the Senate amendment that certain employer taxes receive third priority and are to be paid immediately after payment of third priority wages and the employees' shares of employment taxes on those wages. In the case of employment taxes relating to wages earned and paid after the petition, both the employees' shares and the employer's share will receive first priority as administration expenses of the estate. Seventh. Excise taxes on transactions for which a return, if required, is last due, under otherwise applicable law or under any extension of time to file the return, within 3 years before the petition was filed, or thereafter. If a return is not required with regard to a particular excise tax, priority is given if the transaction or event itself occurred within 3 years before the date on which the title 11 petition was filed. All Federal, State or local taxes generally considered or expressly treated as excises are covered by this category, including sales taxes, estate and gift taxes, gasoline and special fuel taxes, and wagering and truck taxes. Eighth. Certain unpaid customs duties. The House amendment covers in this category duties on imports entered for consumption within 1 year before the filing of the petition, but which are still unliquidated on the petition date; duties covered by an entry liquidated or reliquidated within 1 year before the petition date; and any duty on merchandise entered for consumption within 4 years before the petition but not liquidated on the petition date, if the Secretary of the Treasury or his delegate certifies that duties were not liquidated because of possible assessment of antidumping or countervailing duties or fraud penalties. For purposes of the above priority rules, the House amendment adopts the provision of the Senate bill that any tax liability which, under otherwise applicable tax law, is collectible in the form of a 'penalty,' is to be treated in the same manner as a tax liability. In bankruptcy terminology, such tax liabilities are referred to as pecuniary loss penalties. Thus, any tax liability which under the Internal Revenue Code (title 26) or State or local tax law is payable as a 'penalty,' in addition to the liability of a responsible person under section 6672 of the Internal Revenue Code (26 U.S.C. 6672) will be entitled to the priority which the liability would receive if it were expressly labeled as a 'tax' under the applicable tax law. However, a tax penalty which is punitive in nature is given subordi- nated treatment under section 726(a)(4). The House amendment also adopts the provision of the Senate amendment that a claim arising from an erroneous refund or credit of tax, other than a 'quickie refund,' is to receive the same priority as the tax to which the refund or credit relates. The House amendment deletes the express provision of the Senate amendment that a tax liability is to receive sixth priority if it satisfies any one of the subparagraphs of section 507(a)(6) even if the liability fails to satisfy the terms of one or more other subparagraphs. No change of substance is intended by the deletion, however, in light of section 102(5) of the House amendment, providing a rule of construction that the word 'or' is not intended to be exclusive. The House amendment deletes from the express priority categories of the Senate amendment the priority for a debtor's liability as a third party for failing to surrender property or to pay an obligation in response to a levy for taxes of another, and the priority for amounts provided for under deferred payment agreements between a debtor and the tax authority. The House amendment also adopts the substance of the definition in section 346(a) the Senate amendment of when taxes are to be considered 'incurred' except that the House amendment applies these definitions solely for purposes of determining which category of section 507 tests the priority of a particular tax liability. Thus, for example, the House amendment contains a special rule for the treatment of taxes under the 45-day exception to the preference rules under section 547 and the definitions of when a tax is incurred for priority purposes are not to apply to such preference rules. Under the House amendment, for purposes of the priority rules, a tax on income for a particular period is to be considered 'incurred' on the last day of the period. A tax on or measured by some event, such as the payment of wages or a transfer by reason of death or gift, or an excise tax on a sale or other transaction, is to be considered 'incurred' on the date of the transaction or event. SENATE REPORT NO. 95-989 Section 507 specifies the kinds of claims that are entitled to priority in distribution, and the order of their priority. Paragraph (1) grants first priority to allowed administrative expenses and to fees and charges assessed against the estate under chapter 123 (Sec. 1911 et seq.) of title 28. Taxes included as administrative expenses under section 503(b)(1) of the bill generally receive the first priority, but the bill makes certain qualifications: Examples of these specially treated claims are the estate's liability for recapture of an investment tax credit claimed by the debtor before the title 11 case (this liability receives sixth priority) and the estate's employment tax liabilities on wages earned before, but paid after, the petition was filed (this liability generally receives the same priority as the wages). 'Involuntary gap' creditors, granted first priority under current law, are granted second priority by paragraph (2). This priority, covering claims arising in the ordinary course of the debtor's business or financial affairs after a title 11 case has begun but before a trustee is appointed or before the order for relief, includes taxes incurred during the conduct of such activities. Paragraph (3) expands and increases the wage priority found in current section 64a(2) (section 104(a)(2) of former title 11). The amount entitled to priority is raised from $600 to $1,800. The former figure was last adjusted in 1926. Inflation has made it nearly meaningless, and the bill brings it more than up to date. The three month limit of current law is retained, but is modified to run from the earlier of the date of the filing of the petition or the date of the cessation of the debtor's business. The priority is expanded to cover vacation, severance, and sick leave pay. The bill adds to the third priority so-called 'trust fund' taxes, that is, withheld income taxes and the employees' share of the social security or railroad retirement taxes, but only to the extent that the wages on which taxes are imposed are themselves entitled to third priority. The employer's share, the employment tax and the employer's share of the social security or railroad retirement tax on third priority compensation, is also included in the third priority category, but only if, and to the extent that the wages and related trust fund taxes have first been paid in full. Because of the claimants urgent need for their wages in the typical cases, the employer's taxes should not be paid before the wage claims entitled to priority, as well as the related trust fund taxes, are fully paid. Paragraph (4) overrules United States v. Embassy Restaurant, 359 U.S. 29 (1958), which held that fringe benefits were not entitled to wage priority status. The bill recognizes the realities of labor contract negotiations, where fringe benefits may be substituted for wage demands. The priority granted is limited to claims for contributions to employee benefit plans such as pension plans, health or life insurance plans, and others, arising from services rendered within 120 days before the commencement of the case or the date of cessation of the debtor's business, whichever occurs first. The dollar limit placed on the total of all contributions payable under this paragraph is equal to the difference between the maximum allowable priority under paragraph (3), $1,800, times the number of employees covered by the plan less the actual distributions under paragraph (3) with respect to these employees. Paragraph (5) is a new priority for consumer creditors - those who have deposited money in connection with the purchase, lease, or rental of property, or the purchase of services, for their personal, family, or household use, that were not delivered or provided. The priority amount is not to exceed $600. In order to reach only those persons most deserving of this special priority, it is limited to individuals whose adjustable gross income from all sources derived does not exceed $20,000. See Senate Hearings, testimony of Prof. Vern Countryman, at pp. 848-849. The income of the husband and wife should be aggregated for the purposes of the $20,000 limit if either or both spouses assert such a priority claim. The sixth priority is for certain taxes. Priority is given to income taxes for a taxable year that ended on or before the date of the filing of the petition, if the last due date of the return for such year occurred not more than 3 years immediately before the date on which the petition was filed (Sec. 507(a)(6)(A)(i)). For the purposes of this rule, the last due date of the return is the last date under any extension of time to file the return which the taxing authority may have granted the debtor. Employment taxes and transfer taxes (including gift, estate, sales, use and other excise taxes) are also given sixth priority if the transaction or event which gave rise to the tax occurred before the petition date, provided that the required return or report of such tax liabilities was last due within 3 years before the petition was filed or was last due after the petition date (Sec. 507(a)(6)(A)(ii)). The employment taxes covered under this rule are the employer's share of the social security and railroad retirement taxes and required employer payments toward unemployment insurance. Priority is given to income taxes and other taxes of a kind described in section 507(a)(6)(A)(i) and (ii) which the Federal, State, or local tax authority had assessed within 3 years after the last due date of the return, that is, including any extension of time to file the return, if the debtor filed in title 11 within 240 days after the assessment was made (Sec. 507(a)(6)(B)(i)). This rule may bring into the sixth priority the debtor's tax liability for some taxable years which would not qualify for priority under the general three-year rule of section 507(a)(6)(A). The sixth priority category also includes taxes which the tax authority was barred by law from assessing or collecting at any time during the 300 days before the petition under title 11 was filed (Sec. 507(a)(6)(B)(ii)). In the case of certain Federal taxes, this preserves a priority for tax liabilities for years more than three years before the filing of the petition where the debtor and the Internal Revenue Service were negotiating over an audit of the debtor's returns or were engaged in litigation in the Tax Court. In such situations, the tax law prohibits the service's right to assess a tax deficiency until ninety days after the service sends the taxpayer a deficiency letter or, if the taxpayer files a petition in the Tax Court during that 90-day period, until the outcome of the litigation. A similar priority exists in present law, except that the taxing authority is allowed no time to assess and collect the taxes after the restrictions on assessment (discussed above) are lifted. Some taxpayers have exploited this loophole by filing in bankruptcy immediately after the end of the 90-day period or immediately after the close of Tax Court proceedings. The bill remedies this defect by preserving a priority for taxes the assessment of which was barred by law by giving the tax authority 300 days within which to make the assessment after the lifting of the bar and then to collect or file public notice of its tax lien. Thus, if a taxpayer files a title 11 petition at any time during that 300-day period, the tax deficiency will be entitled to priority. If the petition is filed more than 300 days after the restriction on assessment was lifted, the taxing authority will not have priority for the tax deficiency. Taxes for which an offer in compromise was withdrawn by the debtor, or rejected by a governmental unit, within 240 days before the petition date (Sec. 507(a)(6)(B)(iii)) will also receive sixth priority. This rule closes a loophole under present law under which, following an assessment of tax, some taxpayers have submitted a formal offer in compromise, dragged out negotiations with the taxing authority until the tax liability would lose priority under the three-year priority period of present law, and then filed in bankruptcy before the governmental unit could take collection steps. Also included are certain taxes for which no return or report is required by law (Sec. 507(a)(6)(C)), if the taxable transaction occurred within three years before the petition was filed. Taxes (not covered by the third priority) which the debtor was required by law to withhold or collect from others and for which he is liable in any capacity, regardless of the age of the tax claims (Sec. 507(a)(6)(D)) are included. This category covers the so-called 'trust fund' taxes, that is, income taxes which an employer is required to withhold from the pay of his employees, the employees' shares of social security and railroad retirement taxes, and also Federal unemployment insurance. This category also includes excise taxes which a seller of goods or services is required to collect from a buyer and pay over to a taxing authority. This category also covers the liability of a responsible corporate officer under the Internal Revenue Code (title 26) for income taxes or for the employees' share of employment taxes which, under the tax law, the employer was required to withhold from the wages of employees. This priority will operate where a person found to be a responsible officer has himself filed a petition under title 11, and the priority covers the debtor's liability as an officer under the Internal Revenue Code, regardless of the age of the tax year to which the tax relates. The priority rules under the bill governing employment taxes can be summarized as follows: In the case of wages earned and actually paid before the petition under title 11 was filed, the liability for the employees' share of the employment taxes, regardless of the prepetition year in which the wages were earned and paid. The employer's share of the employment taxes on all wages earned and paid before the petition receive sixth priority; generally, these taxes will be those for which a return was due within three years before the petition. With respect to wages earned by employees before the petition but actually paid by the trustee after the title 11 case commenced, taxes required to be withheld receives the same priority as the wages themselves. Thus, the employees' share of taxes on third priority wages also receives third priority. Taxes on the balance of such wages receive no priority and are collectible only as general claims because the wages themselves are payable only as general claims and liability for the taxes arises only to the extent the wages are actually paid. The employer's share of employment taxes on third priority wages earned before the petition but paid after the petition was filed receives third priority, but only if the wages in this category have first been paid in full. Assuming there are sufficient funds to pay third priority wages and the related employer taxes in full, the employer's share of taxes on the balance of wage payments becomes a general claim (because the wages themselves are payable as general claims). Both the employees' and the employer's share of employment taxes on wages earned and paid after the petition was filed receive first priority as administrative expenses. Also covered by this sixth priority are property taxes required to be assessed within 3 years before the filing of the petition (Sec. 507(a)(6)(E)). Taxes attributable to a tentative carryback adjustment received by the debtor before the petition was filed, such as a 'quickie refund' received under section 6411 of the Internal Revenue Code (title 26) (Sec. 507(a)(6)(F)) are included. However, the tax claim against the debtor will rein a prepetition loss year for which the tax return was last due, including extensions, within 3 years before the petition was filed. Taxes resulting from a recapture, occasioned by a transfer during bankruptcy, of a tax credit or deduction taken during an earlier tax year (Sec. 507(a)(6)(G)) are included. A typical example occurs when there is a sale by the trustee of depreciable property during the case and depreciation deductions taken in prepetition years are subject to recapture under section 1250 of the Code (title 26). Taxes owed by the debtor as a transferee of assets from another person who is liable for a tax, if the tax claim against the transferor would have received priority in a chapter 11 case commenced by the transferor within 1 year before the date of the petition filed by the transferee (Sec. 507(a)(6)(H)), are included. Also included are certain tax payments required to have been made during the 1 year immediately before the petition was filed, where the debtor had previously entered into a deferred payment agreement (including an offer in compromise) to pay an agreed liability in periodic installments but had become delinquent in one or more installments before the petition was filed (Sec. 507(a)(6)(I)). This priority covers all types of deferred or part payment agreements. The priority covers only installments which first became due during the 1 year before the petition but which remained unpaid at the date of the petition. The priority does not come into play, however, if before the case began or during the case, the debtor and the taxing authority agree to a further extension of time to pay the delinquent amounts. Certain tax-related liabilities which are not true taxes or which are not collected by regular assessment procedures (Sec. 507(a)(6)(J)) are included. One type of liability covered in this category is the liability under section 3505 of the Internal Revenue Code (title 26) of a lender who pays wages directly to employees of another employer or who supplies funds to an employer for the payment of wages. Another is the liability under section 6332 of the Internal Revenue Code (title 26), of a person who fails to turn over money or property of the taxpayer in response to a levy. Since the taxing authority must collect such a liability from the third party by suit rather than normal assessment procedures, an extra year is added to the normal 3-year priority periods. If a suit was commenced by the taxing authority within the four-year period and before the petition was filed, the priority is also preserved, provided that the suit had not terminated more than 1 year before the date of the filing of the petition. Also included are certain unpaid customs duties which have not grown unreasonably 'stale' (Sec. 507(a)(6)(K)). These include duties on imports entered for consumption with 3 years before the filing of the petition if the duties are still unliquidated on the petition date. If an import entry has been liquidated (in general, liquidation is in an administrative determination of the value and tariff rate of the item) or reliquidated, within two years of the filing of the petition the customs liability is given priority. If the Secretary of the Treasury certifies that customs duties were not liquidated because of an investigation into possible assessment of antidumping or countervailing duties, or because of fraud penalties, duties not liquidated for this reason during the five years before the importer filed under title 11 also will receive priority. Subsection (a) of this section also provides specifically that interest on sixth priority tax claims accrued before the filing of the petition is also entitled to sixth priority. Subsection (b) of this section provides that any fine or penalty which represents compensation for actual pecuniary loss of a governmental unit, and which involves a tax liability entitled to sixth priority, is to receive the same priority. Subsection (b) also provides that a claim arising from an erroneous refund or credit of tax is to be given the same priority as the tax to which the refund or credit relates. -REFTEXT- REFERENCES IN TEXT Subsections (a)(5) and (a)(6) of this section, referred to in subsec. (d), were redesignated subsections (a)(6) and (a)(7) of this section by Pub. L. 98-353, title III, Sec. 350(1), (2), July 10, 1984, 98 Stat. 358. -MISC2- AMENDMENTS 1990 - Subsec. (a)(8). Pub. L. 101-647 added par. (8). 1984 - Subsec. (a)(3). Pub. L. 98-353, Sec. 449(a)(1), inserted a comma after 'severance'. Subsec. (a)(4). Pub. L. 98-353, Sec. 449(a)(2), substituted 'an employee benefit plan' for 'employee benefit plans' in provisions preceding subpar. (A). Subsec. (a)(4)(B)(i). Pub. L. 98-353, Sec. 449(a)(3), inserted 'each' after 'covered by'. Subsec. (a)(5). Pub. L. 98-353, Sec. 350(3), added par. (5). Former par. (5) redesignated (6). Subsec. (a)(6). Pub. L. 98-353, Sec. 350(1), redesignated former par. (5) as (6) and substituted 'Sixth' for 'Fifth'. Former par. (6) redesignated (7). Subsec. (a)(7). Pub. L. 98-353, Sec. 350(2), 449(a)(4), redesignated former par. (6) as (7), substituted 'Seventh' for 'Sixth', and inserted 'only' after 'units,'. Subsec. (c). Pub. L. 98-353, Sec. 449(b), substituted 'has the same priority' for 'shall be treated the same'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 364, 365, 502, 503, 523, 724, 726, 752, 766, 901, 943, 1123, 1129, 1222, 1226, 1322, 1326 of this title; title 15 section 78fff. ------DocID 14729 Document 74 of 646------ -CITE- 11 USC Sec. 508 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER I -HEAD- Sec. 508. Effect of distribution other than under this title -STATUTE- (a) If a creditor receives, in a foreign proceeding, payment of, or a transfer of property on account of, a claim that is allowed under this title, such creditor may not receive any payment under this title on account of such claim until each of the other holders of claims on account of which such holders are entitled to share equally with such creditor under this title has received payment under this title equal in value to the consideration received by such creditor in such foreign proceeding. (b) If a creditor of a partnership debtor receives, from a general partner that is not a debtor in a case under chapter 7 of this title, payment of, or a transfer of property on account of, a claim that is allowed under this title and that is not secured by a lien on property of such partner, such creditor may not receive any payment under this title on account of such claim until each of the other holders of claims on account of which such holders are entitled to share equally with such creditor under this title has received payment under this title equal in value to the consideration received by such creditor from such general partner. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2585.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 508(b) of the House amendment is new and provides an identical rule with respect to a creditor of a partnership who receives payment from a partner, to that of a creditor of a debtor who receives a payment in a foreign proceeding involving the debtor. SENATE REPORT NO. 95-989 This section prohibits a creditor from receiving any distribution in the bankruptcy case if he has received payment of a portion of his claim in a foreign proceeding, until the other creditors in the bankruptcy case in this country that are entitled to share equally with that creditor have received as much as he has in the foreign proceeding. ------DocID 14730 Document 75 of 646------ -CITE- 11 USC Sec. 509 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER I -HEAD- Sec. 509. Claims of codebtors -STATUTE- (a) Except as provided in subsection (b) or (c) of this section, an entity that is liable with the debtor on, or that has secured, a claim of a creditor against the debtor, and that pays such claim, is subrogated to the rights of such creditor to the extent of such payment. (b) Such entity is not subrogated to the rights of such creditor to the extent that - (1) a claim of such entity for reimbursement or contribution on account of such payment of such creditor's claim is - (A) allowed under section 502 of this title; (B) disallowed other than under section 502(e) of this title; or (C) subordinated under section 510 of this title; or (2) as between the debtor and such entity, such entity received the consideration for the claim held by such creditor. (c) The court shall subordinate to the claim of a creditor and for the benefit of such creditor an allowed claim, by way of subrogation under this section, or for reimbursement or contribution, of an entity that is liable with the debtor on, or that has secured, such creditor's claim, until such creditor's claim is paid in full, either through payments under this title or otherwise. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2585; Pub. L. 98-353, title III, Sec. 450, July 10, 1984, 98 Stat. 375.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 509 of the House amendment represents a substantial revision of provisions contained in H.R. 8200 as passed by the House and in the Senate amendment. Section 509(a) states a general rule that a surety or co-debtor is subrogated to the rights of a creditor assured by the surety or co-debtor to the extent the surety or co-debtor pays such creditor. Section 509(b) states a general exception indicating that subrogation is not granted to the extent that a claim of a surety or co-debtor for reimbursement or contribution is allowed under section 502 or disallowed other than under section 502(e). Additionally, section 509(b)(1)(C) provides that such claims for subrogation are subordinated to the extent that a claim of the surety or co-debtor for reimbursement or contribution is subordinated under section 510(a)(1) or 510(b). Section 509(b)(2) reiterates the well-known rule that prevents a debtor that is ultimately liable on the debt from recovering from a surety or a co-debtor. Although the language in section 509(b)(2) focuses in terms of receipt of consideration, legislative history appearing elsewhere indicates that an agreement to share liabilities should prevail over an agreement to share profits throughout title 11. This is particularly important in the context of co-debtors who are partners. Section 509(c) subordinates the claim of a surety or co-debtor to the claim of an assured creditor until the creditor's claim is paid in full. SENATE REPORT NO. 95-989 Section 509 deals with codebtors generally, and is in addition to the disallowance provision in section 502(e). This section is based on the notion that the only rights available to a surety, guarantor, or comaker are contribution, reimbursement, and subrogation. The right that applies in a particular situation will depend on the agreement between the debtor and the codebtor, and on whether and how payment was made by the codebtor to the creditor. The claim of a surety or codebtor for contribution or reimbursement is discharged even if the claim is never filed, as is any claim for subrogation even if the surety or codebtor chooses to file a claim for contribution or reimbursement instead. Subsection (a) subrogates the codebtor (whether as a codebtor, surety, or guarantor) to the rights of the creditor, to the extent of any payment made by the codebtor to the creditor. Whether the creditor's claim was filed under section 501(a) or 501(b) is irrelevant. The right of subrogation will exist even if the primary creditor's claim is allowed by virtue of being listed under proposed 11 U.S.C. 924 or 1111, and not by reason of a proof of claim. Subsection (b) permits a subrogated codebtor to receive payments in the bankruptcy case only if the creditor has been paid in full, either through payments under the bankruptcy code or otherwise. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353, Sec. 450(a), substituted 'subsection (b) or' for 'subsections (b) and', and inserted 'against the debtor' after 'a creditor'. Subsec. (b)(1). Pub. L. 98-353, Sec. 450(b), substituted 'of such' for 'of a' after 'account'. Subsec. (c). Pub. L. 98-353, Sec. 450(c), substituted 'this section' for 'section 509 of this title'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 502, 901 of this title. ------DocID 14731 Document 76 of 646------ -CITE- 11 USC Sec. 510 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER I -HEAD- Sec. 510. Subordination -STATUTE- (a) A subordination agreement is enforceable in a case under this title to the same extent that such agreement is enforceable under applicable nonbankruptcy law. (b) For the purpose of distribution under this title, a claim arising from rescission of a purchase or sale of a security of the debtor or of an affiliate of the debtor, for damages arising from the purchase or sale of such a security, or for reimbursement or contribution allowed under section 502 on account of such a claim, shall be subordinated to all claims or interests that are senior to or equal the claim or interest represented by such security, except that if such security is common stock, such claim has the same priority as common stock. (c) Notwithstanding subsections (a) and (b) of this section, after notice and a hearing, the court may - (1) under principles of equitable subordination, subordinate for purposes of distribution all or part of an allowed claim to all or part of another allowed claim or all or part of an allowed interest to all or part of another allowed interest; or (2) order that any lien securing such a subordinated claim be transferred to the estate. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2586; Pub. L. 98-353, title III, Sec. 451, July 10, 1984, 98 Stat. 375.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 510(c)(1) of the House amendment represents a compromise between similar provisions in the House bill and Senate amendment. After notice and a hearing, the court may, under principles of equitable subordination, subordinate for purposes of distribution all or part of an allowed claim to all or part of another allowed claim or all or part of an allowed interest to all or part of another allowed interest. As a matter of equity, it is reasonable that a court subordinate claims to claims and interests to interests. It is intended that the term 'principles of equitable subordination' follow existing case law and leave to the courts development of this principle. To date, under existing law, a claim is generally subordinated only if holder of such claim is guilty of inequitable conduct, or the claim itself is of a status susceptible to subordination, such as a penalty or a claim for damages arising from the purchase or sale of a security of the debtor. The fact that such a claim may be secured is of no consequence to the issue of subordination. However, it is inconceivable that the status of a claim as a secured claim could ever be grounds for justifying equitable subordination. Subordination: Since the House amendment authorizes subordination of claims only under principles of equitable subordination, and thus incorporates principles of existing case law, a tax claim would rarely be subordinated under this provision of the bill. Section 511 of the Senate amendment is deleted. Its substance is adopted in section 502(b)(9) of the House amendment which reflects an identical provision contained in H.R. 8200 as passed by the House. SENATE REPORT NO. 95-989 Subsection (a) requires the court to enforce subordination agreements. A subordination agreement will not be enforced, however, in a reorganization case in which the class that is the beneficiary of the agreement has accepted, as specified in proposed 11 U.S.C. 1126, a plan that waives their rights under the agreement. Otherwise, the agreement would prevent just what chapter 11 contemplates: that seniors may give up rights to juniors in the interest of confirmation of a plan and rehabilitation of the debtor. The subsection also requires the court to subordinate in payment any claim for rescission of a purchase or sale of a security of the debtor or of an affiliate, or for damages arising from the purchase or sale of such a security, to all claims and interests that are senior to the claim or interest represented by the security. Thus, the later subordination varies with the claim or interest involved. If the security is a debt instrument, the damages or rescission claim will be granted the status of a general unsecured claim. If the security is an equity security, the damages or rescission claim is subordinated to all creditors and treated the same as the equity security itself. Subsection (b) authorizes the bankruptcy court, in ordering distribution of assets, to subordinate all or any part of any claim to all or any part of another claim, regardless of the priority ranking of either claim. In addition, any lien securing such a subordinated claim may be transferred to the estate. The bill provides, however, that any subordination ordered under this provision must be based on principles of equitable subordination. These principles are defined by case law, and have generally indicated that a claim may normally be subordinated only if its holder is guilty of misconduct. As originally introduced, the bill provided specifically that a tax claim may not be subordinated on equitable grounds. The bill deletes this express exception, but the effect under the amendment should be much the same in most situations since, under the judicial doctrine of equitable subordination, a tax claim would rarely be subordinated. AMENDMENTS 1984 - Subsec. (b). Pub. L. 98-353 amended subsec. (b) generally. Prior to amendment, subsec. (b) read as follows: 'Any claim for recission of a purchase or sale of a security of the debtor or of an affiliate or for damages arising from the purchase or sale of such a security shall be subordinated for purposes of distribution to all claims and interests that are senior or equal to the claim or interest represented by such security.' EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 349, 509, 522, 541, 726, 747, 752, 766, 901, 1129 of this title. ------DocID 14732 Document 77 of 646------ -CITE- 11 USC SUBCHAPTER II -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER II -HEAD- SUBCHAPTER II - DEBTOR'S DUTIES AND BENEFITS ------DocID 14733 Document 78 of 646------ -CITE- 11 USC Sec. 521 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER II -HEAD- Sec. 521. Debtor's duties -STATUTE- The debtor shall - (1) file a list of creditors, and unless the court orders otherwise, a schedule of assets and liabilities, a schedule of current income and current expenditures, and a statement of the debtor's financial affairs; (2) if an individual debtor's schedule of assets and liabilities includes consumer debts which are secured by property of the estate - (A) within thirty days after the date of the filing of a petition under chapter 7 of this title or on or before the date of the meeting of creditors, whichever is earlier, or within such additional time as the court, for cause, within such period fixes, the debtor shall file with the clerk a statement of his intention with respect to the retention or surrender of such property and, if applicable, specifying that such property is claimed as exempt, that the debtor intends to redeem such property, or that the debtor intends to reaffirm debts secured by such property; (B) within forty-five days after the filing of a notice of intent under this section, or within such additional time as the court, for cause, within such forty-five day period fixes, the debtor shall perform his intention with respect to such property, as specified by subparagraph (A) of this paragraph; and (C) nothing in subparagraphs (A) and (B) of this paragraph shall alter the debtor's or the trustee's rights with regard to such property under this title; (3) if a trustee is serving in the case, cooperate with the trustee as necessary to enable the trustee to perform the trustee's duties under this title; (4) if a trustee is serving in the case, surrender to the trustee all property of the estate and any recorded information, including books, documents, records, and papers, relating to property of the estate, whether or not immunity is granted under section 344 of this title, and (5) appear at the hearing required under section 524(d) of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2586; Pub. L. 98-353, title III, Sec. 305, 452, July 10, 1984, 98 Stat. 352, 375; Pub. L. 99-554, title II, Sec. 283(h), Oct. 27, 1986, 100 Stat. 3117.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 521 of the House amendment modifies a comparable provision contained in the House bill and Senate amendment. The Rules of Bankruptcy Procedure should provide where the list of creditors is to be filed. In addition, the debtor is required to attend the hearing on discharge under section 524(d). SENATE REPORT NO. 95-989 This section lists three duties of the debtor in a bankruptcy case. The Rules of Bankruptcy Procedure will specify the means of carrying out these duties. The first duty is to file with the court a list of creditors and, unless the court orders otherwise, a schedule of assets and liabilities and a statement of his financial affairs. Second, the debtor is required to cooperate with the trustee as necessary to enable the trustee to perform the trustee's duties. Finally, the debtor must surrender to the trustee all property of the estate, and any recorded information, including books, documents, records, and papers, relating to property of the estate. This phrase 'recorded information, including books, documents, records, and papers,' has been used here and throughout the bill as a more general term, and includes such other forms of recorded information as data in computer storage or in other machine readable forms. The list in this section is not exhaustive of the debtor's duties. Others are listed elsewhere in proposed title 11, such as in section 343, which requires the debtor to submit to examination, or in the Rules of Bankruptcy Procedure, as continued by Sec. 404(a) of S. 2266, such as the duty to attend any hearing on discharge, Rule 402(2). AMENDMENTS 1986 - Par. (4). Pub. L. 99-554 inserted ', whether or not immunity is granted under section 344 of this title' after second reference to 'estate'. 1984 - Par. (1). Pub. L. 98-353, Sec. 305(2), inserted 'a schedule of current income and current expenditures,' after 'liabilities,'. Pars. (2) to (5). Pub. L. 98-353, Sec. 305(1), (3), added par. (2), redesignated former pars. (2) to (4) as (3) to (5), respectively. Pub. L. 98-353, Sec. 452, which directed the insertion of ', whether or not immunity is granted under section 344 of this title' after second reference to 'estate' in par. (3) as redesignated above, could not be executed because such reference appeared in par. (4) rather than in par. (3). EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 523, 554, 704, 707, 1106, 1111, 1112, 1307 of this title. ------DocID 14734 Document 79 of 646------ -CITE- 11 USC Sec. 522 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER II -HEAD- Sec. 522. Exemptions -STATUTE- (a) In this section - (1) 'dependent' includes spouse, whether or not actually dependent; and (2) 'value' means fair market value as of the date of the filing of the petition or, with respect to property that becomes property of the estate after such date, as of the date such property becomes property of the estate. (b) Notwithstanding section 541 of this title, an individual debtor may exempt from property of the estate the property listed in either paragraph (1) or, in the alternative, paragraph (2) of this subsection. In joint cases filed under section 302 of this title and individual cases filed under section 301 or 303 of this title by or against debtors who are husband and wife, and whose estates are ordered to be jointly administered under Rule 1015(b) of the Bankruptcy Rules, one debtor may not elect to exempt property listed in paragraph (1) and the other debtor elect to exempt property listed in paragraph (2) of this subsection. If the parties cannot agree on the alternative to be elected, they shall be deemed to elect paragraph (1), where such election is permitted under the law of the jurisdiction where the case is filed. Such property is - (1) property that is specified under subsection (d) of this section, unless the State law that is applicable to the debtor under paragraph (2)(A) of this subsection specifically does not so authorize; or, in the alternative, (2)(A) any property that is exempt under Federal law, other than subsection (d) of this section, or State or local law that is applicable on the date of the filing of the petition at the place in which the debtor's domicile has been located for the 180 days immediately preceding the date of the filing of the petition, or for a longer portion of such 180-day period than in any other place; and (B) any interest in property in which the debtor had, immediately before the commencement of the case, an interest as a tenant by the entirety or joint tenant to the extent that such interest as a tenant by the entirety or joint tenant is exempt from process under applicable nonbankruptcy law. (c) Unless the case is dismissed, property exempted under this section is not liable during or after the case for any debt of the debtor that arose, or that is determined under section 502 of this title as if such debt had arisen, before the commencement of the case, except - (1) a debt of a kind specified in section 523(a)(1) or 523(a)(5) of this title; (2) a debt secured by a lien that is - (A)(i) not avoided under subsection (f) or (g) of this section or under section 544, 545, 547, 548, 549, or 724(a) of this title; and (ii) not void under section 506(d) of this title; or (B) a tax lien, notice of which is properly filed; or (3) a debt of a kind specified in section 523(a)(4) or 523(a)(6) of this title owed by an institution-affiliated party of an insured depository institution to a Federal depository institutions regulatory agency acting in its capacity as conservator, receiver, or liquidating agent for such institution. (d) The following property may be exempted under subsection (b)(1) of this section: (1) The debtor's aggregate interest, not to exceed $7,500 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor. (2) The debtor's interest, not to exceed $1,200 in value, in one motor vehicle. (3) The debtor's interest, not to exceed $200 in value in any particular item or $4,000 in aggregate value, in household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments, that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor. (4) The debtor's aggregate interest, not to exceed $500 in value, in jewelry held primarily for the personal, family, or household use of the debtor or a dependent of the debtor. (5) The debtor's aggregate interest in any property, not to exceed in value $400 plus up to $3,750 of any unused amount of the exemption provided under paragraph (1) of this subsection. (6) The debtor's aggregate interest, not to exceed $750 in value, in any implements, professional books, or tools, of the trade of the debtor or the trade of a dependent of the debtor. (7) Any unmatured life insurance contract owned by the debtor, other than a credit life insurance contract. (8) The debtor's aggregate interest, not to exceed in value $4,000 less any amount of property of the estate transferred in the manner specified in section 542(d) of this title, in any accrued dividend or interest under, or loan value of, any unmatured life insurance contract owned by the debtor under which the insured is the debtor or an individual of whom the debtor is a dependent. (9) Professionally prescribed health aids for the debtor or a dependent of the debtor. (10) The debtor's right to receive - (A) a social security benefit, unemployment compensation, or a local public assistance benefit; (B) a veterans' benefit; (C) a disability, illness, or unemployment benefit; (D) alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor; (E) a payment under a stock bonus, pension, profitsharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor, unless - (i) such plan or contract was established by or under the auspices of an insider that employed the debtor at the time the debtor's rights under such plan or contract arose; (ii) such payment is on account of age or length of service; and (iii) such plan or contract does not qualify under section 401(a), 403(a), 403(b), 408, or 409 (FOOTNOTE 1) of the Internal Revenue Code of 1986 (26 U.S.C. 401(a), 403(a), 403(b), 408, or 409). (FOOTNOTE 1) See References in Text note below. (11) The debtor's right to receive, or property that is traceable to - (A) an award under a crime victim's reparation law; (B) a payment on account of the wrongful death of an individual of whom the debtor was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor; (C) a payment under a life insurance contract that insured the life of an individual of whom the debtor was a dependent on the date of such individual's death, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor; (D) a payment, not to exceed $7,500, on account of personal bodily injury, not including pain and suffering or compensation for actual pecuniary loss, of the debtor or an individual of whom the debtor is a dependent; or (E) a payment in compensation of loss of future earnings of the debtor or an individual of whom the debtor is or was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor. (e) A waiver of an exemption executed in favor of a creditor that holds an unsecured claim against the debtor is unenforceable in a case under this title with respect to such claim against property that the debtor may exempt under subsection (b) of this section. A waiver by the debtor of a power under subsection (f) or (h) of this section to avoid a transfer, under subsection (g) or (i) of this section to exempt property, or under subsection (i) of this section to recover property or to preserve a transfer, is unenforceable in a case under this title. (f) Notwithstanding any waiver of exemptions, the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is - (1) a judicial lien; or (2) a nonpossessory, nonpurchase-money security interest in any - (A) household furnishings, household goods, wearing apparel, appliances, books, animals, crops, musical instruments, or jewelry that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor; (B) implements, professional books, or tools, of the trade of the debtor or the trade of a dependent of the debtor; or (C) professionally prescribed health aids for the debtor or a dependent of the debtor. (g) Notwithstanding sections 550 and 551 of this title, the debtor may exempt under subsection (b) of this section property that the trustee recovers under section 510(c)(2), 542, 543, 550, 551, or 553 of this title, to the extent that the debtor could have exempted such property under subsection (b) of this section if such property had not been transferred, if - (1)(A) such transfer was not a voluntary transfer of such property by the debtor; and (B) the debtor did not conceal such property; or (2) the debtor could have avoided such transfer under subsection (f)(2) of this section. (h) The debtor may avoid a transfer of property of the debtor or recover a setoff to the extent that the debtor could have exempted such property under subsection (g)(1) of this section if the trustee had avoided such transfer, if - (1) such transfer is avoidable by the trustee under section 544, 545, 547, 548, 549, or 724(a) of this title or recoverable by the trustee under section 553 of this title; and (2) the trustee does not attempt to avoid such transfer. (i)(1) If the debtor avoids a transfer or recovers a setoff under subsection (f) or (h) of this section, the debtor may recover in the manner prescribed by, and subject to the limitations of, section 550 of this title, the same as if the trustee had avoided such transfer, and may exempt any property so recovered under subsection (b) of this section. (2) Notwithstanding section 551 of this title, a transfer avoided under section 544, 545, 547, 548, 549, or 724(a) of this title, under subsection (f) or (h) of this section, or property recovered under section 553 of this title, may be preserved for the benefit of the debtor to the extent that the debtor may exempt such property under subsection (g) of this section or paragraph (1) of this subsection. (j) Notwithstanding subsections (g) and (i) of this section, the debtor may exempt a particular kind of property under subsections (g) and (i) of this section only to the extent that the debtor has exempted less property in value of such kind than that to which the debtor is entitled under subsection (b) of this section. (k) Property that the debtor exempts under this section is not liable for payment of any administrative expense except - (1) the aliquot share of the costs and expenses of avoiding a transfer of property that the debtor exempts under subsection (g) of this section, or of recovery of such property, that is attributable to the value of the portion of such property exempted in relation to the value of the property recovered; and (2) any costs and expenses of avoiding a transfer under subsection (f) or (h) of this section, or of recovery of property under subsection (i)(1) of this section, that the debtor has not paid. (l) The debtor shall file a list of property that the debtor claims as exempt under subsection (b) of this section. If the debtor does not file such a list, a dependent of the debtor may file such a list, or may claim property as exempt from property of the estate on behalf of the debtor. Unless a party in interest objects, the property claimed as exempt on such list is exempt. (m) Subject to the limitation in subsection (b), this section shall apply separately with respect to each debtor in a joint case. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2586; Pub. L. 98-353, title III, Sec. 306, 453, July 10, 1984, 98 Stat. 353, 375; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095; Pub. L. 99-554, title II, Sec. 283(i), Oct. 27, 1986, 100 Stat. 3117; Pub. L. 101-647, title XXV, Sec. 2522(b), Nov. 29, 1990, 104 Stat. 4866.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 522 of the House amendment represents a compromise on the issue of exemptions between the position taken in the House bill, and that taken in the Senate amendment. Dollar amounts specified in section 522(d) of the House bill have been reduced from amounts as contained in H.R. 8200 as passed by the House. The States may, by passing a law, determine whether the Federal exemptions will apply as an alternative to State exemptions in bankruptcy cases. Section 522(c)(1) tracks the House bill and provides that dischargeable tax claims may not be collected out of exempt property. Section 522(f)(2) is derived from the Senate amendment restricting the debtor to avoidance of nonpossessory, nonpurchase money security interests. Exemptions: Section 522(c)(1) of the House amendment adopts a provision contained in the House bill that dischargeable taxes cannot be collected from exempt assets. This changes present law, which allows collection of dischargeable taxes from exempt property, a rule followed in the Senate amendment. Nondischargeable taxes, however, will continue to the (be) collectable out of exempt property. It is anticipated that in the next session Congress will review the exemptions from levy currently contained in the Internal Revenue Code (title 26) with a view to increasing the exemptions to more realistic levels. SENATE REPORT NO. 95-989 Subsection (a) of this section defines two terms: 'dependent' includes the debtor's spouse, whether or not actually dependent; and 'value' means fair market value as of the date of the filing of the petition. Subsection (b) tracks current law. It permits a debtor the exemptions to which he is entitled under other Federal law and the law of the State of his domicile. Some of the items that may be exempted under Federal laws other than title 11 include: Foreign Service Retirement and Disability payments, 22 U.S.C. 1104; (FOOTNOTE 2) (FOOTNOTE 2) Replaced by 22 U.S.C. 4060(c). Social security payments, 42 U.S.C. 407; Injury or death compensation payments from war risk hazards, 42 U.S.C. 1717; Wages of fishermen, seamen, and apprentices, 46 U.S.C. 601; (FOOTNOTE 3) (FOOTNOTE 3) Replaced by 46 U.S.C. 11108, 11109. Civil service retirement benefits, 5 U.S.C. 729, 2265; (FOOTNOTE 4) (FOOTNOTE 4) Replaced by 5 U.S.C. 8346. Longshoremen's and Harbor Workers' Compensation Act death and disability benefits, 33 U.S.C. 916; Railroad Retirement Act annuities and pensions, 45 U.S.C. 228(L); (FOOTNOTE 5) (FOOTNOTE 5) Replaced by 45 U.S.C. 231m. Veterans benefits, 45 U.S.C. 352(E); (FOOTNOTE 6) (FOOTNOTE 6) Railroad unemployment benefits are covered by 45 U.S.C. 352(e). Special pensions paid to winners of the Congressional Medal of Honor, 38 U.S.C. 3101; (FOOTNOTE 7) and (FOOTNOTE 7) Veterans benefits generally are covered by 38 U.S.C. 3101. Federal homestead lands on debts contracted before issuance of the patent, 43 U.S.C. 175. He may also exempt an interest in property in which the debtor had an interest as a tenant by the entirety or joint tenant to the extent that interest would have been exempt from process under applicable nonbankruptcy law. Under proposed section 541, all property of the debtor becomes property of the estate, but the debtor is permitted to exempt certain property from property of the estate under this section. Property may be exempted even if it is subject to a lien, but only the unencumbered portion of the property is to be counted in computing the 'value' of the property for the purposes of exemption. As under current law, the debtor will be permitted to convert nonexempt property into exempt property before filing a bankruptcy petition. The practice is not fraudulent as to creditors, and permits the debtor to make full use of the exemptions to which he is entitled under the law. Subsection (c) insulates exempt property from prepetition claims other than tax claims (whether or not dischargeable), and other than alimony, maintenance, or support claims that are excepted from discharge. The bankruptcy discharge does not prevent enforcement of valid liens. The rule of Long v. Bullard, 117 U.S. 617 (1886), is accepted with respect to the enforcement of valid liens on nonexempt property as well as on exempt property. Cf. Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 583 (1935). Subsection (c)(3) permits the collection of dischargeable taxes from exempt assets. Only assets exempted from levy under Section 6334 of the Internal Revenue Code (title 26) or under applicable state or local tax law cannot be applied to satisfy these tax claims. This rule applies to prepetition tax claims against the debtor regardless of whether the claims do or do not receive priority and whether they are dischargeable or nondischargeable. Thus, even if a tax is dischargeable vis-a-vis the debtor's after-acquired assets, it may nevertheless be collectible from exempt property held by the estate. (Taxes incurred by the debtor's estate which are collectible as first priority administrative expenses are not collectible from the debtor's estate which are collectible as first priority administrative expenses are not collectible from the debtor's exempt assets.) Subsection (d) protects the debtor's exemptions, either Federal or State, by making unenforceable in a bankruptcy case a waiver of exemptions or a waiver of the debtor's avoiding powers under the following subsections. Subsection (e) protects the debtor's exemptions, his discharge, and thus his fresh start by permitting him to avoid certain liens on exempt property. The debtor may avoid a judicial lien on any property to the extent that the property could have been exempted in the absence of the lien, and may similarly avoid a nonpurchase-money security interest in certain household and personal goods. The avoiding power is independent of any waiver of exemptions. Subsection (f) gives the debtor the ability to exempt property that the trustee recovers under one of the trustee's avoiding powers if the property was involuntarily transferred away from the debtor (such as by the fixing of a judicial lien) and if the debtor did not conceal the property. The debtor is also permitted to exempt property that the trustee recovers as the result of the avoiding of the fixing of certain security interests to the extent that the debtor could otherwise have exempted the property. Subsection (g) provides that if the trustee does not exercise an avoiding power to recover a transfer of property that would be exempt, the debtor may exercise it and exempt the property, if the transfer was involuntary and the debtor did not conceal the property. If the debtor wishes to preserve his right to pursue any action under this provision, then he must intervene in any action brought by the trustee based on the same cause of action. It is not intended that the debtor be given an additional opportunity to avoid a transfer or that the transferee should have to defend the same action twice. Rather, the section is primarily designed to give the debtor the rights the trustee could have, but has not, pursued. The debtor is given no greater rights under this provision than the trustee, and thus, the debtor's avoiding powers under proposed sections 544, 545, 547, and 548, are subject to proposed 546, as are the trustee's powers. These subsections are cumulative. The debtor is not required to choose which he will use to gain an exemption. Instead, he may use more than one in any particular instance, just as the trustee's avoiding powers are cumulative. Subsection (h) permits recovery by the debtor of property transferred by an avoided transfer from either the initial or subsequent transferees. It also permits preserving a transfer for the benefit of the debtor. In either event, the debtor may exempt the property recovered or preserved. Subsection (i) makes clear that the debtor may exempt property under the avoiding subsections (f) and (h) only to the extent he has exempted less property than allowed under subsection (b). Subsection (j) makes clear that the liability of the debtor's exempt property is limited to the debtor's aliquot share of the costs and expenses recovery of property that the trustee recovers and the debtor later exempts, and any costs and expenses of avoiding a transfer by the debtor that the debtor has not already paid. Subsection (k) requires the debtor to file a list of property that he claims as exempt from property of the estate. Absent an objection to the list, the property is exempted. A dependent of the debtor may file it and thus be protected if the debtor fails to file the list. Subsection (l) provides the rule for a joint case. HOUSE REPORT NO. 95-595 Subsection (a) of this section defines two terms: 'dependent' includes the debtor's spouse, whether or not actually dependent; and 'value' means fair market value as of the date of the filing of the petition. Subsection (b), the operative subsection of this section, is a significant departure from present law. It permits an individual debtor in a bankruptcy case a choice between exemption systems. The debtor may choose the Federal exemptions prescribed in subsection (d), or he may choose the exemptions to which he is entitled under other Federal law and the law of the State of his domicile. If the debtor chooses the latter, some of the items that may be exempted under other Federal laws include: - Foreign Service Retirement and Disability payments, 22 U.S.C. 1104; (FOOTNOTE 8) (FOOTNOTE 8) Replaced by 22 U.S.C. 4060(c). - Social security payments, 42 U.S.C. 407; - Injury or death compensation payments from war risk hazards, 42 U.S.C. 1717; - Wages of fishermen, seamen, and apprentices, 46 U.S.C. 601; - Civil service retirement benefits, 5 U.S.C. 729, 2265; (FOOTNOTE 9) (FOOTNOTE 9) Replaced by 5 U.S.C. 8346. - Longshoremen's and Harbor Workers' Compensation Act death and disability benefits, 33 U.S.C. 916; - Railroad Retirement Act annuities and pensions, 45 U.S.C. 228(l); (FOOTNOTE 01) (FOOTNOTE 01) Replaced by 45 U.S.C. 231m. - Veterans benefits, 45 U.S.C. 352(E); (FOOTNOTE 11) (FOOTNOTE 11) Railroad unemployment benefits are covered by 45 U.S.C. 352(e). - Special pensions paid to winners of the Congressional Medal of Honor, 38 U.S.C. 3101; (FOOTNOTE 21) and (FOOTNOTE 21) Veterans benefits generally are covered by 38 U.S.C. 3101. - Federal homestead lands on debts contracted before issuance of the patent, 43 U.S.C. 175. He may also exempt an interest in property in which the debtor had an interest as a tenant by the entirety or joint tenant to the extent that interest would have been exempt from process under applicable nonbankruptcy law. The Rules will provide for the situation where the debtor's choice of exemption, Federal or State, was improvident and should be changed, for example, where the court has ruled against the debtor with respect to a major exemption. Under proposed 11 U.S.C. 541, all property of the debtor becomes property of the estate, but the debtor is permitted to exempt certain property from property of the estate under this section. Property may be exempted even if it is subject to a lien, but only the unencumbered portion of the property is to be counted in computing the 'value' of the property for the purposes of exemption. Thus, for example, a residence worth $30,000 with a mortgage of $25,000 will be exemptable to the extent of $5,000. This follows current law. The remaining value of the property will be dealt with in the bankruptcy case as is any interest in property that is subject to a lien. As under current law, the debtor will be permitted to convert nonexempt property into exempt property before filing a bankruptcy petition. See Hearings, pt. 3, at 1355-58. The practice is not fraudulent as to creditors and permits the debtor to make full use of the exemptions to which he is entitled under the law. Subsection (c) insulates exempt property from prepetition claims, except tax and alimony, maintenance, or support claims that are excepted from discharge. The bankruptcy discharge will not prevent enforcement of valid liens. The rule of Long v. Bullard, 117 U.S. 617 (1886) (6 S.Ct. 917, 29 L.Ed. 1004), is accepted with respect to the enforcement of valid liens on nonexempt property as well as on exempt property. Cf. Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 583 (1935) (55 S.Ct. 854). Subsection (d) specifies the Federal exemptions to which the debtor is entitled. They are derived in large part from the Uniform Exemptions Act, promulgated by the Commissioners of Uniform State Laws in August, 1976. Eleven categories of property are exempted. First is a homestead to the extent of $10,000, which may be claimed in real or personal property that the debtor or a dependent of the debtor uses as a residence. Second, the debtor may exempt a motor vehicle to the extent of $1500. Third, the debtor may exempt household goods, furnishings, clothing, and similar household items, held primarily for the personal, family, or household use of the debtor or a dependent of the debtor. 'Animals' includes all animals, such as pets, livestock, poultry, and fish, if they are held primarily for personal, family or household use. The limitation for third category items is $300 on any particular item. The debtor may also exempt up to $750 of personal jewelry. Paragraph (5) permits the exemption of $500, plus any unused amount of the homestead exemption, in any property, in order not to discriminate against the nonhomeowner. Paragraph (6) grants the debtor up to $1000 in implements, professional books, or tools, of the trade of the debtor or a dependent. Paragraph (7) exempts a life insurance contract, other than a credit life insurance contract, owned by the debtor. This paragraph refers to the life insurance contract itself. It does not encompass any other rights under the contract, such as the right to borrow out the loan value. Because of this provision, the trustee may not surrender a life insurance contract, which remains property of the debtor if he chooses the Federal exemptions. Paragraph (8) permits the debtor to exempt up to $5000 in loan value in a life insurance policy owned by the debtor under which the debtor or an individual of whom the debtor is a dependent is the insured. The exemption provided by this paragraph and paragraph (7) will also include the debtor's rights in a group insurance certificate under which the insured is an individual of whom the debtor is a dependent (assuming the debtor has rights in the policy that could be exempted) or the debtor. A trustee is authorized to collect the entire loan value on every life insurance policy owned by the debtor as property of the estate. First, however, the debtor will choose which policy or policies under which the loan value will be exempted. The $5000 figure is reduced by the amount of any automatic premium loan authorized after the date of the filing of the petition under section 542(d). Paragraph (9) exempts professionally prescribed health aids. Paragraph (10) exempts certain benefits that are akin to future earnings of the debtor. These include social security, unemployment compensation, or public assistance benefits, veteran's benefits, disability, illness, or unemployment benefits, alimony, support, or separate maintenance (but only to the extent reasonably necessary for the support of the debtor and any dependents of the debtor), and benefits under a certain stock bonus, pension, profitsharing, annuity or similar plan based on illness, disability, death, age or length of service. Paragraph (11) allows the debtor to exempt certain compensation for losses. These include crime victim's reparation benefits, wrongful death benefits (with a reasonably necessary for support limitation), life insurance proceeds (same limitation), compensation for bodily injury, not including pain and suffering ($10,000 limitation), and loss of future earnings payments (support limitation). This provision in subparagraph (D)(11) is designed to cover payments in compensation of actual bodily injury, such as the loss of a limb, and is not intended to include the attendant costs that accompany such a loss, such as medical payments, pain and suffering, or loss of earnings. Those items are handled separately by the bill. Subsection (e) protects the debtor's exemptions, either Federal or State, by making unenforceable in a bankruptcy case a waiver of exemptions or a waiver of the debtor's avoiding powers under the following subsections. Subsection (f) protects the debtor's exemptions, his discharge, and thus his fresh start by permitting him to avoid certain liens on exempt property. The debtor may avoid a judicial lien on any property to the extent that the property could have been exempted in the absence of the lien, and may similarly avoid a nonpurchase-money security interest in certain household and personal goods. The avoiding power is independent of any waiver of exemptions. Subsection (g) gives the debtor the ability to exempt property that the trustee recovers under one of the trustee's avoiding powers if the property was involuntarily transferred away from the debtor (such as by the fixing of a judicial lien) and if the debtor did not conceal the property. The debtor is also permitted to exempt property that the trustee recovers as the result of the avoiding of the fixing of certain security interests to the extent that the debtor could otherwise have exempted the property. If the trustee does not pursue an avoiding power to recover a transfer of property that would be exempt, the debtor may pursue it and exempt the property, if the transfer was involuntary and the debtor did not conceal the property. If the debtor wishes to preserve his right to pursue an action under this provision, then he must intervene in any action brought by the trustee based on the same cause of action. It is not intended that the debtor be given an additional opportunity to avoid a transfer or that the transferee have to defend the same action twice. Rather, the section is primarily designed to give the debtor the rights the trustee could have pursued if the trustee chooses not to pursue them. The debtor is given no greater rights under this provision than the trustee, and thus the debtor's avoiding powers under proposed 11 U.S.C. 544, 545, 547, and 548, are subject to proposed 11 U.S.C. 546, as are the trustee's powers. These subsections are cumulative. The debtor is not required to choose which he will use to gain an exemption. Instead, he may use more than one in any particular instance, just as the trustee's avoiding powers are cumulative. Subsection (i) permits recovery by the debtor of property transferred in an avoided transfer from either the initial or subsequent transferees. It also permits preserving a transfer for the benefit of the debtor. Under either case the debtor may exempt the property recovered or preserved. Subsection (k) makes clear that the debtor's aliquot share of the costs and expenses (for) recovery of property that the trustee recovers and the debtor later exempts, and any costs and expenses of avoiding a transfer by the debtor that the debtor has not already paid. Subsection (l) requires the debtor to file a list of property that he claims as exempt from property of the estate. Absent an objection to the list, the property is exempted. A dependent of the debtor may file it and thus be protected if the debtor fails to file the list. Subsection (m) requires the clerk of the bankruptcy court to give notice of any exemptions claimed under subsection (l), in order that parties in interest may have an opportunity to object to the claim. Subsection (n) provides the rule for a joint case: each debtor is entitled to the Federal exemptions provided under this section or to the State exemptions, whichever the debtor chooses. -REFTEXT- REFERENCES IN TEXT The Bankruptcy Rules, referred to in subsec. (b), are set out in the Appendix to this title. Section 409 of the Internal Revenue Code (26 U.S.C. 409), referred to in subsec. (d)(10)(E)(iii), which related to retirement bonds, was repealed by Pub. L. 98-369, div. A, title IV, Sec. 491(b), July 18, 1984, 98 Stat. 848, and section 409A of the Internal Revenue Code (26 U.S.C. 409A), which related to qualifications for tax credit employee stock ownership plans, was redesignated section 409. -MISC2- AMENDMENTS 1990 - Subsec. (c)(3). Pub. L. 101-647 added par. (3). 1986 - Subsec. (d)(10)(E)(iii). Pub. L. 99-514 substituted 'Internal Revenue Code of 1986' for 'Internal Revenue Code of 1954'. Subsec. (h)(1). Pub. L. 99-554, Sec. 283(i)(1), substituted '553 of this title' for '553 of this tittle'. Subsec. (i)(2). Pub. L. 99-554, Sec. 283(i)(2), substituted 'this' for 'his' after 'subsection (g) of'. 1984 - Subsec. (a)(2). Pub. L. 98-353, Sec. 453(a), inserted 'or, with respect to property that becomes property of an estate after such date, as of the date such property becomes property of the estate'. Subsec. (b). Pub. L. 98-353, Sec. 306(a), inserted provision that in joint cases filed under section 302 of this title and individual cases filed under section 301 or 303 of this title by or against debtors who are husband and wife, and whose estates are ordered to be jointly administered under Rule 1015(b) of the Bankruptcy Rules, one debtor may not elect to exempt property listed in paragraph (1) and the other debtor elect to exempt property listed in paragraph (2) of this subsection, but that if the parties cannot agree on the alternative to be elected, they shall be deemed to elect paragraph (1), where such election is permitted under the law of the jurisdiction where the case is filed. Subsec. (c). Pub. L. 98-353, Sec. 453(b), amended subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: 'Unless the case is dismissed, property exempted under this section is not liable during or after the case for any debt of the debtor that arose, or that is determined under section 502 of this title as if such claim had arisen before the commencement of the case, except - '(1) a debt of a kind specified in section 523(a)(1) or section 523(a)(5) of this title; or '(2) a lien that is - '(A) not avoided under section 544, 545, 547, 548, 549, or 724(a) of this title; '(B) not voided under section 506(d) of this title; or '(C)(i) a tax lien, notice of which is properly filed; and '(ii) avoided under section 545(2) of this title.' Subsec. (d)(3). Pub. L. 98-353, Sec. 306(b), inserted 'or $4,000 in aggregate value'. Subsec. (d)(5). Pub. L. 98-353, Sec. 306(c), amended par. (5) generally. Prior to amendment, par. (5) read as follows: 'The debtor's aggregate interest, not to exceed in value $400 plus any unused amount of the exemption provided under paragraph (1) of this subsection, in any property.' Subsec. (e). Pub. L. 98-353, Sec. 453(c), substituted 'an exemption' for 'exemptions'. Subsec. (m). Pub. L. 98-353, Sec. 306(d), substituted 'Subject to the limitation in subsection (b), this section shall apply separately with respect to each debtor in a joint case' for 'This section shall apply separately with respect to each debtor in a joint case'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 101, 349, 502, 542, 551, 552, 722, 1123 of this title; title 26 sections 1017, 1398; title 28 section 3014; title 29 section 1405. ------DocID 14735 Document 80 of 646------ -CITE- 11 USC Sec. 523 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER II -HEAD- Sec. 523. Exceptions to discharge -STATUTE- (a) A discharge under section 727, 1141,, (FOOTNOTE 1) 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt - (FOOTNOTE 1) So in original. (1) for a tax or a customs duty - (A) of the kind and for the periods specified in section 507(a)(2) or 507(a)(7) of this title, whether or not a claim for such tax was filed or allowed; (B) with respect to which a return, if required - (i) was not filed; or (ii) was filed after the date on which such return was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition; or (C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax; (2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by - (A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition; (B) use of a statement in writing - (i) that is materially false; (ii) respecting the debtor's or an insider's financial condition; (iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and (iv) that the debtor caused to be made or published with intent to deceive; or (C) for purposes of subparagraph (A) of this paragraph, consumer debts owed to a single creditor and aggregating more than $500 for 'luxury goods or services' incurred by an individual debtor on or within forty days before the order for relief under this title, or cash advances aggregating more than $1,000 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within twenty days before the order for relief under this title, are presumed to be nondischargeable; 'luxury goods or services' do not include goods or services reasonably acquired for the support or maintenance of the debtor or a dependent of the debtor; an extension of consumer credit under an open end credit plan is to be defined for purposes of this subparagraph as it is defined in the Consumer Credit Protection Act (15 U.S.C. 1601 et seq.); (3) neither listed nor scheduled under section 521(1) of this title, with the name, if known to the debtor, of the creditor to whom such debt is owed, in time to permit - (A) if such debt is not of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time for such timely filing; or (B) if such debt is of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim and timely request for a determination of dischargeability of such debt under one of such paragraphs, unless such creditor had notice or actual knowledge of the case in time for such timely filing and request; (4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny; (5) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record, determination made in accordance with State or territorial law by a governmental unit, or property settlement agreement, but not to the extent that - (A) such debt is assigned to another entity, voluntarily, by operation of law, or otherwise (other than debts assigned pursuant to section 402(a)(26) of the Social Security Act, or any such debt which has been assigned to the Federal Government or to a State or any political subdivision of such State); or (B) such debt includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance, or support; (6) for willful and malicious injury by the debtor to another entity or to the property of another entity; (7) to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty - (A) relating to a tax of a kind not specified in paragraph (1) of this subsection; or (B) imposed with respect to a transaction or event that occurred before three years before the date of the filing of the petition; (8) for an educational benefit overpayment or loan made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, or for an obligation to repay funds received as an educational benefit, scholarship or stipend, unless - (A) such loan, benefit, scholarship, or stipend overpayment first became due more than 7 years (exclusive of any applicable suspension of the repayment period) before the date of the filing of the petition; or (B) excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor's dependents; (9) for death or personal injury caused by the debtor's operation of a motor vehicle if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance; (10) that was or could have been listed or scheduled by the debtor in a prior case concerning the debtor under this title or under the Bankruptcy Act in which the debtor waived discharge, or was denied a discharge under section 727(a)(2), (3), (4), (5), (6), or (7) of this title, or under section 14c(1), (2), (3), (4), (6), or (7) of such Act; (11) provided in any final judgment, unreviewable order, or consent order or decree entered in any court of the United States or of any State, issued by a Federal depository institutions regulatory agency, or contained in any settlement agreement entered into by the debtor, arising from any act of fraud or defalcation while acting in a fiduciary capacity committed with respect to any depository institution or insured credit union; or (12) for malicious or reckless failure to fulfill any commitment by the debtor to a Federal depository institutions regulatory agency to maintain the capital of an insured depository institution, except that this paragraph shall not extend any such commitment which would otherwise be terminated due to any act of such agency; (FOOTNOTE 2) (FOOTNOTE 2) So in original. The semicolon probably should be a period. (b) Notwithstanding subsection (a) of this section, a debt that was excepted from discharge under subsection (a)(1), (a)(3), or (a)(8) of this section, under section 17a(1), 17a(3), or 17a(5) of the Bankruptcy Act, under section 439A of the Higher Education Act of 1965 (20 U.S.C. 1087-3), or under section 733(g) of the Public Health Service Act (42 U.S.C. 294f) in a prior case concerning the debtor under this title, or under the Bankruptcy Act, is dischargeable in a case under this title unless, by the terms of subsection (a) of this section, such debt is not dischargeable in the case under this title. (c)(1) Except as provided in subsection (a)(3)(B) of this section, the debtor shall be discharged from a debt of a kind specified in paragraph (2), (4), or (6) of subsection (a) of this section, unless, on request of the creditor to whom such debt is owed, and after notice and a hearing, the court determines such debt to be excepted from discharge under paragraph (2), (4), or (6), as the case may be, of subsection (a) of this section. (2) Paragraph (1) shall not apply in the case of a Federal depository institutions regulatory agency seeking, in its capacity as conservator, receiver, or liquidating agent for an insured depository institution, to recover a debt described in subsection (a)(2), (a)(4), (a)(6), or (a)(11) owed to such institution by an institution-affiliated party unless the receiver, conservator, or liquidating agent was appointed in time to reasonably comply, or for a Federal depository institutions regulatory agency acting in its corporate capacity as a successor to such receiver, conservator, or liquidating agent to reasonably comply, with subsection (a)(3)(B) as a creditor of such institution-affiliated party with respect to such debt. (d) If a creditor requests a determination of dischargeability of a consumer debt under subsection (a)(2) of this section, and such debt is discharged, the court shall grant judgment in favor of the debtor for the costs of, and a reasonable attorney's fee for, the proceeding if the court finds that the position of the creditor was not substantially justified, except that the court shall not award such costs and fees if special circumstances would make the award unjust. (e) Any institution-affiliated party of a depository institution or insured credit union shall be considered to be acting in a fiduciary capacity with respect to the purposes of subsection (a)(4) or (11). -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2590; Pub. L. 96-56, Sec. 3, Aug. 14, 1979, 93 Stat. 387; Pub. L. 97-35, title XXIII, Sec. 2334(b), Aug. 13, 1981, 95 Stat. 863; Pub. L. 98-353, title III, Sec. 307, 371, 454, July 10, 1984, 98 Stat. 353, 364, 375; Pub. L. 99-554, title II, Sec. 257(n), 281, 283(j), Oct. 27, 1986, 100 Stat. 3115-3117; Pub. L. 101-581, Sec. 2(a), Nov. 15, 1990, 104 Stat. 2865; Pub. L. 101-647, title XXV, Sec. 2522(a), title XXXI, Sec. 3102(a), title XXXVI, Sec. 3621, Nov. 29, 1990, 104 Stat. 4865, 4916, 4964.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 523(a)(1) represents a compromise between the position taken in the House bill and the Senate amendment. Section 523(a)(2) likewise represents a compromise between the position taken in the House bill and the Senate amendment with respect to the false financial statement exception to discharge. In order to clarify that a 'renewal of credit' includes a 'refinancing of credit', explicit reference to a refinancing of credit is made in the preamble to section 523(a)(2). A renewal of credit or refinancing of credit that was obtained by a false financial statement within the terms of section 523(a)(2) is nondischargeable. However, each of the provisions of section 523(a)(2) must be proved. Thus, under section 523(a)(2)(A) a creditor must prove that the debt was obtained by false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition. Subparagraph (A) is intended to codify current case law e.g., Neal v. Clark, 95 U.S. 704 (1887) (24 L. Ed. 586), which interprets 'fraud' to mean actual or positive fraud rather than fraud implied in law. Subparagraph (A) is mutually exclusive from subparagraph (B). Subparagraph (B) pertains to the so-called false financial statement. In order for the debt to be nondischargeable, the creditor must prove that the debt was obtained by the use of a statement in writing (i) that is materially false; (ii) respecting the debtor's or an insider's financial condition; (iii) on which the creditor to whom the debtor is liable for obtaining money, property, services, or credit reasonably relied; (iv) that the debtor caused to be made or published with intent to deceive. Section 523(a)(2)(B)(iv) is not intended to change from present law since the statement that the debtor causes to be made or published with the intent to deceive automatically includes a statement that the debtor actually makes or publishes with an intent to deceive. Section 523(a)(2)(B) is explained in the House report. Under section 523(a)(2)(B)(i) a discharge is barred only as to that portion of a loan with respect to which a false financial statement is materially false. In many cases, a creditor is required by state law to refinance existing credit on which there has been no default. If the creditor does not forfeit remedies or otherwise rely to his detriment on a false financial statement with respect to existing credit, then an extension, renewal, or refinancing of such credit is nondischargeable only to the extent of the new money advanced; on the other hand, if an existing loan is in default or the creditor otherwise reasonably relies to his detriment on a false financial statement with regard to an existing loan, then the entire debt is nondischargeable under section 523(a)(2)(B). This codifies the reasoning expressed by the second circuit in In re Danns, 558 F.2d 114 (2d Cir. 1977). Section 523(a)(3) of the House amendment is derived from the Senate amendment. The provision is intended to overrule Birkett v. Columbia Bank, 195 U.S. 345 (1904) (25 S.Ct. 38, 49 L.Ed. 231, 12 Am.Bankr.Rep. 691). Section 523(a)(4) of the House amendment represents a compromise between the House bill and the Senate amendment. Section 523(a)(5) is a compromise between the House bill and the Senate amendment. The provision excepts from discharge a debt owed to a spouse, former spouse or child of the debtor, in connection with a separation agreement, divorce decree, or property settlement agreement, for alimony to, maintenance for, or support of such spouse or child but not to the extent that the debt is assigned to another entity. If the debtor has assumed an obligation of the debtor's spouse to a third party in connection with a separation agreement, property settlement agreement, or divorce proceeding, such debt is dischargeable to the extent that payment of the debt by the debtor is not actually in the nature of alimony, maintenance, or support of debtor's spouse, former spouse, or child. Section 523(a)(6) adopts the position taken in the House bill and rejects the alternative suggested in the Senate amendment. The phrase 'willful and malicious injury' covers a willful and malicious conversion. Section 523(a)(7) of the House amendment adopts the position taken in the Senate amendment and rejects the position taken in the House bill. A penalty relating to a tax cannot be nondischargeable unless the tax itself is nondischargeable. Section 523(a)(8) represents a compromise between the House bill and the Senate amendment regarding educational loans. This provision is broader than current law which is limited to federally insured loans. Only educational loans owing to a governmental unit or a nonprofit institution of higher education are made nondischargeable under this paragraph. Section 523(b) is new. The section represents a modification of similar provisions contained in the House bill and the Senate amendment. Section 523(c) of the House amendment adopts the position taken in the Senate amendment. Section 523(d) represents a compromise between the position taken in the House bill and the Senate amendment on the issue of attorneys' fees in false financial statement complaints to determine dischargeability. The provision contained in the House bill permitting the court to award damages is eliminated. The court must grant the debtor judgment or a reasonable attorneys' fee unless the granting of judgment would be clearly inequitable. Nondischargeable debts: The House amendment retains the basic categories of nondischargeable tax liabilities contained in both bills, but restricts the time limits on certain nondischargeable taxes. Under the amendment, nondischargeable taxes cover taxes entitled to priority under section 507(a)(6) of title 11 and, in the case of individual debtors under chapters 7, 11, or 13, tax liabilities with respect to which no required return had been filed or as to which a late return had been filed if the return became last due, including extensions, within 2 years before the date of the petition or became due after the petition or as to which the debtor made a fraudulent return, entry or invoice or fraudulently attempted to evade or defeat the tax. In the case of individuals in liquidation under chapter 7 or in reorganization under chapter 11 of title 11, section 1141(d)(2) incorporates by reference the exceptions to discharge continued in section 523. Different rules concerning the discharge of taxes where a partnership or corporation reorganizes under chapter 11, apply under section 1141. The House amendment also deletes the reduction rule contained in section 523(e) of the Senate amendment. Under that rule, the amount of an otherwise nondischargeable tax liability would be reduced by the amount which a governmental tax authority could have collected from the debtor's estate if it had filed a timely claim against the estate but which it did not collect because no such claim was filed. This provision is deleted in order not to effectively compel a tax authority to file claim against the estate in 'no asset' cases, along with a dischargeability petition. In no-asset cases, therefore, if the tax authority is not potentially penalized by failing to file a claim, the debtor in such cases will have a better opportunity to choose the prepayment forum, bankruptcy court or the Tax Court, in which to litigate his personal liability for a nondischargeable tax. The House amendment also adopts the Senate amendment provision limiting the nondischargeability of punitive tax penalties, that is, penalties other than those which represent collection of a principal amount of tax liability through the form of a 'penalty.' Under the House amendment, tax penalties which are basically punitive in nature are to be nondischargeable only if the penalty is computed by reference to a related tax liability which is nondischargeable or, if the amount of the penalty is not computed by reference to a tax liability, the transaction or event giving rise to the penalty occurred during the 3-year period ending on the date of the petition. SENATE REPORT NO. 95-989 This section specifies which of the debtor's debts are not discharged in a bankruptcy case, and certain procedures for effectuating the section. The provision in Bankruptcy Act Sec. 17c (section 35(c) of former title 11) granting the bankruptcy courts jurisdiction to determine dischargeability is deleted as unnecessary, in view of the comprehensive grant of jurisdiction prescribed in proposed 28 U.S.C. 1334(b), which is adequate to cover the full jurisdiction that the bankruptcy courts have today over dischargeability and related issues under Bankruptcy Act Sec. 17c. The Rules of Bankruptcy Procedure will specify, as they do today, who may request determinations of dischargeability, subject, of course, to proposed 11 U.S.C. 523(c), and when such a request may be made. Proposed 11 U.S.C. 350, providing for reopening of cases, provides one possible procedure for a determination of dischargeability and related issues after a case is closed. Subsection (a) lists nine kinds of debts excepted from discharge. Taxes that are excepted from discharge are set forth in paragraph (1). These include claims against the debtor which receive priority in the second, third and sixth categories (Sec. 507(a)(3)(B) and (c) and (6)). These categories include taxes for which the tax authority failed to file a claim against the estate or filed its claim late. Whether or not the taxing authority's claim is secured will also not affect the claim's nondischargeability if the tax liability in question is otherwise entitled to priority. Also included in the nondischargeable debts are taxes for which the debtor had not filed a required return as of the petition date, or for which a return had been filed beyond its last permitted due date (Sec. 523(a)(1)(B)). For this purpose, the date of the tax year to which the return relates is immaterial. The late return rule applies, however, only to the late returns filed within three years before the petition was filed, and to late returns filed after the petition in title 11 was filed. For this purpose, the taxable year in question need not be one or more of the three years immediately preceding the filing of the petition. Tax claims with respect to which the debtor filed a fraudulent return, entry or invoice, or fraudulently attempted to evade or defeat any tax (Sec. 523(a)(1)(C)) are included. The date of the taxable year with regard to which the fraud occurred is immaterial. Also included are tax payments due under an agreement for deferred payment of taxes, which a debtor had entered into with the Internal Revenue Service (or State or local tax authority) before the filing of the petition and which relate to a prepetition tax liability (Sec. 523(a)(1)(D)) are also nondischargeable. This classification applies only to tax claims which would have received priority under section 507(a) if the taxpayer had filed a title 11 petition on the date on which the deferred payment agreement was entered into. This rule also applies only to installment payments which become due during and after the commencement of the title 11 case. Payments which had become due within one year before the filing of the petition receive sixth priority, and will be nondischargeable under the general rule of section 523(a)(1)(A). The above categories of nondischargeability apply to customs duties as well as to taxes. Paragraph (2) provides that as under Bankruptcy Act Sec. 17a(2) (section 35(a)(2) of former title 11), a debt for obtaining money, property, services, or a refinancing extension or renewal of credit by false pretenses, a false representation, or actual fraud, or by use of a statement in writing respecting the debtor's financial condition that is materially false, on which the creditor reasonably relied, and which the debtor made or published with intent to deceive, is excepted from discharge. This provision is modified only slightly from current section 17a(2). First, 'actual fraud' is added as a ground for exception from discharge. Second, the creditor must not only have relied on a false statement in writing, but the reliance must have been reasonable. This codifies case law construing present section 17a(2). Third, the phrase 'in any manner whatsoever' that appears in current law after 'made or published' is deleted as unnecessary, the word 'published' is used in the same sense that it is used in defamation cases. Unscheduled debts are excepted from discharge under paragraph (3). The provision, derived from section 17a(3) (section 35(a)(3) of former title 11), follows current law, but clarifies some uncertainties generated by the case law construing 17a(3). The debt is excepted from discharge if it was not scheduled in time to permit timely action by the creditor to protect his rights, unless the creditor had notice or actual knowledge of the case. Paragraph (4) excepts debts for fraud incurred by the debtor while acting in a fiduciary capacity or for defalcation, embezzlement, or misappropriation. Paragraph (5) provides that debts for willful and malicious conversion or injury by the debtor to another entity or the property of another entity are nondischargeable. Under this paragraph 'willful' means deliberate or intentional. To the extent that Tinker v. Colwell, 139 U.S. 473 (1902), held that a less strict standard is intended, and to the extent that other cases have relied on Tinker to apply a 'reckless disregard' standard, they are overruled. Paragraph (6) excepts from discharge debts to a spouse, former spouse, or child of the debtor for alimony to, maintenance for, or support of the spouse or child. This language, in combination with the repeal of section 456(b) of the Social Security Act (42 U.S.C. 656(b)) by section 326 of the bill, will apply to make nondischargeable only alimony, maintenance, or support owed directly to a spouse or dependent. What constitutes alimony, maintenance, or support, will be determined under the bankruptcy law, not State law. Thus, cases such as In re Waller, 494 F.2d 447 (6th Cir. 1974), are overruled, and the result in cases such as Fife v. Fife, 1 Utah 2d 281, 265 P.2d 642 (1952) is followed. The proviso, however, makes nondischargeable any debts resulting from an agreement by the debtor to hold the debtor's spouse harmless on joint debts, to the extent that the agreement is in payment of alimony, maintenance, or support of the spouse, as determined under bankruptcy law considerations as to whether a particular agreement to pay money to a spouse is actually alimony or a property settlement. Paragraph (7) makes nondischargeable certain liabilities for penalties including tax penalties if the underlying tax with respect to which the penalty was imposed is also nondischargeable (sec. 523(a)(7)). These latter liabilities cover those which, but are penal in nature, as distinct from so-called 'pecuniary loss' penalties which, in the case of taxes, involve basically the collection of a tax under the label of a 'penalty.' This provision differs from the bill as introduced, which did not link the nondischarge of a tax penalty with the treatment of the underlying tax. The amended provision reflects the existing position of the Internal Revenue Service as to tax penalties imposed by the Internal Revenue Code (Rev.Rul. 68-574, 1968-2 C.B. 595). Paragraph (8) follows generally current law and excerpts from discharge student loans until such loans have been due and owing for five years. Such loans include direct student loans as well as insured and guaranteed loans. This provision is intended to be self-executing and the lender or institution is not required to file a complaint to determine the nondischargeability of any student loan. Paragraph (9) excepts from discharge debts that the debtor owed before a previous bankruptcy case concerning the debtor in which the debtor was denied a discharge other than on the basis of the six-year bar. Subsection (b) of this section permits discharge in a bankruptcy case of an unscheduled debt from a prior case. This provision is carried over from Bankruptcy Act Sec. 17b (section 35(b) of former title 11). The result dictated by the subsection would probably not be different if the subsection were not included. It is included nevertheless for clarity. Subsection (c) requires a creditor who is owed a debt that may be excepted from discharge under paragraph (2), (4), or (5), (false statements, defalcation or larceny misappropriation, or willful and malicious injury) to initiate proceedings in the bankruptcy court for an exception to discharge. If the creditor does not act, the debt is discharged. This provision does not change current law. Subsection (d) is new. It provides protection to a consumer debtor that dealt honestly with a creditor who sought to have a debt excepted from discharge on the ground of falsity in the incurring of the debt. The debtor may be awarded costs and a reasonable attorney's fee for the proceeding to determine the dischargeability of a debt under subsection (a)(2), if the court finds that the proceeding was frivolous or not brought by its creditor in good faith. The purpose of the provision is to discourage creditors from initiating proceedings to obtaining a false financial statement exception to discharge in the hope of obtaining a settlement from an honest debtor anxious to save attorney's fees. Such practices impair the debtor's fresh start and are contrary to the spirit of the bankruptcy laws. HOUSE REPORT NO. 95-595 Subsection (a) lists eight kinds of debts excepted from discharge. Taxes that are entitled to priority are excepted from discharge under paragraph (1). In addition, taxes with respect to which the debtor made a fraudulent return or willfully attempted to evade or defeat, or with respect to which a return (if required) was not filed or was not filed after the due date and after one year before the bankruptcy case are excepted from discharge. If the taxing authority's claim has been disallowed, then it would be barred by the more modern rules of collateral estoppel from reasserting that claim against the debtor after the case was closed. See Plumb, The Tax Recommendations of the Commission on the Bankruptcy Laws: Tax Procedures, 88 Harv.L.Rev. 1360, 1388 (1975). As under Bankruptcy Act Sec. 17a(2) (section 35(a)(2) of former title 11), debt for obtaining money, property, services, or an extension or renewal of credit by false pretenses, a false representation, or actual fraud, or by use of a statement in writing respecting the debtor's financial condition that is materially false, on which the creditor reasonably relied, and that the debtor made or published with intent to deceive, is excepted from discharge. This provision is modified only slightly from current section 17a(2). First, 'actual fraud' is added as a grounds for exception from discharge. Second, the creditor must not only have relied on a false statement in writing, the reliance must have been reasonable. This codifies case law construing this provision. Third, the phrase 'in any manner whatsoever' that appears in current law after 'made or published' is deleted as unnecessary. The word 'published' is used in the same sense that it is used in slander actions. Unscheduled debts are excepted from discharge under paragraph (3). The provision, derived from section 17a(3) (section 35(a)(3) of former title 11), follows current law, but clarifies some uncertainties generated by the case law construing 17a(3). The debt is excepted from discharge if it was not scheduled in time to permit timely action by the creditor to protect his rights, unless the creditor had notice or actual knowledge of the case. Paragraph (4) excepts debts for embezzlement or larceny. The deletion of willful and malicious conversion from Sec. 17a(2) of the Bankruptcy Act (section 35(a)(2) of former title 11) is not intended to effect a substantive change. The intent is to include in the category of non-dischargeable debts a conversion under which the debtor willfully and maliciously intends to borrow property for a short period of time with no intent to inflict injury but on which injury is in fact inflicted. Paragraph (5) excepts from discharge debts to a spouse, former spouse, or child of the debtor for alimony to, maintenance for, or support of, the spouse or child. This language, in combination with the repeal of section 456(b) of the Social Security Act (42 U.S.C. 656(b)) by section 327 of the bill, will apply to make nondischargeable only alimony, maintenance, or support owed directly to a spouse or dependent. See Hearings, pt. 2, at 942. What constitutes alimony, maintenance, or support, will be determined under the bankruptcy laws, not State law. Thus, cases such as In re Waller, 494 F.2d 447 (6th Cir. 1974); Hearings, pt. 3, at 1308-10, are overruled, and the result in cases such as Fife v. Fife, 1 Utah 2d 281, 265 P.2d 642 (1952) is followed. This provision will, however, make nondischargeable any debts resulting from an agreement by the debtor to hold the debtor's spouse harmless on joint debts, to the extent that the agreement is in payment of alimony, maintenance, or support of the spouse, as determined under bankruptcy law considerations that are similar to considerations of whether a particular agreement to pay money to a spouse is actually alimony or a property settlement. See Hearings, pt. 3, at 1287-1290. Paragraph (6) excepts debts for willful and malicious injury by the debtor to another person or to the property of another person. Under this paragraph, 'willful' means deliberate or intentional. To the extent that Tinker v. Colwell, 193 U.S. 473 (1902) (24 S.Ct. 505, 48 L.Ed. 754, 11 Am.Bankr.Rep. 568), held that a looser standard is intended, and to the extent that other cases have relied on Tinker to apply a 'reckless disregard' standard, they are overruled. Paragraph (7) excepts from discharge a debt for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, that is not compensation for actual pecuniary loss. Paragraph (8) (now (9)) excepts from discharge debts that the debtor owed before a previous bankruptcy case concerning the debtor in which the debtor was denied a discharge other than on the basis of the six-year bar. Subsection (d) is new. It provides protection to a consumer debtor that dealt honestly with a creditor who sought to have a debt excepted from discharge on grounds of falsity in the incurring of the debt. The debtor is entitled to costs of and a reasonable attorney's fee for the proceeding to determine the dischargeability of a debt under subsection (a)(2), if the creditor initiated the proceeding and the debt was determined to be dischargeable. The court is permitted to award any actual pecuniary loss that the debtor may have suffered as a result of the proceeding (such as loss of a day's pay). The purpose of the provision is to discourage creditors from initiating false financial statement exception to discharge actions in the hopes of obtaining a settlement from an honest debtor anxious to save attorney's fees. Such practices impair the debtor's fresh start. -REFTEXT- REFERENCES IN TEXT The Consumer Credit Protection Act, referred to in subsec. (a)(2)(C), is Pub. L. 90-321, May 29, 1968, 82 Stat. 146, as amended, which is classified principally to chapter 41 (Sec. 1601 et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see Short Title note set out under section 1601 of Title 15 and Tables. Section 402(a)(26) of the Social Security Act, referred to in subsec. (a)(5)(A), is classified to section 602(a)(26) of Title 42, The Public Health and Welfare. The Bankruptcy Act, referred to in subsecs. (a)(10) and (b), is act July 1, 1898, ch. 541, 30 Stat. 544, as amended, which was classified generally to former Title 11. Sections 14c and 17a of the Bankruptcy Act were classified to sections 32(c) and 35(a) of former Title 11. Section 439A of the Higher Education Act of 1965 (20 U.S.C. 1087-3), referred to in subsec. (b), was repealed by Pub. L. 95-598, title III, Sec. 317, Nov. 6, 1978, 92 Stat. 2678. Section 733(g) of the Public Health Service Act (42 U.S.C. 294f), referred to in subsec. (b), was repealed by Pub. L. 95-598, title III, Sec. 327, Nov. 6, 1978, 92 Stat. 2679. -MISC2- AMENDMENTS 1990 - Subsec. (a)(8). Pub. L. 101-647, Sec. 3621, substituted 'for an educational benefit overpayment or loan made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, or for an obligation to repay funds received as an educational benefit, scholarship or stipend, unless' for 'for an educational loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or a nonprofit institution, unless' in introductory provisions and amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: 'such loan first became due before five years (exclusive of any applicable suspension of the repayment period) before the date of the filing of the petition; or'. Subsec. (a)(9). Pub. L. 101-581 and Pub. L. 101-647, Sec. 3102(a), identically amended par. (9) generally. Prior to amendment, par. (9) read as follows: 'to any entity, to the extent that such debt arises from a judgment or consent decree entered in a court of record against the debtor wherein liability was incurred by such debtor as a result of the debtor's operation of a motor vehicle while legally intoxicated under the laws or regulations of any jurisdiction within the United States or its territories wherein such motor vehicle was operated and within which such liability was incurred; or'. Subsec. (a)(11), (12). Pub. L. 101-647, Sec. 2522(a)(1), added pars. (11) and (12). Subsec. (c). Pub. L. 101-647, Sec. 2522(a)(3), designated existing provisions as par. (1) and added par. (2). Subsec. (e). Pub. L. 101-647, Sec. 2522(a)(2), added subsec. (e). 1986 - Subsec. (a). Pub. L. 99-554, Sec. 257(n), inserted reference to sections 1228(a) and 1228(b) of this title. Subsec. (a)(1)(A). Pub. L. 99-554, Sec. 283(j)(1)(A), substituted '507(a)(7)' for '507(a)(6)'. Subsec. (a)(5). Pub. L. 99-554, Sec. 281, struck out the comma after 'decree' and inserted ', determination made in accordance with State or territorial law by a governmental unit,' after 'record'. Subsec. (a)(9), (10). Pub. L. 99-554, Sec. 283(j)(1)(B), redesignated par. (9) relating to debts incurred by persons driving while intoxicated, added by Pub. L. 98-353, as (10). Subsec. (b). Pub. L. 99-554, Sec. 283(j)(2), substituted 'Service' for 'Services'. 1984 - Subsec. (a)(2). Pub. L. 98-353, Sec. 454(a)(1), in provisions preceding subpar. (A), struck out 'obtaining' after 'for', and substituted 'refinancing of credit, to the extent obtained' for 'refinance of credit,'. Subsec. (a)(2)(A). Pub. L. 98-353, Sec. 307(a)(1), struck out 'or' at end. Subsec. (a)(2)(B). Pub. L. 98-353, Sec. 307(a)(2), inserted 'or' at end. Subsec. (a)(2)(B)(iii). Pub. L. 98-353, Sec. 454(a)(1)(A), struck out 'obtaining' before 'such'. Subsec. (a)(2)(C). Pub. L. 98-353, Sec. 307(a)(3), added subpar. (C). Subsec. (a)(5). Pub. L. 98-353, Sec. 454(b)(1), inserted 'or other order of a court of record' after 'divorce decree,' in provisions preceding subpar. (A). Subsec. (a)(5)(A). Pub. L. 98-353, Sec. 454(b)(2), inserted ', or any such debt which has been assigned to the Federal Government or to a State or any political subdivision of such State'. Subsec. (a)(8). Pub. L. 98-353, Sec. 371(1), 454(a)(2), struck out 'of higher education' after 'a nonprofit institution of' and struck out 'or' at end. Subsec. (a)(9). Pub. L. 98-353, Sec. 371(2), added the par. (9) relating to debts incurred by persons driving while intoxicated. Subsec. (c). Pub. L. 98-353, Sec. 454(c), inserted 'of a kind' after 'debt'. Subsec. (d). Pub. L. 98-353, Sec. 307(b), substituted 'the court shall grant judgment in favor of the debtor for the costs of, and a reasonable attorney's fee for, the proceeding if the court finds that the position of the creditor was not substantially justified, except that the court shall not award such costs and fees if special circumstances would make the award unjust' for 'the court shall grant judgment against such creditor and in favor of the debtor for the costs of, and a reasonable attorney's fee for, the proceeding to determine dischargeability, unless such granting of judgment would be clearly inequitable'. 1981 - Subsec. (a)(5)(A). Pub. L. 97-35 substituted 'law, or otherwise (other than debts assigned pursuant to section 402(a)(26) of the Social Security Act);' for 'law, or otherwise;'. 1979 - Subsec. (a)(8). Pub. L. 96-56 substituted 'for an educational loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or a nonprofit institution of higher education' for 'to a governmental unit, or a nonprofit institution of higher education, for an educational loan' in the provisions preceding subpar. (A) and inserted '(exclusive of any applicable suspension of the repayment period)' after 'before five years' in subpar. (A). EFFECTIVE DATE OF 1990 AMENDMENTS Section 3104 of title XXXI of Pub. L. 101-647 provided that: '(a) Effective Date. - This title and the amendments made by this title (amending this section and section 1328 of this title and enacting provisions set out as a note under section 101 of this title) shall take effect on the date of the enactment of this Act (Nov. 29, 1990). '(b) Application of Amendments. - The amendments made by this title (amending this section and section 1328 of this title) shall not apply with respect to cases commenced under title 11 of the United States Code before the date of the enactment of this Act.' Amendment by section 3621 of Pub. L. 101-647 effective 180 days after Nov. 29, 1990, see section 3631 of Pub. L. 101-647, set out as an Effective Date note under section 3001 of Title 28, Judiciary and Judicial Procedure. Section 4 of Pub. L. 101-581 provided that: '(a) Effective Date. - This Act and the amendments made by this Act (amending this section and section 1328 of this title and enacting provisions set out as a note under section 101 of this title) shall take effect on the date of the enactment of this Act (Nov. 15, 1990). '(b) Application of Amendments. - The amendments made by this Act (amending this section and section 1328 of this title) shall not apply with respect to cases commenced under title 11 of the United States Code before the date of the enactment of this Act.' EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by sections 281 and 283 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1981 AMENDMENT Amendment by Pub. L. 97-35 effective Aug. 13, 1981, see section 2334(c) of Pub. L. 97-35, set out as a note under section 656 of Title 42, The Public Health and Welfare. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 502, 507, 522, 524, 727, 1141, 1228, 1328 of this title; title 26 sections 6327, 7434. ------DocID 14736 Document 81 of 646------ -CITE- 11 USC Sec. 524 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER II -HEAD- Sec. 524. Effect of discharge -STATUTE- (a) A discharge in a case under this title - (1) voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged under section 727, 944, 1141, 1228, or 1328 of this title, whether or not discharge of such debt is waived; (2) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived; and (3) operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect or recover from, or offset against, property of the debtor of the kind specified in section 541(a)(2) of this title that is acquired after the commencement of the case, on account of any allowable community claim, except a community claim that is excepted from discharge under section 523, 1228(a)(1), or 1328(c)(1) (FOOTNOTE 1) of this title, or that would be so excepted, determined in accordance with the provisions of sections 523(c) and 523(d) of this title, in a case concerning the debtor's spouse commenced on the date of the filing of the petition in the case concerning the debtor, whether or not discharge of the debt based on such community claim is waived. (FOOTNOTE 1) See 1986 Amendment note below. (b) Subsection (a)(3) of this section does not apply if - (1)(A) the debtor's spouse is a debtor in a case under this title, or a bankrupt or a debtor in a case under the Bankruptcy Act, commenced within six years of the date of the filing of the petition in the case concerning the debtor; and (B) the court does not grant the debtor's spouse a discharge in such case concerning the debtor's spouse; or (2)(A) the court would not grant the debtor's spouse a discharge in a case under chapter 7 of this title concerning such spouse commenced on the date of the filing of the petition in the case concerning the debtor; and (B) a determination that the court would not so grant such discharge is made by the bankruptcy court within the time and in the manner provided for a determination under section 727 of this title of whether a debtor is granted a discharge. (c) An agreement between a holder of a claim and the debtor, the consideration for which, in whole or in part, is based on a debt that is dischargeable in a case under this title is enforceable only to any extent enforceable under applicable nonbankruptcy law, whether or not discharge of such debt is waived, only if - (1) such agreement was made before the granting of the discharge under section 727, 1141, 1228, or 1328 of this title; (2) such agreement contains a clear and conspicuous statement which advises the debtor that the agreement may be rescinded at any time prior to discharge or within sixty days after such agreement is filed with the court, whichever occurs later, by giving notice of rescission to the holder of such claim; (3) such agreement has been filed with the court and, if applicable, accompanied by a declaration or an affidavit of the attorney that represented the debtor during the course of negotiating an agreement under this subsection, which states that such agreement - (A) represents a fully informed and voluntary agreement by the debtor; and (B) does not impose an undue hardship on the debtor or a dependent of the debtor; (4) the debtor has not rescinded such agreement at any time prior to discharge or within sixty days after such agreement is filed with the court, whichever occurs later, by giving notice of recission (FOOTNOTE 2) to the holder of such claim; (FOOTNOTE 2) So in original. Probably should be 'rescission'. (5) the provisions of subsection (d) of this section have been complied with; and (6)(A) in a case concerning an individual who was not represented by an attorney during the course of negotiating an agreement under this subsection, the court approves such agreement as - (i) not imposing an undue hardship on the debtor or a dependent of the debtor; and (ii) in the best interest of the debtor. (B) Subparagraph (A) shall not apply to the extent that such debt is a consumer debt secured by real property. (d) In a case concerning an individual, when the court has determined whether to grant or not to grant a discharge under section 727, 1141, 1228, or 1328 of this title, the court may hold a hearing at which the debtor shall appear in person. At any such hearing, the court shall inform the debtor that a discharge has been granted or the reason why a discharge has not been granted. If a discharge has been granted and if the debtor desires to make an agreement of the kind specified in subsection (c) of this section, then the court shall hold a hearing at which the debtor shall appear in person and at such hearing the court shall - (1) inform the debtor - (A) that such an agreement is not required under this title, under nonbankruptcy law, or under any agreement not made in accordance with the provisions of subsection (c) of this section; and (B) of the legal effect and consequences of - (i) an agreement of the kind specified in subsection (c) of this section; and (ii) a default under such an agreement; (2) determine whether the agreement that the debtor desires to make complies with the requirements of subsection (c)(6) of this section, if the consideration for such agreement is based in whole or in part on a consumer debt that is not secured by real property of the debtor. (e) Except as provided in subsection (a)(3) of this section, discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt. (f) Nothing contained in subsection (c) or (d) of this section prevents a debtor from voluntarily repaying any debt. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2592; Pub. L. 98-353, title III, Sec. 308, 455, July 10, 1984, 98 Stat. 354, 376; Pub. L. 99-554, title II, Sec. 257(o), 282, 283(k), Oct. 27, 1986, 100 Stat. 3115-3117.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 524(a) of the House amendment represents a compromise between the House bill and the Senate amendment. Section 524(b) of the House amendment is new, and represents standards clarifying the operation of section 524(a)(3) with respect to community property. Sections 524(c) and (d) represent a compromise between the House bill and Senate amendment on the issue of reaffirmation of a debt discharged in bankruptcy. Every reaffirmation to be enforceable must be approved by the court, and any debtor may rescind a reaffirmation for 30 days from the time the reaffirmation becomes enforceable. If the debtor is an individual the court must advise the debtor of various effects of reaffirmation at a hearing. In addition, to any extent the debt is a consumer debt that is not secured by real property of the debtor reaffirmation is permitted only if the court approves the reaffirmation agreement, before granting a discharge under section 727, 1141, or 1328, as not imposing a hardship on the debtor or a dependent of the debtor and in the best interest of the debtor; alternatively, the court may approve an agreement entered into in good faith that is in settlement of litigation of a complaint to determine dischargeability or that is entered into in connection with redemption under section 722. The hearing on discharge under section 524(d) will be held whether or not the debtor desires to reaffirm any debts. SENATE REPORT NO. 95-989 Subsection (a) specifies that a discharge in a bankruptcy case voids any judgment to the extent that it is a determination of the personal liability of the debtor with respect to a prepetition debt, and operates as an injunction against the commencement or continuation of an action, the employment of process, or any act, including telephone calls, letters, and personal contacts, to collect, recover, or offset any discharged debt as a personal liability of the debtor, or from property of the debtor, whether or not the debtor has waived discharge of the debt involved. The injunction is to give complete effect to the discharge and to eliminate any doubt concerning the effect of the discharge as a total prohibition on debt collection efforts. This paragraph has been expanded over a comparable provision in Bankruptcy Act Sec. 14f (section 32(f) of former title 11) to cover any act to collect, such as dunning by telephone or letter, or indirectly through friends, relatives, or employers, harassment, threats of repossession, and the like. The change is consonant with the new policy forbidding binding reaffirmation agreements under proposed 11 U.S.C. 524(b), and is intended to insure that once a debt is discharged, the debtor will not be pressured in any way to repay it. In effect, the discharge extinguishes the debt, and creditors may not attempt to avoid that. The language 'whether or not discharge of such debt is waived' is intended to prevent waiver of discharge of a particular debt from defeating the purposes of this section. It is directed at waiver of discharge of a particular debt, not waiver of discharge in toto as permitted under section 727(a)(9). Subsection (a) also codifies the split discharge for debtors in community property states. If community property was in the estate and community claims were discharged, the discharge is effective against community creditors of the nondebtor spouse as well as of the debtor spouse. Subsection (b) gives further effect to the discharge. It prohibits reaffirmation agreements after the commencement of the case with respect to any dischargeable debt. The prohibition extends to agreements the consideration for which in whole or in part is based on a dischargeable debt, and it applies whether or not discharge of the debt involved in the agreement has been waived. Thus, the prohibition on reaffirmation agreements extends to debts that are based on discharged debts. Thus, 'second generation' debts, which included all or a part of a discharged debt could not be included in any new agreement for new money. This subsection will not have any effect on reaffirmations of debts discharged under the Bankruptcy Act (former title 11). It will only apply to discharges granted if commenced under the new title 11 bankruptcy code. Subsection (c) grants an exception to the anti-reaffirmation provision. It permits reaffirmation in connection with the settlement of a proceeding to determine the dischargeability of the debt being reaffirmed, or in connection with a redemption agreement permitted under section 722. In either case, the reaffirmation agreement must be entered into in good faith and must be approved by the court. Subsection (d) provides the discharge of the debtor does not affect co-debtors or guarantors. -REFTEXT- REFERENCES IN TEXT The Bankruptcy Act, referred to in subsec. (b)(1), is act July 1, 1898, ch. 541, 30 Stat. 544, as amended, which was classified generally to former Title 11. -MISC2- AMENDMENTS 1986 - Subsec. (a)(1). Pub. L. 99-554, Sec. 257(o)(1), inserted reference to section 1228 of this title. Subsec. (a)(3). Pub. L. 99-554, Sec. 257(o)(2), which directed the substitution of ', 1228(a)(1), or 1328(a)(1)' for 'or 1328(a)(1)' was executed by substituting ', 1228(a)(1), or 1328(c)(1)' for 'or 1328(c)(1)' as the probable intent of Congress. Subsec. (c)(1). Pub. L. 99-554, Sec. 257(o)(1), inserted reference to section 1228 of this title. Subsec. (d). Pub. L. 99-554, Sec. 257(o)(1), inserted reference to section 1228 of this title. Pub. L. 99-554, Sec. 282, substituted 'shall' for 'may' before 'hold' in first sentence, inserted 'any' after 'At' in second sentence, and inserted 'the court shall hold a hearing at which the debtor shall appear in person and' after 'then' in third sentence. Subsec. (d)(2). Pub. L. 99-554, Sec. 283(k), substituted 'section' for 'subsection' after 'subsection (c)(6) of this'. 1984 - Subsec. (a)(2). Pub. L. 98-353, Sec. 308(a), 455, struck out 'or from property of the debtor,' before 'whether or not discharge', and substituted 'an act' for 'any act'. Subsec. (a)(3). Pub. L. 98-353, Sec. 455, substituted 'an act' for 'any act'. Subsec. (c)(2). Pub. L. 98-353, Sec. 308(b)(1), (3), added par. (2). Former par. (2), which related to situations where the debtor had not rescinded the agreement within 30 days after the agreement became enforceable, was struck out. Subsec. (c)(3), (4). Pub. L. 98-352, Sec. 308(b)(3), added pars. (3) and (4). Former pars. (3) and (4) redesignated (5) and (6), respectively. Subsec. (c)(5). Pub. L. 98-353, Sec. 308(b)(2), redesignated former par. (3) as (5). Subsec. (c)(6). Pub. L. 98-353, Sec. 308(b)(2), (4), redesignated former par. (4) as (6) and generally amended par. (6), as so redesignated, thereby striking out provisions relating to court approval of such agreements as are entered into in good faith and are in settlement of litigation under section 523 of this title or provide for redemption under section 722 of this title. Subsec. (d)(2). Pub. L. 98-353, Sec. 308(c), substituted 'subsection (c)(6)' for 'subsection (c)(4)'. Subsec. (f). Pub. L. 98-353, Sec. 308(d), added subsec. (f). EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by sections 282 and 283 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 108, 521, 901 of this title. ------DocID 14737 Document 82 of 646------ -CITE- 11 USC Sec. 525 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER II -HEAD- Sec. 525. Protection against discriminatory treatment -STATUTE- (a) Except as provided in the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499a-499s), the Packers and Stockyards Act, 1921 (7 U.S.C. 181-229), and section 1 of the Act entitled 'An Act making appropriations for the Department of Agriculture for the fiscal year ending June 30, 1944, and for other purposes,' approved July 12, 1943 (57 Stat. 422; 7 U.S.C. 204), a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act. (b) No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt - (1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act; (2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or (3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2593; Pub. L. 98-353, title III, Sec. 309, July 10, 1984, 98 Stat. 354.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 This section is additional debtor protection. It codifies the result of Perez v. Campbell, 402 U.S. 637 (1971), which held that a State would frustrate the Congressional policy of a fresh start for a debtor if it were permitted to refuse to renew a drivers license because a tort judgment resulting from an automobile accident had been unpaid as a result of a discharge in bankruptcy. Notwithstanding any other laws, section 525 prohibits a governmental unit from denying, revoking, suspending, or refusing to renew a license, permit, charter, franchise, or other similar grant to, from conditioning such a grant to, from discrimination with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor or that is or has been associated with a debtor. The prohibition extends only to discrimination or other action based solely on the basis of the bankruptcy, on the basis of insolvency before or during bankruptcy prior to a determination of discharge, or on the basis of nonpayment of a debt discharged in the bankruptcy case (the Perez situation). It does not prohibit consideration of other factors, such as future financial responsibility or ability, and does not prohibit imposition of requirements such as net capital rules, if applied nondiscriminatorily. In addition, the section is not exhaustive. The enumeration of various forms of discrimination against former bankrupts is not intended to permit other forms of discrimination. The courts have been developing the Perez rule. This section permits further development to prohibit actions by governmental or quasi-governmental organizations that perform licensing functions, such as a State bar association or a medical society, or by other organizations that can seriously affect the debtors' livelihood or fresh start, such as exclusion from a union on the basis of discharge of a debt to the union's credit union. The effect of the section, and of further interpretations of the Perez rule, is to strengthen the anti-reaffirmation policy found in section 524(b). Discrimination based solely on nonpayment could encourage reaffirmations, contrary to the expressed policy. The section is not so broad as a comparable section proposed by the Bankruptcy Commission, S. 236, 94th Cong., 1st Sess. Sec. 4-508 (1975), which would have extended the prohibition to any discrimination, even by private parties. Nevertheless, it is not limiting either, as noted. The courts will continue to mark the contours of the anti-discrimination provision in pursuit of sound bankruptcy policy. -REFTEXT- REFERENCES IN TEXT The Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499a-499s), referred to in subsec. (a), is act June 10, 1930, ch. 436, 46 Stat. 531, as amended, which is classified generally to chapter 20A (Sec. 499a et seq.) of Title 7, Agriculture. For complete classification of this Act to the Code, see section 499r of Title 7 and Tables. The Packers and Stockyards Act, 1921 (7 U.S.C. 181-229), referred to in subsec. (a), is act Aug. 15, 1921, ch. 64, 42 Stat. 159, as amended, which is classified generally to chapter 9 (Sec. 181 et seq.) of Title 7. For complete classification of this Act to the Code, see section 181 of Title 7 and Tables. The Bankruptcy Act, referred to in subsecs. (a) and (b), is act July 1, 1898, ch. 541, 30 Stat. 544, as amended, which was classified generally to former Title 11. -MISC2- AMENDMENTS 1984 - Pub. L. 98-353 designated existing provisions as subsec. (a), inserted 'the' before 'Perishable', and added subsec. (b). EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 14738 Document 83 of 646------ -CITE- 11 USC SUBCHAPTER III -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- SUBCHAPTER III - THE ESTATE ------DocID 14739 Document 84 of 646------ -CITE- 11 USC Sec. 541 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 541. Property of the estate -STATUTE- (a) The commencement of a case under section 301, 302, or 303 of this title creates an estate. Such estate is comprised of all the following property, wherever located and by whomever held: (1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case. (2) All interests of the debtor and the debtor's spouse in community property as of the commencement of the case that is - (A) under the sole, equal, or joint management and control of the debtor; or (B) liable for an allowable claim against the debtor, or for both an allowable claim against the debtor and an allowable claim against the debtor's spouse, to the extent that such interest is so liable. (3) Any interest in property that the trustee recovers under section 329(b), 363(n), 543, 550, 553, or 723 of this title. (4) Any interest in property preserved for the benefit of or ordered transferred to the estate under section 510(c) or 551 of this title. (5) Any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date - (A) by bequest, devise, or inheritance; (B) as a result of a property settlement agreement with the debtor's spouse, or of an interlocutory or final divorce decree; or (C) as a beneficiary of a life insurance policy or of a death benefit plan. (6) Proceeds, product, offspring, rents, or profits of or from property of the estate, except such as are earnings from services performed by an individual debtor after the commencement of the case. (7) Any interest in property that the estate acquires after the commencement of the case. (b) Property of the estate does not include - (1) any power that the debtor may exercise solely for the benefit of an entity other than the debtor; (2) any interest of the debtor as a lessee under a lease of nonresidential real property that has terminated at the expiration of the stated term of such lease before the commencement of the case under this title, and ceases to include any interest of the debtor as a lessee under a lease of nonresidential real property that has terminated at the expiration of the stated term of such lease during the case; or (3) any eligibility of the debtor to participate in programs authorized under the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.; 42 U.S.C. 2751 et seq.), or any accreditation status or State licensure of the debtor as an educational institution. (c)(1) Except as provided in paragraph (2) of this subsection, an interest of the debtor in property becomes property of the estate under subsection (a)(1), (a)(2), or (a)(5) of this section notwithstanding any provision in an agreement, transfer instrument, or applicable nonbankruptcy law - (A) that restricts or conditions transfer of such interest by the debtor; or (B) that is conditioned on the insolvency or financial condition of the debtor, on the commencement of a case under this title, or on the appointment of or taking possession by a trustee in a case under this title or a custodian before such commencement, and that effects or gives an option to effect a forfeiture, modification, or termination of the debtor's interest in property. (2) A restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title. (d) Property in which the debtor holds, as of the commencement of the case, only legal title and not an equitable interest, such as a mortgage secured by real property, or an interest in such a mortgage, sold by the debtor but as to which the debtor retains legal title to service or supervise the servicing of such mortgage or interest, becomes property of the estate under subsection (a)(1) or (2) of this section only to the extent of the debtor's legal title to such property, but not to the extent of any equitable interest in such property that the debtor does not hold. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2594; Pub. L. 98-353, title III, Sec. 363(a), 456, July 10, 1984, 98 Stat. 363, 376; Pub. L. 101-508, title III, Sec. 3007(a)(2), Nov. 5, 1990, 104 Stat. 1388-28.) -STATAMEND- AMENDMENT OF SECTION For termination of amendment by section 3008 of Pub. L. 101-508, see Termination Date of 1990 Amendment note below. -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 541(a)(7) is new. The provision clarifies that any interest in property that the estate acquires after the commencement of the case is property of the estate; for example, if the estate enters into a contract, after the commencement of the case, such a contract would be property of the estate. The addition of this provision by the House amendment merely clarifies that section 541(a) is an all-embracing definition which includes charges on property, such as liens held by the debtor on property of a third party, or beneficial rights and interests that the debtor may have in property of another. However, only the debtor's interest in such property becomes property of the estate. If the debtor holds bare legal title or holds property in trust for another, only those rights which the debtor would have otherwise had emanating from such interest pass to the estate under section 541. Neither this section nor section 545 will affect various statutory provisions that give a creditor a lien that is valid both inside and outside bankruptcy against a bona fide purchaser of property from the debtor, or that creates a trust fund for the benefit of creditors meeting similar criteria. See Packers and Stockyards Act Sec. 206, 7 U.S.C. 196 (1976). Section 541(c)(2) follows the position taken in the House bill and rejects the position taken in the Senate amendment with respect to income limitations on a spend-thrift trust. Section 541(d) of the House amendment is derived from section 541(e) of the Senate amendment and reiterates the general principle that where the debtor holds bare legal title without any equitable interest, that the estate acquires bare legal title without any equitable interest in the property. The purpose of section 541(d) as applied to the secondary mortgage market is identical to the purpose of section 541(e) of the Senate amendment and section 541(d) will accomplish the same result as would have been accomplished by section 541(e). Even if a mortgage seller retains for purposes of servicing legal title to mortgages or interests in mortgages sold in the secondary mortgage market, the trustee would be required by section 541(d) to turn over the mortgages or interests in mortgages to the purchaser of those mortgages. The seller of mortgages in the secondary mortgage market will often retain the original mortgage notes and related documents and the seller will not endorse the notes to reflect the sale to the purchaser. Similarly, the purchaser will often not record the purchaser's ownership of the mortgages or interests in mortgages under State recording statutes. These facts are irrelevant and the seller's retention of the mortgage documents and the purchaser's decision not to record do not change the trustee's obligation to turn the mortgages or interests in mortgages over to the purchaser. The application of section 541(d) to secondary mortgage market transactions will not be affected by the terms of the servicing agreement between the mortgage servicer and the purchaser of the mortgages. Under section 541(d), the trustee is required to recognize the purchaser's title to the mortgages or interests in mortgages and to turn this property over to the purchaser. It makes no difference whether the servicer and the purchaser characterize their relationship as one of trust, agency, or independent contractor. The purpose of section 541(d) as applied to the secondary mortgage market is therefore to make certain that secondary mortgage market sales as they are currently structured are not subject to challenge by bankruptcy trustees and that purchasers of mortgages will be able to obtain the mortgages or interests in mortgages which they have purchased from trustees without the trustees asserting that a sale of mortgages is a loan from the purchaser to the seller. Thus, as section 541(a)(1) clearly states, the estate is comprised of all legal or equitable interests of the debtor in property as of the commencement of the case. To the extent such an interest is limited in the hands of the debtor, it is equally limited in the hands of the estate except to the extent that defenses which are personal against the debtor are not effective against the estate. Property of the estate: The Senate amendment provided that property of the estate does not include amounts held by the debtor as trustee and any taxes withheld or collected from others before the commencement of the case. The House amendment removes these two provisions. As to property held by the debtor as a trustee, the House amendment provides that property of the estate will include whatever interest the debtor held in the property at the commencement of the case. Thus, where the debtor held only legal title to the property and the beneficial interest in that property belongs to another, such as exists in the case of property held in trust, the property of the estate includes the legal title, but not the beneficial interest in the property. As to withheld taxes, the House amendment deletes the rule in the Senate bill as unnecessary since property of the estate does not include the beneficial interest in property held by the debtor as a trustee. Under the Internal Revenue Code of 1954 (section 7501) (26 U.S.C. 7501), the amounts of withheld taxes are held to be a special fund in trust for the United States. Where the Internal Revenue Service can demonstrate that the amounts of taxes withheld are still in the possession of the debtor at the commencement of the case, then if a trust is created, those amounts are not property of the estate. Compare In re Shakesteers Coffee Shops, 546 F.2d 821 (9th Cir. 1976) with In re Glynn Wholesale Building Materials, Inc. (S.D. Ga. 1978) and In re Progress Tech Colleges, Inc., 42 Aftr 2d 78-5573 (S.D. Ohio 1977). Where it is not possible for the Internal Revenue Service to demonstrate that the amounts of taxes withheld are still in the possession of the debtor at the commencement of the case, present law generally includes amounts of withheld taxes as property of the estate. See, e.g., United States v. Randall, 401 U.S. 513 (1973) (91 S. Ct. 991, 28 L.Ed.2d 273) and In re Tamasha Town and Country Club, 483 F.2d 1377 (9th Cir. 1973). Nonetheless, a serious problem exists where 'trust fund taxes' withheld from others are held to be property of the estate where the withheld amounts are commingled with other assets of the debtor. The courts should permit the use of reasonable assumptions under which the Internal Revenue Service, and other tax authorities, can demonstrate that amounts of withheld taxes are still in the possession of the debtor at the commencement of the case. For example, where the debtor had commingled that amount of withheld taxes in his general checking account, it might be reasonable to assume that any remaining amounts in that account on the commencement of the case are the withheld taxes. In addition, Congress may consider future amendments to the Internal Revenue Code (title 26) making clear that amounts of withheld taxes are held by the debtor in a trust relationship and, consequently, that such amounts are not property of the estate. SENATE REPORT NO. 95-989 This section defines property of the estate, and specifies what property becomes property of the estate. The commencement of a bankruptcy case creates an estate. Under paragraph (1) of subsection (a), the estate is comprised of all legal or equitable interest of the debtor in property, wherever located, as of the commencement of the case. The scope of this paragraph is broad. It includes all kinds of property, including tangible or intangible property, causes of action (see Bankruptcy Act Sec. 70a(6) (section 110(a)(6) of former title 11)), and all other forms of property currently specified in section 70a of the Bankruptcy Act Sec. 70a (section 110(a) of former title 11), as well as property recovered by the trustee under section 542 of proposed title 11, if the property recovered was merely out of the possession of the debtor, yet remained 'property of the debtor.' The debtor's interest in property also includes 'title' to property, which is an interest, just as are a possessory interest, or lease-hold interest, for example. The result of Segal v. Rochelle, 382 U.S. 375 (1966), is followed, and the right to a refund is property of the estate. Though this paragraph will include choses in action and claims by the debtor against others, it is not intended to expand the debtor's rights against others more than they exist at the commencement of the case. For example, if the debtor has a claim that is barred at the time of the commencement of the case by the statute of limitations, then the trustee would not be able to pursue that claim, because he too would be barred. He could take no greater rights than the debtor himself had. But see proposed 11 U.S.C. 108, which would permit the trustee a tolling of the statute of limitations if it had not run before the date of the filing of the petition. Paragraph (1) has the effect of overruling Lockwood v. Exchange Bank, 190 U.S. 294 (1903), because it includes as property of the estate all property of the debtor, even that needed for a fresh start. After the property comes into the estate, then the debtor is permitted to exempt it under proposed 11 U.S.C. 522, and the court will have jurisdiction to determine what property may be exempted and what remains as property of the estate. The broad jurisdictional grant in proposed 28 U.S.C. 1334 would have the effect of overruling Lockwood independently of the change made by this provision. Paragraph (1) also has the effect of overruling Lines v. Frederick, 400 U.S. 18 (1970). Situations occasionally arise where property ostensibly belonging to the debtor will actually not be property of the debtor, but will be held in trust for another. For example, if the debtor has incurred medical bills that were covered by insurance, and the insurance company had sent the payment of the bills to the debtor before the debtor had paid the bill for which the payment was reimbursement, the payment would actually be held in a constructive trust for the person to whom the bill was owed. This section and proposed 11 U.S.C. 545 also will not affect various statutory provisions that give a creditor of the debtor a lien that is valid outside as well as inside bankruptcy, or that creates a trust fund for the benefit of a creditor of the debtor. See Packers and Stockyards Act Sec. 206, 7 U.S.C. 196. Bankruptcy Act Sec. 8 (section 26 of former title 11) has been deleted as unnecessary. Once the estate is created, no interests in property of the estate remain in the debtor. Consequently, if the debtor dies during the case, only property exempted from property of the estate or acquired by the debtor after the commencement of the case and not included as property of the estate will be available to the representative of the debtor's probate estate. The bankruptcy proceeding will continue in rem with respect to property of the state, and the discharge will apply in personam to relieve the debtor, and thus his probate representative, of liability for dischargeable debts. The estate also includes the interests of the debtor and the debtor's spouse in community property, subject to certain limitations; property that the trustee recovers under the avoiding powers; property that the debtor acquires by bequest, devise, inheritance, a property settlement agreement with the debtor's spouse, or as the beneficiary of a life insurance policy within 180 days after the petition; and proceeds, product, offspring, rents, and profits of or from property of the estate, except such as are earning from services performed by an individual debtor after the commencement of the case. Proceeds here is not used in a confining sense, as defined in the Uniform Commercial Code, but is intended to be a broad term to encompass all proceeds of property of the estate. The conversion in form of property of the estate does not change its character as property of the estate. Subsection (b) excludes from property of the estate any power, such as a power of appointment, that the debtor may exercise solely for the benefit of an entity other than the debtor. This changes present law which excludes powers solely benefiting other persons but not other entities. Subsection (c) invalidates restrictions on the transfer of property of the debtor, in order that all of the interests of the debtor in property will become property of the estate. The provisions invalidated are those that restrict or condition transfer of the debtor's interest, and those that are conditioned on the insolvency or financial condition of the debtor, on the commencement of a bankruptcy case, or on the appointment of a custodian of the debtor's property. Paragraph (2) of subsection (c), however, preserves restrictions on a transfer of a spendthrift trust that the restriction is enforceable nonbankruptcy law to the extent of the income reasonably necessary for the support of a debtor and his dependents. Subsection (d) (now (e)), derived from section 70c of the Bankruptcy Act (section 110(c) of former title 11), gives the estate the benefit of all defenses available to the debtor as against an entity other than the estate, including such defenses as statutes of limitations, statutes of frauds, usury, and other personal defenses, and makes waiver by the debtor after the commencement of the case ineffective to bind the estate. Section 541(e) (now (d)) confirms the current status under the Bankruptcy Act (former title 11) of bona fide secondary mortgage market transactions as the purchase and sale of assets. Mortgages or interests in mortgages sold in the secondary market should not be considered as part of the debtor's estate. To permit the efficient servicing of mortgages or interests in mortgages the seller often retains the original mortgage notes and related documents, and the purchaser records under State recording statutes the purchaser's ownership of the mortgages or interests in mortgages purchased. Section 541(e) makes clear that the seller's retention of the mortgage documents and the purchaser's decision not to record do not impair the asset sale character of secondary mortgage market transactions. The committee notes that in secondary mortgage market transactions the parties may characterize their relationship as one of trust, agency, or independent contractor. The characterization adopted by the parties should not affect the statutes in bankruptcy on bona fide secondary mortgage market purchases and sales. -REFTEXT- REFERENCES IN TEXT The Higher Education Act of 1965, referred to in subsec. (b)(3), is Pub. L. 89-329, Nov. 8, 1965, 79 Stat. 1219, as amended, which is classified principally to chapter 28 (Sec. 1001 et seq.) of Title 20, Education. For complete classification of this Act to the Code, see Short Title note set out under section 1001 of Title 20 and Tables. -MISC2- AMENDMENTS 1990 - Subsec. (b)(3). Pub. L. 101-508, Sec. 3007(a)(2), 3008, temporarily added par. (3). See Termination Date of 1990 Amendment note below. 1984 - Subsec. (a). Pub. L. 98-353, Sec. 456(a)(1), (2), struck out 'under' after 'under' and inserted 'and by whomever held' after 'located'. Subsec. (a)(3). Pub. L. 98-353, Sec. 456(a)(3), inserted '329(b), 363(n),'. Subsec. (a)(5). Pub. L. 98-353, Sec. 456(a)(4), substituted 'Any' for 'An'. Subsec. (a)(6). Pub. L. 98-353, Sec. 456(a)(5), substituted 'or profits' for 'and profits'. Subsec. (b). Pub. L. 98-353, Sec. 363(a), amended subsec. (b) generally. Prior to amendment, subsec. (b) read as follows: 'Property of the estate does not include any power that the debtor may only exercise solely for the benefit of an entity other than the debtor.' Subsec. (c)(1). Pub. L. 98-353, Sec. 456(b)(1), inserted 'in an agreement, transfer, instrument, or applicable nonbankruptcy law'. Subsec. (c)(1)(B). Pub. L. 98-353, Sec. 456(b)(2), substituted 'taking' for 'the taking', and inserted 'before such commencement' after 'custodian'. Subsec. (d). Pub. L. 98-353, Sec. 456(c), inserted '(1) or (2)' after '(a)'. Subsec. (e). Pub. L. 98-353, Sec. 456(d), struck out subsec. (e) which read as follows: 'The estate shall have the benefit of any defense available to the debtor as against an entity other than the estate, including statutes of limitation, statutes of frauds, usury, and other personal defenses. A waiver of any such defense by the debtor after the commencement of the case does not bind the estate.' TERMINATION DATE OF 1990 AMENDMENT Amendment by Pub. L. 101-508 to cease to be effective Oct. 1, 1996, see section 3008 of Pub. L. 101-508, set out in an Effective and Termination Dates of 1990 Amendment note under section 362 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 101, 365, 522, 524, 726, 728, 1207, 1306 of this title; title 28 section 1409. ------DocID 14740 Document 85 of 646------ -CITE- 11 USC Sec. 542 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 542. Turnover of property to the estate -STATUTE- (a) Except as provided in subsection (c) or (d) of this section, an entity, other than a custodian, in possession, custody, or control, during the case, of property that the trustee may use, sell, or lease under section 363 of this title, or that the debtor may exempt under section 522 of this title, shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate. (b) Except as provided in subsection (c) or (d) of this section, an entity that owes a debt that is property of the estate and that is matured, payable on demand, or payable on order, shall pay such debt to, or on the order of, the trustee, except to the extent that such debt may be offset under section 553 of this title against a claim against the debtor. (c) Except as provided in section 362(a)(7) of this title, an entity that has neither actual notice nor actual knowledge of the commencement of the case concerning the debtor may transfer property of the estate, or pay a debt owing to the debtor, in good faith and other than in the manner specified in subsection (d) of this section, to an entity other than the trustee, with the same effect as to the entity making such transfer or payment as if the case under this title concerning the debtor had not been commenced. (d) A life insurance company may transfer property of the estate or property of the debtor to such company in good faith, with the same effect with respect to such company as if the case under this title concerning the debtor had not been commenced, if such transfer is to pay a premium or to carry out a nonforfeiture insurance option, and is required to be made automatically, under a life insurance contract with such company that was entered into before the date of the filing of the petition and that is property of the estate. (e) Subject to any applicable privilege, after notice and a hearing, the court may order an attorney, accountant, or other person that holds recorded information, including books, documents, records, and papers, relating to the debtor's property or financial affairs, to to (FOOTNOTE 1) turn over or disclose such recorded information to the trustee. (FOOTNOTE 1) So in original. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2595; Pub. L. 98-353, title III, Sec. 457, July 10, 1984, 98 Stat. 376.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 542(a) of the House amendment modifies similar provisions contained in the House bill and the Senate amendment treating with turnover of property to the estate. The section makes clear that any entity, other than a custodian, is required to deliver property of the estate to the trustee or debtor in possession whenever such property is acquired by the entity during the case, if the trustee or debtor in possession may use, sell, or lease the property under section 363, or if the debtor may exempt the property under section 522, unless the property is of inconsequential value or benefit to the estate. This section is not intended to require an entity to deliver property to the trustee if such entity has obtained an order of the court authorizing the entity to retain possession, custody or control of the property. The House amendment adopts section 542(c) of the House bill in preference to a similar provision contained in section 542(c) of the Senate amendment. Protection afforded by section 542(c) applies only to the transferor or payor and not to a transferee or payee receiving a transfer or payment, as the case may be. Such transferee or payee is treated under section 549 and section 550 of title 11. The extent to which the attorney client privilege is valid against the trustee is unclear under current law and is left to be determined by the courts on a case by case basis. SENATE REPORT NO. 95-989 Subsection (a) of this section requires anyone holding property of the estate on the date of the filing of the petition, or property that the trustee may use, sell, or lease under section 363, to deliver it to the trustee. The subsection also requires an accounting. The holder of property of the estate is excused from the turnover requirement of this subsection if the property held is of inconsequential value to the estate. However, this provision must be read in conjunction with the remainder of the subsection, so that if the property is of inconsequential monetary value, yet has a significant use value for the estate, the holder of the property would not be excused from turnover. Subsection (b) requires an entity that owes money to the debtor as of the date of the petition, or that holds money payable on demand or payable on order, to pay the money to the order of the trustee. An exception is made to the extent that the entity has a valid right of setoff, as recognized by section 553. Subsection (c) provides an exception to subsections (a) and (b). It protects an entity that has neither actual notice nor actual knowledge of the case and that transfers, in good faith, property that is deliverable or payable to the trustee to someone other than to the estate or on order of the estate. This subsection codifies the result of Bank of Marin v. England, 385 U.S. 99 (1966), but does not go so far as to permit bank setoff in violation of the automatic stay, proposed 11 U.S.C. 362(a)(7), even if the bank offsetting the debtor's balance has no knowledge of the case. Subsection (d) protects life insurance companies that are required by contract to make automatic premium loans from property that might otherwise be property of the estate. Subsection (e) requires an attorney, accountant, or other professional that holds recorded information relating to the debtor's property or financial affairs, to surrender it to the trustee. This duty is subject to any applicable claim of privilege, such as attorney-client privilege. It is a new provision that deprives accountants and attorneys of the leverage that they have today, under State law lien provisions, to receive payment in full ahead of other creditors when the information they hold is necessary to the administration of the estate. AMENDMENTS 1984 - Subsec. (e). Pub. L. 98-353 inserted 'to turn over or' before 'disclose'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 349, 502, 522, 549 of this title. ------DocID 14741 Document 86 of 646------ -CITE- 11 USC Sec. 543 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 543. Turnover of property by a custodian -STATUTE- (a) A custodian with knowledge of the commencement of a case under this title concerning the debtor may not make any disbursement from, or take any action in the administration of, property of the debtor, proceeds, product, offspring, rents, or profits of such property, or property of the estate, in the possession, custody, or control of such custodian, except such action as is necessary to preserve such property. (b) A custodian shall - (1) deliver to the trustee any property of the debtor held by or transferred to such custodian, or proceeds, product, offspring, rents, or profits of such property, that is in such custodian's possession, custody, or control on the date that such custodian acquires knowledge of the commencement of the case; and (2) file an accounting of any property of the debtor, or proceeds, product, offspring, rents, or profits of such property, that, at any time, came into the possession, custody, or control of such custodian. (c) The court, after notice and a hearing, shall - (1) protect all entities to which a custodian has become obligated with respect to such property or proceeds, product, offspring, rents, or profits of such property; (2) provide for the payment of reasonable compensation for services rendered and costs and expenses incurred by such custodian; and (3) surcharge such custodian, other than an assignee for the benefit of the debtor's creditors that was appointed or took possession more than 120 days before the date of the filing of the petition, for any improper or excessive disbursement, other than a disbursement that has been made in accordance with applicable law or that has been approved, after notice and a hearing, by a court of competent jurisdiction before the commencement of the case under this title. (d) After notice and hearing, the bankruptcy court - (1) may excuse compliance with subsection (a), (b), or (c) of this section, if the interests of creditors and, if the debtor is not insolvent, of equity security holders would be better served by permitting a custodian to continue in possession, custody, or control of such property, and (2) shall excuse compliance with subsections (a) and (b)(1) of this section if the custodian is an assignee for the benefit of the debtor's creditors that was appointed or took possession more than 120 days before the date of the filing of the petition, unless compliance with such subsections is necessary to prevent fraud or injustice. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2595; Pub. L. 98-353, title III, Sec. 458, July 10, 1984, 98 Stat. 376.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 543(a) is a modification of similar provisions contained in the House bill and the Senate amendment. The provision clarifies that a custodian may always act as is necessary to preserve property of the debtor. Section 543(c)(3) excepts from surcharge a custodian that is an assignee for the benefit of creditors, who was appointed or took possession before 120 days before the date of the filing of the petition, whichever is later. The provision also prevents a custodian from being surcharged in connection with payments made in accordance with applicable law. SENATE REPORT NO. 95-989 This section requires a custodian appointed before the bankruptcy case to deliver to the trustee and to account for property that has come into his possession, custody, or control as a custodian. 'Property of the debtor' in section (a) includes property that was property of the debtor at the time the custodian took the property, but the title to which passed to the custodian. The section requires the court to protect any obligations incurred by the custodian, provide for the payment of reasonable compensation for services rendered and costs and expenses incurred by the custodian, and to surcharge the custodian for any improper or excessive disbursement, unless it has been approved by a court of competent jurisdiction. Subsection (d) reinforces the general abstention policy in section 305 by permitting the bankruptcy court to authorize the custodianship to proceed notwithstanding this section. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353, Sec. 458(a), inserted ', product, offspring, rents, or profits' after 'proceeds'. Subsec. (b)(1). Pub. L. 98-353, Sec. 458(b)(1), inserted 'held by or' after 'debtor', and ', product, offspring, rents, or profits' after 'proceeds'. Subsec. (b)(2). Pub. L. 98-353, Sec. 458(b)(2), inserted ', product, offspring, rents, or profits' after 'proceeds'. Subsec. (c)(1). Pub. L. 98-353, Sec. 458(c)(1), inserted 'or proceeds, product, offspring, rents, or profits of such property' after 'property'. Subsec. (c)(3). Pub. L. 98-353, Sec. 458(c)(2), inserted 'that has been' before 'approved'. Subsec. (d). Pub. L. 98-353, Sec. 458(d), designated existing provisions as par. (1) and added par. (2). EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 349, 502, 503, 522, 541, 726 of this title. ------DocID 14742 Document 87 of 646------ -CITE- 11 USC Sec. 544 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 544. Trustee as lien creditor and as successor to certain creditors and purchasers -STATUTE- (a) The trustee shall have, as of the commencement of the case, and without regard to any knowledge of the trustee or of any creditor, the rights and powers of, or may avoid any transfer of property of the debtor or any obligation incurred by the debtor that is voidable by - (1) a creditor that extends credit to the debtor at the time of the commencement of the case, and that obtains, at such time and with respect to such credit, a judicial lien on all property on which a creditor on a simple contract could have obtained such a judicial lien, whether or not such a creditor exists; (2) a creditor that extends credit to the debtor at the time of the commencement of the case, and obtains, at such time and with respect to such credit, an execution against the debtor that is returned unsatisfied at such time, whether or not such a creditor exists; or (3) a bona fide purchaser of real property, other than fixtures, from the debtor, against whom applicable law permits such transfer to be perfected, that obtains the status of a bona fide purchaser and has perfected such transfer at the time of the commencement of the case, whether or not such a purchaser exists. (b) The trustee may avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under section 502 of this title or that is not allowable only under section 502(e) of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2596; Pub. L. 98-353, title III, Sec. 459, July 10, 1984, 98 Stat. 377.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 544(a)(3) modifies similar provisions contained in the House bill and Senate amendment so as not to require a creditor to perform the impossible in order to perfect his interest. Both the lien creditor test in section 544(a)(1), and the bona fide purchaser test in section 544(a)(3) should not require a transferee to perfect a transfer against an entity with respect to which applicable law does not permit perfection. The avoiding powers under section 544(a)(1), (2), and (3) are new. In particular, section 544(a)(1) overrules Pacific Finance Corp. v. Edwards, 309 F.2d 224 (9th Cir. 1962), and In re Federals, Inc., 553 F.2d 509 (6th Cir. 1977), insofar as those cases held that the trustee did not have the status of a creditor who extended credit immediately prior to the commencement of the case. The House amendment deletes section 544(c) of the House bill. SENATE REPORT NO. 95-989 Subsection (a) is the 'strong arm clause' of current law, now found in Bankruptcy Act Sec. 70c (section 110(c) of former title 11). It gives the trustee the rights of a creditor on a simple contract with a judicial lien on the property of the debtor as of the date of the petition; of a creditor with a writ of execution against the property of the debtor unsatisfied as of the date of the petition; and a bona fide purchaser of the real property of the debtor as of the date of the petition. 'Simple contract' as used here is derived from Bankruptcy Act Sec. 60a(4) (section 96(a)(4) of former title 11). The third status, that of a bona fide purchaser of real property, is new. Subsection (b) is derived from current section 70e (section 110(e) of former title 11). It gives the trustee the rights of actual unsecured creditors under applicable law to void transfers. It follows Moore v. Bay, 284 U.S. 4 (1931), and overrules those cases that hold section 70e gives the trustee the rights of secured creditors. AMENDMENTS 1984 - Subsec. (a)(1). Pub. L. 98-353, Sec. 459(1), inserted 'such' after 'obtained'. Subsec. (a)(2). Pub. L. 98-353, Sec. 459(2), substituted '; or' for '; and'. Subsec. (a)(3). Pub. L. 98-353, Sec. 459(3), inserted ', other than fixtures,' after 'property', and 'and has perfected such transfer' after 'purchaser' the second place it appeared. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 303, 349, 502, 522, 546, 548, 550, 551, 552, 749, 764, 901, 926 of this title; title 28 section 1409. ------DocID 14743 Document 88 of 646------ -CITE- 11 USC Sec. 545 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 545. Statutory liens -STATUTE- The trustee may avoid the fixing of a statutory lien on property of the debtor to the extent that such lien - (1) first becomes effective against the debtor - (A) when a case under this title concerning the debtor is commenced; (B) when an insolvency proceeding other than under this title concerning the debtor is commenced; (C) when a custodian is appointed or authorized to take or takes possession; (D) when the debtor becomes insolvent; (E) when the debtor's financial condition fails to meet a specified standard; or (F) at the time of an execution against property of the debtor levied at the instance of an entity other than the holder of such statutory lien; (2) is not perfected or enforceable at the time of the commencement of the case against a bona fide purchaser that purchases such property at the time of the commencement of the case, whether or not such a purchaser exists; (3) is for rent; or (4) is a lien of distress for rent. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2597; Pub. L. 98-353, title III, Sec. 460, July 10, 1984, 98 Stat. 377.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 545 of the House amendment modifies similar provisions contained in the House bill and Senate amendment to make clear that a statutory lien may be avoided under section 545 only to the extent the lien violates the perfection standards of section 545. Thus a Federal tax lien is invalid under section 545(2) with respect to property specified in sections 6323(b) and (c) of the Internal Revenue Code of 1954 (title 26). As a result of this modification, section 545(b) of the Senate amendment is deleted as unnecessary. Statutory liens: The House amendment retains the provision of section 545(2) of the House bill giving the trustee in a bankruptcy case the same power which a bona fide purchaser has to take over certain kinds of personal property despite the existence of a tax lien covering that property. The amendment thus retains present law, and deletes section 545(b) of the Senate amendment which would have no longer allowed the trustee to step into the shoes of a bona fide purchaser for this purpose. SENATE REPORT NO. 95-989 This section permits the trustee to avoid the fixing of certain statutory liens. It is derived from subsections 67b and 67c of present law (section 107(b) and (c) of former title 11). Liens that first become effective on the bankruptcy or insolvency of the debtor are voidable by the trustee. Liens that are not perfected or enforceable on the date of the petition against a bona fide purchaser are voidable. If a transferee is able to perfect under section 546(a) and that perfection relates back to an earlier date, then in spite of the filing of the bankruptcy petition, the trustee would not be able to defeat the lien, because the lien would be perfected and enforceable against a bona fide purchaser that purchased the property on the date of the filing of the petition. Finally, a lien for rent or of distress for rent is voidable, whether the lien is a statutory lien or a common law lien of distress for rent. See proposed 11 U.S.C. 101(37); Bankruptcy Act Sec. 67(c)(1)(C). The trustee may avoid a lien under this section even if the lien has been enforced by sale before the commencement of the case. To that extent, Bankruptcy Act Sec. 67c(5) is not followed. Subsection (b) limits the trustee's power to avoid tax liens under Federal, state, or local law. For example, under Sec. 6323 of the Internal Revenue Code (Title 26). Once public notice of a tax lien has been filed, the Government is generally entitled to priority over subsequent lienholders. However, certain purchasers who acquire an interest in certain specific kinds of personal property will take free of an existing filed tax lien attaching to such property. Among the specific kinds of personal property which a purchaser can acquire free of an existing tax lien (unless the buyer knows of the existence of the lien) are stocks and securities, motor vehicles, inventory, and certain household goods. Under the present Bankruptcy Act (Sec. 67(c)(1)) (section 107(c)(1) of former title 11), the trustee may be viewed as a bona fide purchaser, so that he can take over any such designated items free of tax liens even if the tax authority has perfected its lien. However, the reasons for enabling a bona fide purchaser to take these kinds of assets free of an unfiled tax lien, that is, to encourage free movement of these assets in general commerce, do not apply to a trustee in a title 11 case, who is not in the same position as an ordinary bona fide purchaser as to such property. The bill accordingly adds a new subsection (b) to sec. 545 providing, in effect, that a trustee in bankruptcy does not have the right under this section to take otherwise specially treated items of personal property free of a tax lien filed before the filing of the petition. AMENDMENTS 1984 - Par. (1)(A). Pub. L. 98-353, Sec. 460(1), struck out 'is' after 'is'. Par. (1)(C). Pub. L. 98-353, Sec. 460(2), substituted 'appointed or authorized to take' for 'apponted'. Par. (2). Pub. L. 98-353, Sec. 460(3), substituted 'at the time of the commencement of the case' for 'on the date of the filing of the petition' in two places. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 303, 349, 502, 522, 546, 547, 548, 550, 551, 552, 749, 764, 901, 926 of this title; title 26 sections 6327, 7434. ------DocID 14744 Document 89 of 646------ -CITE- 11 USC Sec. 546 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 546. Limitations on avoiding powers -STATUTE- (a) An action or proceeding under section 544, 545, 547, 548, or 553 of this title may not be commenced after the earlier of - (1) two years after the appointment of a trustee under section 702, 1104, 1163, 1302, or 1202 of this title; or (2) the time the case is closed or dismissed. (b) The rights and powers of a trustee under sections 544, 545, and 549 of this title are subject to any generally applicable law that permits perfection of an interest in property to be effective against an entity that acquires rights in such property before the date of such perfection. If such law requires seizure of such property or commencement of an action to accomplish such perfection, and such property has not been seized or such action has not been commenced before the date of the filing of the petition, such interest in such property shall be perfected by notice within the time fixed by such law for such seizure or commencement. (c) Except as provided in subsection (d) of this section, the rights and powers of a trustee under sections 544(a), 545, 547, and 549 of this title are subject to any statutory or common-law right of a seller of goods that has sold goods to the debtor, in the ordinary course of such seller's business, to reclaim such goods if the debtor has received such goods while insolvent, but - (1) such a seller may not reclaim any such goods unless such seller demands in writing reclamation of such goods before ten days after receipt of such goods by the debtor; and (2) the court may deny reclamation to a seller with such a right of reclamation that has made such a demand only if the court - (A) grants the claim of such a seller priority as a claim of a kind specified in section 503(b) of this title; or (B) secures such claim by a lien. (d) In the case of a seller who is a producer of grain sold to a grain storage facility, owned or operated by the debtor, in the ordinary course of such seller's business (as such terms are defined in section 557 of this title) or in the case of a United States fisherman who has caught fish sold to a fish processing facility owned or operated by the debtor in the ordinary course of such fisherman's business, the rights and powers of the trustee under sections 544(a), 545, 547, and 549 of this title are subject to any statutory or common law right of such producer or fisherman to reclaim such grain or fish if the debtor has received such grain or fish while insolvent, but - (1) such producer or fisherman may not reclaim any grain or fish unless such producer or fisherman demands, in writing, reclamation of such grain or fish before ten days after receipt thereof by the debtor; and (2) the court may deny reclamation to such a producer or fisherman with a right of reclamation that has made such a demand only if the court secures such claim by a lien. (e) Notwithstanding sections 544, 545, 547, 548(a)(2), and 548(b) of this title, the trustee may not avoid a transfer that is a margin payment, as defined in section 101(34), 741(5), or 761(15) of this title, or settlement payment, as defined in section 101(35) or 741(8) of this title, made by or to a commodity broker, forward contract merchant, stockbroker, financial institution, or securities clearing agency, that is made before the commencement of the case, except under section 548(a)(1) of this title. (f) Notwithstanding sections 544, 545, 547, 548(a)(2), and 548(b) of this title, the trustee may not avoid a transfer that is a margin payment, as defined in section 741(5) or 761(15) of this title, or settlement payment, as defined in section 741(8) of this title, made by or to a repo participant, in connection with a repurchase agreement and that is made before the commencement of the case, except under section 548(a)(1) of this title. (g) Notwithstanding sections 544, 545, 547, 548(a)(2) and 548(b) of this title, the trustee may not avoid a transfer under a swap agreement, made by or to a swap participant, in connection with a swap agreement and that is made before the commencement of the case, except under section 548(a)(1) of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2597; Pub. L. 97-222, Sec. 4, July 27, 1982, 96 Stat. 236; Pub. L. 98-353, title III, Sec. 351, 393, 461, July 10, 1984, 98 Stat. 358, 365, 377; Pub. L. 99-554, title II, Sec. 257(d), 283(l), Oct. 27, 1986, 100 Stat. 3114, 3117; Pub. L. 101-311, title I, Sec. 103, title II, Sec. 203, June 25, 1990, 104 Stat. 268, 269.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 546(a) of the House amendment is derived from section 546(c) of the Senate amendment. Section 546(c) of the House amendment is derived from section 546(b) of the Senate amendment. It applies to receipt of goods on credit as well as by cash sales. The section clarifies that a demand for reclamation must be made in writing anytime before 10 days after receipt of the goods by the debtor. The section also permits the court to grant the reclaiming creditor a lien or an administrative expense in lieu of turning over the property. SENATE REPORT NO. 95-989 The trustee's rights and powers under certain of the avoiding powers are limited by section 546. First, if an interest holder against whom the trustee would have rights still has, under applicable nonbankruptcy law, and as of the date of the petition, the opportunity to perfect his lien against an intervening interest holder, then he may perfect his interest against the trustee. If applicable law requires seizure for perfection, then perfection is by notice to the trustee instead. The rights granted to a creditor under this subsection prevail over the trustee only if the transferee has perfected the transfer in accordance with applicable law, and that perfection relates back to a date that is before the commencement of the case. The phrase 'generally applicable law' relates to those provisions of applicable law that apply both in bankruptcy cases and outside of bankruptcy cases. For example, many State laws, under the Uniform Commercial Code, permit perfection of a purchase-money security interest to relate back to defeat an earlier levy by another creditor if the former was perfected within ten days of delivery of the property. U.C.C. Sec. 9-301(2). Such perfection would then be able to defeat an intervening hypothetical judicial lien creditor on the date of the filing of the petition. The purpose of the subsection is to protect, in spite of the surprise intervention of a bankruptcy petition, those whom State law protects by allowing them to perfect their liens or interests as of an effective date that is earlier than the date of perfection. It is not designed to give the States an opportunity to enact disguised priorities in the form of liens that apply only in bankruptcy cases. Subsection (b) (now (c)) specifies that the trustee's rights and powers under the strong arm clause, the successor to creditors provision, the preference section, and the postpetition transaction section are all subject to any statutory or common-law right of a seller, in the ordinary course of business, of goods to the debtor to reclaim the goods if the debtor received the goods on credit while insolvent. The seller must demand reclamation within ten days after receipt of the goods by the debtor. As under nonbankruptcy law, the right is subject to any superior rights of secured creditors. The purpose of the provision is to recognize, in part, the validity of section 2-702 of the Uniform Commercial Code, which has generated much litigation, confusion, and divergent decisions in different circuits. The right is subject, however, to the power of the court to deny reclamation and protect the seller by granting him a priority as an administrative expense for his claim arising out of the sale of the goods. Subsection (c) (now (a)) adds a statute of limitations to the use by the trustee of the avoiding powers. The limitation is two years after his appointment, or the time the case is closed or dismissed, whichever occurs later. AMENDMENTS 1990 - Subsec. (e). Pub. L. 101-311, Sec. 203, inserted reference to sections 101(34) and 101(35) of this title. Subsec. (g). Pub. L. 101-311, Sec. 103, added subsec. (g). 1986 - Subsec. (a)(1). Pub. L. 99-554, Sec. 257(d), inserted reference to section 1202 of this title. Subsec. (e). Pub. L. 99-554, Sec. 283(l), inserted a comma after 'stockbroker'. 1984 - Subsec. (a)(1). Pub. L. 98-353, Sec. 461(a), substituted '; or' for '; and'. Subsec. (b). Pub. L. 98-353, Sec. 461(b), substituted 'a trustee under sections 544, 545, and' for 'the trustee under sections 544, 545, or'. Subsec. (c). Pub. L. 98-353, Sec. 351(1), 461(c)(1)-(4), substituted 'Except as provided in subsection (d) of this section, the' for 'The', substituted 'a trustee' for 'the trustee', struck out 'right' before 'or common-law', inserted 'of goods that has sold goods to the debtor' after 'seller', and struck out 'of goods to the debtor' after 'business,'. Subsec. (c)(2). Pub. L. 98-353, Sec. 461(c)(5)(A), inserted 'the' after 'if' in provisions preceding subpar. (A). Subsec. (c)(2)(A). Pub. L. 98-353, Sec. 461(c)(5)(B), substituted 'a claim of a kind specified in section 503(b) of this title' for 'an administrative expense'. Subsec. (d). Pub. L. 98-353, Sec. 351(3), added subsec. (d). Former subsec. (d) redesignated (e). Subsec. (e). Pub. L. 98-353, Sec. 351(2), 461(d), redesignated former subsec. (d) as (e) and inserted 'financial institution' after 'stockbroker'. Subsec. (f). Pub. L. 98-353, Sec. 393, added subsec. (f). 1982 - Subsec. (d). Pub. L. 97-222 added subsec. (d). EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 283 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 362, 901 of this title. ------DocID 14745 Document 90 of 646------ -CITE- 11 USC Sec. 547 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 547. Preferences -STATUTE- (a) In this section - (1) 'inventory' means personal property leased or furnished, held for sale or lease, or to be furnished under a contract for service, raw materials, work in process, or materials used or consumed in a business, including farm products such as crops or livestock, held for sale or lease; (2) 'new value' means money or money's worth in goods, services, or new credit, or release by a transferee of property previously transferred to such transferee in a transaction that is neither void nor voidable by the debtor or the trustee under any applicable law, including proceeds of such property, but does not include an obligation substituted for an existing obligation; (3) 'receivable' means right to payment, whether or not such right has been earned by performance; and (4) a debt for a tax is incurred on the day when such tax is last payable without penalty, including any extension. (b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of an interest of the debtor in property - (1) to or for the benefit of a creditor; (2) for or on account of an antecedent debt owed by the debtor before such transfer was made; (3) made while the debtor was insolvent; (4) made - (A) on or within 90 days before the date of the filing of the petition; or (B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and (5) that enables such creditor to receive more than such creditor would receive if - (A) the case were a case under chapter 7 of this title; (B) the transfer had not been made; and (C) such creditor received payment of such debt to the extent provided by the provisions of this title. (c) The trustee may not avoid under this section a transfer - (1) to the extent that such transfer was - (A) intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous exchange for new value given to the debtor; and (B) in fact a substantially contemporaneous exchange; (2) to the extent that such transfer was - (A) in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee; (B) made in the ordinary course of business or financial affairs of the debtor and the transferee; and (C) made according to ordinary business terms; (3) that creates a security interest in property acquired by the debtor - (A) to the extent such security interest secures new value that was - (i) given at or after the signing of a security agreement that contains a description of such property as collateral; (ii) given by or on behalf of the secured party under such agreement; (iii) given to enable the debtor to acquire such property; and (iv) in fact used by the debtor to acquire such property; and (B) that is perfected on or before 10 days after the debtor receives possession of such property; (4) to or for the benefit of a creditor, to the extent that, after such transfer, such creditor gave new value to or for the benefit of the debtor - (A) not secured by an otherwise unavoidable security interest; and (B) on account of which new value the debtor did not make an otherwise unavoidable transfer to or for the benefit of such creditor; (5) that creates a perfected security interest in inventory or a receivable or the proceeds of either, except to the extent that the aggregate of all such transfers to the transferee caused a reduction, as of the date of the filing of the petition and to the prejudice of other creditors holding unsecured claims, of any amount by which the debt secured by such security interest exceeded the value of all security interests for such debt on the later of - (A)(i) with respect to a transfer to which subsection (b)(4)(A) of this section applies, 90 days before the date of the filing of the petition; or (ii) with respect to a transfer to which subsection (b)(4)(B) of this section applies, one year before the date of the filing of the petition; or (B) the date on which new value was first given under the security agreement creating such security interest; (6) that is the fixing of a statutory lien that is not avoidable under section 545 of this title; or (7) if, in a case filed by an individual debtor whose debts are primarily consumer debts, the aggregate value of all property that constitutes or is affected by such transfer is less than $600. (d) The trustee may avoid a transfer of an interest in property of the debtor transferred to or for the benefit of a surety to secure reimbursement of such a surety that furnished a bond or other obligation to dissolve a judicial lien that would have been avoidable by the trustee under subsection (b) of this section. The liability of such surety under such bond or obligation shall be discharged to the extent of the value of such property recovered by the trustee or the amount paid to the trustee. (e)(1) For the purposes of this section - (A) a transfer of real property other than fixtures, but including the interest of a seller or purchaser under a contract for the sale of real property, is perfected when a bona fide purchaser of such property from the debtor against whom applicable law permits such transfer to be perfected cannot acquire an interest that is superior to the interest of the transferee; and (B) a transfer of a fixture or property other than real property is perfected when a creditor on a simple contract cannot acquire a judicial lien that is superior to the interest of the transferee. (2) For the purposes of this section, except as provided in paragraph (3) of this subsection, a transfer is made - (A) at the time such transfer takes effect between the transferor and the transferee, if such transfer is perfected at, or within 10 days after, such time; (B) at the time such transfer is perfected, if such transfer is perfected after such 10 days; or (C) immediately before the date of the filing of the petition, if such transfer is not perfected at the later of - (i) the commencement of the case; or (ii) 10 days after such transfer takes effect between the transferor and the transferee. (3) For the purposes of this section, a transfer is not made until the debtor has acquired rights in the property transferred. (f) For the purposes of this section, the debtor is presumed to have been insolvent on and during the 90 days immediately preceding the date of the filing of the petition. (g) For the purposes of this section, the trustee has the burden of proving the avoidability of a transfer under subsection (b) of this section, and the creditor or party in interest against whom recovery or avoidance is sought has the burden of proving the nonavoidability of a transfer under subsection (c) of this section. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2597; Pub. L. 98-353, title III, Sec. 310, 462, July 10, 1984, 98 Stat. 355, 377; Pub. L. 99-554, title II, Sec. 283(m), Oct. 27, 1986, 100 Stat. 3117.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS No limitation is provided for payments to commodity brokers as in section 766 of the Senate amendment other than the amendment to section 548 of title 11. Section 547(c)(2) protects most payments. Section 547(b)(2) of the House amendment adopts a provision contained in the House bill and rejects an alternative contained in the Senate amendment relating to the avoidance of a preferential transfer that is payment of a tax claim owing to a governmental unit. As provided, section 106(c) of the House amendment overrules contrary language in the House report with the result that the Government is subject to avoidance of preferential transfers. Contrary to language contained in the House report, payment of a debt by means of a check is equivalent to a cash payment, unless the check is dishonored. Payment is considered to be made when the check is delivered for purposes of sections 547(c)(1) and (2). Section 547(c)(6) of the House bill is deleted and is treated in a different fashion in section 553 of the House amendment. Section 547(c)(6) represents a modification of a similar provision contained in the House bill and Senate amendment. The exception relating to satisfaction of a statutory lien is deleted. The exception for a lien created under title 11 is deleted since such a lien is a statutory lien that will not be avoidable in a subsequent bankruptcy. Section 547(e)(1)(B) is adopted from the House bill and Senate amendment without change. It is intended that the simple contract test used in this section will be applied as under section 544(a)(1) not to require a creditor to perfect against a creditor on a simple contract in the event applicable law makes such perfection impossible. For example, a purchaser from a debtor at an improperly noticed bulk sale may take subject to the rights of a creditor on a simple contract of the debtor for 1 year after the bulk sale. Since the purchaser cannot perfect against such a creditor on a simple contract, he should not be held responsible for failing to do the impossible. In the event the debtor goes into bankruptcy within a short time after the bulk sale, the trustee should not be able to use the avoiding powers under section 544(a)(1) or 547 merely because State law has made some transfers of personal property subject to the rights of a creditor on a simple contract to acquire a judicial lien with no opportunity to perfect against such a creditor. Preferences: The House amendment deletes from the category of transfers on account of antecedent debts which may be avoided under the preference rules, section 547(b)(2), the exception in the Senate amendment for taxes owed to governmental authorities. However, for purposes of the 'ordinary course' exception to the preference rules contained in section 547(c)(2), the House amendment specifies that the 45-day period referred to in section 547(c)(2)(B) is to begin running, in the case of taxes from the last due date, including extensions, of the return with respect to which the tax payment was made. SENATE REPORT NO. 95-989 This section is a substantial modification of present law. It modernizes the preference provisions and brings them more into conformity with commercial practice and the Uniform Commercial Code. Subsection (a) contains three definitions. Inventory, new value, and receivable are defined in their ordinary senses, but are defined to avoid any confusion or uncertainty surrounding the terms. Subsection (b) is the operative provision of the section. It authorizes the trustee to avoid a transfer if five conditions are met. These are the five elements of a preference action. First, the transfer must be to or for the benefit of a creditor. Second, the transfer must be for or on account of an antecedent debt owed by the debtor before the transfer was made. Third, the transfer must have been made when the debtor was insolvent. Fourth, the transfer must have been made during the 90 days immediately preceding the commencement of the case. If the transfer was to an insider, the trustee may avoid the transfer if it was made during the period that begins one year before the filing of the petition and ends 90 days before the filing, if the insider to whom the transfer was made had reasonable cause to believe the debtor was insolvent at the time the transfer was made. Finally, the transfer must enable the creditor to whom or for whose benefit it was made to receive a greater percentage of his claim than he would receive under the distributive provisions of the bankruptcy code. Specifically, the creditor must receive more than he would if the case were a liquidation case, if the transfer had not been made, and if the creditor received payment of the debt to the extent provided by the provisions of the code. The phrasing of the final element changes the application of the greater percentage test from that employed under current law. Under this language, the court must focus on the relative distribution between classes as well as the amount that will be received by the members of the class of which the creditor is a member. The language also requires the court to focus on the allowability of the claim for which the preference was made. If the claim would have been entirely disallowed, for example, then the test of paragraph (5) will be met, because the creditor would have received nothing under the distributive provisions of the bankruptcy code. The trustee may avoid a transfer of a lien under this section even if the lien has been enforced by sale before the commencement of the case, Subsection (b)(2) of this section in effect exempts from the preference rules payments by the debtor of tax liabilities, regardless of their priority status. Subsection (c) contains exceptions to the trustee's avoiding power. If a creditor can qualify under any one of the exceptions, then he is protected to that extent. If he can qualify under several, he is protected by each to the extent that he can qualify under each. The first exception is for a transfer that was intended by all parties to be a contemporaneous exchange for new value, and was in fact substantially contemporaneous. Normally, a check is a credit transaction. However, for the purposes of this paragraph, a transfer involving a check is considered to be 'intended to be contemporaneous', and if the check is presented for payment in the normal course of affairs, which the Uniform Commercial Code specifies as 30 days, U.C.C. Sec. 3-503(2)(a), that will amount to a transfer that is 'in fact substantially contemporaneous.' The second exception protects transfers in the ordinary course of business (or of financial affairs, where a business is not involved) transfers. For the case of a consumer, the paragraph uses the phrase 'financial affairs' to include such nonbusiness activities as payment of monthly utility bills. If the debt on account of which the transfer was made was incurred in the ordinary course of both the debtor and the transferee, if the transfer was made not later than 45 days after the debt was incurred, if the transfer itself was made in the ordinary course of both the debtor and the transferee, and if the transfer was made according to ordinary business terms, then the transfer is protected. The purpose of this exception is to leave undisturbed normal financial relations, because it does not detract from the general policy of the preference section to discourage unusual action by either the debtor or his creditors during the debtor's slide into bankruptcy. The third exception is for enabling loans in connection with which the debtor acquires the property that the loan enabled him to purchase after the loan is actually made. The fourth exception codifies the net result rule in section 60c of current law (section 96(c) of former title 11). If the creditor and the debtor have more than one exchange during the 90-day period, the exchanges are netted out according to the formula in paragraph (4). Any new value that the creditor advances must be unsecured in order for it to qualify under this exception. Paragraph (5) codifies the improvement in position test, and thereby overrules such cases as DuBay v. Williams, 417 F.2d 1277 (C.A.9, 1966), and Grain Merchants of Indiana, Inc. v. Union Bank and Savings Co., 408 F.2d 209 (C.A.7, 1969). A creditor with a security interest in a floating mass, such as inventory or accounts receivable, is subject to preference attack to the extent he improves his position during the 90-day period before bankruptcy. The test is a two-point test, and requires determination of the secured creditor's position 90 days before the petition and on the date of the petition. If new value was first given after 90 days before the case, the date on which it was first given substitutes for the 90-day point. Paragraph (6) excepts statutory liens validated under section 545 from preference attack. It also protects transfers in satisfaction of such liens, and the fixing of a lien under section 365(j), which protects a vendee whose contract to purchase real property from the debtor is rejected. Subsection (d), derived from section 67a of the Bankruptcy Act (section 107(a) of former title 11), permits the trustee to avoid a transfer to reimburse a surety that posts a bond to dissolve a judicial lien that would have been avoidable under this section. The second sentence protects the surety from double liability. Subsection (e) determines when a transfer is made for the purposes of the preference section. Paragraph (1) defines when a transfer is perfected. For real property, a transfer is perfected when it is valid against a bona fide purchaser. For personal property and fixtures, a transfer is perfected when it is valid against a creditor on a simple contract that obtains a judicial lien after the transfer is perfected. 'Simple contract' as used here is derived from Bankruptcy Act Sec. 60a(4) (section 96(a)(4) of former title 11). Paragraph (2) specifies that a transfer is made when it takes effect between the transferor and the transferee if it is perfected at or within 10 days after that time. Otherwise, it is made when the transfer is perfected. If it is not perfected before the commencement of the case, it is made immediately before the commencement of the case. Paragraph (3) specifies that a transfer is not made until the debtor has acquired rights in the property transferred. This provision, more than any other in the section, overrules DuBay and Grain Merchants, and in combination with subsection (b)(2), overrules In re King-Porter Co., 446 F.2d 722 (5th Cir. 1971). Subsection (e) is designed to reach the different results under the 1962 version of Article 9 of the U.C.C. and under the 1972 version because different actions are required under each version in order to make a security agreement effective between the parties. Subsection (f) creates a presumption of insolvency for the 90 days preceding the bankruptcy case. The presumption is as defined in Rule 301 of the Federal Rules of Evidence, made applicable in bankruptcy cases by sections 224 and 225 of the bill. The presumption requires the party against whom the presumption exists to come forward with some evidence to rebut the presumption, but the burden of proof remains on the party in whose favor the presumption exists. AMENDMENTS 1986 - Subsec. (b)(4)(B). Pub. L. 99-554 inserted 'and' after the semicolon. 1984 - Subsec. (a)(2). Pub. L. 98-353, Sec. 462(a)(1), inserted 'including proceeds of such property,' after 'law,'. Subsec. (a)(4). Pub. L. 98-353, Sec. 462(a)(2), struck out ', without penalty' after 'any extension', and inserted 'without penalty' after 'payable'. Subsec. (b). Pub. L. 98-353, Sec. 462(b)(1), substituted 'of an interest of the debtor in property' for 'of property of the debtor' in provisions preceding par. (1). Subsec. (b)(4)(B). Pub. L. 98-353, Sec. 462(b)(2), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: 'between 90 days and one year before the date of the filing of the petition, if such creditor, at the time of such transfer - '(i) was an insider; and '(ii) had reasonable cause to believe the debtor was insolvent at the time of such transfer; and'. Subsec. (c)(2)(A). Pub. L. 98-353, Sec. 462(d)(1), inserted 'by the debtor' after 'incurred'. Subsec. (c)(2)(B) to (D). Pub. L. 98-353, Sec. 462(c), struck out subpar. (B) which read as follows: 'made not later than 45 days after such debt was incurred;' and redesignated subpars. (C) and (D) as (B) and (C), respectively. Subsec. (c)(3). Pub. L. 98-353, Sec. 462(d)(2), substituted 'that creates' for 'of'. Subsec. (c)(3)(B). Pub. L. 98-353, Sec. 462(d)(3), inserted 'on or' after 'perfected', and substituted 'the debtor receives possession of such property' for 'such security interest attaches'. Subsec. (c)(5). Pub. L. 98-353, Sec. 462(d)(4), substituted 'that creates' for 'of', and 'all security interests' for 'all security interest'. Subsec. (c)(5)(A)(ii). Pub. L. 98-353, Sec. 462(d)(5), substituted 'or' for 'and'. Subsec. (c)(7). Pub. L. 98-353, Sec. 310(3), added par. (7). Subsec. (d). Pub. L. 98-353, Sec. 462(e), substituted 'The' for 'A' before 'trustee may avoid', inserted 'an interest in' after 'transfer of', inserted 'to or for the benefit of a surety' after 'transferred', and inserted 'such' after 'reimbursement of'. Subsec. (e)(2)(C)(i). Pub. L. 98-353, Sec. 462(f), substituted 'or' for 'and'. Subsec. (g). Pub. L. 98-353, Sec. 462(g), added subsec. (g). EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 109, 303, 349, 362, 502, 522, 546, 548, 550, 551, 552, 749, 764, 901, 926 of this title. ------DocID 14746 Document 91 of 646------ -CITE- 11 USC Sec. 548 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 548. Fraudulent transfers and obligations -STATUTE- (a) The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily - (1) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; or (2)(A) received less than a reasonably equivalent value in exchange for such transfer or obligation; and (B)(i) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation; (ii) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital; or (iii) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor's ability to pay as such debts matured. (b) The trustee of a partnership debtor may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, to a general partner in the debtor, if the debtor was insolvent on the date such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation. (c) Except to the extent that a transfer or obligation voidable under this section is voidable under section 544, 545, or 547 of this title, a transferee or obligee of such a transfer or obligation that takes for value and in good faith has a lien on or may retain any interest transferred or may enforce any obligation incurred, as the case may be, to the extent that such transferee or obligee gave value to the debtor in exchange for such transfer or obligation. (d)(1) For the purposes of this section, a transfer is made when such transfer is so perfected that a bona fide purchaser from the debtor against whom applicable law permits such transfer to be perfected cannot acquire an interest in the property transferred that is superior to the interest in such property of the transferee, but if such transfer is not so perfected before the commencement of the case, such transfer is made immediately before the date of the filing of the petition. (2) In this section - (A) 'value' means property, or satisfaction or securing of a present or antecedent debt of the debtor, but does not include an unperformed promise to furnish support to the debtor or to a relative of the debtor; (B) a commodity broker, forward contract merchant, stockbroker, financial institution, or securities clearing agency that receives a margin payment, as defined in section 101(34), 741(5) or 761(15) of this title, or settlement payment, as defined in section 101(35) or 741(8) of this title, takes for value to the extent of such payment; (C) a repo participant that receives a margin payment, as defined in section 741(5) or 761(15) of this title, or settlement payment, as defined in section 741(8) of this title, in connection with a repurchase agreement, takes for value to the extent of such payment; and (D) a swap participant that receives a transfer in connection with a swap agreement takes for value to the extent of such transfer. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2600; Pub. L. 97-222, Sec. 5, July 27, 1982, 96 Stat. 236; Pub. L. 98-353, title III, Sec. 394, 463, July 10, 1984, 98 Stat. 365, 378; Pub. L. 99-554, title II, Sec. 283(n), Oct. 27, 1986, 100 Stat. 3117; Pub. L. 101-311, title I, Sec. 104, title II, Sec. 204, June 25, 1990, 104 Stat. 268, 269.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 548(d)(2) is modified to reflect general application of a provision contained in section 766 of the Senate amendment with respect to commodity brokers. In particular, section 548(d)(2)(B) of the House amendment makes clear that a commodity broker who receives a margin payment is considered to receive the margin payment in return for 'value' for purposes of section 548. SENATE REPORT NO. 95-989 This section is derived in large part from section 67d of the Bankruptcy Act (section 107(d) of former title 11). It permits the trustee to avoid transfers by the debtor in fraud of his creditors. Its history dates from the statute of 13 Eliz. c. 5 (1570). The trustee may avoid fraudulent transfers or obligations if made with actual intent to hinder, delay, or defraud a past or future creditor. Transfers made for less than a reasonably equivalent consideration are also vulnerable if the debtor was or thereby becomes insolvent, was engaged in business with an unreasonably small capital, or intended to incur debts that would be beyond his ability to repay. The trustee of a partnership debtor may avoid any transfer of partnership property to a partner in the debtor if the debtor was or thereby became insolvent. If a transferee's only liability to the trustee is under this section, and if he takes for value and in good faith, then subsection (c) grants him a lien on the property transferred, or other similar protection. Subsection (d) specifies that for the purposes of fraudulent transfer section, a transfer is made when it is valid against a subsequent bona fide purchaser. If not made before the commencement of the case, it is considered made immediately before then. Subsection (d) also defines 'value' to mean property, or the satisfaction or securing of a present or antecedent debt, but does not include an unperformed promise to furnish support to the debtor or a relative of the debtor. AMENDMENTS 1990 - Subsec. (d)(2)(B). Pub. L. 101-311, Sec. 204, inserted reference to sections 101(34) and 101(35) of this title. Subsec. (d)(2)(D). Pub. L. 101-311, Sec. 104, added subpar. (D). 1986 - Subsec. (d)(2)(B). Pub. L. 99-554 substituted ', financial institution' for 'financial institution,'. 1984 - Subsec. (a). Pub. L. 98-353, Sec. 463(a)(1), substituted 'if the debtor voluntarily or involuntarily' for 'if the debtor' in provisions preceding par. (1). Subsec. (a)(1). Pub. L. 98-353, Sec. 463(a)(2), substituted 'was made' for 'occurred'. Subsec. (a)(2)(B)(ii). Pub. L. 98-353, Sec. 463(a)(3), inserted 'or a transaction' after 'engaged in business'. Subsec. (c). Pub. L. 98-353, Sec. 463(b), inserted 'or may retain' after 'lien on' and struck out ', may retain any lien transferred,' before 'or may enforce any obligation incurred'. Subsec. (d)(1). Pub. L. 98-353, Sec. 463(c)(1), substituted 'is so' for 'becomes so far', 'applicable law permits such transfer to be' for 'such transfer could have been', and 'is made' for 'occurs'. Subsec. (d)(2)(B). Pub. L. 98-353, Sec. 463(c)(2), inserted 'financial institution,' after 'stockbroker'. Subsec. (d)(2)(C). Pub. L. 98-353, Sec. 394(2), added subpar. (C). 1982 - Subsec. (d)(2)(B). Pub. L. 97-222 substituted 'a commodity broker, forward contract merchant, stockbroker, or securities clearing agency that receives a margin payment, as defined in section 741(5) or 761(15) of this title, or settlement payment, as defined in section 741(8) of this title, takes for value to extent of such payment' for 'a commodity broker or forward contract merchant that receives a margin payment, as defined in section 761(15) of this title, takes for value'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 303, 349, 502, 522, 546, 550, 551, 552, 749, 764, 901, 926 of this title. ------DocID 14747 Document 92 of 646------ -CITE- 11 USC Sec. 549 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 549. Postpetition transactions -STATUTE- (a) Except as provided in subsection (b) or (c) of this section, the trustee may avoid a transfer of property of the estate - (1) that occurs after the commencement of the case; and (2)(A) that is authorized only under section 303(f) or 542(c) of this title; or (B) that is not authorized under this title or by the court. (b) In an involuntary case, a transfer made after the commencement of such case but before the order for relief to the extent any value, including services, but not including satisfaction or securing of a debt that arose before the commencement of the case, is given after the commencement of the case in exchange for such transfer, notwithstanding any notice or knowledge of the case that the transferee has. (c) The trustee may not avoid under subsection (a) of this section a transfer of real property to a good faith purchaser without knowledge of the commencement of the case and for present fair equivalent value unless a copy or notice of the petition was filed, where a transfer of such real property may be recorded to perfect such transfer, before such transfer is so perfected that a bona fide purchaser of such property, against whom applicable law permits such transfer to be perfected, could not acquire an interest that is superior to the interest of such good faith purchaser. A good faith purchaser without knowledge of the commencement of the case and for less than present fair equivalent value has a lien on the property transferred to the extent of any present value given, unless a copy or notice of the petition was so filed before such transfer was so perfected. (d) An action or proceeding under this section may not be commenced after the earlier of - (1) two years after the date of the transfer sought to be avoided; or (2) the time the case is closed or dismissed. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2601; Pub. L. 98-353, title III, Sec. 464, July 10, 1984, 98 Stat. 379; Pub. L. 99-554, title II, Sec. 283(o), Oct. 27, 1986, 100 Stat. 3117.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 549 of the House amendment has been redrafted in order to incorporate sections 342(b) and (c) of the Senate amendment. Those sections have been consolidated and redrafted in section 549(c) of the House amendment. Section 549(d) of the House amendment adopts a provision contained in section 549(c) of the Senate amendment. SENATE REPORT NO. 95-989 This section modifies section 70d of current law (section 110(d) of former title 11). It permits the trustee to avoid transfers of property that occur after the commencement of the case. The transfer must either have been unauthorized, or authorized under a section that protects only the transferor. Subsection (b) protects 'involuntary gap' transferees to the extent of any value (including services, but not including satisfaction of a debt that arose before the commencement of the case), given after commencement in exchange for the transfer. Notice or knowledge of the transferee is irrelevant in determining whether he is protected under this provision. AMENDMENTS 1986 - Subsec. (b). Pub. L. 99-554 substituted 'made' for 'that occurs', and 'to the extent' for 'is valid against the trustee to the extent of', and inserted 'is' before 'given'. 1984 - Subsec. (a). Pub. L. 98-353, Sec. 464(a)(1), (2), substituted '(b) or (c)' for '(b) and (c)' in provisions preceding par. (1) and inserted 'only' between 'authorized' and 'under' in par. (2)(A). In the original of Pub. L. 98-353, subsec. (a)(2) of section 464 thereof ended with a period but was followed by pars. (3), (4), and (5). Such pars. (3), (4), and (5) purported to amend subsec. (a) of this section in ways not susceptible of execution. In a predecessor bill (S. 445), these pars. (3), (4), and (5) formed a part of a subsec. (b) of section 361 thereof which amended subsec. (b) of this section. Such subsec. (b) of section 361 of S. 445 was not carried into Pub. L. 98-353, Sec. 464. Subsec. (c). Pub. L. 98-353, Sec. 464(c), amended subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: 'The trustee may not avoid under subsection (a) of this section a transfer, to a good faith purchaser without knowledge of the commencement of the case and for present fair equivalent value or to a purchaser at a judicial sale, of real property located other than in the county in which the case is commenced, unless a copy of the petition was filed in the office where conveyances of real property in such county are recorded before such transfer was so far perfected that a bona fide purchaser of such property against whom applicable law permits such transfer to be perfected cannot acquire an interest that is superior to the interest of such good faith or judicial sale purchaser. A good faith purchaser, without knowledge of the commencement of the case and for less than present fair equivalent value, of real property located other than in the county in which the case is commenced, under a transfer that the trustee may avoid under this section, has a lien on the property transferred to the extent of any present value given, unless a copy of the petition was so filed before such transfer was so perfected.' Subsec. (d)(1). Pub. L. 98-353, Sec. 464(d), substituted 'or' for 'and'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 303, 349, 502, 522, 546, 550, 551, 749, 764, 901, 926 of this title. ------DocID 14748 Document 93 of 646------ -CITE- 11 USC Sec. 550 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 550. Liability of transferee of avoided transfer -STATUTE- (a) Except as otherwise provided in this section, to the extent that a transfer is avoided under section 544, 545, 547, 548, 549, 553(b), or 724(a) of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from - (1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or (2) any immediate or mediate transferee of such initial transferee. (b) The trustee may not recover under section (a)(2) of this section from - (1) a transferee that takes for value, including satisfaction or securing of a present or antecedent debt, in good faith, and without knowledge of the voidability of the transfer avoided; or (2) any immediate or mediate good faith transferee of such transferee. (c) The trustee is entitled to only a single satisfaction under subsection (a) of this section. (d)(1) A good faith transferee from whom the trustee may recover under subsection (a) of this section has a lien on the property recovered to secure the lesser of - (A) the cost, to such transferee, of any improvement made after the transfer, less the amount of any profit realized by or accruing to such transferee from such property; and (B) any increase in the value of such property as a result of such improvement, of the property transferred. (2) In this subsection, 'improvement' includes - (A) physical additions or changes to the property transferred; (B) repairs to such property; (C) payment of any tax on such property; (D) payment of any debt secured by a lien on such property that is superior or equal to the rights of the trustee; and (E) preservation of such property. (e) An action or proceeding under this section may not be commenced after the earlier of - (1) one year after the avoidance of the transfer on account of which recovery under this section is sought; or (2) the time the case is closed or dismissed. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2601; Pub. L. 98-353, title III, Sec. 465, July 10, 1984, 98 Stat. 379.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 550(a)(1) of the House amendment has been modified in order to permit recovery from an entity for whose benefit an avoided transfer is made in addition to a recovery from the initial transferee of the transfer. Section 550(c) would still apply, and the trustee is entitled only to a single satisfaction. The liability of a transferee under section 550(a) applies only 'to the extent that a transfer is avoided'. This means that liability is not imposed on a transferee to the extent that a transferee is protected under a provision such as section 548(c) which grants a good faith transferee for value of a transfer that is avoided only as a fraudulent transfer, a lien on the property transferred to the extent of value given. Section 550(b) of the House amendment is modified to indicate that value includes satisfaction or securing of a present antecedent debt. This means that the trustee may not recover under subsection (a)(2) from a subsequent transferee that takes for 'value', provided the subsequent transferee also takes in good faith and without knowledge of the transfer avoided. Section 550(e) of the House amendment is derived from section 550(e) of the Senate amendment. SENATE REPORT NO. 95-989 Section 550 prescribes the liability of a transferee of an avoided transfer, and enunciates the separation between the concepts of avoiding a transfer and recovering from the transferee. Subsection (a) permits the trustee to recover from the initial transferee of an avoided transfer or from any immediate or mediate transferee of the initial transferee. The words 'to the extent that' in the lead in to this subsection are designed to incorporate the protection of transferees found in proposed 11 U.S.C. 549(b) and 548(c). Subsection (b) limits the liability of an immediate or mediate transferee of the initial transferee if such secondary transferee takes for value, in good faith and without knowledge of the voidability of the transfer. An immediate or mediate good faith transferee of a protected secondary transferee is also shielded from liability. This subsection is limited to the trustee's right to recover from subsequent transferees under subsection (a)(2). It does not limit the trustee's rights against the initial transferee under subsection (a)(1). The phrase 'good faith' in this paragraph is intended to prevent a transferee from whom the trustee could recover from transferring the recoverable property to an innocent transferee, and receiving a retransfer from him, that is, 'washing' the transaction through an innocent third party. In order for the transferee to be excepted from liability under this paragraph, he himself must be a good faith transferee. Subsection (c) is a further limitation on recovery. It specifies that the trustee is entitled to only one satisfactory, under subsection (a), even if more than one transferee is liable. Subsection (d) protects good faith transferees, either initial or subsequent, to the extent of the lesser of the cost of any improvement the transferee makes in the transferred property and the increase in value of the property as a result of the improvement. Paragraph (2) of the subsection defines improvement to include physical additions or changes to the property, repairs, payment of taxes on the property, payment of a debt secured by a lien on the property, discharge of a lien on the property, and preservation of the property. Subsection (e) establishes a statute of limitations on avoidance by the Trustee. The limitation is one year after the avoidance of the transfer or the time the case is closed or dismissed, whichever is earlier. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353, Sec. 465(a), substituted '549, 553(b), or 724(a) of this title' for '549, or 724(a) of this title'. Subsec. (d)(1)(A). Pub. L. 98-353, Sec. 465(b)(1), inserted 'or accruing to' after 'by'. Subsec. (d)(1)(B). Pub. L. 98-353, Sec. 465(b)(2), substituted 'the value of such property' for 'value'. Subsec. (d)(2)(D). Pub. L. 98-353, Sec. 465(b)(3), substituted 'payment of any debt secured by a lien on such property that is superior or equal to the rights of the trustee; and' for 'payment of any debt secured by a lien on such property.' Subsec. (d)(2)(E), (F). Pub. L. 98-353, Sec. 465(b)(3), (4), struck out subpar. (E) 'discharge of any lien against such property that is superior or equal to the rights of the trustee; and' and redesignated subpar. (F) as (E). Subsec. (e)(1). Pub. L. 98-353, Sec. 465(c), substituted 'or' for 'and'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 349, 502, 522, 541, 901, 926 of this title. ------DocID 14749 Document 94 of 646------ -CITE- 11 USC Sec. 551 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 551. Automatic preservation of avoided transfer -STATUTE- Any transfer avoided under section 522, 544, 545, 547, 548, 549, or 724(a) of this title, or any lien void under section 506(d) of this title, is preserved for the benefit of the estate but only with respect to property of the estate. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2602.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 551 is adopted from the House bill and the alternative in the Senate amendment is rejected. The section is clarified to indicate that a transfer avoided or a lien that is void is preserved for the benefit of the estate, but only with respect to property of the estate. This prevents the trustee from asserting an avoided tax lien against after acquired property of the debtor. SENATE REPORT NO. 95-989 This section is a change from present law. It specifies that any avoided transfer is automatically preserved for the benefit of the estate. Under current law, the court must determine whether or not the transfer should be preserved. The operation of the section is automatic, unlike current law, even though preservation may not benefit the estate in every instance. A preserved lien may be abandoned by the trustee under proposed 11 U.S.C. 554 if the preservation does not benefit the estate. The section as a whole prevents junior lienors from improving their position at the expense of the estate when a senior lien is avoided. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 522, 541, 901 of this title. ------DocID 14750 Document 95 of 646------ -CITE- 11 USC Sec. 552 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 552. Postpetition effect of security interest -STATUTE- (a) Except as provided in subsection (b) of this section, property acquired by the estate or by the debtor after the commencement of the case is not subject to any lien resulting from any security agreement entered into by the debtor before the commencement of the case. (b) Except as provided in sections 363, 506(c), 522, 544, 545, 547, and 548 of this title, if the debtor and an entity entered into a security agreement before the commencement of the case and if the security interest created by such security agreement extends to property of the debtor acquired before the commencement of the case and to proceeds, product, offspring, rents, or profits of such property, then such security interest extends to such proceeds, product, offspring, rents, or profits acquired by the estate after the commencement of the case to the extent provided by such security agreement and by applicable nonbankruptcy law, except to any extent that the court, after notice and a hearing and based on the equities of the case, orders otherwise. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2602; Pub. L. 98-353, title III, Sec. 466, July 10, 1984, 98 Stat. 380.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 552(a) is derived from the House bill and the alternative provision in the Senate amendment is rejected. Section 552(b) represents a compromise between the House bill and the Senate amendment. Proceeds coverage, but not after acquired property clauses, are valid under title 11. The provision allows the court to consider the equities in each case. In the course of such consideration the court may evaluate any expenditures by the estate relating to proceeds and any related improvement in position of the secured party. Although this section grants a secured party a security interest in proceeds, product, offspring, rents, or profits, the section is explicitly subject to other sections of title 11. For example, the trustee or debtor in possession may use, sell, or lease proceeds, product, offspring, rents or profits under section 363. SENATE REPORT NO. 95-989 Under the Uniform Commercial Code, article 9, creditors may take security interests in after-acquired property. Section 552 governs the effect of such a prepetition security interest in postpetition property. It applies to all security interests as defined in section 101(37) of the bankruptcy code, not only to U.C.C. security interests. As a general rule, if a security agreement is entered into before the commencement of the case, then property that the estate acquires is not subject to the security interest created by a provision in the security agreement extending the security interest to after-acquired property. Subsection (b) provides an important exception consistent with the Uniform Commercial Code. If the security agreement extends to proceeds, product, offspring, rents, or profits of the property in question, then the proceeds would continue to be subject to the security interest pursuant to the terms of the security agreement and provisions of applicable law, except to the extent that where the estate acquires the proceeds at the expense of other creditors holding unsecured claims, the expenditure resulted in an improvement in the position of the secured party. The exception covers the situation where raw materials, for example, are converted into inventory, or inventory into accounts, at some expense to the estate, thus depleting the fund available for general unsecured creditors, but is limited to the benefit inuring to the secured party thereby. Situations in which the estate incurs expense in simply protecting collateral are governed by 11 U.S.C. 506(c). In ordinary circumstances, the risk of loss in continued operations will remain with the estate. HOUSE REPORT NO. 95-595 Under the Uniform Commercial Code, Article 9, creditors may take security interests in after-acquired property. This section governs the effect of such a prepetition security interest in postpetition property. It applies to all security interests as defined in section 101 of the bankruptcy code, not only to U.C.C. security interests. As a general rule, if a security agreement is entered into before the case, then property that the estate acquires is not subject to the security interest created by the security agreement. Subsection (b) provides the only exception. If the security agreement extends to proceeds, product, offspring, rents, or profits of property that the debtor had before the commencement of the case, then the proceeds, etc., continue to be subject to the security interest, except to the extent that the estate acquired the proceeds to the prejudice of other creditors holding unsecured claims. 'Extends to' as used here would include an automatically arising security interest in proceeds, as permitted under the 1972 version of the Uniform Commercial Code, as well as an interest in proceeds specifically designated, as required under the 1962 Code or similar statutes covering property not covered by the Code. 'Prejudice' is not intended to be a broad term here, but is designed to cover the situation where the estate expends funds that result in an increase in the value of collateral. The exception is to cover the situation where raw materials, for example, are converted into inventory, or inventory into accounts, at some expense to the estate, thus depleting the fund available for general unsecured creditors. The term 'proceeds' is not limited to the technical definition of that term in the U.C.C., but covers any property into which property subject to the security interest is converted. AMENDMENTS 1984 - Subsec. (b). Pub. L. 98-353 inserted '522,' after '506(c),', substituted 'an entity entered' for 'a secured party enter', and substituted 'except to any extent' for 'except to the extent'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 363, 901, 928 of this title; title 26 section 1398. ------DocID 14751 Document 96 of 646------ -CITE- 11 USC Sec. 553 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 553. Setoff -STATUTE- (a) Except as otherwise provided in this section and in sections 362 and 363 of this title, this title does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case, except to the extent that - (1) the claim of such creditor against the debtor is disallowed other than under section 502(b)(3) of this title; (FOOTNOTE 1) (FOOTNOTE 1) See References in Text note below. (2) such claim was transferred, by an entity other than the debtor, to such creditor - (A) after the commencement of the case; or (B)(i) after 90 days before the date of the filing of the petition; and (ii) while the debtor was insolvent; or (3) the debt owed to the debtor by such creditor was incurred by such creditor - (A) after 90 days before the date of the filing of the petition; (B) while the debtor was insolvent; and (C) for the purpose of obtaining a right of setoff against the debtor. (b)(1) Except with respect to a setoff of a kind described in section 362(b)(6), 362(b)(7), 362(b)(14),, (FOOTNOTE 2) 365(h)(2), or 365(i)(2) of this title, if a creditor offsets a mutual debt owing to the debtor against a claim against the debtor on or within 90 days before the date of the filing of the petition, then the trustee may recover from such creditor the amount so offset to the extent that any insufficiency on the date of such setoff is less than the insufficiency on the later of - (FOOTNOTE 2) So in original. (A) 90 days before the date of the filing of the petition; and (B) the first date during the 90 days immediately preceding the date of the filing of the petition on which there is an insufficiency. (2) In this subsection, 'insufficiency' means amount, if any, by which a claim against the debtor exceeds a mutual debt owing to the debtor by the holder of such claim. (c) For the purposes of this section, the debtor is presumed to have been insolvent on and during the 90 days immediately preceding the date of the filing of the petition. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2602; Pub. L. 98-353, title III, Sec. 395, 467, July 10, 1984, 98 Stat. 365, 380; Pub. L. 101-311, title I, Sec. 105, June 25, 1990, 104 Stat. 268.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 553 of the House amendment is derived from a similar provision contained in the Senate amendment, but is modified to clarify application of a two-point test with respect to setoffs. SENATE REPORT NO. 95-989 This section preserves, with some changes, the right of setoff in bankruptcy cases now found in section 68 of the Bankruptcy Act (section 108 of former title 11). One exception to the right is the automatic stay, discussed in connection with proposed 11 U.S.C. 362. Another is the right of the trustee to use property under section 363 that is subject to a right of setoff. The section states that the right of setoff is unaffected by the bankruptcy code except to the extent that the creditor's claim is disallowed, the creditor acquired (other than from the debtor) the claim during the 90 days preceding the case while the debtor was insolvent, the debt being offset was incurred for the purpose of obtaining a right of setoff, while the debtor was insolvent and during the 90-day prebankruptcy period, or the creditor improved his position in the 90-day period (similar to the improvement in position test found in the preference section 547(c)(5)). Only the last exception is an addition to current law. As under section 547(f), the debtor is presumed to have been insolvent during the 90 days before the case. -REFTEXT- REFERENCES IN TEXT Section 502(b) of this title, referred to in subsec. (a)(1), was amended by Pub. L. 98-353, title III, Sec. 445(b)(4), July 10, 1984, 98 Stat. 373, by repealing par. (3) and redesignating pars. (4) to (9) as (3) to (8), respectively. -MISC2- AMENDMENTS 1990 - Subsec. (b)(1). Pub. L. 101-311 substituted '362(b)(7), 362(b)(14),' for '362(b)(7),'. 1984 - Subsec. (b)(1). Pub. L. 98-353 inserted ', 362(b)(7),' after '362(b)(6)', and substituted ', 365(h)(2), or 365(i)(2)' for 'or 365(h)(1)'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 349, 502, 506, 522, 541, 542, 546, 550, 901 of this title; title 15 section 78eee. ------DocID 14752 Document 97 of 646------ -CITE- 11 USC Sec. 554 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 554. Abandonment of property of the estate -STATUTE- (a) After notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. (b) On request of a party in interest and after notice and a hearing, the court may order the trustee to abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. (c) Unless the court orders otherwise, any property scheduled under section 521(1) of this title not otherwise administered at the time of the closing of a case is abandoned to the debtor and administered for purposes of section 350 of this title. (d) Unless the court orders otherwise, property of the estate that is not abandoned under this section and that is not administered in the case remains property of the estate. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2603; Pub. L. 98-353, title III, Sec. 468, July 10, 1984, 98 Stat. 380; Pub. L. 99-554, title II, Sec. 283(p), Oct. 27, 1986, 100 Stat. 3118.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 554(b) is new and permits a party in interest to request the court to order the trustee to abandon property of the estate that is burdensome to the estate or that is of inconsequential value to the estate. SENATE REPORT NO. 95-989 Under this section the court may authorize the trustee to abandon any property of the estate that is burdensome to the estate or that is of inconsequential value to the estate. Abandonment may be to any party with a possessory interest in the property abandoned. In order to aid administration of the case, subsection (b) deems the court to have authorized abandonment of any property that is scheduled under section 521(1) and that is not administered before the case is closed. That property is deemed abandoned to the debtor. Subsection (c) specifies that if property is neither abandoned nor administered it remains property of the estate. AMENDMENTS 1986 - Subsec. (c). Pub. L. 99-554 substituted '521(1)' for '521(a)(1)'. 1984 - Subsecs. (a), (b). Pub. L. 98-353, Sec. 468(a), inserted 'and benefit' after 'value'. Subsec. (c). Pub. L. 98-353, Sec. 468(b), amended subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: 'Unless the court orders otherwise, any property that is scheduled under section 521(1) of this title and that is not administered before a case is closed under section 350 of this title is deemed abandoned.' Subsec. (d). Pub. L. 98-353, Sec. 468(c), struck out 'section (a) or (b) of' after 'not abandoned under'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 557, 722 of this title. ------DocID 14753 Document 98 of 646------ -CITE- 11 USC Sec. 555 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 555. Contractual right to liquidate a securities contract -STATUTE- The exercise of a contractual right of a stockbroker, financial institution, or securities clearing agency to cause the liquidation of a securities contract, as defined in section 741(7), because of a condition of the kind specified in section 365(e)(1) of this title shall not be stayed, avoided, or otherwise limited by operation of any provision of this title or by order of a court or administrative agency in any proceeding under this title unless such order is authorized under the provisions of the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) or any statute administered by the Securities and Exchange Commission. As used in this section, the term 'contractual right' includes a right set forth in a rule or bylaw of a national securities exchange, a national securities association, or a securities clearing agency. -SOURCE- (Added Pub. L. 97-222, Sec. 6(a), July 27, 1982, 96 Stat. 236, and amended Pub. L. 98-353, title III, Sec. 469, July 10, 1984, 98 Stat. 380.) -REFTEXT- REFERENCES IN TEXT The Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), referred to in text, is Pub. L. 91-598, Dec. 30, 1970, 84 Stat. 1636, as amended, which is classified generally to chapter 2B-1 (Sec. 78aaa et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 78aaa of Title 15 and Tables. -MISC2- AMENDMENTS 1984 - Pub. L. 98-353 inserted ', financial institution,' after 'stockbroker'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 14754 Document 99 of 646------ -CITE- 11 USC Sec. 556 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 556. Contractual right to liquidate a commodities contract or forward contract -STATUTE- The contractual right of a commodity broker or forward contract merchant to cause the liquidation of a commodity contract, as defined in section 761(4), or forward contract because of a condition of the kind specified in section 365(e)(1) of this title, and the right to a variation or maintenance margin payment received from a trustee with respect to open commodity contracts or forward contracts, shall not be stayed, avoided, or otherwise limited by operation of any provision of this title or by the order of a court in any proceeding under this title. As used in this section, the term 'contractual right' includes a right set forth in a rule or bylaw of a clearing organization or contract market or in a resolution of the governing board thereof and a right, whether or not evidenced in writing, arising under common law, under law merchant or by reason of normal business practice. -SOURCE- (Added Pub. L. 97-222, Sec. 6(a), July 27, 1982, 96 Stat. 236, and amended Pub. L. 101-311, title II, Sec. 205, June 25, 1990, 104 Stat. 270.) -MISC1- AMENDMENTS 1990 - Pub. L. 101-311 inserted before period at end 'and a right, whether or not evidenced in writing, arising under common law, under law merchant or by reason of normal business practice'. ------DocID 14755 Document 100 of 646------ -CITE- 11 USC Sec. 557 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 557. Expedited determination of interests in, and abandonment or other disposition of grain assets -STATUTE- (a) This section applies only in a case concerning a debtor that owns or operates a grain storage facility and only with respect to grain and the proceeds of grain. This section does not affect the application of any other section of this title to property other than grain and proceeds of grain. (b) In this section - (1) 'grain' means wheat, corn, flaxseed, grain sorghum, barley, oats, rye, soybeans, other dry edible beans, or rice; (2) 'grain storage facility' means a site or physical structure regularly used to store grain for producers, or to store grain acquired from producers for resale; and (3) 'producer' means an entity which engages in the growing of grain. (c)(1) Notwithstanding sections 362, 363, 365, and 554 of this title, on the court's own motion the court may, and on the request of the trustee or an entity that claims an interest in grain or the proceeds of grain the court shall, expedite the procedures for the determination of interests in and the disposition of grain and the proceeds of grain, by shortening to the greatest extent feasible such time periods as are otherwise applicable for such procedures and by establishing, by order, a timetable having a duration of not to exceed 120 days for the completion of the applicable procedure specified in subsection (d) of this section. Such time periods and such timetable may be modified by the court, for cause, in accordance with subsection (f) of this section. (2) The court shall determine the extent to which such time periods shall be shortened, based upon - (A) any need of an entity claiming an interest in such grain or the proceeds of grain for a prompt determination of such interest; (B) any need of such entity for a prompt disposition of such grain; (C) the market for such grain; (D) the conditions under which such grain is stored; (E) the costs of continued storage or disposition of such grain; (F) the orderly administration of the estate; (G) the appropriate opportunity for an entity to assert an interest in such grain; and (H) such other considerations as are relevant to the need to expedite such procedures in the case. (d) The procedures that may be expedited under subsection (c) of this section include - (1) the filing of and response to - (A) a claim of ownership; (B) a proof of claim; (C) a request for abandonment; (D) a request for relief from the stay of action against property under section 362(a) of this title; (E) a request for determination of secured status; (F) a request for determination of whether such grain or the proceeds of grain - (i) is property of the estate; (ii) must be turned over to the estate; or (iii) may be used, sold, or leased; and (G) any other request for determination of an interest in such grain or the proceeds of grain; (2) the disposition of such grain or the proceeds of grain, before or after determination of interests in such grain or the proceeds of grain, by way of - (A) sale of such grain; (B) abandonment; (C) distribution; or (D) such other method as is equitable in the case; (3) subject to sections 701, 702, 703, 1104, 1202, and 1302 of this title, the appointment of a trustee or examiner and the retention and compensation of any professional person required to assist with respect to matters relevant to the determination of interests in or disposition of such grain or the proceeds of grain; and (4) the determination of any dispute concerning a matter specified in paragraph (1), (2), or (3) of this subsection. (e)(1) Any governmental unit that has regulatory jurisdiction over the operation or liquidation of the debtor or the debtor's business shall be given notice of any request made or order entered under subsection (c) of this section. (2) Any such governmental unit may raise, and may appear and be heard on, any issue relating to grain or the proceeds of grain in a case in which a request is made, or an order is entered, under subsection (c) of this section. (3) The trustee shall consult with such governmental unit before taking any action relating to the disposition of grain in the possession, custody, or control of the debtor or the estate. (f) The court may extend the period for final disposition of grain or the proceeds of grain under this section beyond 120 days if the court finds that - (1) the interests of justice so require in light of the complexity of the case; and (2) the interests of those claimants entitled to distribution of grain or the proceeds of grain will not be materially injured by such additional delay. (g) Unless an order establishing an expedited procedure under subsection (c) of this section, or determining any interest in or approving any disposition of grain or the proceeds of grain, is stayed pending appeal - (1) the reversal or modification of such order on appeal does not affect the validity of any procedure, determination, or disposition that occurs before such reversal or modification, whether or not any entity knew of the pendency of the appeal; and (2) neither the court nor the trustee may delay, due to the appeal of such order, any proceeding in the case in which such order is issued. (h)(1) The trustee may recover from grain and the proceeds of grain the reasonable and necessary costs and expenses allowable under section 503(b) of this title attributable to preserving or disposing of grain or the proceeds of grain, but may not recover from such grain or the proceeds of grain any other costs or expenses. (2) Notwithstanding section 326(a) of this title, the dollar amounts of money specified in such section include the value, as of the date of disposition, of any grain that the trustee distributes in kind. (i) In all cases where the quantity of a specific type of grain held by a debtor operating a grain storage facility exceeds ten thousand bushels, such grain shall be sold by the trustee and the assets thereof distributed in accordance with the provisions of this section. -SOURCE- (Added Pub. L. 98-353, title III, Sec. 352(a), July 10, 1984, 98 Stat. 359, and amended Pub. L. 99-554, title II, Sec. 257(p), Oct. 27, 1986, 100 Stat. 3115.) -MISC1- AMENDMENTS 1986 - Subsec. (d)(3). Pub. L. 99-554 inserted reference to section 1202 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE Section effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as an Effective Date of 1984 Amendment note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 507, 546, 901 of this title. ------DocID 14756 Document 101 of 646------ -CITE- 11 USC Sec. 558 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 558. Defenses of the estate -STATUTE- The estate shall have the benefit of any defense available to the debtor as against any entity other than the estate, including statutes of limitation, statutes of frauds, usury, and other personal defenses. A waiver of any such defense by the debtor after the commencement of the case does not bind the estate. -SOURCE- (Added Pub. L. 98-353, title III, Sec. 470(a), July 10, 1984, 98 Stat. 380.) -MISC1- EFFECTIVE DATE Section effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as an Effective Date of 1984 Amendment note under section 101 of this title. ------DocID 14757 Document 102 of 646------ -CITE- 11 USC Sec. 559 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 559. Contractual right to liquidate a repurchase agreement -STATUTE- The exercise of a contractual right of a repo participant to cause the liquidation of a repurchase agreement because of a condition of the kind specified in section 365(e)(1) of this title shall not be stayed, avoided, or otherwise limited by operation of any provision of this title or by order of a court or administrative agency in any proceeding under this title, unless, where the debtor is a stockbroker or securities clearing agency, such order is authorized under the provisions of the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.) or any statute administered by the Securities and Exchange Commission. In the event that a repo participant liquidates one or more repurchase agreements with a debtor and under the terms of one or more such agreements has agreed to deliver assets subject to repurchase agreements to the debtor, any excess of the market prices received on liquidation of such assets (or if any such assets are not disposed of on the date of liquidation of such repurchase agreements, at the prices available at the time of liquidation of such repurchase agreements from a generally recognized source or the most recent closing bid quotation from such a source) over the sum of the stated repurchase prices and all expenses in connection with the liquidation of such repurchase agreements shall be deemed property of the estate, subject to the available rights of setoff. As used in this section, the term 'contractual right' includes a right set forth in a rule or bylaw, applicable to each party to the repurchase agreement, of a national securities exchange, a national securities association, or a securities clearing agency, and a right, whether or not evidenced in writing, arising under common law, under law merchant or by reason of normal business practice. -SOURCE- (Added Pub. L. 98-353, title III, Sec. 396(a), July 10, 1984, 98 Stat. 366.) -REFTEXT- REFERENCES IN TEXT The Securities Investor Protection Act of 1970, referred to in text, is Pub. L. 91-598, Dec. 30, 1970, 84 Stat. 1636, as amended, which is classified generally to chapter 2B-1 (Sec. 78aaa et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 78aaa of Title 15 and Tables. -MISC2- EFFECTIVE DATE Section effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as an Effective Date of 1984 Amendment note under section 101 of this title. ------DocID 14758 Document 103 of 646------ -CITE- 11 USC Sec. 560 -EXPCITE- TITLE 11 CHAPTER 5 SUBCHAPTER III -HEAD- Sec. 560. Contractual right to terminate a swap agreement -STATUTE- The exercise of any contractual right of any swap participant to cause the termination of a swap agreement because of a condition of the kind specified in section 365(e)(1) of this title or to offset or net out any termination values or payment amounts arising under or in connection with any swap agreement shall not be stayed, avoided, or otherwise limited by operation of any provision of this title or by order of a court or administrative agency in any proceeding under this title. As used in this section, the term 'contractual right' includes a right, whether or not evidenced in writing, arising under common law, under law merchant, or by reason of normal business practice. -SOURCE- (Added Pub. L. 101-311, title I, Sec. 106(a), June 25, 1990, 104 Stat. 268.) ------DocID 14759 Document 104 of 646------ -CITE- 11 USC CHAPTER 7 -EXPCITE- TITLE 11 CHAPTER 7 -HEAD- CHAPTER 7 - LIQUIDATION -MISC1- SUBCHAPTER I - OFFICERS AND ADMINISTRATION Sec. 701. Interim trustee. 702. Election of trustee. 703. Successor trustee. 704. Duties of trustee. 705. Creditors' committee. 706. Conversion. 707. Dismissal. SUBCHAPTER II - COLLECTION, LIQUIDATION, AND DISTRIBUTION OF THE ESTATE 721. Authorization to operate business. 722. Redemption. 723. Rights of partnership trustee against general partners. 724. Treatment of certain liens. 725. Disposition of certain property. 726. Distribution of property of the estate. 727. Discharge. 728. Special tax provisions. SUBCHAPTER III - STOCKBROKER LIQUIDATION 741. Definitions for this subchapter. 742. Effect of section 362 of this title in this subchapter. 743. Notice. 744. Executory contracts. 745. Treatment of accounts. 746. Extent of customer claims. 747. Subordination of certain customer claims. 748. Reduction of securities to money. 749. Voidable transfers. 750. Distribution of securities. 751. Customer name securities. 752. Customer property. SUBCHAPTER IV - COMMODITY BROKER LIQUIDATION 761. Definitions for this subchapter. 762. Notice to the Commission and right to be heard. 763. Treatment of accounts. 764. Voidable transfers. 765. Customer instructions. 766. Treatment of customer property. AMENDMENTS 1984 - Pub. L. 98-353, title III, Sec. 471, July 10, 1984, 98 Stat. 380, substituted 'Successor' for 'Succesor' in item 703. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in sections 103, 109, 303, 321, 326, 327, 330, 346, 347, 362, 365, 502, 508, 521, 524, 547, 1106, 1112, 1129, 1141, 1173, 1174, 1201, 1207, 1208, 1225, 1228, 1301, 1306, 1307, 1325, 1328 of this title; title 7 section 24; title 15 section 78fff-1; title 26 sections 108, 1398, 6012; title 28 sections 586, 1930; title 29 section 1362. ------DocID 14760 Document 105 of 646------ -CITE- 11 USC SUBCHAPTER I -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER I -HEAD- SUBCHAPTER I - OFFICERS AND ADMINISTRATION -SECREF- SUBCHAPTER REFERRED TO IN OTHER SECTIONS This subchapter is referred to in section 103 of this title; title 15 section 78fff. ------DocID 14761 Document 106 of 646------ -CITE- 11 USC Sec. 701 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER I -HEAD- Sec. 701. Interim trustee -STATUTE- (a)(1) Promptly after the order for relief under this chapter, the United States trustee shall appoint one disinterested person that is a member of the panel of private trustees established under section 586(a)(1) of title 28 or that is serving as trustee in the case immediately before the order for relief under this chapter to serve as interim trustee in the case. (2) If none of the members of such panel is willing to serve as interim trustee in the case, then the United States trustee may serve as interim trustee in the case. (b) The service of an interim trustee under this section terminates when a trustee elected or designated under section 702 of this title to serve as trustee in the case qualifies under section 322 of this title. (c) An interim trustee serving under this section is a trustee in a case under this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2604; Pub. L. 99-554, title II, Sec. 215, Oct. 27, 1986, 100 Stat. 3100.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS The House amendment deletes section 701(d) of the Senate amendment. It is anticipated that the Rules of Bankruptcy Procedure will require the appointment of an interim trustee at the earliest practical moment in commodity broker bankruptcies, but no later than noon of the day after the date of the filing of the petition, due to the volatility of such cases. SENATE REPORT NO. 95-989 This section requires the court to appoint an interim trustee. The appointment must be made from the panel of private trustees established and maintained by the Director of the Administrative Office under proposed 28 U.S.C. 604(e). Subsection (a) requires the appointment of an interim trustee to be made promptly after the order for relief, unless a trustee is already serving in the case, such as before a conversion from a reorganization to a liquidation case. Subsection (b) specifies that the appointment of an interim trustee expires when the permanent trustee is elected or designated under section 702. Subsection (c) makes clear that an interim trustee is a trustee in a case under the bankruptcy code. Subsection (d) provides that in a commodity broker case where speed is essential the interim trustee must be appointed by noon of the business day immediately following the order for relief. AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554 designated existing provisions as par. (1), substituted 'the United States trustee shall appoint' for 'the court shall appoint', '586(a)(1)' for '604(f)', 'that is serving' for 'that was serving', and added par. (2). EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 303, 322, 348, 557, 703 of this title. ------DocID 14762 Document 107 of 646------ -CITE- 11 USC Sec. 702 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER I -HEAD- Sec. 702. Election of trustee -STATUTE- (a) A creditor may vote for a candidate for trustee only if such creditor - (1) holds an allowable, undisputed, fixed, liquidated, unsecured claim of a kind entitled to distribution under section 726(a)(2), 726(a)(3), 726(a)(4), 752(a), 766(h), or 766(i) of this title; (2) does not have an interest materially adverse, other than an equity interest that is not substantial in relation to such creditor's interest as a creditor, to the interest of creditors entitled to such distribution; and (3) is not an insider. (b) At the meeting of creditors held under section 341 of this title, creditors may elect one person to serve as trustee in the case if election of a trustee is requested by creditors that may vote under subsection (a) of this section, and that hold at least 20 percent in amount of the claims specified in subsection (a)(1) of this section that are held by creditors that may vote under subsection (a) of this section. (c) A candidate for trustee is elected trustee if - (1) creditors holding at least 20 percent in amount of the claims of a kind specified in subsection (a)(1) of this section that are held by creditors that may vote under subsection (a) of this section vote; and (2) such candidate receives the votes of creditors holding a majority in amount of claims specified in subsection (a)(1) of this section that are held by creditors that vote for a trustee. (d) If a trustee is not elected under this section, then the interim trustee shall serve as trustee in the case. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2604; Pub. L. 97-222, Sec. 7, July 27, 1982, 96 Stat. 237; Pub. L. 98-353, title III, Sec. 472, July 10, 1984, 98 Stat. 380.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS The House amendment adopts section 702(a)(2) of the Senate amendment. An insubstantial equity interest does not disqualify a creditor from voting for a candidate for trustee. SENATE REPORT NO. 95-989 Subsection (a) of this section specifies which creditors may vote for a trustee. Only a creditor that holds an allowable, undisputed, fixed, liquidated, unsecured claim that is not entitled to priority, that does not have an interest materially adverse to the interest of general unsecured creditors, and that is not an insider may vote for a trustee. The phrase 'materially adverse' is currently used in the Rules of Bankruptcy Procedure, rule 207(d). The application of the standard requires a balancing of various factors, such as the nature of the adversity. A creditor with a very small equity position would not be excluded from voting solely because he holds a small equity in the debtor. The Rules of Bankruptcy Procedure also currently provide for temporary allowance of claims, and will continue to do so for the purposes of determining who is eligible to vote under this provision. Subsection (b) permits creditors at the meeting of creditors to elect one person to serve as trustee in the case. Creditors holding at least 20 percent in amount of the claims specified in the preceding paragraph must request election before creditors may elect a trustee. Subsection (c) specifies that a candidate for trustee is elected trustee if creditors holding at least 20 percent in amount of those claims actually vote, and if the candidate receives a majority in amount of votes actually cast. Subsection (d) specifies that if a trustee is not elected, then the interim trustee becomes the permanent trustee and serves in the case permanently. AMENDMENTS 1984 - Subsec. (b). Pub. L. 98-353, Sec. 472(a), inserted 'held' after 'meeting of creditors'. Subsec. (c)(1). Pub. L. 98-353, Sec. 472(b)(1), inserted 'of a kind' after 'claims'. Subsec. (c)(2). Pub. L. 98-353, Sec. 472(b)(2), substituted 'for a trustee' for 'for trustee'. Subsec. (d). Pub. L. 98-353, Sec. 472(c), substituted 'this section' for 'subsection (c) of this section'. 1982 - Subsec. (a)(1). Pub. L. 97-222 substituted '726(a)(4), 752(a), 766(h), or 766(i)' for 'or 726(a)(4)'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 322, 546, 557, 701, 703, 705 of this title. ------DocID 14763 Document 108 of 646------ -CITE- 11 USC Sec. 703 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER I -HEAD- Sec. 703. Successor trustee -STATUTE- (a) If a trustee dies or resigns during a case, fails to qualify under section 322 of this title, or is removed under section 324 of this title, creditors may elect, in the manner specified in section 702 of this title, a person to fill the vacancy in the office of trustee. (b) Pending election of a trustee under subsection (a) of this section, if necessary to preserve or prevent loss to the estate, the United States trustee may appoint an interim trustee in the manner specified in section 701(a). (c) If creditors do not elect a successor trustee under subsection (a) of this section or if a trustee is needed in a case reopened under section 350 of this title, then the United States trustee - (1) shall appoint one disinterested person that is a member of the panel of private trustees established under section 586(a)(1) of title 28 to serve as trustee in the case; or (2) may, if none of the disinterested members of such panel is willing to serve as trustee, serve as trustee in the case. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2605; Pub. L. 98-353, title III, Sec. 473, July 10, 1984, 98 Stat. 381; Pub. L. 99-554, title II, Sec. 216, Oct. 27, 1986, 100 Stat. 3100.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 If the office of trustee becomes vacant during the case, this section makes provision for the selection of a successor trustee. The office might become vacant through death, resignation, removal, failure to qualify under section 322 by posting bond, or the reopening of a case. If it does, creditors may elect a successor in the same manner as they may elect a trustee under the previous section. Pending the election of a successor, the court may appoint an interim trustee in the usual manner if necessary to preserve or prevent loss to the estate. If creditors do not elect a successor, or if a trustee is needed in a reopened case, then the court appoints a disinterested member of the panel of private trustees to serve. AMENDMENTS 1986 - Subsec. (b). Pub. L. 99-554 amended subsec. (b) generally, substituting 'the United States trustee may appoint' for 'the court may appoint' and 'manner specified in section 701(a)' for 'manner and subject to the provisions of section 701 of this title'. Subsec. (c). Pub. L. 99-554 amended subsec. (c) generally, substituting 'this section or' for 'this section, or', 'then the United States trustee' for 'then the court', designating part of existing provisions as par. (1), and, as so designated, substituting '586(a)(1)' for '604(f)', 'in the case; or' for 'in the case.', and adding par. (2). 1984 - Subsec. (b). Pub. L. 98-353 substituted 'and subject to the provisions of section 701 of this title' for 'specified in section 701(a) of this title. Sections 701(b) and 701(c) of this title apply to such interim trustee'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 322, 557 of this title. ------DocID 14764 Document 109 of 646------ -CITE- 11 USC Sec. 704 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER I -HEAD- Sec. 704. Duties of trustee -STATUTE- The trustee shall - (1) collect and reduce to money the property of the estate for which such trustee serves, and close such estate as expeditiously as is compatible with the best interests of parties in interest; (2) be accountable for all property received; (3) ensure that the debtor shall perform his intention as specified in section 521(2)(B) of this title; (4) investigate the financial affairs of the debtor; (5) if a purpose would be served, examine proofs of claims and object to the allowance of any claim that is improper; (6) if advisable, oppose the discharge of the debtor; (7) unless the court orders otherwise, furnish such information concerning the estate and the estate's administration as is requested by a party in interest; (8) if the business of the debtor is authorized to be operated, file with the court, with the United States trustee, and with any governmental unit charged with responsibility for collection or determination of any tax arising out of such operation, periodic reports and summaries of the operation of such business, including a statement of receipts and disbursements, and such other information as the United States trustee or the court requires; and (9) make a final report and file a final account of the administration of the estate with the court and with the United States trustee. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2605; Pub. L. 98-353, title III, Sec. 311(a), 474, July 10, 1984, 98 Stat. 355, 381; Pub. L. 99-554, title II, Sec. 217, Oct. 27, 1986, 100 Stat. 3100.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 704(8) of the Senate amendment is deleted in the House amendment. Trustees should give constructive notice of the commencement of the case in the manner specified under section 549(c) of title 11. SENATE REPORT NO. 95-989 The essential duties of the trustee are enumerated in this section. Others, or elaborations on these, may be prescribed by the Rules of Bankruptcy Procedure to the extent not inconsistent with those prescribed by this section. The duties are derived from section 47a of the Bankruptcy Act (section 75(a) of former title 11). The trustee's principal duty is to collect and reduce to money the property of the estate for which he serves, and to close up the estate as expeditiously as is compatible with the best interests of parties in interest. He must be accountable for all property received, and must investigate the financial affairs of the debtor. If a purpose would be served (such as if there are assets that will be distributed), the trustee is required to examine proofs of claims and object to the allowance of any claim that is improper. If advisable, the trustee must oppose the discharge of the debtor, which is for the benefit of general unsecured creditors whom the trustee represents. The trustee is responsible to furnish such information concerning the estate and its administration as is requested by a party in interest. If the business of the debtor is authorized to be operated, then the trustee is required to file with governmental units charged with the responsibility for collection or determination of any tax arising out of the operation of the business periodic reports and summaries of the operation, including a statement of receipts and disbursements, and such other information as the court requires. He is required to give constructive notice of the commencement of the case in the manner specified under section 342(b). AMENDMENTS 1986 - Par. (8). Pub. L. 99-554, Sec. 217(1), inserted ', with the United States trustee,' after 'with the court' and 'the United States trustee or' after 'information as'. Par. (9). Pub. L. 99-554, Sec. 217(2), inserted 'with the United States trustee' after 'court'. 1984 - Par. (1). Pub. L. 98-353, Sec. 474, substituted 'close such estate' for 'close up such estate'. Pars. (3) to (9). Pub. L. 98-353, Sec. 311(a), added par. (3) and redesignated former pars. (3) to (8) as (4) to (9), respectively. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1106, 1202, 1302, 1304 of this title; title 29 section 1342. ------DocID 14765 Document 110 of 646------ -CITE- 11 USC Sec. 705 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER I -HEAD- Sec. 705. Creditors' committee -STATUTE- (a) At the meeting under section 341(a) of this title, creditors that may vote for a trustee under section 702(a) of this title may elect a committee of not fewer than three, and not more than eleven, creditors, each of whom holds an allowable unsecured claim of a kind entitled to distribution under section 726(a)(2) of this title. (b) A committee elected under subsection (a) of this section may consult with the trustee or the United States trustee in connection with the administration of the estate, make recommendations to the trustee or the United States trustee respecting the performance of the trustee's duties, and submit to the court or the United States trustee any question affecting the administration of the estate. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2605; Pub. L. 99-554, title II, Sec. 218, Oct. 27, 1986, 100 Stat. 3100.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 705(a) of the House amendment adopts a provision contained in the Senate amendment that limits a committee of creditors to not more than 11; the House bill contained no maximum limitation. SENATE REPORT NO. 95-989 This section is derived from section 44b of the Bankruptcy Act (section 72(b) of former title 11) without substantial change. It permits election by general unsecured creditors of a committee of not fewer than 3 members and not more than 11 members to consult with the trustee in connection with the administration of the estate, to make recommendations to the trustee respecting the performance of his duties, and to submit to the court any question affecting the administration of the estate. There is no provision for compensation or reimbursement of its counsel. AMENDMENTS 1986 - Subsec. (b). Pub. L. 99-554 inserted 'or the United States trustee' in three places. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. ------DocID 14766 Document 111 of 646------ -CITE- 11 USC Sec. 706 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER I -HEAD- Sec. 706. Conversion -STATUTE- (a) The debtor may convert a case under this chapter to a case under chapter 11, 12, or 13 of this title at any time, if the case has not been converted under section 1112, 1307, or 1208 of this title. Any waiver of the right to convert a case under this subsection is unenforceable. (b) On request of a party in interest and after notice and a hearing, the court may convert a case under this chapter to a case under chapter 11 of this title at any time. (c) The court may not convert a case under this chapter to a case under chapter 12 or 13 of this title unless the debtor requests such conversion. (d) Notwithstanding any other provision of this section, a case may not be converted to a case under another chapter of this title unless the debtor may be a debtor under such chapter. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2606; Pub. L. 99-554, title II, Sec. 257(q), Oct. 27, 1986, 100 Stat. 3115.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 706(a) of the House amendment adopts a provision contained in the Senate amendment indicating that a waiver of the right to convert a case under section 706(a) is unenforceable. The explicit reference in title 11 forbidding the waiver of certain rights is not intended to imply that other rights, such as the right to file a voluntary bankruptcy case under section 301, may be waived. Section 706 of the House amendment adopts a similar provision contained in H.R. 8200 as passed by the House. Competing proposals contained in section 706(c) and section 706(d) of the Senate amendment are rejected. SENATE REPORT NO. 95-989 Subsection (a) of this section gives the debtor the one-time absolute right of conversion of a liquidation case to a reorganization or individual repayment plan case. If the case has already once been converted from chapter 11 or 13 to chapter 7, then the debtor does not have that right. The policy of the provision is that the debtor should always be given the opportunity to repay his debts, and a waiver of the right to convert a case is unenforceable. Subsection (b) permits the court, on request of a party in interest and after notice and a hearing, to convert the case to chapter 11 at any time. The decision whether to convert is left in the sound discretion of the court, based on what will most inure to the benefit of all parties in interest. Subsection (c) is part of the prohibition against involuntary chapter 13 cases, and prohibits the court from converting a case to chapter 13 without the debtor's consent. Subsection (d) reinforces section 109 by prohibiting conversion to a chapter unless the debtor is eligible to be a debtor under that chapter. AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554, Sec. 257(q)(1), inserted references to chapter 12 and section 1208 of this title. Subsec. (c). Pub. L. 99-554, Sec. 257(q)(2), inserted reference to chapter 12. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 348, 1146, 1208, 1231, 1307 of this title. ------DocID 14767 Document 112 of 646------ -CITE- 11 USC Sec. 707 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER I -HEAD- Sec. 707. Dismissal -STATUTE- (a) The court may dismiss a case under this chapter only after notice and a hearing and only for cause, including - (1) unreasonable delay by the debtor that is prejudicial to creditors; (2) nonpayment of any fees or charges required under chapter 123 of title 28; and (3) failure of the debtor in a voluntary case to file, within fifteen days or such additional time as the court may allow after the filing of the petition commencing such case, the information required by paragraph (1) of section 521, but only on a motion by the United States trustee. (b) After notice and a hearing, the court, on its own motion or on a motion by the United States trustee, but not at the request or suggestion of any party in interest, may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts if it finds that the granting of relief would be a substantial abuse of the provisions of this chapter. There shall be a presumption in favor of granting the relief requested by the debtor. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2606; Pub. L. 98-353, title III, Sec. 312, 475, July 10, 1984, 98 Stat. 355, 381; Pub. L. 99-554, title II, Sec. 219, Oct. 27, 1986, 100 Stat. 3100.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 707 of the House amendment indicates that the court may dismiss a case only after notice and a hearing. SENATE REPORT NO. 95-989 This section authorizes the court to dismiss a liquidation case only for cause, such as unreasonable delay by the debtor that is prejudicial to creditors or nonpayment of any fees and charges required under chapter 123 (Sec. 1911 et seq.) of title 28. These causes are not exhaustive, but merely illustrative. The section does not contemplate, however, that the ability of the debtor to repay his debts in whole or in part constitutes adequate cause for dismissal. To permit dismissal on that ground would be to enact a non-uniform mandatory chapter 13, in lieu of the remedy of bankruptcy. AMENDMENTS 1986 - Subsec. (a)(3). Pub. L. 99-554, Sec. 219(a), added par. (3). Subsec. (b). Pub. L. 99-554, Sec. 219(b), substituted 'motion or on a motion by the United States trustee, but' for 'motion and'. 1984 - Pub. L. 98-353 designated existing provisions as subsec. (a) and in pars. (1) and (2) substituted 'or' for 'and', and added subsec. (b). EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. RULES PROMULGATED BY SUPREME COURT United States Supreme Court to prescribe general rules implementing the practice and procedure to be followed under subsec. (b) of this section, with section 2075 of Title 28, Judiciary and Judicial Procedure, to apply with respect to such general rules, see section 320 of Pub. L. 98-353, set out as a note under section 2075 of Title 28. ------DocID 14768 Document 113 of 646------ -CITE- 11 USC SUBCHAPTER II -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER II -HEAD- SUBCHAPTER II - COLLECTION, LIQUIDATION, AND DISTRIBUTION OF THE ESTATE -SECREF- SUBCHAPTER REFERRED TO IN OTHER SECTIONS This subchapter is referred to in section 103 of this title; title 15 section 78fff. ------DocID 14769 Document 114 of 646------ -CITE- 11 USC Sec. 721 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER II -HEAD- Sec. 721. Authorization to operate business -STATUTE- The court may authorize the trustee to operate the business of the debtor for a limited period, if such operation is in the best interest of the estate and consistent with the orderly liquidation of the estate. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2606.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 This section is derived from section 2a(5) of the Bankruptcy Act (section 11(a)(5) of former title 11). It permits the court to authorize the operation of any business of the debtor for a limited period, if the operation is in the best interest of the estate and consistent with orderly liquidation of the estate. An example is the operation of a watch company to convert watch movements and cases into completed watches which will bring much higher prices than the component parts would have brought. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 327, 363, 364 of this title. ------DocID 14770 Document 115 of 646------ -CITE- 11 USC Sec. 722 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER II -HEAD- Sec. 722. Redemption -STATUTE- An individual debtor may, whether or not the debtor has waived the right to redeem under this section, redeem tangible personal property intended primarily for personal, family, or household use, from a lien securing a dischargeable consumer debt, if such property is exempted under section 522 of this title or has been abandoned under section 554 of this title, by paying the holder of such lien the amount of the allowed secured claim of such holder that is secured by such lien. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2606.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 722 of the House amendment adopts the position taken in H.R. 8200 as passed by the House and rejects the alternative contained in section 722 of the Senate amendment. SENATE REPORT NO. 95-989 This section is new and is broader than rights of redemption under the Uniform Commercial Code. It authorizes an individual debtor to redeem tangible personal property intended primarily for personal, family, or household use, from a lien securing a nonpurchase money dischargeable consumer debt. It applies only if the debtor's interest in the property is exempt or has been abandoned. This right to redeem is a very substantial change from current law. To prevent abuses such as may occur when the debtor deliberately allows the property to depreciate in value, the debtor will be required to pay the fair market value of the goods or the amount of the claim if the claim is less. The right is personal to the debtor and not assignable. HOUSE REPORT NO. 95-595 This section is new and is broader than rights of redemption under the Uniform Commercial Code. It authorizes an individual debtor to redeem tangible personal property intended primarily for personal, family, or household use, from a lien securing a dischargeable consumer debt. It applies only if the debtor's interest in the property is exempt or has been abandoned. The right to redeem extends to the whole of the property, not just the debtor's exempt interest in it. Thus, for example, if a debtor owned a $2,000 car, subject to a $1,200 lien, the debtor could exempt his $800 interest in the car. The debtor is permitted a $1,500 exemption in a car, proposed 11 U.S.C. 522(d)(2). This section permits him to pay the holder of the lien $1,200 and redeem the entire car, not just the remaining $700 of his exemption. The redemption is accomplished by paying the holder of the lien the amount of the allowed claim secured by the lien. The provision amounts to a right of first refusal for the debtor in consumer goods that might otherwise be repossessed. The right of redemption under this section is not waivable. ------DocID 14771 Document 116 of 646------ -CITE- 11 USC Sec. 723 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER II -HEAD- Sec. 723. Rights of partnership trustee against general partners -STATUTE- (a) If there is a deficiency of property of the estate to pay in full all claims which are allowed in a case under this chapter concerning a partnership and with respect to which a general partner of the partnership is personally liable, the trustee shall have a claim against such general partner for the full amount of the deficiency. (b) To the extent practicable, the trustee shall first seek recovery of such deficiency from any general partner in such partnership that is not a debtor in a case under this title. Pending determination of such deficiency, the court may order any such partner to provide the estate with indemnity for, or assurance of payment of, any deficiency recoverable from such partner, or not to dispose of property. (c) Notwithstanding section 728(c) of this title, the trustee has a claim against the estate of each general partner in such partnership that is a debtor in a case under this title for the full amount of all claims of creditors allowed in the case concerning such partnership. Notwithstanding section 502 of this title, there shall not be allowed in such partner's case a claim against such partner on which both such partner and such partnership are liable, except to any extent that such claim is secured only by property of such partner and not by property of such partnership. The claim of the trustee under this subsection is entitled to distribution in such partner's case under section 726(a) of this title the same as any other claim of a kind specified in such section. (d) If the aggregate that the trustee recovers from the estates of general partners under subsection (c) of this section is greater than any deficiency not recovered under subsection (b) of this section, the court, after notice and a hearing, shall determine an equitable distribution of the surplus so recovered, and the trustee shall distribute such surplus to the estates of the general partners in such partnership according to such determination. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2606; Pub. L. 98-353, title III, Sec. 476, July 10, 1984, 98 Stat. 381.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 723(c) of the House amendment is a compromise between similar provisions contained in the House bill and Senate amendment. The section makes clear that the trustee of a partnership has a claim against each general partner for the full amount of all claims of creditors allowed in the case concerning the partnership. By restricting the trustee's rights to claims of 'creditors,' the trustee of the partnership will not have a claim against the general partners for administrative expenses or claims allowed in the case concerning the partnership. As under present law, sections of the Bankruptcy Act (former title 11) applying to codebtors and sureties apply to the relationship of a partner with respect to a partnership debtor. See sections 501(b), 502(e), 506(d)(2), 509, 524(d), and 1301 of title 11. SENATE REPORT NO. 95-989 This section is a significant departure from present law. It repeals the jingle rule, which, for ease of administration, denied partnership creditors their rights against general partners by permitting general partners' individual creditors to share in their estates first to the exclusion of partnership creditors. The result under this section more closely tracks generally applicable partnership law, without a significant administrative burden. Subsection (a) specifies that each general partner in a partnership debtor is liable to the partnership's trustee for any deficiency of partnership property to pay in full all administrative expenses and all claims against the partnership. Subsection (b) requires the trustee to seek recovery of the deficiency from any general partner that is not a debtor in a bankruptcy case. The court is empowered to order that partner to indemnify the estate or not to dispose of property pending a determination of the deficiency. The language of the subsection is directed to cases under the bankruptcy code. However, if, during the early stages of the transition period, a partner in a partnership is proceeding under the Bankruptcy Act (former title 11) while the partnership is proceeding under the bankruptcy code, the trustee should not first seek recovery against the Bankruptcy Act partner. Rather, the Bankruptcy Act partner should be deemed for the purposes of this section and the rights of the trustee to be proceeding under title 11. Subsection (c) requires the partnership trustee to seek recovery of the full amount of the deficiency from the estate of each general partner that is a debtor in a bankruptcy case. The trustee will share equally with the partners' individual creditors in the assets of the partners' estates. Claims of partnership creditors who may have filed against the partner will be disallowed to avoid double counting. Subsection (d) provides for the case where the total recovery from all of the bankrupt general partners is greater than the deficiency of which the trustee sought recovery. This case would most likely occur for a partnership with a large number of general partners. If the situation arises, the court is required to determine an equitable redistribution of the surplus to the estate of the general partners. The determination will be based on factors such as the relative liability of each of the general partners under the partnership agreement and the relative rights of each of the general partners in the profits of the enterprise under the partnership agreement. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353, Sec. 476, substituted provisions that the trustee shall have a claim for the full amount of the deficiency against a general partner who is personally liable with respect to claims concerning partnerships which are allowed in a case under this chapter, for provisions that each general partner in the partnership would be liable to the trustee for the full amount of such deficiency. Subsec. (c). Pub. L. 98-353, Sec. 476(b), substituted 'such partner's case' for 'such case' in two places, 'by property of such partnership' for 'be property of such partnership', and 'a kind specified in such section' for 'the kind specified in such section'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 541 of this title. ------DocID 14772 Document 117 of 646------ -CITE- 11 USC Sec. 724 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER II -HEAD- Sec. 724. Treatment of certain liens -STATUTE- (a) The trustee may avoid a lien that secures a claim of a kind specified in section 726(a)(4) of this title. (b) Property in which the estate has an interest and that is subject to a lien that is not avoidable under this title and that secures an allowed claim for a tax, or proceeds of such property, shall be distributed - (1) first, to any holder of an allowed claim secured by a lien on such property that is not avoidable under this title and that is senior to such tax lien; (2) second, to any holder of a claim of a kind specified in section 507(a)(1), 507(a)(2), 507(a)(3), 507(a)(4), 507(a)(5), or 507(a)(6) of this title, to the extent of the amount of such allowed tax claim that is secured by such tax lien; (3) third, to the holder of such tax lien, to any extent that such holder's allowed tax claim that is secured by such tax lien exceeds any amount distributed under paragraph (2) of this subsection; (4) fourth, to any holder of an allowed claim secured by a lien on such property that is not avoidable under this title and that is junior to such tax lien; (5) fifth, to the holder of such tax lien, to the extent that such holder's allowed claim secured by such tax lien is not paid under paragraph (3) of this subsection; and (6) sixth, to the estate. (c) If more than one holder of a claim is entitled to distribution under a particular paragraph of subsection (b) of this section, distribution to such holders under such paragraph shall be in the same order as distribution to such holders would have been other than under this section. (d) A statutory lien the priority of which is determined in the same manner as the priority of a tax lien under section 6323 of the Internal Revenue Code of 1986 (26 U.S.C. 6323) shall be treated under subsection (b) of this section the same as if such lien were a tax lien. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2607; Pub. L. 98-353, title III, Sec. 477, July 10, 1984, 98 Stat. 381; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095; Pub. L. 99-554, title II, Sec. 283(r), Oct. 27, 1986, 100 Stat. 3118.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 724 of the House amendment adopts the provision taken in the House bill and rejects the provision taken in the Senate amendment. In effect, a tax claim secured by a lien is treated as a claim between the fifth and sixth priority in a case under chapter 7 rather than as a secured claim. Treatment of certain liens: The House amendment modifies present law by requiring the subordination of tax liens on both real and personal property to the payment of claims having a priority. This means that assets are to be distributed from the debtor's estate to pay higher priority claims before the tax claims are paid, even though the tax claims are properly secured. Under present law and the Senate amendment only tax liens on personal property, but not on real property, are subordinated to the payment of claims having a priority above the priority for tax claims. SENATE REPORT NO. 95-989 Subsection (a) of section 724 permits the trustee to avoid a lien that secures a fine, penalty, forfeiture, or multiple, punitive, or exemplary damages claim to the extent that the claim is not compensation for actual pecuniary loss. The subsection follows the policy found in section 57j of the Bankruptcy Act (section 93(j) of former title 11) of protecting unsecured creditors from the debtor's wrongdoing, but expands the protection afforded. The lien is made voidable rather than void in chapter 7, in order to permit the lien to be revived if the case is converted to chapter 11 under which penalty liens are not voidable. To make the lien void would be to permit the filing of a chapter 7, the voiding of the lien, and the conversion to a chapter 11, simply to avoid a penalty lien, which should be valid in a reorganization case. Subsection (b) governs tax liens. This provision retains the rule of present bankruptcy law (Sec. 67(C)(3) of the Bankruptcy Act (section 107(c)(3) of former title 11)) that a tax lien on personal property, if not avoidable by the trustee, is subordinated in payment to unsecured claims having a higher priority than unsecured tax claims. Those other claims may be satisfied from the amount that would otherwise have been applied to the tax lien, and any excess of the amount of the lien is then applied to the tax. Any personal property (or sale proceeds) remaining is to be used to satisfy claims secured by liens which are junior to the tax lien. Any proceeds remaining are next applied to pay any unpaid balance of the tax lien. Subsection (d) specifies that any statutory lien whose priority is determined in the same manner as a tax lien is to be treated as a tax lien under this section, even if the lien does not secure a claim for taxes. An example is the ERISA (29 U.S.C. 1001 et seq.) lien. HOUSE REPORT NO. 95-595 Subsection (b) governs tax liens. It is derived from section 67c(3) of the Bankruptcy Act (section 107(c)(3) of former title 11), without substantial modification in result. It subordinates tax liens to administrative expense and wage claims, and solves certain circuity of liens problems that arise in connection with the subordination. The order of distribution of property subject to a tax lien is as follows: First, to holders of liens senior to the tax lien; second, to administrative expenses, wage claims, and consumer creditors that are granted priority, but only to the extent of the amount of the allowed tax claim secured by the lien. In other words, the priority claimants step into the shoes of the tax collector. Third, to the tax claimant, to the extent that priority claimants did not use up his entire claim. Fourth, to junior lien holders. Fifth, to the tax collector to the extent that he was not paid under paragraph (3). Finally, any remaining property goes to the estate. The result of these provisions are to leave senior and junior lienors and holders of unsecured claims undisturbed. If there are any liens that are equal in status to the tax lien, they share pari passu with the tax lien under the distribution provisions of this subsection. AMENDMENTS 1986 - Subsec. (b)(2). Pub. L. 99-554 inserted reference to section 507(a)(6) of this title. Subsec. (d). Pub. L. 99-514 substituted 'Internal Revenue Code of 1986' for 'Internal Revenue Code of 1954'. 1984 - Subsec. (b). Pub. L. 98-353, Sec. 477(a)(1), substituted 'a tax' for 'taxes' in provisions preceding par. (1). Subsec. (b)(2). Pub. L. 98-353, Sec. 477(a)(2), substituted 'any holder of a claim of a kind specified' for 'claims specified', 'section 507(a)(1)' for 'sections 507(a)(1)', and 'or 507(a)(5) of this title' for 'and 507(a)(5) of this title'. Subsec. (b)(3). Pub. L. 98-353, Sec. 477(a)(3), substituted 'allowed tax claim' for 'allowed claim'. Subsec. (c). Pub. L. 98-353, Sec. 477(b), substituted 'holder of a claim is entitled' for 'creditor is entitled' and 'holders' for 'creditors' in two places. Subsec. (d). Pub. L. 98-353, Sec. 477(c), substituted 'the priority of which' for 'whose priority' and 'the same as if such lien were a tax lien' for 'the same as a tax lien'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 303, 349, 502, 522, 550, 551, 764 of this title; title 26 sections 6327, 7434. ------DocID 14773 Document 118 of 646------ -CITE- 11 USC Sec. 725 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER II -HEAD- Sec. 725. Disposition of certain property -STATUTE- After the commencement of a case under this chapter, but before final distribution of property of the estate under section 726 of this title, the trustee, after notice and a hearing, shall dispose of any property in which an entity other than the estate has an interest, such as a lien, and that has not been disposed of under another section of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2607; Pub. L. 98-353, title III, Sec. 478, July 10, 1984, 98 Stat. 381.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 725 of the House amendment adopts the substance contained in both the House bill and Senate amendment but transfers an administrative function to the trustee in accordance with the general thrust of this legislation to separate the administrative and the judicial functions where appropriate. SENATE REPORT NO. 95-989 This section requires the court to determine the appropriate disposition of property in which the estate and an entity other than the estate have an interest. It would apply, for example, to property subject to a lien or property co-owned by the estate and another entity. The court must make the determination with respect to property that is not disposed of under another section of the bankruptcy code, such as by abandonment under section 554, by sale or distribution under 363, or by allowing foreclosure by a secured creditor by lifting the stay under section 362. The purpose of the section is to give the court appropriate authority to ensure that collateral or its proceeds is returned to the proper secured creditor, that consigned or bailed goods are returned to the consignor or bailor and so on. Current law is curiously silent on this point, though case law has grown to fill the void. The section is in lieu of a section that would direct a certain distribution to secured creditors. It gives the court greater flexibility to meet the circumstances, and it is broader, permitting disposition of property subject to a co-ownership interest. AMENDMENTS 1984 - Pub. L. 98-353 substituted 'distribution of property of the estate' for 'distribution'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 14774 Document 119 of 646------ -CITE- 11 USC Sec. 726 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER II -HEAD- Sec. 726. Distribution of property of the estate -STATUTE- (a) Except as provided in section 510 of this title, property of the estate shall be distributed - (1) first, in payment of claims of the kind specified in, and in the order specified in, section 507 of this title; (2) second, in payment of any allowed unsecured claim, other than a claim of a kind specified in paragraph (1), (3), or (4) of this subsection, proof of which is - (A) timely filed under section 501(a) of this title; (B) timely filed under section 501(b) or 501(c) of this title; or (C) tardily filed under section 501(a) of this title, if - (i) the creditor that holds such claim did not have notice or actual knowledge of the case in time for timely filing of a proof of such claim under section 501(a) of this title; and (ii) proof of such claim is filed in time to permit payment of such claim; (3) third, in payment of any allowed unsecured claim proof of which is tardily filed under section 501(a) of this title, other than a claim of the kind specified in paragraph (2)(C) of this subsection; (4) fourth, in payment of any allowed claim, whether secured or unsecured, for any fine, penalty, or forfeiture, or for multiple, exemplary, or punitive damages, arising before the earlier of the order for relief or the appointment of a trustee, to the extent that such fine, penalty, forfeiture, or damages are not compensation for actual pecuniary loss suffered by the holder of such claim; (5) fifth, in payment of interest at the legal rate from the date of the filing of the petition, on any claim paid under paragraph (1), (2), (3), or (4) of this subsection; and (6) sixth, to the debtor. (b) Payment on claims of a kind specified in paragraph (1), (2), (3), (4), (5), (6) or (7) of section 507(a) of this title, or in paragraph (2), (3), (4), or (5) of subsection (a) of this section, shall be made pro rata among claims of the kind specified in each such particular paragraph, except that in a case that has been converted to this chapter under section 1112 (FOOTNOTE 1) 1208, or 1307 of this title, a claim allowed under section 503(b) of this title incurred under this chapter after such conversion has priority over a claim allowed under section 503(b) of this title incurred under any other chapter of this title or under this chapter before such conversion and over any expenses of a custodian superseded under section 543 of this title. (FOOTNOTE 1) So in original. Probably should be followed by a comma. (c) Notwithstanding subsections (a) and (b) of this section, if there is property of the kind specified in section 541(a)(2) of this title, or proceeds of such property, in the estate, such property or proceeds shall be segregated from other property of the estate, and such property or proceeds and other property of the estate shall be distributed as follows: (1) Claims allowed under section 503 of this title shall be paid either from property of the kind specified in section 541(a)(2) of this title, or from other property of the estate, as the interest of justice requires. (2) Allowed claims, other than claims allowed under section 503 of this title, shall be paid in the order specified in subsection (a) of this section, and, with respect to claims of a kind specified in a particular paragraph of section 507 of this title or subsection (a) of this section, in the following order and manner: (A) First, community claims against the debtor or the debtor's spouse shall be paid from property of the kind specified in section 541(a)(2) of this title, except to the extent that such property is solely liable for debts of the debtor. (B) Second, to the extent that community claims against the debtor are not paid under subparagraph (A) of this paragraph, such community claims shall be paid from property of the kind specified in section 541(a)(2) of this title that is solely liable for debts of the debtor. (C) Third, to the extent that all claims against the debtor including community claims against the debtor are not paid under subparagraph (A) or (B) of this paragraph such claims shall be paid from property of the estate other than property of the kind specified in section 541(a)(2) of this title. (D) Fourth, to the extent that community claims against the debtor or the debtor's spouse are not paid under subparagraph (A), (B), or (C) of this paragraph, such claims shall be paid from all remaining property of the estate. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2608; Pub. L. 98-353, title III, Sec. 479, July 10, 1984, 98 Stat. 381; Pub. L. 99-554, title II, Sec. 257(r), 283(s), Oct. 27, 1986, 100 Stat. 3115, 3118.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 726(a)(4) adopts a provision contained in the Senate amendment subordinating prepetition penalties and penalties arising in the involuntary gap period to the extent the penalties are not compensation for actual pecuniary laws. The House amendment deletes a provision following section 726(a)(6) of the Senate amendment providing that the term 'claim' includes interest due owed before the date of the filing of the petition as unnecessary since a right to payment for interest due is a right to payment which is within the definition of 'claim' in section 101(4) of the House amendment. SENATE REPORT NO. 95-989 This section is the general distribution section for liquidation cases. It dictates the order in which distribution of property of the estate, which has usually been reduced to money by the trustee under the requirements of section 704(1). First, property is distributed among priority claimants, as determined by section 507, and in the order prescribed by section 507. Second, distribution is to general unsecured creditors. This class excludes priority creditors and the two classes of subordinated creditors specified below. The provision is written to permit distribution to creditors that tardily file claims if their tardiness was due to lack of notice or knowledge of the case. Though it is in the interest of the estate to encourage timely filing, when tardy filing is not the result of a failure to act by the creditor, the normal subordination penalty should not apply. Third distribution is to general unsecured creditors who tardily file. Fourth distribution is to holders of fine, penalty, forfeiture, or multiple, punitive, or exemplary damage claims. More of these claims are disallowed entirely under present law. They are simply subordinated here. Paragraph (4) provides that punitive penalties, including prepetition tax penalties, are subordinated to the payment of all other classes of claims, except claims for interest accruing during the case. In effect, these penalties are payable out of the estate's assets only if and to the extent that a surplus of assets would otherwise remain at the close of the case for distribution back to the debtor. Paragraph (5) provides that postpetition interest on prepetition claims is also to be paid to the creditor in a subordinated position. Like prepetition penalties, such interest will be paid from the estate only if and to the extent that a surplus of assets would otherwise remain for return to the debtor at the close of the case. This section also specifies that interest accrued on all claims (including priority and nonpriority tax claims) which accrued before the date of the filing of the title 11 petition is to be paid in the same order of distribution of the estate's assets as the principal amount of the related claims. Any surplus is paid to the debtor under paragraph (6). Subsection (b) follows current law. It specifies that claims within a particular class are to be paid pro rata. This provision will apply, of course, only when there are inadequate funds to pay the holders of claims of a particular class in full. The exception found in the section, which also follows current law, specifies that liquidation administrative expenses are to be paid ahead of reorganization administrative expenses if the case has been converted from a reorganization case to a liquidation case, or from an individual repayment plan case to a liquidation case. Subsection (c) governs distributions in cases in which there is community property and other property of the estate. The section requires the two kinds of property to be segregated. The distribution is as follows: First, administrative expenses are to be paid, as the court determines on any reasonable equitable basis, from both kinds of property. The court will divide administrative expenses according to such factors as the amount of each kind of property in the estate, the cost of preservation and liquidation of each kind of property, and whether any particular administrative expenses are attributable to one kind of property or the other. Second, claims are to be paid as provided under subsection (a) (the normal liquidation case distribution rules) in the following order and manner: First, community claims against the debtor or the debtor's spouse are paid from community property, except such as is liable solely for the debts of the debtor. Second, community claims against the debtor, to the extent not paid under the first provision, are paid from community property that is solely liable for the debts of the debtor. Third, community claims, to the extent they remain unpaid, and all other claims against the debtor, are paid from noncommunity property. Fourth, if any community claims against the debtor or the debtor's spouse remain unpaid, they are paid from whatever property remains in the estate. This would occur if community claims against the debtor's spouse are large in amount and most of the estate's property is property solely liable, under nonbankruptcy law, for debts of the debtor. The marshalling rules in this section apply only to property of the estate. However, they will provide a guide to the courts in the interpretation of proposed 11 U.S.C. 725, relating to distribution of collateral, in cases in which there is community property. If a secured creditor has a lien on both community and noncommunity property, the marshalling rules here - by analogy would dictate that the creditor be satisfied first out of community property, and then out of separate property. AMENDMENTS 1986 - Subsec. (b). Pub. L. 99-554, Sec. 283(s), inserted reference to par. (7) of section 507(a) of this title. Pub. L. 99-554, Sec. 257(r), inserted reference to section 1208 of this title. 1984 - Subsec. (b). Pub. L. 98-353, Sec. 479(a), substituted 'each such particular paragraph' for 'a particular paragraph', 'a claim allowed under section 503(b) of this title' for 'administrative expenses' in two places, and 'has priority over' for 'have priority over'. Subsec. (c)(1). Pub. L. 98-353, Sec. 479(b)(1), substituted 'Claims allowed under section 503 of this title' for 'Administrative expenses'. Subsec. (c)(2). Pub. L. 98-353, Sec. 479(b)(2), substituted 'Allowed claims, other than claims allowed under section 503 of this title,' for 'Claims other than for administrative expenses'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 283 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 347, 702, 705, 723, 724, 725, 752, 766 of this title; title 15 section 78fff; title 20 section 1087-2. ------DocID 14775 Document 120 of 646------ -CITE- 11 USC Sec. 727 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER II -HEAD- Sec. 727. Discharge -STATUTE- (a) The court shall grant the debtor a discharge, unless - (1) the debtor is not an individual; (2) the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed - (A) property of the debtor, within one year before the date of the filing of the petition; or (B) property of the estate, after the date of the filing of the petition; (3) the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor's financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case; (4) the debtor knowingly and fraudulently, in or in connection with the case - (A) made a false oath or account; (B) presented or used a false claim; (C) gave, offered, received, or attempted to obtain money, property, or advantage, or a promise of money, property, or advantage, for acting or forbearing to act; or (D) withheld from an officer of the estate entitled to possession under this title, any recorded information, including books, documents, records, and papers, relating to the debtor's property or financial affairs; (5) the debtor has failed to explain satisfactorily, before determination of denial of discharge under this paragraph, any loss of assets or deficiency of assets to meet the debtor's liabilities; (6) the debtor has refused, in the case - (A) to obey any lawful order of the court, other than an order to respond to a material question or to testify; (B) on the ground of privilege against self-incrimination, to respond to a material question approved by the court or to testify, after the debtor has been granted immunity with respect to the matter concerning which such privilege was invoked; or (C) on a ground other than the properly invoked privilege against self-incrimination, to respond to a material question approved by the court or to testify; (7) the debtor has committed any act specified in paragraph (2), (3), (4), (5), or (6) of this subsection, on or within one year before the date of the filing of the petition, or during the case, in connection with another case, under this title or under the Bankruptcy Act, concerning an insider; (8) the debtor has been granted a discharge under this section, under section 1141 of this title, or under section 14, 371, or 476 of the Bankruptcy Act, in a case commenced within six years before the date of the filing of the petition; (9) the debtor has been granted a discharge under section 1228 or 1328 of this title, or under section 660 or 661 of the Bankruptcy Act, in a case commenced within six years before the date of the filing of the petition, unless payments under the plan in such case totaled at least - (A) 100 percent of the allowed unsecured claims in such case; or (B)(i) 70 percent of such claims; and (ii) the plan was proposed by the debtor in good faith, and was the debtor's best effort; or (10) the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter. (b) Except as provided in section 523 of this title, a discharge under subsection (a) of this section discharges the debtor from all debts that arose before the date of the order for relief under this chapter, and any liability on a claim that is determined under section 502 of this title as if such claim had arisen before the commencement of the case, whether or not a proof of claim based on any such debt or liability is filed under section 501 of this title, and whether or not a claim based on any such debt or liability is allowed under section 502 of this title. (c)(1) The trustee, a creditor, or the United States trustee may object to the granting of a discharge under subsection (a) of this section. (2) On request of a party in interest, the court may order the trustee to examine the acts and conduct of the debtor to determine whether a ground exists for denial of discharge. (d) On request of the trustee, a creditor, or the United States trustee, and after notice and a hearing, the court shall revoke a discharge granted under subsection (a) of this section if - (1) such discharge was obtained through the fraud of the debtor, and the requesting party did not know of such fraud until after the granting of such discharge; (2) the debtor acquired property that is property of the estate, or became entitled to acquire property that would be property of the estate, and knowingly and fraudulently failed to report the acquisition of or entitlement to such property, or to deliver or surrender such property to the trustee; or (3) the debtor committed an act specified in subsection (a)(6) of this section. (e) The trustee, a creditor, or the United States trustee may request a revocation of a discharge - (1) under subsection (d)(1) of this section within one year after such discharge is granted; or (2) under subsection (d)(2) or (d)(3) of this section before the later of - (A) one year after the granting of such discharge; and (B) the date the case is closed. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2609; Pub. L. 98-353, title III, Sec. 480, July 10, 1984, 98 Stat. 382; Pub. L. 99-554, title II, Sec. 220, 257(s), Oct. 27, 1986, 100 Stat. 3101, 3116.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Sections 727(a) (8) and (9) of the House amendment represent a compromise between provisions contained in section 727(a)(8) of the House bill and Senate amendment. Section 727(a)(8) of the House amendment adopts section 727(a)(8) of the House bill. However, section 727(a)(9) of the House amendment contains a compromise based on section 727(a)(8) of the Senate amendment with respect to the circumstances under which a plan by way of composition under Chapter XIII of the Bankruptcy Act (chapter 13 of former title 11) should be a bar to discharge in a subsequent proceeding under title 11. The paragraph provides that a discharge under section 660 or 661 of the Bankruptcy Act (section 1060 or 1061 of former title 11) or section 1328 of title 11 in a case commenced within 6 years before the date of the filing of the petition in a subsequent case, operates as a bar to discharge unless, first, payments under the plan totaled at least 100 percent of the allowed unsecured claims in the case; or second, payments under the plan totaled at least 70 percent of the allowed unsecured claims in the case and the plan was proposed by the debtor in good faith and was the debtor's best effort. It is expected that the Rules of Bankruptcy Procedure will contain a provision permitting the debtor to request a determination of whether a plan is the debtor's 'best effort' prior to confirmation of a plan in a case under chapter 13 of title 11. In determining whether a plan is the debtor's 'best effort' the court will evaluate several factors. Different facts and circumstances in cases under chapter 13 operate to make any rule of thumb of limited usefulness. The court should balance the debtor's assets, including family income, health insurance, retirement benefits, and other wealth, a sum which is generally determinable, against the foreseeable necessary living expenses of the debtor and the debtor's dependents, which unfortunately is rarely quantifiable. In determining the expenses of the debtor and the debtor's dependents, the court should consider the stability of the debtor's employment, if any, the age of the debtor, the number of the debtor's dependents and their ages, the condition of equipment and tools necessary to the debtor's employment or to the operation of his business, and other foreseeable expenses that the debtor will be required to pay during the period of the plan, other than payments to be made to creditors under the plan. Section 727(a)(10) of the House amendment clarifies a provision contained in section 727(a)(9) of the House bill and Senate amendment indicating that a discharge may be barred if the court approves a waiver of discharge executed in writing by the debtor after the order for relief under chapter 7. Section 727(b) of the House amendment adopts a similar provision contained in the Senate amendment modifying the effect of discharge. The provision makes clear that the debtor is discharged from all debts that arose before the date of the order for relief under chapter 7 in addition to any debt which is determined under section 502 as if it were a prepetition claim. Thus, if a case is converted from chapter 11 or chapter 13 to a case under chapter 7, all debts prior to the time of conversion are discharged, in addition to debts determined after the date of conversion of a kind specified in section 502, that are to be determined as prepetition claims. This modification is particularly important with respect to an individual debtor who files a petition under chapter 11 or chapter 13 of title 11 if the case is converted to chapter 7. The logical result of the House amendment is to equate the result that obtains whether the case is converted from another chapter to chapter 7, or whether the other chapter proceeding is dismissed and a new case is commenced by filing a petition under chapter 7. SENATE REPORT NO. 95-989 This section is the heart of the fresh start provisions of the bankruptcy law. Subsection (a) requires the court to grant a debtor a discharge unless one of nine conditions is met. The first condition is that the debtor is not an individual. This is a change from present law, under which corporations and partnerships may be discharged in liquidation cases, though they rarely are. The change in policy will avoid trafficking in corporate shells and in bankrupt partnerships. 'Individual' includes a deceased individual, so that if the debtor dies during the bankruptcy case, he will nevertheless be released from his debts, and his estate will not be liable for them. Creditors will be entitled to only one satisfaction - from the bankruptcy estate and not from the probate estate. The next three grounds for denial of discharge center on the debtor's wrongdoing in or in connection with the bankruptcy case. They are derived from Bankruptcy Act Sec. 14c (section 32(c) of former title 11). If the debtor, with intent to hinder, delay, or defraud his creditors or an officer of the estate, has transferred, removed, destroyed, mutilated, or concealed, or has permitted any such action with respect to, property of the debtor within the year preceding the case, or property of the estate after the commencement of the case, then the debtor is denied discharge. The debtor is also denied discharge if he has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any books and records from which his financial condition might be ascertained, unless the act or failure to act was justified under all the circumstances of the case. The fourth ground for denial of discharge is the commission of a bankruptcy crime, although the standard of proof is preponderance of the evidence rather than proof beyond a reasonable doubt. These crimes include the making of a false oath or account, the use or presentation of a false claim, the giving or receiving of money for acting or forbearing to act, and the withholding from an officer of the estate entitled to possession of books and records relating to the debtor's financial affairs. The fifth ground for denial of discharge is the failure of the debtor to explain satisfactorily any loss of assets or deficiency of assets to meet the debtor's liabilities. The sixth ground concerns refusal to testify. It is a change from present law, under which the debtor may be denied discharge for legitimately exercising his right against self-incrimination. Under this provision, the debtor may be denied discharge if he refuses to obey any lawful order of the court, or if he refuses to testify after having been granted immunity or after improperly invoking the constitutional privilege against self-incrimination. The seventh ground for denial of discharge is the commission of an act specified in grounds two through six during the year before the debtor's case in connection with another bankruptcy case concerning an insider. The eighth ground for denial of discharge is derived from Sec. 14c(5) of the Bankruptcy Act (section 32(c)(5) of former title 11). If the debtor has been granted a discharge in a case commenced within 6 years preceding the present bankruptcy case, he is denied discharge. This provision, which is no change from current law with respect to straight bankruptcy, is the 6-year bar to discharge. Discharge under chapter 11 will bar a discharge for 6 years. As under current law, confirmation of a composition wage earner plan under chapter 13 is a basis for invoking the 6-year bar. The ninth ground is approval by the court of a waiver of discharge. Subsection (b) specifies that the discharge granted under this section discharges the debtor from all debts that arose before the date of the order for relief. It is irrelevant whether or not a proof of claim was filed with respect to the debt, and whether or not the claim based on the debt was allowed. Subsection (c) permits the trustee, or a creditor, to object to discharge. It also permits the court, on request of a party in interest, to order the trustee to examine the acts and conduct of the debtor to determine whether a ground for denial of discharge exists. Subsection (d) requires the court to revoke a discharge already granted in certain circumstances. If the debtor obtained the discharge through fraud, if he acquired and concealed property of the estate, or if he refused to obey a court order or to testify, the discharge is to be revoked. Subsection (e) permits the trustee or a creditor to request revocation of a discharge within 1 year after the discharge is granted, on the grounds of fraud, and within one year of discharge or the date of the closing of the case, whichever is later, on other grounds. -REFTEXT- REFERENCES IN TEXT The Bankruptcy Act, referred to in subsec. (a)(7), is act July 1, 1898, ch. 541, 30 Stat. 544, as amended, which was classified generally to former Title 11. Sections 14, 371, and 476 of the Bankruptcy Act, referred to in subsec. (a)(8), are section 14 of act July 1, 1898, ch. 541, 30 Stat. 550, section 371 of act July 1, 1898, ch. 541, as added June 22, 1938, ch. 575, Sec. 1, 52 Stat. 912, and section 476 of act July 1, 1898, ch. 541, as added June 22, 1938, ch. 575, Sec. 1, 52 Stat. 924, which were classified to sections 32, 771, and 876 of former Title 11. Sections 660 and 661 of the Bankruptcy Act, referred to in subsec. (a)(9), are sections 660 and 661 of act July 1, 1898, ch. 541, as added June 22, 1938, ch. 575, Sec. 1, 52 Stat. 935, 936, which were classified to sections 1060 and 1061 of former Title 11. -MISC2- AMENDMENTS 1986 - Subsec. (a)(9). Pub. L. 99-554, Sec. 257(s), inserted reference to section 1228 of this title. Subsec. (c). Pub. L. 99-554, Sec. 220, amended subsec. (c) generally, substituting 'The trustee, a creditor, or the United States trustee may object' for 'The trustee or a creditor may object' in par. (1). Subsec. (d). Pub. L. 99-554, Sec. 220, amended subsec. (d) generally, substituting ', a creditor, or the United States trustee,' for 'or a creditor,' in provisions preceding par. (1) and 'acquisition of or entitlement to such property' for 'acquisition of, or entitlement to, such property' in par. (2). Subsec. (e). Pub. L. 99-554, Sec. 220, amended subsec. (e) generally, substituting 'The trustee, a creditor, or the United States trustee may' for 'The trustee or a creditor may' in provisions preceding par. (1), 'section within' for 'section, within' and 'discharge is granted' for 'discharge was granted' in par. (1), 'section before' for 'section, before' in provisions of par. (2) preceding subpar. (A), and 'discharge; and' for 'discharge; or' in par. (2)(A). 1984 - Subsec. (a)(6)(C). Pub. L. 98-353, Sec. 480(a)(1), substituted 'properly' for 'property'. Subsec. (a)(7). Pub. L. 98-353, Sec. 480(a)(2), inserted ', under this title or under the Bankruptcy Act,' after 'another case'. Subsec. (a)(8). Pub. L. 98-353, Sec. 480(a)(3), substituted '371,' for '371'. Subsec. (c)(1). Pub. L. 98-353, Sec. 480(b), substituted 'to the granting of a discharge' for 'to discharge'. Subsec. (e)(2)(A). Pub. L. 98-353, Sec. 480(c), substituted 'or' for 'and'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Effective date and applicability of amendment by section 220 of Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 348, 523, 524, 1141 of this title; title 12 section 1715z-1a. ------DocID 14776 Document 121 of 646------ -CITE- 11 USC Sec. 728 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER II -HEAD- Sec. 728. Special tax provisions -STATUTE- (a) For the purposes of any State or local law imposing a tax on or measured by income, the taxable period of a debtor that is an individual shall terminate on the date of the order for relief under this chapter, unless the case was converted under section 1112 or 1208 of this title. (b) Notwithstanding any State or local law imposing a tax on or measured by income, the trustee shall make tax returns of income for the estate of an individual debtor in a case under this chapter or for a debtor that is a corporation in a case under this chapter only if such estate or corporation has net taxable income for the entire period after the order for relief under this chapter during which the case is pending. If such entity has such income, or if the debtor is a partnership, then the trustee shall make and file a return of income for each taxable period during which the case was pending after the order for relief under this chapter. (c) If there are pending a case under this chapter concerning a partnership and a case under this chapter concerning a partner in such partnership, a governmental unit's claim for any unpaid liability of such partner for a State or local tax on or measured by income, to the extent that such liability arose from the inclusion in such partner's taxable income of earnings of such partnership that were not withdrawn by such partner, is a claim only against such partnership. (d) Notwithstanding section 541 of this title, if there are pending a case under this chapter concerning a partnership and a case under this chapter concerning a partner in such partnership, then any State or local tax refund or reduction of tax of such partner that would have otherwise been property of the estate of such partner under section 541 of this title - (1) is property of the estate of such partnership to the extent that such tax refund or reduction of tax is fairly apportionable to losses sustained by such partnership and not reimbursed by such partner; and (2) is otherwise property of the estate of such partner. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2611; Pub. L. 98-353, title III, Sec. 481, July 10, 1984, 98 Stat. 382; Pub. L. 99-554, title II, Sec. 257(t), Oct. 27, 1986, 100 Stat. 3116.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 728 of the House amendment adopts a provision contained in the House bill that was deleted by the Senate amendment. Liquidations: The House bill contained special tax provisions concerning the treatment of liquidations cases for State and local tax laws. These provisions deal with the taxable years of an individual debtor, return-filing requirements, and rules allocating State and local tax liabilities and refunds between a bankrupt partner and the partnership of which he is a member. The Senate amendment deleted these rules pending consideration of the Federal tax treatment of bankruptcy in the next Congress. The House amendment returns these provisions to the bill in order that they may be studied by the bankruptcy and tax bars who may wish to submit comments to Congress in connection with its consideration of these provisions in the next Congress. SENATE REPORT NO. 95-989 Section 728 of title 11 applies only to state and local taxation. This provision contains four subsections which embody special tax provisions that apply in a case under chapter 7. Subsection (a) terminates the taxable year of an individual debtor on the date of the order for relief under chapter 7 of title 11. The date of termination of the individual's taxable year is the date on which the estate first becomes a separate taxable entity. If the case was originally filed under chapter 11 of title 11, then the estate would have been made a separate taxable entity on the date of the order for relief under that chapter. In the rare case of a multiple conversion, then the date of the order for relief under the first chapter under which the estate was a separate taxable entity is controlling. Subsection (b) permits the trustee of the estate of an individual debtor or a corporation in a case under chapter 7 of title 11 to make a tax return only if the estate or corporation has net taxable income for the entire case. If the estate or corporation has net taxable income at the close of the case, then the trustee files an income tax return for each tax year during which the case was pending. The trustee of a partnership debtor must always file returns for each such taxable period. Subsection (c) sets forth a marshalling rule pertaining to tax claims against a partner and a partnership in a case under chapter 7 of title 11. To the extent that the income tax liability arose from the inclusion of undistributed earnings in the partner's taxable income, the court is required to disallow the tax claim against the partner's estate and to allow such claim against the partnership estate. No burden is placed on the taxing authority; the taxing authority should file a complete proof of claim in each case and the court will execute the marshalling. If the partnership's assets are insufficient to satisfy partnership creditors in full, then section 723(c) of title 11 will apply, notwithstanding this subsection, to allow any unsatisfied tax claims to be asserted by the partnership trustee against the estate of the partner. The marshalling rule under this subsection applies only for purposes of allowance and distribution. Thus the tax claim may be nondischargeable with respect to an individual partner. Subsection (d) requires the court to apportion any tax refund or reduction of tax between the estate of a partner and the estate of his partnership. The standard of apportionment entitles the partnership estate to receive that part of the tax refund or reduction that is attributable to losses sustained by the partnership that were deducted by the partner but for which the partner never reimbursed the partnership. The partner's estate receives any part not allocated to the partnership estate. The section applies notwithstanding section 541 of title 11, which includes the partner's right to a tax refund or to reduction of tax as property of the partner's estate. AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554 inserted reference to section 1208 of this title. 1984 - Subsec. (c). Pub. L. 98-353, Sec. 481(a), substituted 'taxable income' for 'taxable income,'. Subsec. (d)(2). Pub. L. 98-353, Sec. 481(b), substituted 'is otherwise property of the estate of such partner' for 'is property of the estate of such partner otherwise'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 346, 348, 723 of this title. ------DocID 14777 Document 122 of 646------ -CITE- 11 USC SUBCHAPTER III -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER III -HEAD- SUBCHAPTER III - STOCKBROKER LIQUIDATION -SECREF- SUBCHAPTER REFERRED TO IN OTHER SECTIONS This subchapter is referred to in section 103 of this title. ------DocID 14778 Document 123 of 646------ -CITE- 11 USC Sec. 741 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER III -HEAD- Sec. 741. Definitions for this subchapter -STATUTE- In this subchapter - (1) 'Commission' means Securities and Exchange Commission; (2) 'customer' includes - (A) entity with whom a person deals as principal or agent and that has a claim against such person on account of a security received, acquired, or held by such person in the ordinary course of such person's business as a stockbroker, from or for the securities account or accounts of such entity - (i) for safekeeping; (ii) with a view to sale; (iii) to cover a consummated sale; (iv) pursuant to a purchase; (v) as collateral under a security agreement; or (vi) for the purpose of effecting registration of transfer; and (B) entity that has a claim against a person arising out of - (i) a sale or conversion of a security received, acquired, or held as specified in subparagraph (A) of this paragraph; or (ii) a deposit of cash, a security, or other property with such person for the purpose of purchasing or selling a security; (3) 'customer name security' means security - (A) held for the account of a customer on the date of the filing of the petition by or on behalf of the debtor; (B) registered in such customer's name on such date or in the process of being so registered under instructions from the debtor; and (C) not in a form transferable by delivery on such date; (4) 'customer property' means cash, security, or other property, and proceeds of such cash, security, or property, received, acquired, or held by or for the account of the debtor, from or for the securities account of a customer - (A) including - (i) property that was unlawfully converted from and that is the lawful property of the estate; (ii) a security held as property of the debtor to the extent such security is necessary to meet a net equity claim of a customer based on a security of the same class and series of an issuer; (iii) resources provided through the use or realization of a customer's debit cash balance or a debit item includible in the Formula for Determination of Reserve Requirement for Brokers and Dealers as promulgated by the Commission under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.); and (iv) other property of the debtor that any applicable law, rule, or regulation requires to be set aside or held for the benefit of a customer, unless including such property as customer property would not significantly increase customer property; but (B) not including - (i) a customer name security delivered to or reclaimed by a customer under section 751 of this title; or (ii) property to the extent that a customer does not have a claim against the debtor based on such property; (5) 'margin payment' means payment or deposit of cash, a security, or other property, that is commonly known to the securities trade as original margin, initial margin, maintenance margin, or variation margin, or as a mark-to-market payment, or that secures an obligation of a participant in a securities clearing agency; (6) 'net equity' means, with respect to all accounts of a customer that such customer has in the same capacity - (A)(i) aggregate dollar balance that would remain in such accounts after the liquidation, by sale or purchase, at the time of the filing of the petition, of all securities positions in all such accounts, except any customer name securities of such customer; minus (ii) any claim of the debtor against such customer in such capacity that would have been owing immediately after such liquidation; plus (B) any payment by such customer to the trustee, within 60 days after notice under section 342 of this title, of any business related claim of the debtor against such customer in such capacity; (7) 'securities contract' means contract for the purchase, sale, or loan of a security, including an option for the purchase or sale of a security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any option entered into on a national securities exchange relating to foreign currencies, or the guarantee of any settlement of cash or securities by or to a securities clearing agency; (8) 'settlement payment' means a preliminary settlement payment, a partial settlement payment, an interim settlement payment, a settlement payment on account, a final settlement payment, or any other similar payment commonly used in the securities trade; and (9) 'SIPC' means Securities Investor Protection Corporation. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2611; Pub. L. 97-222, Sec. 8, July 27, 1982, 96 Stat. 237; Pub. L. 98-353, title III, Sec. 482, July 10, 1984, 98 Stat. 382.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 741(6) of the House bill and Senate amendment is deleted by the House amendment since the defined term is used only in section 741(4)(A)(iii). A corresponding change is made in that section. SENATE REPORT NO. 95-989 Section 741 sets forth definitions for subchapter III of chapter 7. Paragraph (1) defines 'Commission' to mean the Securities and Exchange Commission. Paragraph (2) defines 'customer' to include anybody that interacts with the debtor in a capacity that concerns securities transactions. The term embraces cash or margin customers of a broker or dealer in the broadest sense. Paragraph (3) defines 'customer name security' in a restrictive fashion to include only non-transferable securities that are registered, or in the process of being registered in a customer's own name. The securities must not be endorsed by the customer and the stockbroker must not be able to legally transfer the securities by delivery, by a power of attorney, or otherwise. Paragraph (4) defines 'customer property' to include all property of the debtor that has been segregated for customers or property that should have been segregated but was unlawfully converted. Clause (i) refers to customer property not properly segregated by the debtor or customer property converted and then recovered so as to become property of the estate. Unlawfully converted property that has been transferred to a third party is excluded until it is recovered as property of the estate by virtue of the avoiding powers. The concept excludes customer name securities that have been delivered to or reclaimed by a customer and any property properly belonging to the stockholder, such as money deposited by a customer to pay for securities that the stockholder has distributed to such customer. Paragraph (5) (now (6)) defines 'net equity' to establish the extent to which a customer will be entitled to share in the single and separate fund. Accounts of a customer are aggregated and offset only to the extent the accounts are held by the customer in the same capacity. Thus, a personal account is separate from an account held as trustee. In a community property state an account held for the community is distinct from an account held as separate property. The net equity is computed by liquidating all securities positions in the accounts and crediting the account with any amount due to the customer. Regardless of the actual dates, if any, of liquidation, the customer is only entitled to the liquidation value at the time of the filing of the petition. To avoid double counting, the liquidation value of customer name securities belonging to a customer is excluded from net equity. Thus, clause (ii) includes claims against a customer resulting from the liquidation of a security under clause (i). The value of a security on which trading has been suspended at the time of the filing of the petition will be estimated. Once the net liquidation value is computed, any amount that the customer owes to the stockbroker is subtracted including any amount that would be owing after the hypothetical liquidation, such as brokerage fees. Debts owed by the customer to the debtor, other than in a securities related transaction, will not reduce the net equity of the customer. Finally, net equity is increased by any payment by the customer to the debtor actually paid within 60 days after notice. The principal reason a customer would make such a payment is to reclaim customer name securities under Sec. 751. Paragraph (6) defines '1934 Act' to mean the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). Paragraph (7) (now (9)) defines 'SIPC' to mean the Securities Investor Protection Corporation. -REFTEXT- REFERENCES IN TEXT The Securities Exchange Act of 1934, referred to in par. (4)(A), is act June 6, 1934, ch. 404, 48 Stat. 881, as amended, which is classified principally to chapter 2B (Sec. 78a et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 78a of Title 15 and Tables. -MISC2- AMENDMENTS 1984 - Par. (2)(A). Pub. L. 98-353, Sec. 482(1), substituted 'with whom a person deals' for 'with whom the debtor deals', 'that has a claim' for 'that holds a claim', 'against such person' for 'against the debtor', 'held by such person' for 'held by the debtor', and 'such person's business as a stockbroker,' for 'business as a stockbroker'. Par. (2)(B). Pub. L. 98-353, Sec. 482(2)(A), (B), substituted 'has a claim' for 'holds a claim' and 'against a person' for 'against the debtor' in provisions preceding cl. (i). Par. (2)(B)(ii). Pub. L. 98-353, Sec. 482(2)(C), substituted 'such person' for 'the debtor'. Par. (4)(A)(i). Pub. L. 98-353, Sec. 482(3), substituted 'from and that is the lawful' for 'and that is'. Par. (6)(A)(i). Pub. L. 98-353, Sec. 482(4), inserted a comma after 'petition' and 'any' after 'except'. Par. (7). Pub. L. 98-353, Sec. 482(5), amended par. (7) generally, inserting provisions relating to options for the purchase or sale of certificates of deposit, or a group or index of securities (including any interest therein or based on the value thereof), or any option entered into on a national securities exchange relating to foreign currencies. Par. (8). Pub. L. 98-353, Sec. 482(6), inserted 'a final settlement payment,'. 1982 - Par. (4). Pub. L. 97-222, Sec. 8(1), struck out 'at any time' after 'security, or property,' in provisions preceding subpar. (A), and inserted 'of a customer' after 'claim' in subpar. (A)(ii). Par. (5). Pub. L. 97-222, Sec. 8(3), added par. (5). Former par. (5) redesignated (6). Par. (6). Pub. L. 97-222, Sec. 8(2), (4), redesignated former par. (5) as (6), in provisions preceding subpar. (A), substituted 'all accounts of a customer that such customer has' for 'the aggregate of all of a customer's accounts that such customer holds', in subpar. (A)(2) inserted 'in such capacity', and in subpar. (B) inserted 'in such capacity'. Former par. (6) redesignated (9). Pars. (7), (8). Pub. L. 97-222, Sec. 8(5), added pars. (7) and (8). Par. (9). Pub. L. 97-222, Sec. 8(2), (6), redesignated former par. (6) as (9) and substituted 'Securities' for 'Security'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 101, 362, 546, 548, 555, 752 of this title; title 12 sections 1787, 1821. ------DocID 14779 Document 124 of 646------ -CITE- 11 USC Sec. 742 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER III -HEAD- Sec. 742. Effect of section 362 of this title in this subchapter -STATUTE- Notwithstanding section 362 of this title, SIPC may file an application for a protective decree under the Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.). The filing of such application stays all proceedings in the case under this title unless and until such application is dismissed. If SIPC completes the liquidation of the debtor, then the court shall dismiss the case. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2613; Pub. L. 97-222, Sec. 9, July 27, 1982, 96 Stat. 237.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 742 of the House amendment deletes a sentence contained in the Senate amendment requiring the trustee in an interstate stock-brokerage liquidation to comply with the provisions of subchapter IV of chapter 7 if the debtor is also a commodity broker. The House amendment expands the requirement to require the SIPC trustee to perform such duties, if the debtor is a commodity broker, under section 7(b) of the Securities Investor Protection Act (15 U.S.C. 78ggg(b)). The requirement is deleted from section 742 since the trustee of an intrastate stockbroker will be bound by the provisions of subchapter IV of chapter 7 if the debtor is also a commodity broker by reason of section 103 of title 11. SENATE REPORT NO. 95-989 Section 742 indicates that the automatic stay does not prevent SIPC from filing an application for a protective decree under SIPA. If SIPA does file such an application, then all bankruptcy proceedings are suspended until the SIPC action is completed. If SIPC completes liquidation of the stockbroker then the bankruptcy case is dismissed. -REFTEXT- REFERENCES IN TEXT The Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), referred to in text, is Pub. L. 91-598, Dec. 30, 1970, 84 Stat. 1636, as amended, which is classified generally to chapter 2B-1 (Sec. 78aaa et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 78aaa of Title 15 and Tables. -MISC2- AMENDMENTS 1982 - Pub. L. 97-222 substituted 'title' for 'chapter' after 'all proceedings in the case under this'. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 349 of this title. ------DocID 14780 Document 125 of 646------ -CITE- 11 USC Sec. 743 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER III -HEAD- Sec. 743. Notice -STATUTE- The clerk shall give the notice required by section 342 (FOOTNOTE 1) of this title to SIPC and to the Commission. (FOOTNOTE 1) See 1986 Amendment note below. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2613; Pub. L. 99-554, title II, Sec. 283(t), Oct. 27, 1986, 100 Stat. 3118.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 743 requires that notice of the order for relief be given to SIPC and to the SEC in every stockbroker case. AMENDMENTS 1986 - Pub. L. 99-554 which directed the amendment of this section by striking '(d)' was executed by striking '(a)' after 'section 342' as the probable intent of Congress. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. ------DocID 14781 Document 126 of 646------ -CITE- 11 USC Sec. 744 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER III -HEAD- Sec. 744. Executory contracts -STATUTE- Notwithstanding section 365(d)(1) of this title, the trustee shall assume or reject, under section 365 of this title, any executory contract of the debtor for the purchase or sale of a security in the ordinary course of the debtor's business, within a reasonable time after the date of the order for relief, but not to exceed 30 days. If the trustee does not assume such a contract within such time, such contract is rejected. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2613; Pub. L. 97-222, Sec. 10, July 27, 1982, 96 Stat. 238.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 744 instructs the court to give the trustee a reasonable time, not to exceed 30 days, to assume or reject any executory contract of the stockbroker to buy or sell securities. Any contract not assumed within the time fixed by the court is considered to be rejected. AMENDMENTS 1982 - Pub. L. 97-222 inserted 'but' after 'relief,'. ------DocID 14782 Document 127 of 646------ -CITE- 11 USC Sec. 745 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER III -HEAD- Sec. 745. Treatment of accounts -STATUTE- (a) Accounts held by the debtor for a particular customer in separate capacities shall be treated as accounts of separate customers. (b) If a stockbroker or a bank holds a customer net equity claim against the debtor that arose out of a transaction for a customer of such stockbroker or bank, each such customer of such stockbroker or bank shall be treated as a separate customer of the debtor. (c) Each trustee's account specified as such on the debtor's books, and supported by a trust deed filed with, and qualified as such by, the Internal Revenue Service, and under the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.), shall be treated as a separate customer account for each beneficiary under such trustee account. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2613; Pub. L. 97-222, Sec. 11, July 27, 1982, 96 Stat. 238; Pub. L. 98-353, title III, Sec. 483, July 10, 1984, 98 Stat. 383; Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 745(a) indicates that each account held by a customer in a separate capacity is to be considered a separate account. This prevents the offset of accounts held in different capacities. Subsection (b) indicates that a bank or another stockbroker that is a customer of a debtor is considered to hold its customers accounts in separate capacities. Thus a bank or other stockbroker is not treated as a mutual fund for purposes of bulk investment. This protects unrelated customers of a bank or other stockholder from having their accounts offset. Subsection (c) effects the same result with respect to a trust so that each beneficiary is treated as the customer of the debtor rather than the trust itself. This eliminates any doubt whether a trustee holds a personal account in a separate capacity from his trustee's account. AMENDMENTS 1986 - Subsec. (c). Pub. L. 99-514 substituted 'Internal Revenue Code of 1986' for 'Internal Revenue Code of 1954'. 1984 - Subsec. (a). Pub. L. 98-353 inserted 'the debtor for' after 'by'. 1982 - Subsec. (c). Pub. L. 97-222 substituted 'Each' for 'A'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 14783 Document 128 of 646------ -CITE- 11 USC Sec. 746 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER III -HEAD- Sec. 746. Extent of customer claims -STATUTE- (a) If, after the date of the filing of the petition, an entity enters into a transaction with the debtor, in a manner that would have made such entity a customer had such transaction occurred before the date of the filing of the petition, and such transaction was entered into by such entity in good faith and before the qualification under section 322 of this title of a trustee, such entity shall be deemed a customer, and the date of such transaction shall be deemed to be the date of the filing of the petition for the purpose of determining such entity's net equity. (b) An entity does not have a claim as a customer to the extent that such entity transferred to the debtor cash or a security that, by contract, agreement, understanding, or operation of law, is - (1) part of the capital of the debtor; or (2) subordinated to the claims of any or all creditors. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2613; Pub. L. 97-222, Sec. 12, July 27, 1982, 96 Stat. 238.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 746(a) protects entities who deal in good faith with the debtor after the filing of the petition and before a trustee is appointed by deeming such entities to be customers. The principal application of this section will be in an involuntary case before the order for relief, because Sec. 701(b) requires prompt appointment of an interim trustee after the order for relief. Subsection (b) indicates that an entity who holds securities that are either part of the capital of the debtor or that are subordinated to the claims of any creditor of the debtor is not a customer with respect to those securities. This subsection will apply when the stockbroker has sold securities in itself to the customer or when the customer has otherwise placed such securities in an account with the stockbroker. AMENDMENTS 1982 - Pub. L. 97-222, Sec. 12(c), substituted 'claims' for 'claim' in section catchline. Subsec. (a). Pub. L. 97-222, Sec. 12(a), substituted 'enters into' for 'effects, with respect to cash or a security,', struck out 'with respect to such cash or security' wherever appearing, and substituted 'the date of the filing of the petition' for 'such date', and 'entered into' for 'effected'. Subsec. (b). Pub. L. 97-222, Sec. 12(b), substituted 'transferred to the debtor' for 'has a claim for' in provisions preceding par. (1), and struck out 'is' in par. (2). ------DocID 14784 Document 129 of 646------ -CITE- 11 USC Sec. 747 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER III -HEAD- Sec. 747. Subordination of certain customer claims -STATUTE- Except as provided in section 510 of this title, unless all other customer net equity claims have been paid in full, the trustee may not pay in full or pay in part, directly or indirectly, any net equity claim of a customer that was, on the date the transaction giving rise to such claim occurred - (1) an insider; (2) a beneficial owner of at least five percent of any class of equity securities of the debtor, other than - (A) nonconvertible stock having fixed preferential dividend and liquidation rights; or (B) interests of limited partners in a limited partnership; (3) a limited partner with a participation of at least five percent in the net assets or net profits of the debtor; or (4) an entity that, directly or indirectly, through agreement or otherwise, exercised or had the power to exercise control over the management or policies of the debtor. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2613; Pub. L. 97-222, Sec. 13, July 27, 1982, 96 Stat. 238.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 747 subordinates to other customer claims, all claims of a customer who is an insider, a five percent owner of the debtor, or otherwise in control of the debtor. AMENDMENTS 1982 - Pub. L. 97-222 substituted 'the transaction giving rise to such claim occurred' for 'such claim arose' in provisions preceding par. (1). ------DocID 14785 Document 130 of 646------ -CITE- 11 USC Sec. 748 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER III -HEAD- Sec. 748. Reduction of securities to money -STATUTE- As soon as practicable after the date of the order for relief, the trustee shall reduce to money, consistent with good market practice, all securities held as property of the estate, except for customer name securities delivered or reclaimed under section 751 of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2614.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 748 requires the trustee to liquidate all securities, except for customer name securities, of the estate in a manner consistent with good market practice. The trustee should refrain from flooding a thin market with a large percentage of shares in any one issue. If the trustee holds restricted securities or securities in which trading has been suspended, then the trustee must arrange to liquidate such securities in accordance with the securities laws. A private placement may be the only exemption available with the customer of the debtor the best prospect for such a placement. The subsection does not permit such a customer to bid in his net equity as part of the purchase price; a contrary result would permit a customer to receive a greater percentage on his net equity claim than other customers. ------DocID 14786 Document 131 of 646------ -CITE- 11 USC Sec. 749 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER III -HEAD- Sec. 749. Voidable transfers -STATUTE- (a) Except as otherwise provided in this section, any transfer of property that, but for such transfer, would have been customer property, may be avoided by the trustee, and such property shall be treated as customer property, if and to the extent that the trustee avoids such transfer under section 544, 545, 547, 548, or 549 of this title. For the purpose of such sections, the property so transferred shall be deemed to have been property of the debtor and, if such transfer was made to a customer or for a customer's benefit, such customer shall be deemed, for the purposes of this section, to have been a creditor. (b) Notwithstanding sections 544, 545, 547, 548, and 549 of this title, the trustee may not avoid a transfer made before five days after the order for relief if such transfer is approved by the Commission by rule or order, either before or after such transfer, and if such transfer is - (1) a transfer of a securities contract entered into or carried by or through the debtor on behalf of a customer, and of any cash, security, or other property margining or securing such securities contract; or (2) the liquidation of a securities contract entered into or carried by or through the debtor on behalf of a customer. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2614; Pub. L. 97-222, Sec. 14, July 27, 1982, 96 Stat. 238.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 749 indicates that if the trustee avoids a transfer, property recovered is customer property to any extent it would have been customer property but for the transfer. The section clarifies that a customer who receives a transfer of property of the debtor is a creditor and that property in a customer's account is property of a creditor for purposes of the avoiding powers. AMENDMENTS 1982 - Pub. L. 97-222 substituted '(a) Except as otherwise provided in this section, any' for 'Any', and 'but' for 'except', inserted 'such property', substituted 'or 549' for '549, or 724(a)', and added subsec. (b). ------DocID 14787 Document 132 of 646------ -CITE- 11 USC Sec. 750 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER III -HEAD- Sec. 750. Distribution of securities -STATUTE- The trustee may not distribute a security except under section 751 of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2614.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 750 forbids the trustee from distributing a security other than a customer name security. The term 'distribution' refers to a distribution to customers in satisfaction of net equity claims and is not intended to preclude the trustee from liquidating securities under proposed 11 U.S.C. 748. ------DocID 14788 Document 133 of 646------ -CITE- 11 USC Sec. 751 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER III -HEAD- Sec. 751. Customer name securities -STATUTE- The trustee shall deliver any customer name security to or on behalf of the customer entitled to such security, unless such customer has a negative net equity. With the approval of the trustee, a customer may reclaim a customer name security after payment to the trustee, within such period as the trustee allows, of any claim of the debtor against such customer to the extent that such customer will not have a negative net equity after such payment. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2614.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 751 requires the trustee to deliver a customer name security to the customer entitled to such security unless the customer has a negative net equity. The customer's net equity will be negative when the amount owed by the customer to the stockbroker exceeds the liquidation value of the non-customer name securities in the customer's account. If the customer is a net debtor of the stockbroker, then the trustee may permit the customer to repay debts to the stockbroker so that the customer will no longer be in debt to the stockbroker. If the customer refuses to pay such amount, then the court may order the customer to endorse the security in order that the trustee may liquidate such property. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 741, 748, 750 of this title. ------DocID 14789 Document 134 of 646------ -CITE- 11 USC Sec. 752 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER III -HEAD- Sec. 752. Customer property -STATUTE- (a) The trustee shall distribute customer property ratably to customers on the basis and to the extent of such customers' allowed net equity claims and in priority to all other claims, except claims of the kind specified in section 507(a)(1) of this title that are attributable to the administration of such customer property. (b)(1) The trustee shall distribute customer property in excess of that distributed under subsection (a) of this section in accordance with section 726 of this title. (2) Except as provided in section 510 of this title, if a customer is not paid the full amount of such customer's allowed net equity claim from customer property, the unpaid portion of such claim is a claim entitled to distribution under section 726 of this title. (c) Any cash or security remaining after the liquidation of a security interest created under a security agreement made by the debtor, excluding property excluded under section 741(4)(B) of this title, shall be apportioned between the general estate and customer property in the same proportion as the general estate of the debtor and customer property were subject to such security interest. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2614; Pub. L. 97-222, Sec. 15, July 27, 1982, 96 Stat. 238; Pub. L. 98-353, title III, Sec. 484, July 10, 1984, 98 Stat. 383.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 752(a) requires the trustee to distribute customer property to customers based on the amount of their net equity claims. Customer property is to be distributed in priority to all claims except expenses of administration entitled to priority under Sec. 507(1). It is anticipated that the court will apportion such administrative claims on an equitable basis between the general estate and the customer property of the debtor. Subsection (b)(1) indicates that in the event customer property exceeds customers net equity claims and administrative expenses, the excess pours over into the general estate. This event would occur if the value of securities increased dramatically after the order for relief but before liquidation by the trustee. Subsection (b)(2) indicates that the unpaid portion of a customer's net equity claim is entitled to share in the general estate as an unsecured claim unless subordinated by the court under proposed 11 U.S.C. 501. A net equity claim of a customer that is subordinated under section 747 is entitled to share in distribution under section 726(a)(2) unless subordinated under section 510 independently of the subordination under section 747. Subsection (c) provides for apportionment between customer property and the general estate of any equity of the debtor in property remaining after a secured creditor liquidates a security interest. This might occur if a stockbroker hypothecates securities of his own and of his customers if the value of the hypothecated securities exceeds the debt owed to the secured party. The apportionment is to be made according to the ratio of customer property and general property of the debtor that comprised the collateral. The subsection refers to cash and securities of customers to include any customer property unlawfully converted by the stockbroker in the course of such a transaction. The apportionment is made subject to section 741(4)(B) to insure that property in a customer's account that is owed to the stockbroker will not be considered customer property. This recognizes the right of the stockbroker to withdraw money that has been erroneously placed in a customer's account or that is otherwise owing to the stockbroker. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353, Sec. 484(a), substituted 'customers' allowed' for 'customers allowed', 'except claims of the kind' for 'except claims', and 'such customer property' for 'customer property'. Subsec. (b)(2). Pub. L. 98-353, Sec. 484(b), substituted 'section 726' for 'section 726(a)'. 1982 - Subsec. (c). Pub. L. 97-222 substituted 'Any cash or security remaining after the liquidation of a security interest created under a security agreement made by the debtor, excluding property excluded under section 741(4)(B) of this title, shall be apportioned between the general estate and customer property in the same proportion as the general estate of the debtor and customer property were subject to such security interest' for 'Subject to section 741(4)(B) of this title, any cash or security remaining after the liquidation of a security interest created under a security agreement made by the debtor shall be apportioned between the general estate and customer property in the proportion that the general property of the debtor and the cash or securities of customers were subject to such security interest'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 702 of this title. ------DocID 14790 Document 135 of 646------ -CITE- 11 USC SUBCHAPTER IV -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER IV -HEAD- SUBCHAPTER IV - COMMODITY BROKER LIQUIDATION -SECREF- SUBCHAPTER REFERRED TO IN OTHER SECTIONS This subchapter is referred to in section 103 of this title; title 7 section 24; title 15 section 78fff-1. ------DocID 14791 Document 136 of 646------ -CITE- 11 USC Sec. 761 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER IV -HEAD- Sec. 761. Definitions for this subchapter -STATUTE- In this subchapter - (1) 'Act' means Commodity Exchange Act (7 U.S.C. 1 et seq.); (2) 'clearing organization' means organization that clears commodity contracts made on, or subject to the rules of, a contract market or board of trade; (3) 'Commission' means Commodity Futures Trading Commission; (4) 'commodity contract' means - (A) with respect to a futures commission merchant, contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a contract market or board of trade; (B) with respect to a foreign futures commission merchant, foreign future; (C) with respect to a leverage transaction merchant, leverage transaction; (D) with respect to a clearing organization, contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a contract market or board of trade that is cleared by such clearing organization, or commodity option traded on, or subject to the rules of, a contract market or board of trade that is cleared by such clearing organization; (E) with respect to a commodity options dealer, commodity option; (5) 'commodity option' means agreement or transaction subject to regulation under section 4c(b) of the Act (7 U.S.C. 6c(b)); (6) 'commodity options dealer' means person that extends credit to, or that accepts cash, a security, or other property from, a customer of such person for the purchase or sale of an interest in a commodity option; (7) 'contract market' means board of trade designated as a contract market by the Commission under the Act; (8) 'contract of sale', 'commodity', 'future delivery', 'board of trade', and 'futures commission merchant' have the meanings assigned to those terms in the Act; (9) 'customer' means - (A) with respect to a futures commission merchant - (i) entity for or with whom such futures commission merchant deals and that holds a claim against such futures commission merchant on account of a commodity contract made, received, acquired, or held by or through such futures commission merchant in the ordinary course of such futures commission merchant's business as a futures commission merchant from or for the commodity futures account of such entity; or (ii) entity that holds a claim against such futures commission merchant arising out of - (I) the making, liquidation, or change in the value of a commodity contract of a kind specified in clause (i) of this subparagraph; (II) a deposit or payment of cash, a security, or other property with such futures commission merchant for the purpose of making or margining such a commodity contract; or (III) the making or taking of delivery on such a commodity contract; (B) with respect to a foreign futures commission merchant - (i) entity for or with whom such foreign futures commission merchant deals and that holds a claim against such foreign futures commission merchant on account of a commodity contract made, received, acquired, or held by or through such foreign futures commission merchant in the ordinary course of such foreign futures commission merchant's business as a foreign futures commission merchant from or for the foreign futures account of such entity; or (ii) entity that holds a claim against such foreign futures commission merchant arising out of - (I) the making, liquidation, or change in value of a commodity contract of a kind specified in clause (i) of this subparagraph; (II) a deposit or payment of cash, a security, or other property with such foreign futures commission merchant for the purpose of making or margining such a commodity contract; or (III) the making or taking of delivery on such a commodity contract; (C) with respect to a leverage transaction merchant - (i) entity for or with whom such leverage transaction merchant deals and that holds a claim against such leverage transaction merchant on account of a commodity contract engaged in by or with such leverage transaction merchant in the ordinary course of such leverage transaction merchant's business as a leverage transaction merchant from or for the leverage account of such entity; or (ii) entity that holds a claim against such leverage transaction merchant arising out of - (I) the making, liquidation, or change in value of a commodity contract of a kind specified in clause (i) of this subparagraph; (II) a deposit or payment of cash, a security, or other property with such leverage transaction merchant for the purpose of entering into or margining such a commodity contract; or (III) the making or taking of delivery on such a commodity contract; (D) with respect to a clearing organization, clearing member of such clearing organization with whom such clearing organization deals and that holds a claim against such clearing organization on account of cash, a security, or other property received by such clearing organization to margin, guarantee, or secure a commodity contract in such clearing member's proprietary account or customers' account; or (E) with respect to a commodity options dealer - (i) entity for or with whom such commodity options dealer deals and that holds a claim on account of a commodity contract made, received, acquired, or held by or through such commodity options dealer in the ordinary course of such commodity options dealer's business as a commodity options dealer from or for the commodity options account of such entity; or (ii) entity that holds a claim against such commodity options dealer arising out of - (I) the making of, liquidation of, exercise of, or a change in value of, a commodity contract of a kind specified in clause (i) of this subparagraph; or (II) a deposit or payment of cash, a security, or other property with such commodity options dealer for the purpose of making, exercising, or margining such a commodity contract; (10) 'customer property' means cash, a security, or other property, or proceeds of such cash, security, or property, received, acquired, or held by or for the account of the debtor, from or for the account of a customer - (A) including - (i) property received, acquired, or held to margin, guarantee, secure, purchase, or sell a commodity contract; (ii) profits or contractual or other rights accruing to a customer as a result of a commodity contract; (iii) an open commodity contract; (iv) specifically identifiable customer property; (v) warehouse receipt or other document held by the debtor evidencing ownership of or title to property to be delivered to fulfill a commodity contract from or for the account of a customer; (vi) cash, a security, or other property received by the debtor as payment for a commodity to be delivered to fulfill a commodity contract from or for the account of a customer; (vii) a security held as property of the debtor to the extent such security is necessary to meet a net equity claim based on a security of the same class and series of an issuer; (viii) property that was unlawfully converted from and that is the lawful property of the estate; and (ix) other property of the debtor that any applicable law, rule, or regulation requires to be set aside or held for the benefit of a customer, unless including such property as customer property would not significantly increase customer property; but (B) not including property to the extent that a customer does not have a claim against the debtor based on such property; (11) 'foreign future' means contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a board of trade outside the United States; (12) 'foreign futures commission merchant' means entity engaged in soliciting or accepting orders for the purchase or sale of a foreign future or that, in connection with such a solicitation or acceptance, accepts cash, a security, or other property, or extends credit to margin, guarantee, or secure any trade or contract that results from such a solicitation or acceptance; (13) 'leverage transaction' means agreement that is subject to regulation under section 19 of the Commodity Exchange Act (7 U.S.C. 23), and that is commonly known to the commodities trade as a margin account, margin contract, leverage account, or leverage contract; (14) 'leverage transaction merchant' means person in the business of engaging in leverage transactions; (15) 'margin payment' means payment or deposit of cash, a security, or other property, that is commonly known to the commodities trade as original margin, initial margin, maintenance margin, or variation margin, including mark-to-market payments, settlement payments, variation payments, daily settlement payments, and final settlement payments made as adjustments to settlement prices; (16) 'member property' means customer property received, acquired, or held by or for the account of a debtor that is a clearing organization, from or for the proprietary account of a customer that is a clearing member of the debtor; and (17) 'net equity' means, subject to such rules and regulations as the Commission promulgates under the Act, with respect to the aggregate of all of a customer's accounts that such customer has in the same capacity - (A) the balance remaining in such customer's accounts immediately after - (i) all commodity contracts of such customer have been transferred, liquidated, or become identified for delivery; and (ii) all obligations of such customer in such capacity to the debtor have been offset; plus (B) the value, as of the date of return under section 766 of this title, of any specifically identifiable customer property actually returned to such customer before the date specified in subparagraph (A) of this paragraph; plus (C) the value, as of the date of transfer, of - (i) any commodity contract to which such customer is entitled that is transferred to another person under section 766 of this title; and (ii) any cash, security, or other property of such customer transferred to such other person under section 766 of this title to margin or secure such transferred commodity contract. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2615; Pub. L. 97-222, Sec. 16, July 27, 1982, 96 Stat. 238; Pub. L. 98-353, title III, Sec. 485, July 10, 1984, 98 Stat. 383.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Subchapter IV of chapter 7 represents a compromise between similar chapters in the House bill and Senate amendment. Section 761(2) of the House amendment defines 'clearing organization' to cover an organization that clears commodity contracts on a contract market or a board of trade; the expansion of the definition is intended to include clearing organizations that clear commodity options. Section 761(4) of the House amendment adopts the term 'commodity contract' as used in section 761(5) of the Senate amendment but with the more precise substantive definitions contained in section 761(8) of the House bill. The definition is modified to insert 'board of trade' to cover commodity options. Section 761(5) of the House amendment adopts the definition contained in section 761(6) of the Senate amendment in preference to the definition contained in section 761(4) of the House bill which erroneously included onions. Section 761(9) of the House amendment represents a compromise between similar provisions contained in section 761(10) of the Senate amendment and section 761(9) of the House bill. The compromise adopts the substance contained in the House bill and adopts the terminology of 'commodity contract' in lieu of 'contractual commitment' as suggested in the Senate amendment. Section 761(10) of the House amendment represents a compromise between similar sections in the House bill and Senate amendment regarding the definition of 'customer property.' The definition of 'distribution share' contained in section 761(12) of the Senate amendment is deleted as unnecessary. Section 761(12) of the House amendment adopts a definition of 'foreign futures commission merchant' similar to the definition contained in section 761(14) of the Senate amendment. The definition is modified to cover either an entity engaged in soliciting orders or the purchase or sale of a foreign future, or an entity that accepts cash, a security, or other property for credit in connection with such a solicitation or acceptance. Section 761(13) of the House amendment adopts a definition of 'leverage transaction' identical to the definition contained in section 761(15) of the Senate amendment. Section 761(15) of the House amendment adopts the definition of 'margin payment' contained in section 761(17) of the Senate amendment. Section 761(17) of the House amendment adopts a definition of 'net equity' derived from section 761(15) of the House bill. SENATE REPORT NO. 95-989 Paragraph (1) defines 'Act' to mean the Commodity Exchange Act (7 U.S.C. 1 et seq.). Paragraph (2) defines 'clearing organization' to mean an organization that clears (i.e., matches purchases and sales) commodity futures contracts made on or subject to the rules of a contract market or commodity options transactions made on or subject to the rules of a commodity option exchange. Although commodity option trading on exchanges is currently prohibited, it is anticipated that CFTC may permit such trading in the future. Paragraphs (3) and (4) define terms 'Commission' and 'commodity futures contract'. Paragraph (5) (now (4)) defines 'commodity contract' to mean a commodity futures contract (Sec. 761(4)), a commodity option (Sec. 761(6)), or a leverage contract (Sec. 761(15)). Paragraph (b) (probably should be '(6)' which is now (5)) defines 'commodity option' by reference to section 4c(b) of the Commodity Exchange Act (7 U.S.C. 6c(b)). Paragraphs (7), (8), and (9) (now (6), (7), and (8)) define 'commodity options dealer,' 'contract market,' 'contract of sale,' 'commodity,' 'future delivery,' 'board of trade,' and 'futures commission merchant.' Paragraph (10) (now (9)) defines the term 'customer' to mean with respect to a futures commission merchant or a foreign futures commission merchant, the entity for whom the debtor carries a commodity futures contract or foreign future, or with whom such a contract is carried (such as another commodity broker), or from whom the debtor has received, acquired, or holds cash, securities, or other property arising out of or connected with specified transactions involving commodity futures contracts or foreign futures. This section also defines 'customer' in the context of leverage transaction merchants, clearing organizations, and commodity options dealers. Persons associated with a commodity broker, such as its employees, officers, or partners, may be customers under this definition. The definition of 'customer' serves to isolate that class of persons entitled to the protection subchapter IV provides to customers. In addition, section 101(5) defines 'commodity broker' to mean a futures commission merchant, foreign futures commission merchant, clearing organization, leverage transaction merchant, or commodity options dealer, with respect to which there is a customer. Accordingly, the definition of customer also serves to designate those entities which must utilize chapter 7 and are precluded from reorganizing under chapter 11. Paragraph (11) (now (10)) defines 'customer property' to mean virtually all property or proceeds thereof, received, acquired, or held by or for the account of the debtor for a customer arising out of or in connection with a transaction involving a commodity contract. Paragraph (12) defines 'distribution share' to mean the amount to which a customer is entitled under section 765(a). Paragraphs (13), (14), (15), and (16) (now (11), (12), (13), and (14)) define 'foreign future,' 'foreign futures commission merchant,' 'leverage transaction,' and 'leverage transaction merchant.' Paragraph (17) (now (15)) defines 'margin payment' to mean a payment or deposit commonly known to the commodities trade as original margin, initial margin, or variation margin. Paragraph (18) (now (16)) defines 'member property.' Paragraph (19) (now (17)) defines 'net equity' to be the sum of (A) the value of all customer property remaining in a customer's account immediately after all commodity contracts of such customer have been transferred, liquidated, or become identified for delivery and all obligations of such customer to the debtor have been offset (such as margin payments, whether or not called, and brokerage commissions) plus (B) the value of specifically identifiable customer property previously returned to the customer by the trustee, plus (C) if the trustee has transferred any commodity contract to which the customer is entitled or any margin or security for such contract, the value of such contract and margin or security. Net equity, therefore, will be the total amount of customer property to which a customer is entitled as of the date of the filing of the bankruptcy petition, although valued at subsequent dates. The Commission is given authority to promulgate rules and regulations to further refine this definition. HOUSE REPORT NO. 95-595 Paragraph (8) (now (4)) is a dynamic definition of 'contractual commitment'. The definition will vary depending on the character of the debtor in each case. If the debtor is a futures commission merchant or a clearing organization, then subparagraphs (A) and (D) indicate that the definition means a contract of sale of a commodity for future delivery on a contract market. If the debtor is a foreign futures commission merchant, a leverage transaction merchant, or a commodity options dealer, then subparagraphs (B), (C), and (E) indicate that the definition means foreign future, leverage transaction, or commodity option, respectively. Paragraph (9) defines 'customer' in a similar style. It is anticipated that a debtor with multifaceted characteristics will have separate estates for each different kind of customer. Thus, a debtor that is a leverage transaction merchant and a commodity options dealer would have separate estates for the leverage transaction customers and for the options customers, and a general estate for other creditors. Customers for each kind of commodity broker, except the clearing organization, arise from either of two relationships. In subparagraphs (A), (B), (C), and (E), clause (i) treats with customers to the extent of contractual commitments with the debtor in either a broker or a dealer relationship. Clause (ii) treats with customers to the extent of proceeds from contractual commitments or deposits for the purpose of making contractual commitments. The customer of the clearing organization is a member with a proprietary or customers' account. Paragraph (10) defines 'customer property' to include all property in customer accounts and property that should have been in those accounts but was diverted through conversion or mistake. Clause (i) refers to customer property not properly segregated by the debtor or customer property converted and then recovered so as to become property of the estate. Clause (vii) is intended to exclude property that would cost more to recover from a third party than the value of the property itself. Subparagraph (B) excludes property in a customer's account that belongs to the commodity broker, such as a contract placed in the account by error, or cash due the broker for a margin payment that the broker has made. Paragraph (15) (now (17)) defines 'net equity' to include the value of all contractual commitments at the time of liquidation or transfer less any obligations owed by the customer to the debtor, such as brokerage fees. In addition, the term includes the value of any specifically identifiable property as of the date of return to the customer and the value of any customer property transferred to another commodity broker as of the date of transfer. This definition places the risk of market fluctuations on the customer until commitments leave the estate. -REFTEXT- REFERENCES IN TEXT The Commodity Exchange Act (7 U.S.C. 1 et seq.), referred to in pars. (1), (7), (8), and (17), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, as amended, which is classified generally to chapter 1 (Sec. 1 et seq.) of Title 7, Agriculture. For complete classification of this Act to the Code, see section 1 of Title 7 and Tables. -MISC2- AMENDMENTS 1984 - Par. (10)(A)(viii). Pub. L. 98-353 substituted 'from and that is the lawful property' for 'and that is property'. 1982 - Par. (2). Pub. L. 97-222, Sec. 16(1), inserted 'made' after 'commodity contracts'. Par. (4). Pub. L. 97-222, Sec. 16(2), substituted 'with respect to' for 'if the debtor is' wherever appearing, and substituted 'cleared by such clearing organization, or commodity option traded on, or subject to the rules of, a contract market or board of trade that is cleared by such clearing organization' for 'cleared by the debtor' in subpar. (D). Par. (9). Pub. L. 97-222, Sec. 16(3), substituted 'with respect to' for 'if the debtor is' wherever appearing, in subpar. (A) substituted 'such futures commission merchant' for 'the debtor' wherever appearing and 'such futures commission merchant's' for 'the debtor's', in subpar. (B) substituted 'such foreign futures commission merchant' for 'the debtor' wherever appearing and 'such foreign futures commission merchant's' for 'the debtor's', in subpar. (C) substituted 'such leverage transaction merchant' for 'the debtor' wherever appearing and 'such leverage transaction merchant's' for 'the debtor's', inserted 'or' after the semicolon in cl. (i), and substituted 'holds' for 'hold' in cl. (ii), in subpar. (D) substituted 'such clearing organization' for 'the debtor' wherever appearing, and in subpar. (E) substituted 'such commodity options dealer' for 'the debtor' wherever appearing and 'such commodity options dealer's' for 'the debtor's'. Par. (10). Pub. L. 97-222, Sec. 16(4), struck out 'at any time' after 'security, or property,' in provisions preceding subpar. (A). Par. (12). Pub. L. 97-222, Sec. 16(5), inserted a comma after 'property' and struck out the comma after 'credit'. Par. (13). Pub. L. 97-222, Sec. 16(6), substituted 'section 19 of the Commodity Exchange Act (7 U.S.C. 23)' for 'section 217 of the Commodity Futures Trading Commission Act of 1974 (7 U.S.C. 15a)'. Par. (14). Pub. L. 97-222, Sec. 16(7), struck out 'that is engaged' after 'means person'. Par. (15). Pub. L. 97-222, Sec. 16(8), substituted 'mark-to-market payments, settlement payments, variation payments, daily settlement payments, and final settlement payments made as adjustments to settlement prices' for 'a daily variation settlement payment'. Par. (16). Pub. L. 97-222, Sec. 16(9), struck out 'at any time' after 'customer property'. Par. (17). Pub. L. 97-222, Sec. 16(10), in provisions preceding subpar. (A) substituted 'has' for 'holds', in subpar. (A) inserted 'the' after '(A)' in provisions preceding cl. (i), and 'in such capacity' after 'customer' in cl. (ii). EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 101, 362, 546, 548, 556 of this title; title 12 section 1821. ------DocID 14792 Document 137 of 646------ -CITE- 11 USC Sec. 762 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER IV -HEAD- Sec. 762. Notice to the Commission and right to be heard -STATUTE- (a) The clerk shall give the notice required by section 342 of this title to the Commission. (b) The Commission may raise and may appear and be heard on any issue in a case under this chapter. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2618.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 762 provides that the Commission shall be given such notice as is appropriate of an order for relief in a bankruptcy case and that the Commission may raise and may appear and may be heard on any issue in case involving a commodity broker liquidation. ------DocID 14793 Document 138 of 646------ -CITE- 11 USC Sec. 763 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER IV -HEAD- Sec. 763. Treatment of accounts -STATUTE- (a) Accounts held by the debtor for a particular customer in separate capacities shall be treated as accounts of separate customers. (b) A member of a clearing organization shall be deemed to hold such member's proprietary account in a separate capacity from such member's customers' account. (c) The net equity in a customer's account may not be offset against the net equity in the account of any other customer. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2618; Pub. L. 98-353, title III, Sec. 486, July 10, 1984, 98 Stat. 383.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 763 provides for separate treatment of accounts held in separate capacities. A deficit in one account held for a customer may not be offset against the net equity in another account held by the same customer in a separate capacity or held by another customer. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353 substituted 'by the debtor for' for 'by' and 'treated as' for 'deemed to be'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 14794 Document 139 of 646------ -CITE- 11 USC Sec. 764 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER IV -HEAD- Sec. 764. Voidable transfers -STATUTE- (a) Except as otherwise provided in this section, any transfer by the debtor of property that, but for such transfer, would have been customer property, may be avoided by the trustee, and such property shall be treated as customer property, if and to the extent that the trustee avoids such transfer under section 544, 545, 547, 548, 549, or 724(a) of this title. For the purpose of such sections, the property so transferred shall be deemed to have been property of the debtor, and, if such transfer was made to a customer or for a customer's benefit, such customer shall be deemed, for the purposes of this section, to have been a creditor. (b) Notwithstanding sections 544, 545, 547, 548, 549, and 724(a) of this title, the trustee may not avoid a transfer made before five days after the order for relief, if such transfer is approved by the Commission by rule or order, either before or after such transfer, and if such transfer is - (1) a transfer of a commodity contract entered into or carried by or through the debtor on behalf of a customer, and of any cash, securities, or other property margining or securing such commodity contract; or (2) the liquidation of a commodity contract entered into or carried by or through the debtor on behalf of a customer. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2618; Pub. L. 97-222, Sec. 17, July 27, 1982, 96 Stat. 240; Pub. L. 98-353, title III, Sec. 487, July 10, 1984, 98 Stat. 383.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 764 of the House amendment is derived from the House bill. SENATE REPORT NO. 95-989 Section 764 permits the trustee to void any transfer of property that, except for such transfer, would have been customer property, to the extent permitted under section 544, 545, 547, 548, 549, or 724(a). HOUSE REPORT NO. 95-595 Section 764 indicates the extent to which the avoiding powers may be used by the trustee under subchapter IV of chapter 7. If property recovered would have been customer property if never transferred, then subsection (a) indicates that it will be so treated when recovered. Subsection (b) prohibits avoiding any transaction that occurs before or within five days after the petition if the transaction is approved by the Commission and concerns an open contractual commitment. This enables the Commission to exercise its discretion to protect the integrity of the market by insuring that transactions cleared with other brokers will not be undone on a preference or a fraudulent transfer theory. Subsection (c) insulates variation margin payments and other deposits from the avoiding powers except to the extent of actual fraud under section 548(a)(1). This facilitates prepetition transfers and protects the ordinary course of business in the market. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353 substituted 'any transfer by the debtor' for 'any transfer'. 1982 - Subsec. (a). Pub. L. 97-222, Sec. 17(a), substituted 'but' for 'except', inserted 'such property' after 'trustee, and', and substituted 'shall be' for 'is' wherever appearing. Subsec. (b). Pub. L. 97-222, Sec. 17(b), substituted 'order for relief' for 'date of the filing of the petition'. Subsec. (c). Pub. L. 97-222, Sec. 17(c), struck out subsec. (c) which provided that the trustee could not avoid a transfer that was a margin payment to or deposit with a commodity broker or forward contract merchant or was a settlement payment made by a clearing organization and that occurred before the commencement of the case. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 14795 Document 140 of 646------ -CITE- 11 USC Sec. 765 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER IV -HEAD- Sec. 765. Customer instructions -STATUTE- (a) The notice required by section 342 of this title to customers shall instruct each customer - (1) to file a proof of such customer's claim promptly, and to specify in such claim any specifically identifiable security, property, or commodity contract; and (2) to instruct the trustee of such customer's desired disposition, including transfer under section 766 of this title or liquidation, of any commodity contract specifically identified to such customer. (b) The trustee shall comply, to the extent practicable, with any instruction received from a customer regarding such customer's desired disposition of any commodity contract specifically identified to such customer. If the trustee has transferred, under section 766 of this title, such a commodity contract, the trustee shall transmit any such instruction to the commodity broker to whom such commodity contract was so transferred. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2619; Pub. L. 97-222, Sec. 18, July 27, 1982, 96 Stat. 240; Pub. L. 98-353, title III, Sec. 488, July 10, 1984, 98 Stat. 383.) -MISC1- HISTORICAL AND REVISION NOTES For Historical and Revision Notes for this section, see Historical and Revision Notes set out under section 766 of this title. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353 substituted 'notice required by' for 'notice under'. 1982 - Subsec. (b). Pub. L. 97-222 substituted 'commodity contract' for 'commitment'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 365 of this title. ------DocID 14796 Document 141 of 646------ -CITE- 11 USC Sec. 766 -EXPCITE- TITLE 11 CHAPTER 7 SUBCHAPTER IV -HEAD- Sec. 766. Treatment of customer property -STATUTE- (a) The trustee shall answer all margin calls with respect to a specifically identifiable commodity contract of a customer until such time as the trustee returns or transfers such commodity contract, but the trustee may not make a margin payment that has the effect of a distribution to such customer of more than that to which such customer is entitled under subsection (h) or (i) of this section. (b) The trustee shall prevent any open commodity contract from remaining open after the last day of trading in such commodity contract, or into the first day on which notice of intent to deliver on such commodity contract may be tendered, whichever occurs first. With respect to any commodity contract that has remained open after the last day of trading in such commodity contract or with respect to which delivery must be made or accepted under the rules of the contract market on which such commodity contract was made, the trustee may operate the business of the debtor for the purpose of - (1) accepting or making tender of notice of intent to deliver the physical commodity underlying such commodity contract; (2) facilitating delivery of such commodity; or (3) disposing of such commodity if a party to such commodity contract defaults. (c) The trustee shall return promptly to a customer any specifically identifiable security, property, or commodity contract to which such customer is entitled, or shall transfer, on such customer's behalf, such security, property, or commodity contract to a commodity broker that is not a debtor under this title, subject to such rules or regulations as the Commission may prescribe, to the extent that the value of such security, property, or commodity contract does not exceed the amount to which such customer would be entitled under subsection (h) or (i) of this section if such security, property, or commodity contract were not returned or transferred under this subsection. (d) If the value of a specifically identifiable security, property, or commodity contract exceeds the amount to which the customer of the debtor is entitled under subsection (h) or (i) of this section, then such customer to whom such security, property, or commodity contract is specifically identified may deposit cash with the trustee equal to the difference between the value of such security, property, or commodity contract and such amount, and the trustee then shall - (1) return promptly such security, property, or commodity contract to such customer; or (2) transfer, on such customer's behalf, such security, property, or commodity contract to a commodity broker that is not a debtor under this title, subject to such rules or regulations as the Commission may prescribe. (e) Subject to subsection (b) of this section, the trustee shall liquidate any commodity contract that - (1) is identified to a particular customer and with respect to which such customer has not timely instructed the trustee as to the desired disposition of such commodity contract; (2) cannot be transferred under subsection (c) of this section; or (3) cannot be identified to a particular customer. (f) As soon as practicable after the commencement of the case, the trustee shall reduce to money, consistent with good market practice, all securities and other property, other than commodity contracts, held as property of the estate, except for specifically identifiable securities or property distributable under subsection (h) or (i) of this section. (g) The trustee may not distribute a security or other property except under subsection (h) or (i) of this section. (h) Except as provided in subsection (b) of this section, the trustee shall distribute customer property ratably to customers on the basis and to the extent of such customers' allowed net equity claims, and in priority to all other claims, except claims of a kind specified in section 507(a)(1) of this title that are attributable to the administration of customer property. Such distribution shall be in the form of - (1) cash; (2) the return or transfer, under subsection (c) or (d) of this section, of specifically identifiable customer securities, property, or commodity contracts; or (3) payment of margin calls under subsection (a) of this section. Notwithstanding any other provision of this subsection, a customer net equity claim based on a proprietary account, as defined by Commission rule, regulation, or order, may not be paid either in whole or in part, directly or indirectly, out of customer property unless all other customer net equity claims have been paid in full. (i) If the debtor is a clearing organization, the trustee shall distribute - (1) customer property, other than member property, ratably to customers on the basis and to the extent of such customers' allowed net equity claims based on such customers' accounts other than proprietary accounts, and in priority to all other claims, except claims of a kind specified in section 507(a)(1) of this title that are attributable to the administration of such customer property; and (2) member property ratably to customers on the basis and to the extent of such customers' allowed net equity claims based on such customers' proprietary accounts, and in priority to all other claims, except claims of a kind specified in section 507(a)(1) of this title that are attributable to the administration of member property or customer property. (j)(1) The trustee shall distribute customer property in excess of that distributed under subsection (h) or (i) of this section in accordance with section 726 of this title. (2) Except as provided in section 510 of this title, if a customer is not paid the full amount of such customer's allowed net equity claim from customer property, the unpaid portion of such claim is a claim entitled to distribution under section 726 of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2619; Pub. L. 97-222, Sec. 19, July 27, 1982, 96 Stat. 240; Pub. L. 98-353, title III, Sec. 489, July 10, 1984, 98 Stat. 383.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Sections 765 and 766 of the House amendment represent a consolidation and redraft of sections 765, 766, 767, and 768 of the House bill and sections 765, 766, 767, and 768 of the Senate amendment. In particular, section 765(a) of the House amendment is derived from section 765(a) of the House bill and section 767(a) of the Senate amendment. Under section 765(a) of the House amendment customers are notified of the opportunity to immediately file proofs of claim and to identify specifically identifiable securities, property, or commodity contracts. The customer is also afforded an opportunity to instruct the trustee regarding the customer's desires concerning disposition of the customer's commodity contracts. Section 767(b) (probably should be 765(b)) makes clear that the trustee must comply with instructions received to the extent practicable, but in the event the trustee has transferred commodity contracts to a commodity broker, such instructions shall be forwarded to the broker. Section 766(a) of the House amendment is derived from section 768(c) of the House bill and section 767(f) of the Senate amendment. Section 766(b) of the House amendment is derived from section 765(d) of the House bill, and section 767(g) of the Senate amendment. Section 766(c) of the House amendment is derived from section 768(a) of the House bill and section 767(e) of the Senate amendment. Section 766(d) of the House amendment is derived from section 768(b) of the House bill and the second sentence of section 767(e) of the Senate amendment. Section 766(e) of the House amendment is derived from section 765(c) of the House bill and sections 767(c) and (d) of the Senate amendment. The provision clarifies that the trustee may liquidate a commodity contract only if the commodity contract cannot be transferred to a commodity broker under section 766(c), cannot be identified to a particular customer, or has been identified with respect to a particular customer, but with respect to which the customer's instructions have not been received. Section 766(f) of the House amendment is derived from section 766(b) of the House bill and section 767(h) of the Senate amendment. The term 'all securities and other property' is not intended to include a commodity contract. Section 766(g) of the House amendment is derived from section 766(a) of the House bill. Section 766(h) of the House amendment is derived from section 767(a) of the House bill and section 765(a) of the Senate amendment. In order to induce private trustees to undertake the difficult and risky job of liquidating a commodity broker, the House amendment contains a provision insuring that a pro rata share of administrative claims will be paid. The provision represents a compromise between the position taken in the House bill, subordinating customer property to all expenses of administration, and the position taken in the Senate amendment requiring the distribution of customer property in advance of any expenses of administration. The position in the Senate amendment is rejected since customers, in any event, would have to pay a brokerage commission or fee in the ordinary course of business. The compromise provision requires customers to pay only those administrative expenses that are attributable to the administration of customer property. Section 766(i) of the House amendment is derived from section 767(b) of the House bill and contains a similar compromise with respect to expenses of administration as the compromise detailed in connection with section 766(h) of the House amendment. Section 766(j) of the House amendment is derived from section 767(c) of the House bill. No counterpart is contained in the Senate amendment. The provision takes account of the rare case where the estate has customer property in excess of customer claims and administrative expenses attributable to those claims. The section also specifies that to the extent a customer is not paid in full out of customer property, that the unpaid claim will be treated the same as any other general unsecured creditor. Section 768 of the Senate amendment was deleted from the House amendment as unwise. The provision in the Senate amendment would have permitted the trustee to distribute customer property based upon an estimate of value of the customer's account, with no provision for recapture of excessive disbursements. Moreover, the section would have exonerated the trustee from any liability for such an excessive disbursement. Furthermore, the section is unclear with respect to the customer's rights in the event the trustee makes a distribution less than the share to which the customer is entitled. The provision is deleted in the House amendment so that this difficult problem may be handled on a case-by-case basis by the courts as the facts and circumstances of each case require. Section 769 of the Senate amendment is deleted in the House amendment as unnecessary. The provision was intended to codify Board of Trade v. Johnson, 264 U.S. 1 (1924) (Ill.1924, 44 S.Ct. 232). Board of Trade against Johnson is codified in section 363(f) of the House amendment which indicates the only five circumstances in which property may be sold free and clear of an interest in such property of an entity other than the estate. Section 770 of the Senate amendment is deleted in the House amendment as unnecessary. That section would have permitted commodity brokers to liquidate commodity contracts, notwithstanding any contrary order of the court. It would require an extraordinary circumstance, such as a threat to the national security, to enjoin a commodity broker from liquidating a commodity contract. However, in those circumstances, an injunction must prevail. Failure of the House amendment to incorporate section 770 of the Senate amendment does not imply that the automatic stay prevents liquidation of commodity contracts by commodity brokers. To the contrary, whenever by contract, or otherwise, a commodity broker is entitled to liquidate a position as a result of a condition specified in a contract, other than a condition or default of the kind specified in section 365(b)(2) of title 11, the commodity broker may engage in such liquidation. To this extent, the commodity broker's contract with his customer is treated no differently than any other contract under section 365 of title 11. SENATE REPORT NO. 95-989 (Section 765) Subsection (a) of this section (now section 766(h)) provides that with respect to liquidation of commodity brokers which are not clearing organizations, the trustee shall distribute customer property to customers on the basis and to the extent of such customers' allowed net equity claims, and in priority to all other claims. This section grants customers' claims first priority in the distribution of the estate. Subsection (b) (now section 766(i)) grants the same priority to member property and other customer property in the liquidation of a clearing organization. A fundamental purpose of these provisions is to ensure that the property entrusted by customers to their brokers will not be subject to the risks of the broker's business and will be available for disbursement to customers if the broker becomes bankrupt. As a result of section 765, a customer need not trace any funds in order to avoid treatment as a general creditor as was required by the Seventh Circuit in In re Rosenbaum Grain Corporation. Section 766 lists certain transfers which are not voidable by the trustee of a commodity broker. Subsection (a) exempts transfers approved by the Commission by rule or order, either before or after the transfer. It is expected that the Commission will use this power sparingly and only when necessary to effectuate the remedial purposes of this legislation, bearing in mind that the immediate transfer of customer accounts from bankrupt commodity brokers to solvent commodity brokers is one of the primary goals of this subchapter. The committee considered and rejected a provision in subsection (b) that would have exempted payments made to a commodity broker. The Commission may not by rule exempt such transfers. The Commission's prompt attention to the promulgation of such rules and regulations is expected. Subsection (b) (now section 764(c)) provides for the nonavoidability of margin payments made by a commodity broker, other than a clearing organization. If such payments are made by or to a clearing organization, they are nonavoidable pursuant to subsection (c). All other margin payments made by a commodity broker, other than a clearing organization, are nonavoidable if they meet the conditions set forth in subsection (b). Subsections (b)(1) and (b)(2) parallel the requirements for avoidance of fraudulent transfers and obligations under section 548. Subsection (b)(3) adds a requirement that there be collusion between the transferee and transferor in order for such payments to be voidable. It would be unfair to permit recovery from an innocent commodity broker since such brokers are, for the most part, simply conduits for margin payments and do not retain margin for use in their operations. Subsection (b)(4) would permit recovery of a subsequent transferee only if it had actual knowledge at the time of that subsequent transfer of the scheme to defraud. Again it should be noted that if the transfer is a margin payment and the subsequent transferee is a clearing organization, the transfer is nonavoidable under section 766(c). Subsection (c) (now section 548(d)(2)) overrules Seligson v. New York Produce Exchange, and provides as a matter of law that margin payments made by or to a clearing organization are not voidable. Section 767 sets forth the procedures to be followed by the trustee. It should be emphasized that many of the duties imposed on the trustee are required to be discharged by the trustee immediately upon his appointment. The earlier these duties are discharged the less potential market disruption can result. The initial duty of the trustee is to endeavor to transfer to another commodity broker or brokers all identified customer accounts together with the customer property margining such accounts, to the extent the trustee deems appropriate. Although it is preferable for all such accounts to be transferred, exigencies may dictate a partial transfer. The requirement that the value of the accounts and property transferred not exceed the customer's distribution share may necessitate a slight delay until the trustee can submit to the court, for its disapproval, an estimate of each customer's distribution share pursuant to section 768. Subsection (c) (now section 766(e)) provides that contemporaneously with the estimate of the distribution share and the transfer of identified customer accounts and property, subsection (c) provides that the trustee should make arrangements for the liquidation of all commodity contracts maintained by the debtor that are not identifiable to specific customers. These contracts would, of course, include all such contracts held in the debtor's proprietory account. At approximately the same time, the trustee should notify each customer of the debtor's bankruptcy and instruct each customer immediately to submit a claim including any claim to a specifically identifiable security or other property, and advise the trustee as to the desired disposition of commodity contracts carried by the debtor for the customer. This requirement is placed upon the trustee to insure that producers who have hedged their production in the commodities market are allowed the opportunity to preserve their positions. The theory of the commodity market is that it exists for producers and buyers of commodities and not for the benefit of the speculators whose transactions now comprise the overwhelming majority of trades. Maintenance of positions by hedges may require them to put up additional margin payments in the hours and days following the commodity broker bankruptcy, which they may be unable or unwilling to do. In such cases, their positions will be quickly liquidated by the trustee, but they must have the opportunity to make those margin payments before they are summarily liquidated out of the market to the detriment of their growing crop. The failure of the customer to advise the trustee as to disposition of the customer's commodity contract will not delay a transfer of a contract pursuant to subsection (b) so long as the contract can otherwise be identified to the customer. Nor will the failure of the customer to submit a claim prevent the customer from recovering the net equity in that customer's account, absent a claim the customer cannot participate in the determination of the net equity in the account. If the customer submits instructions pursuant to subsection (a) after the customer's commodity contracts are transferred to another commodity broker, the trustee must transmit the instruction to the transferee. If the customer's commodity contracts are not transferred before the customer's instructions are received, the trustee must attempt to comply with the instruction, subject to the provisions of section 767(d). Under subsection (d) (now section 766(e)), the trustee has discretion to liquidate any commodity contract carried by the debtor at any time. This discretion must be exercised with restraint in such cases, consistent with the purposes of this subchapter and good business practices. The committee intends that hedged accounts will be given special consideration before liquidation as discussed in connection with subsection (c). Subsection (e) (now section 766(c)) instructs the trustee as to the disposition of any security or other property, not disposed of pursuant to subsection (b) or (d), that is specifically identifiable to a customer and to which the customer is entitled. Such security or other property must be returned to the customer or promptly transferred to another commodity broker for the benefit of the customer. If the value of the security or other property retained or transferred, together with any other distribution made by the trustee to or on behalf of the customer, exceeds the customer's distribution share the customer must deposit cash with the trustee equal to that difference before the return or transfer of the security or other property. Subsection (f) (now section 766(a)) requires the trustee to answer margin calls on specifically identifiable customer commodity contracts, but only to the extent that the margin payment, together with any other distribution made by the trustee to or on behalf of the customer, does not exceed the customer's distribution share. Subsection (g) (now section 766(b)) requires the trustee to liquidate all commodity futures contracts prior to the close of trading in that contract, or the first day on which notice of intent to deliver on that contract may be tendered, whichever occurs first. If the customer desires that the contract be kept open for delivery, the contract should be transferred to another commodity broker pursuant to subsection (b). If for some reason the trustee is unable to transfer a contract on which delivery must be made or accepted and is unable to close out such contract, the trustee is authorized to operate the business of the debtor for the purpose of accepting or making tender of notice of intent to deliver the physical commodity underlying the contract, facilitating delivery of the physical commodity or disposing of the physical commodity in the event of a default. Any property received, not previously held, by the trustee in connection with its operation of the business of the debtor for these purposes, is not by the terms of this subchapter specifically included in the definition of customer property. Finally, subsection (h) (now section 766(f)) requires the trustee to liquidate the debtor's estate as soon as practicable and consistent with good market practice, except for specifically identifiable securities or other property distributable under subsection (e). Section 768 is an integral part of the commodity broker liquidation procedures outlined in section 767. Prompt action by the trustee to transfer or liquidate customer commodity contracts is necessary to protect customers, the debtor's estate, and the marketplace generally. However, transfers of customer accounts and property valued in excess of the customer's distribution share are prohibited. Since a determination of the customer's distribution share requires a determination of the customer's net equity and the total dollar value of customer property held by or for the account of the debtor, it is possible that the customer's distribution share will not be determined, and thus the customer's contracts and property will not be transferred, on a timely basis. To avoid this problem, and to expedite transfers of customer property, section 768 permits the trustee to make distributions to customers in accordance with a preliminary estimate of the debtor's customer property and each customer's distribution share. It is acknowledged that the necessity for prompt action may not allow the trustee to assemble all relevant facts before such an estimate is made. However, the trustee is expected to develop as accurate an estimate as possible based on the available facts. Further, in order to permit expeditious action, section 768 does not require that notice be given to customers or other creditors before the court approves or disapproves the estimate. Nor does section 768 require that customer claims be received pursuant to section 767(a) before the trustee may act upon and in accordance with the estimate. If the estimate is inaccurate, the trustee is absolved of liability for a distribution which exceeds the customer's actual distribution share so long as the distribution did not exceed the customer's estimated distribution share. However, a trustee may have a claim back against a customer who received more than its actual distribution share. HOUSE REPORT NO. 95-595 Section 765(a) indicates that a customer must file a proof of claim, including any claim to specifically identifiable property, within such time as the court fixes. Subsection (c) (of section 765 (now section 766(e))) sets forth the general rule requiring the trustee to liquidate contractual commitments that are either not specifically identifiable or with respect to which a customer has not instructed the trustee during the time fixed by the court. Subsection (d) (now section 766(b)) indicates an exception to the time limits in the rule by requiring the trustee to liquidate any open contractual commitment before the last day of trading or the first day during which delivery may be demanded, whichever first occurs, if transfer cannot be effectuated. Section 766(a) (now section 766(g)) indicates that the trustee may distribute securities or other property only under section 768. This does not preclude a distribution of cash under section 767(a) or distribution of any excess customer property under section 767(c) to the general estate. Subsection (b) (now section 766(f)) indicates that the trustee shall liquidate all securities and other property that is not specifically identifiable property as soon as practicable after the commencement of the case and in accordance with good market practice. If securities are restricted or trading has been suspended, the trustee will have to make an exempt sale or file a registration statement. In the event of a private placement, a customer is not entitled to 'bid in' his net equity claim. To do so would enable him to receive a greater percentage recovery than other customers. Section 767(a) (now section 766(h)) provides for the trustee to distribute customer property pro rata according to customers' net equity claims. The court will determine an equitable portion of customer property to pay administrative expenses. Paragraphs (2) and (3) indicate that the return of specifically identifiable property constitutes a distribution of net equity. Subsection (b) (now section 766(i)) indicates that if the debtor is a clearing organization, customer property is to be segregated into customers' accounts and proprietary accounts and distributed accordingly without offset. This protects a member's customers from having their claims offset against the member's proprietary account. Subsection (c)(1) (now section 766(j)(1)) indicates that any excess customer property will pour over into the general estate. This unlikely event would occur only if customers fail to file proofs of claim. Subsection (c)(2) (now section 766(j)(2)) indicates that to the extent customers are not paid in full, they are entitled to share in the general estate as unsecured creditors, unless subordinated by the court under proposed 11 U.S.C. 510. Section 768(a) (now section 766(c)) requires the trustee to return specifically identifiable property to the extent that such distribution will not exceed a customer's net equity claim. Thus, if the customer owes money to a commodity broker, this will be offset under section 761(15)(A)(ii). If the value of the specifically identifiable property exceeds the net equity claim, then the customer may deposit cash with the trustee to make up the difference after which the trustee may return or transfer the customer's property. Subsection (c) (now section 766(a)) permits the trustee to answer all margin calls, to the extent of the customer's net equity claim, with respect to any specifically identifiable open contractual commitment. It should be noted that any payment under subsections (a) or (c) will be considered a reduction of the net equity claim under section 767(a). Thus the customer's net equity claim is a dynamic amount that varies with distributions of specifically identifiable property or margin payments on such property. This approach differs from the priority given to specifically identifiable property under subchapter III of chapter 7 by limiting the priority effect to a right to receive specific property as part of, rather than in addition to, a ratable share of customer property. This policy is designed to protect the small customer who is unlikely to have property in specifically identifiable form as compared with the professional trader. The CFTC is authorized to make rules defining specifically identifiable property under section 302 of the bill, in title III. AMENDMENTS 1984 - Subsec. (j)(2). Pub. L. 98-353 substituted 'section 726' for 'section 726(a)'. 1982 - Subsec. (a). Pub. L. 97-222, Sec. 19(a), inserted 'to such customer' after 'distribution'. Subsec. (b). Pub. L. 97-222, Sec. 19(b), struck out 'that is being actively traded as of the date of the filing of the petition' after 'any open commodity contract' and inserted 'the' after 'rules of'. Subsec. (d). Pub. L. 97-222, Sec. 19(c), substituted 'the amount to which the customer of the debtor is entitled under subsection (h) or (i) of this section, then such' for 'such amount, then the' and 'the trustee then shall' for 'the trustee shall'. Subsec. (h). Pub. L. 97-222, Sec. 19(d), inserted provision that notwithstanding any other provision of this subsection, a customer net equity claim based on a proprietary account, as defined by Commission rule, regulation, or order, may not be paid either in whole or in part, directly or indirectly, out of customer property unless all other customer net equity claims have been paid in full. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 365, 702, 761, 765 of this title; title 7 section 24. ------DocID 14797 Document 142 of 646------ -CITE- 11 USC CHAPTER 9 -EXPCITE- TITLE 11 CHAPTER 9 -HEAD- CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY -MISC1- SUBCHAPTER I - GENERAL PROVISIONS Sec. 901. Applicability of other sections of this title. 902. Definitions for this chapter. 903. Reservation of State power to control municipalities. 904. Limitation on jurisdiction and powers of court. SUBCHAPTER II - ADMINISTRATION 921. Petition and proceedings relating to petition. 922. Automatic stay of enforcement of claims against the debtor. 923. Notice. 924. List of creditors. 925. Effect of list of claims. 926. Avoiding powers. 927. Limitation on recourse. 928. Post petition effect of security interest. 929. Municipal leases. 930. Dismissal. SUBCHAPTER III - THE PLAN 941. Filing of plan. 942. Modification of plan. 943. Confirmation. 944. Effect of confirmation. 945. Continuing jurisdiction and closing of the case. 946. Effect of exchange of securities before the date of the filing of the petition. AMENDMENTS 1988 - Pub. L. 100-597, Sec. 11, Nov. 3, 1988, 102 Stat. 3030, added items 927 to 929 and redesignated former item 927 as 930. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in sections 101, 103, 109, 347, 362, 365, 502, 503 of this title; title 28 section 1930. ------DocID 14798 Document 143 of 646------ -CITE- 11 USC SUBCHAPTER I -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER I -HEAD- SUBCHAPTER I - GENERAL PROVISIONS ------DocID 14799 Document 144 of 646------ -CITE- 11 USC Sec. 901 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER I -HEAD- Sec. 901. Applicability of other sections of this title -STATUTE- (a) Sections 301, 344, 347(b), 349, 350(b), 361, 362, 364(c), 364(d), 364(e), 364(f), 365, 366, 501, 502, 503, 504, 506, 507(a)(1), 509, 510, 524(a)(1), 524(a)(2), 544, 545, 546, 547, 548, 549(a), 549(c), 549(d), 550, 551, 552, 553, 557, 1102, 1103, 1109, 1111(b), 1122, 1123(a)(1), 1123(a)(2), 1123(a)(3), 1123(a)(4), 1123(a)(5), 1123(b), 1124, 1125, 1126(a), 1126(b), 1126(c), 1126(e), 1126(f), 1126(g), 1127(d), 1128, 1129(a)(2), 1129(a)(3), 1129(a)(6), 1129(a)(8), 1129(a)(10), 1129(b)(1), 1129(b)(2)(A), 1129(b)(2)(B), 1142(b), 1143, 1144, and 1145 of this title apply in a case under this chapter. (b) A term used in a section of this title made applicable in a case under this chapter by subsection (a) of this section or section 103(e) of this title has the meaning defined for such term for the purpose of such applicable section, unless such term is otherwise defined in section 902 of this title. (c) A section made applicable in a case under this chapter by subsection (a) of this section that is operative if the business of the debtor is authorized to be operated is operative in a case under this chapter. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2621; Pub. L. 98-353, title III, Sec. 353, 490, July 10, 1984, 98 Stat. 361, 383; Pub. L. 100-597, Sec. 3, Nov. 3, 1988, 102 Stat. 3028.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Chapter 9 of the House amendment represents a compromise between chapter 9 of the House bill and 9 of the Senate amendment. In most respects this chapter follows current law with respect to the adjustment of debts of a municipality. Stylistic changes and minor substantive revisions have been made in order to conform this chapter with other new chapters of the bankruptcy code. There are few major differences between the House bill and the Senate amendment on this issue. Section 901 indicates the applicability of other sections of title 11 in cases under chapter 9. Included are sections providing for creditors' committees under sections 1102 and 1103. HOUSE REPORT NO. 95-595 Section 901 makes applicable appropriate provisions of other chapters of proposed title 11. The general rule set out in section 103(e) is that only the provisions of chapters 1 and 9 apply in a chapter 9 case. Section 901 is the exception, and specifies other provisions that do apply. They are as follows: Sec. 301. Voluntary cases. Application of this section makes clear, as under current chapter IX (chapter 9 of former title 11), that a municipal case can be commenced only by the municipality itself. There are no involuntary chapter 9 cases. Sec. 344. Self-incrimination; immunity. Application of this section is of no substantive effect for the administration of the case, but merely provides that the general rules in part V (Sec. 6001 et seq.) of title 18 govern immunity. Sec. 347(b). Unclaimed property. This provision currently appears in section 96(d) of chapter IX (section 416(d) of former title 11). Sec. 349. Effect of dismissal. This section governs the effect of a dismissal of a chapter 9 case. It provides in substance that rights that existed before the case that were disturbed by the commencement of the case are reinstated. This section does not concern grounds for dismissal, which are found in section 926. Sec. 361. Adequate protection. Section 361 provides the general standard for the protection of secured creditors whose property is used in a case under title 11. Its importance lies in its application to sections 362 and 364. Sec. 362. Automatic stay. The automatic stay provisions of the general portions of the title are incorporated into chapter 9. There is an automatic stay provided in current Bankruptcy Act Sec. 85(e) (section 405(e) of former title 11). The thrust of section 362 is the same as that of section 85(e), but, of course, its application in chapter 9 is modernized and drafted to conform with the stay generally applicable under the bankruptcy code. An additional part of the automatic stay applicable only to municipal cases is included in section 922. Sec. 364(c), 364(d), 364(e). Obtaining credit. This section governs the borrowing of money by a municipality in reorganization. It is narrower than a comparable provision in current law, section 82(b)(2) (section 402(b)(2) of former title 11). The difference lies mainly in the removal under the bill of the authority of the court to supervise borrowing by the municipality in instances in which none of the special bankruptcy powers are involved. That is, if a municipality could borrow money outside of the bankruptcy court, then it should have the same authority in bankruptcy court, under the doctrine of Ashton v. Cameron Water District No. 1, 298 U.S. 513 (1936) (Tex.1936, 56 S.Ct. 892, 80 L.Ed. 1309, 31 Am.Bankr.Rep.N.S. 96, rehearing denied 57 S.Ct. 5, 299 U.S. 619, 81 L.Ed. 457) and National League of Cities v. Usery, 426 U.S. 833 (1976) (Dist.Col.1976, 96 S.Ct. 2465, 49 L.Ed.2d 245, on remand 429 F. Supp. 703). Only when the municipality needs special authority, such as subordination of existing liens, or special priority for the borrowed funds, will the court become involved in the authorization. Sec. 365. Executory contracts and unexpired leases. The applicability of section 365 incorporates the general power of a bankruptcy court to authorize the assumption or rejection of executory contracts or unexpired leases found in other chapters of the title. This section is comparable to section 82(b)(1) of current law (section 402(b)(1) of former title 11). Sec. 366. Utility service. This section gives a municipality the same authority as any other debtor with respect to continuation of utility service during the proceeding, provided adequate assurance of future payment is provided. No comparable explicit provision is found in current law, although the case law seems to support the same result. Sec. 501. Filing of proofs of claims. This section permits filing of proofs of claims in a chapter 9 case. Note, however, that section 924 permits listing of creditors' claims, as under chapter 11 and under section 85(b) of chapter IX (section 405(b) of former title 11). Sec. 502. Allowance of claims. This section applies the general allowance rules to chapter 9 cases. This is no change from current law. Sec. 503. Administrative expenses. Administrative expenses as defined in section 503 will be paid in a chapter 9 case, as provided under section 89(1) of current law (section 409(1) of former title 11). Sec. 504. Sharing of compensation. There is no comparable provision in current law. However, this provision applies generally throughout the proposed law, and will not affect the progress of the case, only the interrelations between attorneys and other professionals that participate in the case. Sec. 506. Determination of secured status. Section 506 specifies that claims secured by a lien should be separated, to the extent provided, into secured and unsecured claims. It applies generally. Current law follows this result, though there is no explicit provision. Sec. 507(1). Priorities. Paragraph (1) of section 507 requires that administrative expenses be paid first. This rule will apply in chapter 9 cases. It is presently found in section 89(1) (section 409(1) of former title 11). The two other priorities presently found in section 89 have been deleted. The second for claims arising within 3 months before the case is commenced, is deleted from the statute, but may be within the court's equitable power to award, under the case of Fosdick v. Schall, 99 U.S. 235 (1878) (25 L.Ed. 339). Leaving the provision to the courts permits greater flexibility, as under railroad cases, than an absolute three-month rule. The third priority under current law, for claims which are entitled to priority under the laws of the United States, is deleted because of the proposed amendment to section 3466 of the Revised Statutes (former 31 U.S.C. 191, see 31 U.S.C. 3713(a)) contained in section 321(a) of title III of the bill, which previously has given the United States an absolute first priority in chapter X (chapter 10 of former title 11) and section 77 (section 205 of former title 11) cases. Because the priority rules are regularized and brought together in the bankruptcy laws by this bill, the need for incorporation of priorities elsewhere specified is eliminated. Sec. 509. Claims of codebtors. This section provides for the treatment of sureties, guarantors, and codebtors. The general rule of postponement found in the other chapters will apply in chapter 9. This section adopts current law. Sec. 510. Subordination of claims. This section permits the court to subordinate, on equitable grounds, any claim, and requires enforcement of contractual subordination agreements, and subordination of securities rescission claims. The section recognizes the inherent equitable power of the court under current law, and the practice followed with respect to contractual provisions. Sec. 547. Preferences. Incorporation of section 547 will permit the debtor to recover preferences. This power will be used primarily when those who gave the preferences have been replaced by new municipal officers or when creditors coerced preferential payments. Unlike Bankruptcy Act Sec. 85(h) (section 405(h) of former title 11), the section does not permit the appointment of a trustee for the purpose of pursuing preferences. Moreover, this bill does not incorporate the other avoiding powers of a trustee for chapter 9, found in current section 85(h). Sec. 550. Liability of transfers. Incorporation of this section is made necessary by the incorporation of the preference section, and permits recovery by the debtor from a transferee of an avoided preference. Sec. 551. Automatic preservation of avoided transfer. Application of section 551 requires preservation of any avoided preference for the benefit of the estate. Sec. 552. Postpetition effect of security interest. This section will govern the applicability after the commencement of the case of security interests granted by the debtor before the commencement of the case. Sec. 553. Setoff. Under current law, certain setoff is stayed. Application of this section preserves that result, though the setoffs that are permitted under section 553 are better defined than under present law. Application of this section is necessary to stay the setoff and to provide the offsetting creditor with the protection to which he is entitled under present law. Sec. 1122. Classification of claims. This section is derived from current section 88(b) (section 408(b) of former title 11), and is substantially similar. Sec. 1123(a)(1)-(4), (b). Contents of plan. The general provisions governing contents of a chapter 11 plan are made applicable here, with two exceptions relating to the rights of stockholders, which are not applicable in chapter 9 cases. This section expands current law by specifying the contents of a plan in some detail. Section 91 of current law (section 411 of former title 11) speaks only in general terms. The substance of the two sections is substantially the same, however. Sec. 1124. Impairment of claims. The confirmation standards adopted in chapter 9 are the same as those of chapter 11. This changes current chapter IX (chapter 9 of former title 11), which requires compliance with the fair and equitable rule. The greater flexibility of proposed chapter 11 is carried over into chapter 9, for there appears to be no reason why the confirmation standards for the two chapters should be different, or why the elimination of the fair and equitable rule from corporate reorganizations should not be followed in municipal debt adjustments. The current chapter IX rule is based on the confirmation rules of current chapter X (chapter 10 of former title 11). The change in the latter suggests a corresponding change in the former. Section 1124 is one part of the new confirmation standard. It defines impairment, for use in section 1129. Sec. 1125. Postpetition disclosure and solicitation. The change in the confirmation standard necessitates a corresponding change in the disclosure requirements for solicitation of acceptances of a plan. Under current chapter IX (chapter 9 of former title 11) there is no disclosure requirement. Incorporation of section 1125 will insure that creditors receive adequate information before they are required to vote on a plan. Sec. 1126(a), (b), (c), (e), (f), (g). Acceptance of plan. Section 1126 incorporates the current chapter IX (chapter 9 of former title 11) acceptance requirement: two-thirds in amount and a majority in number, Bankruptcy Act Sec. 92 (section 412 of former title 11). Section 1125 permits exclusion of certain acceptances from the computation if the acceptances were obtained in bad faith or, unlike current law, if there is a conflict of interest motivating the acceptance. Sec. 1127(d). Modification of plan. This section governs the change of a creditor's vote on the plan after a modification is proposed. It is derived from current section 92(e) (section 412(e) of former title 11). Sec. 1128. Hearing on confirmation. This section requires a hearing on the confirmation of the plan, and permits parties in interest to object. It is the same as Bankruptcy Act Sec. 93 and 94(a) (sections 413 and 414(a) of former title 11), though the provision, comparable to section 206 of current chapter X (section 606 of former title 11), permitting a labor organization to appear and be heard on the economic soundness of the plan, has been deleted as more appropriate for the Rules. Sec. 1129(a)(2), (3), (8), (b)(1), (2). Confirmation of plan. This section provides the boiler-plate language that the plan be proposed in good faith and that it comply with the provisions of the chapter, and also provides the financial standard for confirmation, which replaces the fair and equitable rule. See Sec. 1124, supra. Sec. 1142(b). Execution of plan. Derived from Bankruptcy Act Sec. 96(b) (section 416(b) of former title 11), this section permits the court to order execution and delivery of instruments in order to execute the plan. Sec. 1143. Distribution. This section is the same in substance as section 96(d) (section 416(d) of former title 11), which requires presentment or delivery of securities within five years, and bars creditors that do not act within that time. Sec. 1144. Revocation of order of confirmation. This section permits the court to revoke the order of confirmation and the discharge if the confirmation of the plan was procured by fraud. There is no comparable provision in current chapter IX (chapter 9 of former title 11). AMENDMENTS 1988 - Subsec. (a). Pub. L. 100-597 inserted '1129(a)(6),' after '1129(a)(3),'. 1984 - Subsec. (a). Pub. L. 98-353 inserted '557,' after '553,' and substituted '1111(b),' for '1111(b)'. EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not applicable to any case commenced under this title before that date, see section 12 of Pub. L. 100-597, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 103, 902, 943 of this title. ------DocID 14800 Document 145 of 646------ -CITE- 11 USC Sec. 902 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER I -HEAD- Sec. 902. Definitions for this chapter -STATUTE- In this chapter - (1) 'property of the estate', when used in a section that is made applicable in a case under this chapter by section 103(e) or 901 of this title, means property of the debtor; (2) 'special revenues' means - (A) receipts derived from the ownership, operation, or disposition of projects or systems of the debtor that are primarily used or intended to be used primarily to provide transportation, utility, or other services, including the proceeds of borrowings to finance the projects or systems; (B) special excise taxes imposed on particular activities or transactions; (C) incremental tax receipts from the benefited area in the case of tax-increment financing; (D) other revenues or receipts derived from particular functions of the debtor, whether or not the debtor has other functions; or (E) taxes specifically levied to finance one or more projects or systems, excluding receipts from general property, sales, or income taxes (other than tax-increment financing) levied to finance the general purposes of the debtor; (3) 'special tax payer' means record owner or holder of legal or equitable title to real property against which a special assessment or special tax has been levied the proceeds of which are the sole source of payment of an obligation issued by the debtor to defray the cost of an improvement relating to such real property; (4) 'special tax payer affected by the plan' means special tax payer with respect to whose real property the plan proposes to increase the proportion of special assessments or special taxes referred to in paragraph (2) of this section assessed against such real property; and (5) 'trustee', when used in a section that is made applicable in a case under this chapter by section 103(e) or 901 of this title, means debtor, except as provided in section 926 of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2622; Pub. L. 98-353, title III, Sec. 491, July 10, 1984, 98 Stat. 383; Pub. L. 100-597, Sec. 4, Nov. 3, 1988, 102 Stat. 3028.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 902(2) of the Senate amendment is deleted since the bankruptcy court will have jurisdiction over all cases under chapter 9. The concept of a claim being materially and adversely affected reflected in section 902(1) of the Senate amendment has been deleted and replaced with the new concept of 'impairment' set forth in section 1124 of the House amendment and incorporated by reference into chapter 9. SENATE REPORT NO. 95-989 There are six definitions for use in chapter 9. Paragraph (1) defines what claims are included in a chapter 9 case and adopts the definition now found in section 81(1) (section 401(1) of former title 11). All claims against the petitioner generally will be included, with one significant exception. Municipalities are authorized, under section 103(c) of the Internal Revenue Code of 1954, as amended (title 26), to issue tax-exempt industrial development revenue bonds to provide for the financing of certain projects for privately owned companies. The bonds are sold on the basis of the credit of the company on whose behalf they are issued, and the principal, interest, and premium, if any, are payable solely from payments made by the company to the trustee under the bond indenture and do not constitute claims on the tax revenues or other funds of the issuing municipalities. The municipality merely acts as the vehicle to enable the bonds to be issued on a tax-exempt basis. Claims that arise by virtue of these bonds are not among the claims defined by this paragraph and amounts owed by private companies to the holders of industrial development revenue bonds are not to be included among the assets of the municipality that would be affected by the plan. See Cong. Record, 94th Cong., 1st Sess. H.R. 12073 (statement by Mr. Don Edwards, floor manager of the bill in the House). Paragraph (2) defines the court which means the federal district court or federal district judge before which the case is pending. Paragraph (3) (now (1)) specifies that when the term 'property of the estate' is used in a section in another chapter made applicable in chapter 9 cases, the term means 'property of the debtor'. Paragraphs (4) and (5) (now (2) and (3)) adopt the definition of 'special taxpayer affected by the plan' that appears in current sections 81(10) and 81(11) of the Bankruptcy Act (section 401(10) and (11) of former title 11). Paragraph (6) (now (4)) provides that 'trustee' means 'debtor' when used in conjunction with chapter 9. HOUSE REPORT NO. 95-595 There are only four definitions for use only in chapter 9. The first specifies that when the term 'property of the estate' is used in a section in another chapter made applicable in chapter 9 cases, the term will mean 'property of the debtor'. Paragraphs (2) and (3) adopt the definition of 'special taxpayer affected by the plan' that appears in current sections 81(10) and 81(11) (section 401(10) and (11) of former title 11). Paragraph (4) provides for 'trustee' the same treatment as provided for 'property of the estate', specifying that it means 'debtor' when used in conjunction with chapter 9. AMENDMENTS 1988 - Pars. (2) to (5). Pub. L. 100-597 added par. (2) and redesignated former pars. (2) to (4) as (3) to (5), respectively. 1984 - Par. (2). Pub. L. 98-353 substituted 'legal or equitable title to real property against which a special assessment or special tax has been levied' for 'title, legal or equitable, to real property against which has been levied a special assessment or special tax'. EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not applicable to any case commenced under this title before that date, see section 12 of Pub. L. 100-597, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 901 of this title. ------DocID 14801 Document 146 of 646------ -CITE- 11 USC Sec. 903 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER I -HEAD- Sec. 903. Reservation of State power to control municipalities -STATUTE- This chapter does not limit or impair the power of a State to control, by legislation or otherwise, a municipality of or in such State in the exercise of the political or governmental powers of such municipality, including expenditures for such exercise, but - (1) a State law prescribing a method of composition of indebtedness of such municipality may not bind any creditor that does not consent to such composition; and (2) a judgment entered under such a law may not bind a creditor that does not consent to such composition. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2622; Pub. L. 98-353, title III, Sec. 492, July 10, 1984, 98 Stat. 383.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 903 of the House amendment represents a stylistic revision of section 903 of the Senate amendment. To the extent section 903 of the House bill would have changed present law, such section is rejected. SENATE REPORT NO. 95-989 Section 903 is derived, with stylistic changes, from section 83 of current Chapter IX (section 403 of former title 11). It sets forth the primary authority of a State, through its constitution, laws, and other powers, over its municipalities. The proviso in section 83, prohibiting State composition procedures for municipalities, is retained. Deletion of the provision would 'permit all States to enact their own versions of Chapter IX (chapter 9 of former title 11)', Municipal Insolvency, 50 Am.Bankr.L.J. 55, 65, which would frustrate the constitutional mandate of uniform bankruptcy laws. Constitution of the United States, Art. I, Sec. 8. This section provides that the municipality can consent to the court's orders in regard to use of its income or property. It is contemplated that such consent will be required by the court for the issuance of certificates of indebtedness under section 364(c). Such consent could extend to enforcement of the conditions attached to the certificates or the municipal services to be provided during the proceedings. AMENDMENTS 1984 - Par. (2). Pub. L. 98-353 struck out 'to' before 'that does not consent'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 14802 Document 147 of 646------ -CITE- 11 USC Sec. 904 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER I -HEAD- Sec. 904. Limitation on jurisdiction and powers of court -STATUTE- Notwithstanding any power of the court, unless the debtor consents or the plan so provides, the court may not, by any stay, order, or decree, in the case or otherwise, interfere with - (1) any of the political or governmental powers of the debtor; (2) any of the property or revenues of the debtor; or (3) the debtor's use or enjoyment of any income-producing property. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2622.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 This section adopts the policy of section 82(c) of current law (section 402(c) of former title 11). The only change in this section from section 82(c) is to conform the section to the style and cross-references of S. 2266. HOUSE REPORT NO. 95-595 This section adopts the policy of section 82(c) of current law (section 402(c) of former title 11). The Usery case underlines the need for this limitation on the court's powers. The only change in this section from section 82(c) is to conform the section to the style and cross-references of H.R. 8200. This section makes clear that the court may not interfere with the choices a municipality makes as to what services and benefits it will provide to its inhabitants. ------DocID 14803 Document 148 of 646------ -CITE- 11 USC SUBCHAPTER II -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER II -HEAD- SUBCHAPTER II - ADMINISTRATION -MISC1- AMENDMENTS 1984 - Pub. L. 98-353, title III, Sec. 493, July 10, 1984, 98 Stat. 383, substituted 'SUBCHAPTER' for 'SUBCHAPER'. ------DocID 14804 Document 149 of 646------ -CITE- 11 USC Sec. 921 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER II -HEAD- Sec. 921. Petition and proceedings relating to petition -STATUTE- (a) Notwithstanding sections 109(d) and 301 of this title, a case under this chapter concerning an unincorporated tax or special assessment district that does not have such district's own officials is commenced by the filing under section 301 of this title of a petition under this chapter by such district's governing authority or the board or body having authority to levy taxes or assessments to meet the obligations of such district. (b) The chief judge of the court of appeals for the circuit embracing the district in which the case is commenced shall designate the bankruptcy judge to conduct the case. (c) After any objection to the petition, the court, after notice and a hearing, may dismiss the petition if the debtor did not file the petition in good faith or if the petition does not meet the requirements of this title. (d) If the petition is not dismissed under subsection (c) of this section, the court shall order relief under this chapter. (e) The court may not, on account of an appeal from an order for relief, delay any proceeding under this chapter in the case in which the appeal is being taken; nor shall any court order a stay of such proceeding pending such appeal. The reversal on appeal of a finding of jurisdiction does not affect the validity of any debt incurred that is authorized by the court under section 364(c) or 364(d) of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2622; Pub. L. 98-353, title III, Sec. 494, July 10, 1984, 98 Stat. 383.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 905 of the Senate amendment is incorporated as section 921(b) of the House amendment with the difference that the chief judge of the circuit embracing the district in which the case is commenced designates a bankruptcy judge to conduct the case in lieu of a district judge as under present law. It is intended that a municipality may commence a case in any district in which the municipality is located, as under present law. Section 906 of the Senate amendment has been adopted in substance in section 109(c) of the House amendment. SENATE REPORT NO. 95-989 Section 905 (now 921(b)) adopts the procedures for selection of the judge for the chapter 9 case as found in current section 82(d) (section 402(d) of former title 11). It is expected that the large chapter 9 case might take up almost all the judicial time of the presiding judge and involve very complex legal questions. Selection should not be left to chance or the luck of the draw. This provision will insure that calendar demands and levels of experience can be considered in the selection of the judge in a chapter 9 case. HOUSE REPORT NO. 95-595 Subsection (a) is derived from section 85(a) (section 405(a) of former title 11), second sentence, of current law. There is no substantive change in the law. The subsection permits a municipality that does not have its own officers to be moved into chapter 9 by the action of the body or board that has authority to levy taxes for the municipality. Subsection (b) permits a party in interest to object to the filing of the petition not later than 15 days after notice. This provision tracks the third sentence of section 85(a) (section 405(a) of former title 11), except that the provision for publication in section 85(a) is left to the Rules (see Rule 9-14), and therefore the determinative date is left less definite. Subsection (c) permits the court to dismiss a petition not filed in good faith or not filed in compliance with the requirements of the chapter. This provision is the fourth sentence of section 85(a) (section 405(a) of former title 11). Subsection (d) directs the court to order relief on the petition if it does not dismiss the case under subsection (c). Subsection (e) contains the fifth and sixth sentences of section 85(a) (section 405(a) of former title 11). AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353, Sec. 494(c), substituted '109(d)' for '109(c)'. Subsec. (c). Pub. L. 98-353, Sec. 494(a), substituted 'any' for 'an', and 'petition if the debtor did not file the petition in good faith' for 'petition, if the debtor did not file the petition in good faith,'. Subsec. (d). Pub. L. 98-353, Sec. 494(b), (d), redesignated subsec. (e) as (d) and substituted 'subsection (c)' for 'subsection (d)'. No former subsec. (d) had been enacted. Subsecs. (e), (f). Pub. L. 98-353, Sec. 494(b), redesignated subsec. (f) as (e). Former subsec. (e) redesignated (d). EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 14805 Document 150 of 646------ -CITE- 11 USC Sec. 922 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER II -HEAD- Sec. 922. Automatic stay of enforcement of claims against the debtor -STATUTE- (a) A petition filed under this chapter operates as a stay, in addition to the stay provided by section 362 of this title, applicable to all entities, of - (1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against an officer or inhabitant of the debtor that seeks to enforce a claim against the debtor; and (2) the enforcement of a lien on or arising out of taxes or assessments owed to the debtor. (b) Subsections (c), (d), (e), (f), and (g) of section 362 of this title apply to a stay under subsection (a) of this section the same as such subsections apply to a stay under section 362(a) of this title. (c) If the debtor provides, under section 362, 364, or 922 of this title, adequate protection of the interest of the holder of a claim secured by a lien on property of the debtor and if, notwithstanding such protection such creditor has a claim arising from the stay of action against such property under section 362 or 922 of this title or from the granting of a lien under section 364(d) of this title, then such claim shall be allowable as an administrative expense under section 503(b) of this title. (d) Notwithstanding section 362 of this title and subsection (a) of this section, a petition filed under this chapter does not operate as a stay of application of pledged special revenues in a manner consistent with section 927 of this title to payment of indebtedness secured by such revenues. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623; Pub. L. 98-353, title III, Sec. 495, July 10, 1984, 98 Stat. 384; Pub. L. 100-597, Sec. 5, Nov. 3, 1988, 102 Stat. 3029.) -MISC1- HISTORICAL AND REVISION NOTES HOUSE REPORT NO. 95-595 The automatic stay provided under section 362 of title 11 is incomplete for a municipality, because there is the possibility of action by a creditor against an officer or inhabitant of the municipality to collect taxes due the municipality. Section 85(e)(1) of current chapter IX (section 405(e)(1) of former title 11) stays such actions. Section 922 carries over that protection into the proposed chapter 9. Subsection (b) applies the provisions for relief from the stay that apply generally in section 362 to the stay under section 922. AMENDMENTS 1988 - Subsecs. (c), (d). Pub. L. 100-597 added subsecs. (c) and (d). 1984 - Subsec. (a)(1). Pub. L. 98-353 substituted 'a judicial' for 'judicial', and 'action or proceeding' for 'proceeding'. EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not applicable to any case commenced under this title before that date, see section 12 of Pub. L. 100-597, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 108 of this title. ------DocID 14806 Document 151 of 646------ -CITE- 11 USC Sec. 923 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER II -HEAD- Sec. 923. Notice -STATUTE- There shall be given notice of the commencement of a case under this chapter, notice of an order for relief under this chapter, and notice of the dismissal of a case under this chapter. Such notice shall also be published at least once a week for three successive weeks in at least one newspaper of general circulation published within the district in which the case is commenced, and in such other newspaper having a general circulation among bond dealers and bondholders as the court designates. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 923 of the House amendment represents a compromise with respect to the notice provisions contained in comparable provisions of the House bill and Senate amendment. As a general matter, title 11 leaves most procedural issues to be determined by the Rules of Bankruptcy Procedure. Section 923 of the House amendment contains certain important aspects of procedure that have been retained from present law. It is anticipated that the Rules of Bankruptcy Procedure will adopt rules similar to the present rules for chapter IX of the Bankruptcy Act (chapter 9 of former title 11). HOUSE REPORT NO. 95-595 The notice provisions in section 923 are significantly more sparse than those provided under section 85(d) of chapter IX (section 405(d) of former title 11). The exact contours of the notice to be given under chapter 9 are left to the Rules. Because the Rules deal with notice in a municipal case (Rule 9-14), and because section 405(d) of title IV of the bill continues those Rules in effect to the extent not inconsistent with the bill, the notice provisions of current law and Rules would continue to apply. ------DocID 14807 Document 152 of 646------ -CITE- 11 USC Sec. 924 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER II -HEAD- Sec. 924. List of creditors -STATUTE- The debtor shall file a list of creditors. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 924 of the House amendment is derived from section 924 of the House bill with the location of the filing of the list of creditors to be determined by the rules of bankruptcy procedure. The detailed requirements of section 724 (probably should be '924') of the Senate bill are anticipated to be incorporated in the rules of bankruptcy procedure. SENATE REPORT NO. 95-989 This section adopts the provision presently contained in section 85(b) of Chapter IX (section 405(b) of former title 11). A list of creditors, as complete and accurate as practicable, must be filed with the court. HOUSE REPORT NO. 95-595 This section directs the debtor to file a list of creditors with the court. A comparable provision is presently contained in section 85(b) of chapter IX (section 405(b) of former title 11). The Rules, in Rule 9-7, copy the provisions of section 85(b), with additional matter. As noted above, section 405(d) of title IV will continue those Rules in effect. Because the form, time of filing, and nature of the list, are procedural matters that may call for some flexibility, those details have been left to the Rules. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 925 of this title. ------DocID 14808 Document 153 of 646------ -CITE- 11 USC Sec. 925 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER II -HEAD- Sec. 925. Effect of list of claims -STATUTE- A proof of claim is deemed filed under section 501 of this title for any claim that appears in the list filed under section 924 of this title, except a claim that is listed as disputed, contingent, or unliquidated. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 925 of the Senate amendment regarding venue and fees has been deleted. SENATE REPORT NO. 95-989 Section 926 (now section 925) follows the policy contained in section 88(a) of the present Act (section 408(a) of former title 11), though certain details are left to the Rules. The language of section 926 is the same as that of proposed 11 U.S.C. 1111, which applies in chapter 11 cases. The list of creditors filed under section 924 is given weight as prima facie evidence of the claims listed (except claims that are listed as disputed, contingent, or unliquidated), which are deemed filed under section 501, obviating the need for listed creditors to file proofs of claim. ------DocID 14809 Document 154 of 646------ -CITE- 11 USC Sec. 926 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER II -HEAD- Sec. 926. Avoiding powers -STATUTE- (a) If the debtor refuses to pursue a cause of action under section 544, 545, 547, 548, 549(a), or 550 of this title, then on request of a creditor, the court may appoint a trustee to pursue such cause of action. (b) A transfer of property of the debtor to or for the benefit of any holder of a bond or note, on account of such bond or note, may not be avoided under section 547 of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623; Pub. L. 100-597, Sec. 6, Nov. 3, 1988, 102 Stat. 3029.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 926 of the House amendment is derived from section 928 of the Senate bill. The provision enables creditors to request the court to appoint a trustee to pursue avoiding powers if the debtor refuses to exercise those powers. Section 901 of the House amendment makes a corresponding change to incorporate avoiding powers included in the Senate amendment, but excluded from the House bill. SENATE REPORT NO. 95-989 This section (928 (now section 926)) adopts current section 85(h) (section 405(h) of former title 11) which provides for a trustee to be appointed for the purpose of pursuing an action under an avoiding power, if the debtor refuses to do so. This section is necessary because a municipality might, by reason of political pressure or desire for future good relations with a particular creditor or class of creditors, make payments to such creditors in the days preceding the petition to the detriment of all other creditors. No change in the elected officials of such a city would automatically occur upon filing of the petition, and it might be very awkward for those same officials to turn around and demand the return of the payments following the filing of the petition. Hence, the need for a trustee for such purpose. The general avoiding powers are incorporated by reference in section 901 and are broader than under current law. Preference, fraudulent conveyances, and other kinds of transfers will thus be voidable. Incorporated by reference also is the power to accept or reject executory contracts and leases (section 365). Within the definition of executory contracts are collective bargaining agreements between the city and its employees. Such contracts may be rejected despite contrary State laws. Courts should readily allow the rejection of such contracts where they are burdensome, the rejection will aid in the municipality's reorganization and in consideration of the equities of each case. On the last point, '(e)quities in favor of the city in chapter 9 will be far more compelling than the equities in favor of the employer in chapter 11. Onerous employment obligations may prevent a city from balancing its budget for some time. The prospect of an unbalanced budget may preclude judicial confirmation of the plan. Unless a city can reject its labor contracts, lack of funds may force cutbacks in police, fire, sanitation, and welfare services, imposing hardships on many citizens. In addition, because cities in the past have often seemed immune to the constraint of 'profitability' faced by private businesses, their wage contracts may be relatively more onerous than those in the private sector.' Executory Contracts and Municipal Bankruptcy, 85 Yale L. J. 957, 965 (1976) (footnote omitted). Rejection of the contracts may require the municipalities to renegotiate such contracts by state collective bargaining laws. It is intended that the power to reject collective bargaining agreements will pre-empt state termination provisions, but not state collective bargaining laws. Thus, a city would not be required to maintain existing employment terms during the renegotiation period. AMENDMENTS 1988 - Pub. L. 100-597 designated existing provisions as subsec. (a) and added subsec. (b). EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not applicable to any case commenced under this title before that date, see section 12 of Pub. L. 100-597, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 902 of this title. ------DocID 14810 Document 155 of 646------ -CITE- 11 USC Sec. 927 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER II -HEAD- Sec. 927. Limitation on recourse -STATUTE- The holder of a claim payable solely from special revenues of the debtor under applicable nonbankruptcy law shall not be treated as having recourse against the debtor on account of such claim pursuant to section 1111(b) of this title. -SOURCE- (Added Pub. L. 100-597, Sec. 7(2), Nov. 3, 1988, 102 Stat. 3029.) -MISC1- PRIOR PROVISIONS A prior section 927 was renumbered section 930 of this title. EFFECTIVE DATE Section effective Nov. 3, 1988, but not applicable to any case commenced under this title before that date, see section 12 of Pub. L. 100-597, set out as an Effective Date of 1988 Amendment note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 922 of this title. ------DocID 14811 Document 156 of 646------ -CITE- 11 USC Sec. 928 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER II -HEAD- Sec. 928. Post petition effect of security interest -STATUTE- (a) Notwithstanding section 552(a) of this title and subject to subsection (b) of this section, special revenues acquired by the debtor after the commencement of the case shall remain subject to any lien resulting from any security agreement entered into by the debtor before the commencement of the case. (b) Any such lien on special revenues, other than municipal betterment assessments, derived from a project or system shall be subject to the necessary operating expenses of such project or system, as the case may be. -SOURCE- (Added Pub. L. 100-597, Sec. 8, Nov. 3, 1988, 102 Stat. 3029.) -MISC1- EFFECTIVE DATE Section effective Nov. 3, 1988, but not applicable to any case commenced under this title before that date, see section 12 of Pub. L. 100-597, set out as an Effective Date of 1988 Amendment note under section 101 of this title. ------DocID 14812 Document 157 of 646------ -CITE- 11 USC Sec. 929 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER II -HEAD- Sec. 929. Municipal leases -STATUTE- A lease to a municipality shall not be treated as an executory contract or unexpired lease for the purposes of section 365 or 502(b)(6) of this title solely by reason of its being subject to termination in the event the debtor fails to appropriate rent. -SOURCE- (Added Pub. L. 100-597, Sec. 9, Nov. 3, 1988, 102 Stat. 3030.) -MISC1- EFFECTIVE DATE Section effective Nov. 3, 1988, but not applicable to any case commenced under this title before that date, see section 12 of Pub. L. 100-597, set out as an Effective Date of 1988 Amendment note under section 101 of this title. ------DocID 14813 Document 158 of 646------ -CITE- 11 USC Sec. 930 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER II -HEAD- Sec. 930. Dismissal -STATUTE- (a) After notice and a hearing, the court may dismiss a case under this chapter for cause, including - (1) want of prosecution; (2) unreasonable delay by the debtor that is prejudicial to creditors; (3) failure to propose a plan within the time fixed under section 941 of this title; (4) if a plan is not accepted within any time fixed by the court; (5) denial of confirmation of a plan under section 943(b) of this title and denial of additional time for filing another plan or a modification of a plan; or (6) if the court has retained jurisdiction after confirmation of a plan - (A) material default by the debtor with respect to a term of such plan; or (B) termination of such plan by reason of the occurrence of a condition specified in such plan. (b) The court shall dismiss a case under this chapter if confirmation of a plan under this chapter is refused. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623, Sec. 927; Pub. L. 98-353, title III, Sec. 496, July 10, 1984, 98 Stat. 384; renumbered Sec. 930, Pub. L. 100-597, Sec. 7(1), Nov. 3, 1988, 102 Stat. 3029.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 927(b) of the House amendment is derived from section 927(b) of the Senate bill. The provision requires mandatory dismissal if confirmation of a plan is refused. The House amendment deletes section 929 of the Senate amendment as unnecessary since the bankruptcy court has original exclusive jurisdiction of all cases under chapter 9. The House amendment deletes section 930 of the Senate amendment and incorporates section 507(a)(1) by reference. SENATE REPORT NO. 95-989 Section 927 conforms to section 98 of current law (section 418 of former title 11). The Section permits dismissal by the court for unreasonable delay by the debtor, failure to propose a plan, failure of acceptance of a plan, or default by the debtor under a conformed plan. Mandatory dismissal is required if confirmation is refused. HOUSE REPORT NO. 95-595 Section 926 (now 927) generally conforms to section 98(a) (section 418(a) of former title 11) of current law. Stylistic changes have been made to conform the language with that used in chapter 11, section 1112. The section permits dismissal by the court for unreasonable delay by the debtor that is prejudicial to creditors, failure to propose a plan, failure of confirmation of a plan, or material default by the debtor under a confirmed plan. The only significant change from current law lies in the second ground. Currently, section 98(a)(2) provides for dismissal if a proposed plan is not accepted, and section 98(b) requires dismissal if an accepted plan is not confirmed. In order to provide greater flexibility to the court, the debtor, and creditors, the bill allows the court to permit the debtor to propose another plan if the first plan is not confirmed. In that event the debtor need not, as under current law, commence the case all over again. This could provide savings in time and administrative expenses if a plan is denied confirmation. AMENDMENTS 1984 - Subsec. (b). Pub. L. 98-353 substituted 'confirmation of a plan under this chapter' for 'confirmation'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 14814 Document 159 of 646------ -CITE- 11 USC SUBCHAPTER III -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER III -HEAD- SUBCHAPTER III - THE PLAN ------DocID 14815 Document 160 of 646------ -CITE- 11 USC Sec. 941 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER III -HEAD- Sec. 941. Filing of plan -STATUTE- The debtor shall file a plan for the adjustment of the debtor's debts. If such a plan is not filed with the petition, the debtor shall file such a plan at such later time as the court fixes. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2624.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 941 gives the debtor the exclusive right to propose a plan, and directs that the debtor propose one either with the petition or within such time as the court directs. The section follows section 90(a) of current law (section 410(a) of former title 11). -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 930 of this title. ------DocID 14816 Document 161 of 646------ -CITE- 11 USC Sec. 942 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER III -HEAD- Sec. 942. Modification of plan -STATUTE- The debtor may modify the plan at any time before confirmation, but may not modify the plan so that the plan as modified fails to meet the requirements of this chapter. After the debtor files a modification, the plan as modified becomes the plan. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2624.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS The House amendment deletes section 942 of the Senate amendment in favor of incorporating section 1125 by cross-reference. Similarly, the House amendment does not incorporate section 944 or 945 of the Senate amendment since incorporation of several sections in chapter 11 in section 901 is sufficient. SENATE REPORT NO. 95-989 Section 942 permits the debtor to modify the plan at any time before confirmation, as does section 90(a) of current law (section 410(a) of former title 11). ------DocID 14817 Document 162 of 646------ -CITE- 11 USC Sec. 943 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER III -HEAD- Sec. 943. Confirmation -STATUTE- (a) A special tax payer may object to confirmation of a plan. (b) The court shall confirm the plan if - (1) the plan complies with the provisions of this title made applicable by sections 103(e) and 901 of this title; (2) the plan complies with the provisions of this chapter; (3) all amounts to be paid by the debtor or by any person for services or expenses in the case or incident to the plan have been fully disclosed and are reasonable; (4) the debtor is not prohibited by law from taking any action necessary to carry out the plan; (5) except to the extent that the holder of a particular claim has agreed to a different treatment of such claim, the plan provides that on the effective date of the plan each holder of a claim of a kind specified in section 507(a)(1) of this title will receive on account of such claim cash equal to the allowed amount of such claim; (6) any regulatory or electoral approval necessary under applicable nonbankruptcy law in order to carry out any provision of the plan has been obtained, or such provision is expressly conditioned on such approval; and (7) the plan is in the best interests of creditors and is feasible. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2624; Pub. L. 98-353, title III, Sec. 497, July 10, 1984, 98 Stat. 384; Pub. L. 100-597, Sec. 10, Nov. 3, 1988, 102 Stat. 3030.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 943(a) of the House amendment makes clear that a special taxpayer may object to confirmation of a plan. Section 943(b) of the House amendment is derived from section 943 of the House bill respecting confirmation of a plan under chapter 9. It must be emphasized that these standards of confirmation are in addition to standards in section 1129 that are made applicable to chapter 9 by section 901 of the House amendment. In particular, if the requirements of sections 1129(a)(8) are not complied with, then the proponent may request application of section 1129(b). The court will then be required to confirm the plan if it complies with the 'fair and equitable' test and is in the best interests of creditors. The best interests of creditors test does not mean liquidation value as under chapter XI of the Bankruptcy Act (chapter 11 of former title 11). In making such a determination, it is expected that the court will be guided by standards set forth in Kelley v. Everglades Drainage District, 319 U.S. 415 (1943) (Fla.1943, 63 S.Ct. 1141, 87 L.Ed. 1485, rehearing denied 63 S.Ct. 1444, 320 U.S. 214, 87 L.Ed. 1851, motion denied 64 S.Ct 783, 321 U.S. 754, 88 L.Ed. 1054) and Fano v. Newport Heights Irrigation Dist., 114 F.2d 563 (9th Cir. 1940), as under present law, the bankruptcy court should make findings as detailed as possible to support a conclusion that this test has been met. However, it must be emphasized that unlike current law, the fair and equitable test under section 1129(b) will not apply if section 1129(a)(8) has been satisfied in addition to the other confirmation standards specified in section 943 and incorporated by reference in section 901 of the House amendment. To the extent that American United Mutual Life Insurance Co. v. City of Avon Park, 311 U.S. 138 (1940) (Fla.1940, 61 S.Ct. 157, 85 L.Ed. 91, 136 A.L.R. 860, rehearing denied 61 S.Ct. 395, 311 U.S. 730, 85 L.Ed. 475) and other cases are to the contrary, such cases are overruled to that extent. SENATE REPORT NO. 95-989 Section 946 (now 943) is adopted from current section 94 (section 414 of former title 11). The test for confirmation is whether or not the plan is fair and equitable and feasible. The fair and equitable test tracts current chapter X (chapter 10 of former title 11) and is known as the strict priority rule. Creditors must be provided, under the plan, the going concern value of their claims. The going concern value contemplates a 'comparison of revenues and expenditures taking into account the taxing power and the extent to which tax increases are both necessary and feasible' Municipal Insolvency, supra, at p. 64, and is intended to provide more of a return to creditors than the liquidation value if the city's assets could be liquidated like those of a private corporation. HOUSE REPORT NO. 95-595 In addition to the confirmation requirements incorporated from section 1129 by section 901, this section specifies additional requirements. Paragraph (1) requires compliance with the provisions of the title made applicable in chapter 9 cases. This provision follows section 94(b)(2) (section 414(b)(2) of former title 11). Paragraph (2) requires compliance with the provisions of chapter 9, as does section 94(b)(2). Paragraph (3) adopts section 94(b)(4), requiring disclosure and reasonableness of all payments to be made in connection with the plan or the case. Paragraph (4), copied from section 92(b)(6) (probably should be '94(b)(6)' which was section 414(b)(6) of former title 11), requires that the debtor not be prohibited by law from taking any action necessary to carry out the plan. Paragraph (5) departs from current law by requiring that administrative expenses be paid in full, but not necessarily in cash. Finally, paragraph (6) requires that the plan be in the best interest of creditors and feasible. The best interest test was deleted in section 94(b)(1) of current chapter IX from previous chapter IX (chapter 9 of former title 11) because it was redundant with the fair and equitable rule. However, this bill proposes a new confirmation standard generally for reorganization, one element of which is the best interest of creditors test; see section 1129(a)(7). In that section, the test is phrased in terms of liquidation of the debtor. Because that is not possible in a municipal case, the test here is phrased in its more traditional form, using the words of art 'best interest of creditors.' The best interest of creditors test here is in addition to the financial standards imposed on the plan by sections 1129(a)(8) and 1129(b), just as those provisions are in addition to the comparable best interest test in chapter 11, 11 U.S.C. 1129(a)(7). The feasibility requirement, added in the revision of chapter IX last year, is retained. AMENDMENTS 1988 - Subsec. (b)(6), (7). Pub. L. 100-597 added par. (6) and redesignated former par. (6) as (7). 1984 - Subsec. (b)(4). Pub. L. 98-353, Sec. 497(1), struck out 'to be taken' after 'necessary'. Subsec. (b)(5). Pub. L. 98-353, Sec. 497(2), substituted provisions requiring the plan to provide payment of cash in an amount equal to the allowed amount of a claim except to the extent that the holder of a particular claim has agreed to different treatment of such claim, for provisions which required the plan to provide for payment of property of a value equal to the allowed amount of such claim except to the extent that the holder of a particular claim has waived such payment on such claim. EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not applicable to any case commenced under this title before that date, see section 12 of Pub. L. 100-597, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 347, 930 of this title. ------DocID 14818 Document 163 of 646------ -CITE- 11 USC Sec. 944 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER III -HEAD- Sec. 944. Effect of confirmation -STATUTE- (a) The provisions of a confirmed plan bind the debtor and any creditor, whether or not - (1) a proof of such creditor's claim is filed or deemed filed under section 501 of this title; (2) such claim is allowed under section 502 of this title; or (3) such creditor has accepted the plan. (b) Except as provided in subsection (c) of this section, the debtor is discharged from all debts as of the time when - (1) the plan is confirmed; (2) the debtor deposits any consideration to be distributed under the plan with a disbursing agent appointed by the court; and (3) the court has determined - (A) that any security so deposited will constitute, after distribution, a valid legal obligation of the debtor; and (B) that any provision made to pay or secure payment of such obligation is valid. (c) The debtor is not discharged under subsection (b) of this section from any debt - (1) excepted from discharge by the plan or order confirming the plan; or (2) owed to an entity that, before confirmation of the plan, had neither notice nor actual knowledge of the case. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2624.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 (Section 947) Subsection (a) (now section 944(a)) makes the provisions of a confirmed plan binding on the debtor and creditors. It is derived from section 95(a) of chapter 9 (section 415(a) of former title 11). Subsections (b) and (c) (now section 944(b) and (c)) provide for the discharge of a municipality. The discharge is essentially the same as that granted under section 95(b) of the Bankruptcy Act (section 415(b) of former title 11). -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 524 of this title. ------DocID 14819 Document 164 of 646------ -CITE- 11 USC Sec. 945 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER III -HEAD- Sec. 945. Continuing jurisdiction and closing of the case -STATUTE- (a) The court may retain jurisdiction over the case for such period of time as is necessary for the successful implementation of the plan. (b) Except as provided in subsection (a) of this section, the court shall close the case when administration of the case has been completed. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2625; Pub. L. 98-353, title III, Sec. 498, July 10, 1984, 98 Stat. 384.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 948 (now 945) permits the court to retain jurisdiction over the case to ensure successful execution of the plan. The provision is the same as that found in section 96(e) of Chapter 9 of the present Act (section 416(e) of former title 11). AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353 substituted 'implementation' for 'execution'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 14820 Document 165 of 646------ -CITE- 11 USC Sec. 946 -EXPCITE- TITLE 11 CHAPTER 9 SUBCHAPTER III -HEAD- Sec. 946. Effect of exchange of securities before the date of the filing of the petition -STATUTE- The exchange of a new security under the plan for a claim covered by the plan, whether such exchange occurred before or after the date of the filing of the petition, does not limit or impair the effectiveness of the plan or of any provision of this chapter. The amount and number specified in section 1126(c) of this title include the amount and number of claims formerly held by a creditor that has participated in any such exchange. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2625.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS The House amendment deletes section 950 of the Senate amendment as unnecessary. The constitutionality of chapter 9 of the House amendment is beyond doubt. SENATE REPORT NO. 95-989 (Section 949) This section (now section 946), which follows section 97 of current law (section 417 of former title 11), permits an exchange of a security before the case is filed to constitute an acceptance of the plan if the exchange was under a proposal that later becomes the plan. ------DocID 7566 Document 166 of 646------ -CITE- 2 USC CHAPTER 11 -EXPCITE- TITLE 2 CHAPTER 11 -HEAD- CHAPTER 11 - CITIZENS' COMMISSION ON PUBLIC SERVICE AND COMPENSATION -MISC1- Sec. 351. Establishment. 352. Membership. 353. Executive Director; additional personnel; detail of personnel of other agencies. 354. Use of United States mails. 355. Administrative support services. 356. Functions. 356a. Omitted. 357. Report by Commission to President with respect to pay. 358. Recommendations of President with respect to pay. 359. Effective date of recommendations of President. 360. Effect of recommendations on existing law and prior recommendations. 361. Publication of recommendations. 362. Requirements applicable to recommendations. 363. Additional function. 364. Provision relating to certain other pay adjustments. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in sections 31, 31-1 of this title; title 3 section 104; title 5 sections 5312 to 5316; title 26 section 7456; title 28 sections 5, 44, 135, 252. ------DocID 14822 Document 167 of 646------ -CITE- 11 USC SUBCHAPTER I -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- SUBCHAPTER I - OFFICERS AND ADMINISTRATION -SECREF- SUBCHAPTER REFERRED TO IN OTHER SECTIONS This subchapter is referred to in section 103 of this title. ------DocID 14823 Document 168 of 646------ -CITE- 11 USC Sec. 1101 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- Sec. 1101. Definitions for this chapter -STATUTE- In this chapter - (1) 'debtor in possession' means debtor except when a person that has qualified under section 322 of this title is serving as trustee in the case; (2) 'substantial consummation' means - (A) transfer of all or substantially all of the property proposed by the plan to be transferred; (B) assumption by the debtor or by the successor to the debtor under the plan of the business or of the management of all or substantially all of the property dealt with by the plan; and (C) commencement of distribution under the plan. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2626.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 This section contains definitions of three terms that are used in chapter 11. Paragraph (1) defines debtor in possession to mean the debtor, except when a trustee who has qualified in serving in the case. Paragraph (2), derived from section 229a of current law (section 629(a) of former title 11), defines substantial consummation. Substantial consummation of a plan occurs when transfer of all or substantially all of the property proposed by the plan to be transferred is actually transferred; when the debtor (or its successor) has assumed the business of the debtor or the management of all or substantially all of the property dealt with by the plan; and when distribution under the plan has commenced. Paragraph (3) defines for purposes of Chapter 11 a public company to mean 'a debtor who, within 12 months prior to the filing of a petition for relief under this chapter, had outstanding liabilities of $5 million or more, exclusive of liabilities for goods, services, or taxes and not less than 1,000 security holders.' There are, as noted, special safeguards for public investors related to the reorganization of a public company, as so defined. Both requirements must be met: liabilities, excluding tax obligations and trade liabilities, must be $5 million or more; and (2) the number of holders of securities, debt or equity, or both, must be not less than 1,000. The amount and number are to be determined as of any time within 12 months prior to the filing of the petition for reorganization. ------DocID 14824 Document 169 of 646------ -CITE- 11 USC Sec. 1102 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- Sec. 1102. Creditors' and equity security holders' committees -STATUTE- (a)(1) As soon as practicable after the order for relief under chapter 11 of this title, the United States trustee shall appoint a committee of creditors holding unsecured claims and may appoint additional committees of creditors or of equity security holders as the United States trustee deems appropriate. (2) On request of a party in interest, the court may order the appointment of additional committees of creditors or of equity security holders if necessary to assure adequate representation of creditors or of equity security holders. The United States trustee shall appoint any such committee. (b)(1) A committee of creditors appointed under subsection (a) of this section shall ordinarily consist of the persons, willing to serve, that hold the seven largest claims against the debtor of the kinds represented on such committee, or of the members of a committee organized by creditors before the commencement of the case under this chapter, if such committee was fairly chosen and is representative of the different kinds of claims to be represented. (2) A committee of equity security holders appointed under subsection (a)(2) of this section shall ordinarily consist of the persons, willing to serve, that hold the seven largest amounts of equity securities of the debtor of the kinds represented on such committee. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2626; Pub. L. 98-353, title III, Sec. 499, July 10, 1984, 98 Stat. 384; Pub. L. 99-554, title II, Sec. 221, Oct. 27, 1986, 100 Stat. 3101.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1102(a) of the House amendment adopts a compromise between the House bill and Senate amendment requiring appointment of a committee of creditors holding unsecured claims by the court; the alternative of creditor committee election is rejected. Section 1102(b) of the House amendment represents a compromise between the House bill and the Senate amendment by preventing the appointment of creditors who are unwilling to serve on a creditors committee. SENATE REPORT NO. 95-989 This section provides for the election and appointment of committees. Subsection (c) provides that this section does not apply in case of a public company, as to which a trustee, appointed under section 1104(a) will have responsibility to administer the estate and to formulate a plan as provided in section 1106(a). There is no need for the election or appointment of committees for which the appointment of a trustee is mandatory. In the case of a public company there are likely to be several committees, each representing a different class of security holders and seeking authority to retain accountants, lawyers, and other experts, who will expect to be paid. If in the case of a public company creditors or stockholders wish to organize committees, they may do so, as authorized under section 1109(a). Compensation and reimbursement will be allowed for contributions to the reorganization pursuant to section 503(b) (3) and (4). HOUSE REPORT NO. 95-595 This section provides for the appointment of creditors' and equity security holders' committees, which will be the primary negotiating bodies for the formulation of the plan of reorganization. They will represent the various classes of creditors and equity security holders from which they are selected. They will also provide supervision of the debtor in possession and of the trustee, and will protect their constituents' interests. Subsection (a) requires the court to appoint at least one committee. That committee is to be composed of creditors holding unsecured claims. The court is authorized to appoint such additional committees as are necessary to assure adequate representation of creditors and equity security holders. The provision will be relied upon in cases in which the debtor proposes to affect several classes of debt or equity holders under the plan, and in which they need representation. Subsection (b) contains precatory language directing the court to appoint the persons holding the seven largest claims against the debtor of the kinds represented on a creditors' committee, or the members of a prepetition committee organized by creditors before the order for relief under chapter 11. The court may continue prepetition committee members only if the committee was fairly chosen and is representative of the different kinds of claims to be represented. The court is restricted to the appointment of persons in order to exclude governmental holders of claims or interests. Paragraph (2) of subsection (b) requires similar treatment for equity security holders' committees. The seven largest holders are normally to be appointed, but the language is only precatory. Subsection (c) authorizes the court, on request of a party in interest, to change the size or the membership of a creditors' or equity security holders' committee if the membership of the committee is not representative of the different kinds of claims or interests to be represented. This subsection is intended, along with the nonbinding nature of subsection (b), to afford the court latitude in appointing a committee that is manageable and representative in light of the circumstances of the case. AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554, Sec. 221(1), amended subsec. (a) generally, substituting 'chapter 11 of this title, the United States trustee shall appoint a committee of creditors holding unsecured claims and may appoint additional committees of creditors or of equity security holders as the United States trustee deems appropriate' for 'this chapter, the court shall appoint a committee of creditors holding unsecured claims' in par. (1) and 'United States trustee' for 'court' in par. (2). Subsec. (c). Pub. L. 99-554, Sec. 221(2), struck out subsec. (c) which read as follows: 'On request of a party in interest and after notice and a hearing, the court may change the membership or the size of a committee appointed under subsection (a) of this section if the membership of such committee is not representative of the different kinds of claims or interests to be represented.' 1984 - Subsec. (b)(1). Pub. L. 98-353 substituted 'commencement of the case' for 'order for relief'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 101, 328, 348, 503, 901, 1103, 1114 of this title. ------DocID 14825 Document 170 of 646------ -CITE- 11 USC Sec. 1103 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- Sec. 1103. Powers and duties of committees -STATUTE- (a) At a scheduled meeting of a committee appointed under section 1102 of this title, at which a majority of the members of such committee are present, and with the court's approval, such committee may select and authorize the employment by such committee of one or more attorneys, accountants, or other agents, to represent or perform services for such committee. (b) An attorney or accountant employed to represent a committee appointed under section 1102 of this title may not, while employed by such committee, represent any other entity having an adverse interest in connection with the case. Representation of one or more creditors of the same class as represented by the committee shall not per se constitute the representation of an adverse interest. (c) A committee appointed under section 1102 of this title may - (1) consult with the trustee or debtor in possession concerning the administration of the case; (2) investigate the acts, conduct, assets, liabilities, and financial condition of the debtor, the operation of the debtor's business and the desirability of the continuance of such business, and any other matter relevant to the case or to the formulation of a plan; (3) participate in the formulation of a plan, advise those represented by such committee of such committee's determinations as to any plan formulated, and collect and file with the court acceptances or rejections of a plan; (4) request the appointment of a trustee or examiner under section 1104 of this title; and (5) perform such other services as are in the interest of those represented. (d) As soon as practicable after the appointment of a committee under section 1102 of this title, the trustee shall meet with such committee to transact such business as may be necessary and proper. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2627; Pub. L. 98-353, title III, Sec. 324, 500, July 10, 1984, 98 Stat. 358, 384.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 This section defines the powers and duties of a committee elected or appointed under section 1102. Under subsection (a) the committee may, if authorized by the court, employ one or more attorneys, accountants, or other agents to represent or perform services for the committee. Normally one attorney should suffice; more than one may be authorized for good cause. The same considerations apply to the services of others, if the need for any at all is demonstrated. Under subsections (c) and (d) the committee, like any party in interest, may confer with the trustee or debtor regarding the administration of the estate; may advise the court on the need for a trustee under section 1104(b). The committee may investigate matters specified in paragraph (2) of subsection (c), but only if authorized by the court and if no trustee or examiner is appointed. HOUSE REPORT NO. 95-595 Subsection (a) of this section authorizes a committee appointed under section 1102 to select and authorize the employment of counsel, accountants, or other agents, to represent or perform services for the committee. The committee's selection and authorization is subject to the court's approval, and may only be done at a meeting of the committee at which a majority of its members are present. The subsection provides for the employment of more than one attorney. However, this will be the exception, and not the rule; cause must be shown to depart from the normal standard. Subsection (b) requires a committee's counsel to cease representation of any other entity in connection with the case after he begins to represent the committee. This will prevent the potential of severe conflicts of interest. Subsection (c) lists a committee's functions in a chapter 11 case. The committee may consult with the trustee or debtor in possession concerning the administration of the case, may investigate the acts, conduct, assets, liabilities and financial condition of the debtor, the operation of the debtor's business, and the desirability of the continuance of the business, and any other matter relevant to the case or to the formulation of a plan. The committee may participate in the formulation of a plan, advise those it represents of the committee's recommendation with respect to any plan formulated, and collect and file acceptances. These will be its most important functions. The committee may also determine the need for the appointment of a trustee, if one has not previously been appointed, and perform such other services as are in the interest of those represented. Subsection (d) requires the trustee and each committee to meet as soon as practicable after their appointments to transact such business as may be necessary and proper. AMENDMENTS 1984 - Subsec. (b). Pub. L. 98-353, Sec. 324, 500(a), substituted 'An attorney or accountant' for 'A person', substituted 'entity having an adverse interest' for 'entity', and inserted provision that representation of one or more creditors of the same class as represented by the committee shall not per se constitute the representation of an adverse interest. Subsec. (c)(3). Pub. L. 98-353, Sec. 500(b)(1), substituted 'determinations' for 'recommendations', and 'acceptances or rejections' for 'acceptances'. Subsec. (c)(4). Pub. L. 98-353, Sec. 500(b)(2), struck out 'if a trustee or examiner, as the case may be, has not previously been appointed under this chapter in the case' after 'section 1104 of this title'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 328, 330, 331, 901, 1114 of this title. ------DocID 14826 Document 171 of 646------ -CITE- 11 USC Sec. 1104 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- Sec. 1104. Appointment of trustee or examiner -STATUTE- (a) At any time after the commencement of the case but before confirmation of a plan, on request of a party in interest or the United States trustee, and after notice and a hearing, the court shall order the appointment of a trustee - (1) for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management, either before or after the commencement of the case, or similar cause, but not including the number of holders of securities of the debtor or the amount of assets or liabilities of the debtor; or (2) if such appointment is in the interests of creditors, any equity security holders, and other interests of the estate, without regard to the number of holders of securities of the debtor or the amount of assets or liabilities of the debtor. (b) If the court does not order the appointment of a trustee under this section, then at any time before the confirmation of a plan, on request of a party in interest or the United States trustee, and after notice and a hearing, the court shall order the appointment of an examiner to conduct such an investigation of the debtor as is appropriate, including an investigation of any allegations of fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of the affairs of the debtor of or by current or former management of the debtor, if - (1) such appointment is in the interests of creditors, any equity security holders, and other interests of the estate; or (2) the debtor's fixed, liquidated, unsecured debts, other than debts for goods, services, or taxes, or owing to an insider, exceed $5,000,000. (c) If the court orders the appointment of a trustee or an examiner, if a trustee or an examiner dies or resigns during the case or is removed under section 324 of this title, or if a trustee fails to qualify under section 322 of this title, then the United States trustee, after consultation with parties in interest (FOOTNOTE 1) shall appoint, subject to the court's approval, one disinterested person other than the United States trustee to serve as trustee or examiner, as the case may be, in the case. (FOOTNOTE 1) So in original. Probably should be followed by a comma. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2627; Pub. L. 99-554, title II, Sec. 222, Oct. 27, 1986, 100 Stat. 3102.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1104 of the House amendment represents a compromise between the House bill and the Senate amendment concerning the appointment of a trustee or examiner. The method of appointment rather than election, is derived from the House bill; the two alternative standards of appointment are derived with modifications from the Senate amendment, instead of the standard stated in the House bill. For example, if the current management of the debtor gambled away rental income before the filing of the petition, a trustee should be appointed after the petition, whether or not postpetition mismanagement can be shown. However, under no circumstances will cause include the number of security holders of the debtor or the amount of assets or liabilities of the debtor. The standard also applies to the appointment of an examiner in those circumstances in which mandatory appointment, as previously detailed, is not required. SENATE REPORT NO. 95-989 Subsection (a) provides for the mandatory appointment of a disinterested trustee in the case of a public company, as defined in section 1101(3), within 10 days of the order for relief, or of a successor, in the event of a vacancy, as soon as practicable. Section 156 of chapter X ((former) 11 U.S.C. 516 (556)) requires the appointment of a disinterested trustee if the debtor's liabilities are $250,000 or over. Section 1104(a) marks a substantial change. The appointment of a trustee is mandatory only for a public company, which under section 1101(3), has $5 million in liabilities, excluding tax and trade obligations, and 1,000 security holders. In view of past experience, cases involving public companies will under normal circumstances probably be relatively few in number but of vast importance in terms of public investor interest. In case of a nonpublic company, the appointment or election of a trustee is discretionary if the interests of the estate and its security holders would be served thereby. A test based on probable costs and benefits of a trusteeship is not practical. The appointment may be made at any time prior to confirmation of the plan. In case of a nonpublic company, if no trustee is appointed, the court may under subsection (c) appoint an examiner, if the appointment would serve the interests of the estate and security holders. The purpose of his appointment is specified in section 1106(b). HOUSE REPORT NO. 95-595 Subsection (a) of this section governs the appointment of trustees in reorganization cases. The court is permitted to order the appointment of one trustee at any time after the commencement of the case if a party in interest so requests. The court may order appointment only if the protection afforded by a trustee is needed and the costs and expenses of a trustee would not be disproportionately higher than the value of the protection afforded. The protection afforded by a trustee would be needed, for example, in cases where the current management of the debtor has been fraudulent or dishonest, or has grossly mismanaged the company, or where the debtor's management has abandoned the business. A trustee would not necessarily be needed to investigate misconduct of former management of the debtor, because an examiner appointed under this section might well be able to serve that function adequately without displacing the current management. Generally, a trustee would not be needed in any case where the protection afforded by a trustee could equally be afforded by an examiner. Though the device of examiner appears in current chapter X (chapter 10 of former title 11), it is rarely used because of the nearly absolute presumption in favor of the appointment of a trustee. Its use here will give the courts, debtors, creditors, and equity security holders greater flexibility in handling the affairs of an insolvent debtor, permitting the court to tailor the remedy to the case. The second test, relating to the costs and expenses of a trustee, is not intended to be a strict cost/benefit analysis. It is included to require the court to have due regard for any additional costs or expenses that the appointment of a trustee would impose on the estate. Subsection (b) permits the court, at any time after the commencement of the case and on request of a party in interest, to order the appointment of an examiner, if the court has not ordered the appointment of a trustee. The examiner would be appointed to conduct such an investigation of the debtor as is appropriate under the particular circumstances of the case, including an investigation of any allegations of fraud, dishonesty, or gross mismanagement of the debtor of or by current or former management of the debtor. The standards for the appointment of an examiner are the same as those for the appointment of a trustee: the protection must be needed, and the costs and expenses must not be disproportionately high. By virtue of proposed 11 U.S.C. 1109, an indenture trustee and the Securities and Exchange Commission will be parties in interest for the purpose of requesting the appointment of a trustee or examiner. Subsection (c) directs that the United States trustee actually select and appoint the trustee or examiner ordered appointed under this section. The United States trustee is required to consult with various parties in interest before selecting and appointing a trustee. He is not bound to select one of the members of the panel of private trustees established under proposed 28 U.S.C. 586(a)(1) which exists only for the purpose of providing trustees for chapter 7 cases. Neither is he precluded from selecting a panel member if the member is qualified to serve as chapter 11 trustee. Appointment by the United States trustee will remove the court from the often criticized practice of appointing an officer that will appear in litigation before the court against an adverse party. AMENDMENTS 1986 - Subsecs. (a), (b). Pub. L. 99-554, Sec. 222(1), (2), inserted 'or the United States trustee' after 'party in interest'. Subsec. (c). Pub. L. 99-554, Sec. 222(3), substituted 'the United States trustee, after consultation with parties in interest shall appoint, subject to the court's approval, one disinterested person other than the United States trustee to serve' for 'the court shall appoint one disinterested person to serve'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 322, 546, 557, 1103, 1106, 1161 of this title. ------DocID 14827 Document 172 of 646------ -CITE- 11 USC Sec. 1105 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- Sec. 1105. Termination of trustee's appointment -STATUTE- At any time before confirmation of a plan, on request of a party in interest or the United States trustee, and after notice and a hearing, the court may terminate the trustee's appointment and restore the debtor to possession and management of the property of the estate and of the operation of the debtor's business. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2628; Pub. L. 98-353, title III, Sec. 501, July 10, 1984, 98 Stat. 384; Pub. L. 99-554, title II, Sec. 223, Oct. 27, 1986, 100 Stat. 3102.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 This section authorizes the court to terminate the trustee's appointment and to restore the debtor to possession and management of the property of the estate and to operation of the debtor's business. Section 1104(a) provides that this section does not apply in the case of a public company, for which the appointment of a trustee is mandatory. HOUSE REPORT NO. 95-595 This section authorizes the court to terminate the trustee's appointment and to restore the debtor to possession and management of the property of the estate, and to operation of the debtor's business. This section would permit the court to reverse its decision to order the appointment of a trustee in light of new evidence. AMENDMENTS 1986 - Pub. L. 99-554 inserted 'or the United States trustee' after 'party in interest'. 1984 - Pub. L. 98-353 substituted 'estate and of the' for 'estate, and'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1161 of this title. ------DocID 14828 Document 173 of 646------ -CITE- 11 USC Sec. 1106 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- Sec. 1106. Duties of trustee and examiner -STATUTE- (a) A trustee shall - (1) perform the duties of a trustee specified in sections 704(2), 704(5), 704(7), 704(8), and 704(9) of this title; (2) if the debtor has not done so, file the list, schedule, and statement required under section 521(1) of this title; (3) except to the extent that the court orders otherwise, investigate the acts, conduct, assets, liabilities, and financial condition of the debtor, the operation of the debtor's business and the desirability of the continuance of such business, and any other matter relevant to the case or to the formulation of a plan; (4) as soon as practicable - (A) file a statement of any investigation conducted under paragraph (3) of this subsection, including any fact ascertained pertaining to fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of the affairs of the debtor, or to a cause of action available to the estate; and (B) transmit a copy or a summary of any such statement to any creditors' committee or equity security holders' committee, to any indenture trustee, and to such other entity as the court designates; (5) as soon as practicable, file a plan under section 1121 of this title, file a report of why the trustee will not file a plan, or recommend conversion of the case to a case under chapter 7, 12, or 13 of this title or dismissal of the case; (6) for any year for which the debtor has not filed a tax return required by law, furnish, without personal liability, such information as may be required by the governmental unit with which such tax return was to be filed, in light of the condition of the debtor's books and records and the availability of such information; and (7) after confirmation of a plan, file such reports as are necessary or as the court orders. (b) An examiner appointed under section 1104(c) of this title shall perform the duties specified in paragraphs (3) and (4) of subsection (a) of this section, and, except to the extent that the court orders otherwise, any other duties of the trustee that the court orders the debtor in possession not to perform. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2628; Pub. L. 98-353, title III, Sec. 311(b)(1), 502, July 10, 1984, 98 Stat. 355, 384; Pub. L. 99-554, title II, Sec. 257(c), Oct. 27, 1986, 100 Stat. 3114.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Subsection (a) of this section prescribes the trustee's duties. He is required to perform the duties of a trustee in a liquidation case specified in section 704 (2), (4), (6), (7), (8), and (9). These include reporting and informational duties, and accountability for all property received. Paragraph (2) of this subsection requires the trustee to file with the court, if the debtor has not done so, the list of creditors, schedule of assets and liabilities, and statement of affairs required under section 521(1). Paragraph (3) of S. 1106 requires the trustee to investigate the acts, conduct, assets, liabilities, and financial condition of the debtor, the operation of the debtor's business, and the desirability of the continuance of the business, and any other matter relevant to the case or to the formulation of a plan. Paragraph (4) requires the trustee to report the results of his investigation to the court and to creditors' committees, equity security holders' committees, indenture trustees and any other entity the court designates. Paragraph (5) requires the trustee to file a plan or to report why a plan cannot be formulated, or to recommend conversion to liquidation or to an individual repayment plan case, or dismissal. It is anticipated that the trustee will consult with creditors and other parties in interest in the formulation of a plan, just as the debtor in possession would. Paragraph (6) (now (7)) requires final reports by the trustee, as the court orders. Subsection (b) gives the trustee's investigative duties to an examiner, if one is appointed. The court is authorized to give the examiner additional duties as the circumstances warrant. Paragraphs (3), (4), and (5) of subsection (a) are derived from sections 165 and 169 of chapter X (sections 565 and 569 of former title 11). AMENDMENTS 1986 - Subsec. (a)(5). Pub. L. 99-554 inserted reference to chapter 12. 1984 - Subsec. (a)(1). Pub. L. 98-353, Sec. 311(b)(1), substituted '704(5), 704(7), 704(8), and 704(9)' for '704(4), 704(6), 704(7) and 704(8)'. Subsec. (b). Pub. L. 98-353, Sec. 502, inserted ', except to the extent that the court orders otherwise,'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. PAYMENT OF CERTAIN BENEFITS TO RETIRED FORMER EMPLOYEES Pub. L. 99-500, Sec. 101(b) (title VI, Sec. 608), Oct. 18, 1986, 100 Stat. 1783-39, 1783-74, and Pub. L. 99-591, Sec. 101(b) (title VI, Sec. 608), Oct. 30, 1986, 100 Stat. 3341-39, 3341-74, as amended by Pub. L. 100-41, May 15, 1987, 101 Stat. 309; Pub. L. 100-99, Aug. 18, 1987, 101 Stat. 716; Pub. L. 100-334, Sec. 3(a), June 16, 1988, 102 Stat. 613, provided that: '(a)(1) Subject to paragraphs (2), (3), (4), and (5), and notwithstanding title 11 of the United States Code, the trustee shall pay benefits to retired former employees under a plan, fund, or program maintained or established by the debtor prior to filing a petition (through the purchase of insurance or otherwise) for the purpose of providing medical, surgical, or hospital care benefits, or benefits in the event of sickness, accident, disability, or death. '(2) The level of benefits required to be paid by this subsection may be modified prior to confirmation of a plan under section 1129 of such title if - '(A) the trustee and an authorized representative of the former employees with respect to whom such benefits are payable agree to the modification of such benefit payments; or '(B) the court finds that a modification proposed by the trustee meets the standards of section 1113(b)(1)(A) of such title and the balance of the equities clearly favors the modification. If such benefits are covered by a collective bargaining agreement, the authorized representative shall be the labor organization that is signatory to such collective bargaining agreement unless there is a conflict of interest. '(3) The trustee shall pay benefits in accordance with this subsection until - '(A) the dismissal of the case involved; or '(B) the effective date of a plan confirmed under section 1129 of such title which provides for the continued payment after confirmation of the plan of all such benefits at the level established under paragraph (2) of this subsection, at any time prior to the confirmation of the plan, for the duration of the period the debtor (as defined in such title) has obligated itself to provide such benefits. '(4) No such benefits paid between the filing of a petition in a case covered by this section and the time a plan confirmed under section 1129 of such title with respect to such case becomes effective shall be deducted or offset from the amount allowed as claims for any benefits which remain unpaid, or from the amount to be paid under the plan with respect to such claims for unpaid benefits, whether such claims for unpaid benefits are based upon or arise from a right to future benefits or from any benefit not paid as a result of modifications allowed pursuant to this section. '(5) No claim for benefits covered by this section shall be limited by section 502(b)(7) of such title. '(b)(1) Notwithstanding any provision of title 11 of the United States Code, the trustee shall pay an allowable claim of any person for a benefit paid - '(A) before the filing of the petition under title 11 of the United States Code; and '(B) directly or indirectly to a retired former employee under a plan, fund, or program described in subsection (a)(1); if, as determined by the court, such person is entitled to recover from such employee, or any provider of health care to such employee, directly or indirectly, the amount of such benefit for which such person receives no payment from the debtor. '(2) For purposes of paragraph (1), the term 'provider of health care' means a person who - '(A) is the direct provider of health care (including a physician, dentist, nurse, podiatrist, optometrist, physician assistant, or ancillary personnel employed under the supervision of a physician); or '(B) administers a facility or institution (including a hospital, alcohol and drug abuse treatment facility, outpatient facility, or health maintenance organization) in which health care is provided. '(c) This section is effective with respect to cases commenced under chapter 11, of title 11, United States Code, in which a plan for reorganization has not been confirmed by the court and in which any such benefit is still being paid on October 2, 1986, and in cases that become subject to chapter 11, title 11, United States Code, after October 2, 1986 and before the date of the enactment of the Retiree Benefits Bankruptcy Protection Act of 1988 (June 16, 1988). '(d) This section shall not apply during any period in which a case is subject to chapter 7, title 11, United States Code.' Similar provisions were contained in Pub. L. 99-656, Sec. 2, Nov. 14, 1986, 100 Stat. 3668, as amended by Pub. L. 100-41, May 15, 1987, 101 Stat. 309; Pub. L. 100-99, Aug. 18, 1987, 101 Stat. 716, and were repealed by Pub. L. 100-334, Sec. 3(b), June 16, 1988, 102 Stat. 614. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1107, 1111, 1202, 1203, 1301 of this title. ------DocID 14829 Document 174 of 646------ -CITE- 11 USC Sec. 1107 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- Sec. 1107. Rights, powers, and duties of debtor in possession -STATUTE- (a) Subject to any limitations on a trustee serving in a case under this chapter, and to such limitations or conditions as the court prescribes, a debtor in possession shall have all the rights, other than the right to compensation under section 330 of this title, and powers, and shall perform all the functions and duties, except the duties specified in sections 1106(a)(2), (3), and (4) of this title, of a trustee serving in a case under this chapter. (b) Notwithstanding section 327(a) of this title, a person is not disqualified for employment under section 327 of this title by a debtor in possession solely because of such person's employment by or representation of the debtor before the commencement of the case. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2628; Pub. L. 98-353, title III, Sec. 503, July 10, 1984, 98 Stat. 384.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS The House amendment adopts section 1107(b) of the Senate amendment which clarifies a point not covered by the House bill. SENATE REPORT NO. 95-989 This section places a debtor in possession in the shoes of a trustee in every way. The debtor is given the rights and powers of a chapter 11 trustee. He is required to perform the functions and duties of a chapter 11 trustee (except the investigative duties). He is also subject to any limitations on a chapter 11 trustee, and to such other limitations and conditions as the court prescribes cf. Wolf v. Weinstein, 372 U.S. 633, 649-650 (1963). AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353 substituted 'on a trustee serving in a case' for 'on a trustee'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 328, 1161 of this title. ------DocID 14830 Document 175 of 646------ -CITE- 11 USC Sec. 1108 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- Sec. 1108. Authorization to operate business -STATUTE- Unless the court, on request of a party in interest and after notice and a hearing, orders otherwise, the trustee may operate the debtor's business. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2629; Pub. L. 98-353, title III, Sec. 504, July 10, 1984, 98 Stat. 384.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS The House amendment adopts section 1108 of the House bill in preference to the style of an identical substantive provision contained in the Senate amendment. Throughout title 11 references to a 'trustee' is read to include other parties under various sections of the bill. For example, section 1107 applies to give the debtor in possession all the rights and powers of a trustee in a case under chapter 11; this includes the power of the trustee to operate the debtor's business under section 1108. SENATE REPORT NO. 95-989 This section permits the debtor's business to continue to be operated, unless the court orders otherwise. Thus, in a reorganization case, operation of the business will be the rule, and it will not be necessary to go to the court to obtain an order authorizing operation. HOUSE REPORT NO. 95-595 This section does not presume that a trustee will be appointed to operate the business of the debtor. Rather, the power granted to trustee under this section is one of the powers that a debtor in possession acquires by virtue of proposed 11 U.S.C. 1107. AMENDMENTS 1984 - Pub. L. 98-353 inserted ', on request of a party in interest and after notice and a hearing,'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 327, 363, 364 of this title. ------DocID 14831 Document 176 of 646------ -CITE- 11 USC Sec. 1109 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- Sec. 1109. Right to be heard -STATUTE- (a) The Securities and Exchange Commission may raise and may appear and be heard on any issue in a case under this chapter, but the Securities and Exchange Commission may not appeal from any judgment, order, or decree entered in the case. (b) A party in interest, including the debtor, the trustee, a creditors' committee, an equity security holders' committee, a creditor, an equity security holder, or any indenture trustee, may raise and may appear and be heard on any issue in a case under this chapter. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2629.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1109 of the House amendment represents a compromise between comparable provisions in the House bill and Senate amendment. As previously discussed the section gives the Securities and Exchange Commission the right to appear and be heard and to raise any issue in a case under chapter 11; however, the Securities and Exchange Commission is not a party in interest and the Commission may not appeal from any judgment, order, or decree entered in the case. Under section 1109(b) a party in interest, including the debtor, the trustee, creditors committee, equity securities holders committee, a creditor, an equity security holder, or an indentured trustee, may raise and may appear and be heard on any issue in a case under chapter 11. Section 1109(c) of the Senate amendment has been moved to subchapter IV pertaining to Railroad Reorganizations. SENATE REPORT NO. 95-989 Subsection (a) provides, in unqualified terms, that any creditor, equity security holder, or an indenture trustee shall have the right to be heard as a party in interest under this chapter in person, by an attorney, or by a committee. It is derived from section 206 of chapter X ((former) 11 U.S.C. 606). Subsection (b) provides that the Securities and Exchange Commission may appear by filing an appearance in a case of a public company and may appear in other cases if authorized or requested by the court. As a party in interest in either case, the Commission may raise and be heard on any issue. The Commission may not appeal from a judgment, order, or decree in a case, but may participate in any appeal by any other party in interest. This is the present law under section 208 of chapter X ((former) 11 U.S.C. 608). HOUSE REPORT NO. 95-595 Section 1109 authorizes the Securities and Exchange Commission and any indenture trustee to intervene in the case at any time on any issue. They may raise an issue or may appear and be heard on an issue that is raised by someone else. The section, following current law, denies the right of appeal to the Securities and Exchange Commission. It does not, however, prevent the Commission from joining or participating in an appeal taken by a true party in interest. The Commission is merely prevented from initiating the appeal in any capacity. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 901 of this title. ------DocID 14832 Document 177 of 646------ -CITE- 11 USC Sec. 1110 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- Sec. 1110. Aircraft equipment and vessels -STATUTE- (a) The right of a secured party with a purchase-money equipment security interest in, or of a lessor or conditional vendor of, whether as trustee or otherwise, aircraft, aircraft engines, propellers, appliances, or spare parts, as defined in section 101 of the Federal Aviation Act of 1958 (49 U.S.C. 1301), (FOOTNOTE 1) or vessels of the United States, as defined in subsection B(4) of the Ship Mortgage Act, 1920 (46 U.S.C. 911(4)), (FOOTNOTE 2) that are subject to a purchase-money equipment security interest granted by, leased to, or conditionally sold to, a debtor that is an air carrier operating under a certificate of convenience and necessity issued by the Civil Aeronautics Board, or a water carrier that holds a certificate of public convenience and necessity or permit issued by the Interstate Commerce Commission, as the case may be, to take possession of such equipment in compliance with the provisions of a purchase-money equipment security agreement, lease, or conditional sale contract, as the case may be, is not affected by section 362 or 363 of this title or by any power of the court to enjoin such taking of possession, unless - (FOOTNOTE 1) Now (49 App. U.S.C. 1301). (FOOTNOTE 2) See References in Text note below. (1) before 60 days after the date of the order for relief under this chapter, the trustee, subject to the court's approval, agrees to perform all obligations of the debtor that become due on or after such date under such security agreement, lease, or conditional sale contract, as the case may be; and (2) any default, other than a default of a kind specified in section 365(b)(2) of this title, under such security agreement, lease, or conditional sale contract, as the case may be - (A) that occurred before such date is cured before the expiration of such 60-day period; and (B) that occurs after such date is cured before the later of - (i) 30 days after the date of such default; and (ii) the expiration of such 60-day period. (b) The trustee and the secured party, lessor, or conditional vendor, as the case may be, whose right to take possession is protected under subsection (a) of this section may agree, subject to the court's approval, to extend the 60-day period specified in subsection (a)(1) of this section. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2629.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1110 of the House amendment adopts an identical provision contained in the House bill without modifications contained in the Senate amendment. This section protects a limited class of financiers of aircraft and vessels and is intended to be narrowly construed to prevent secured parties or lessors from gaining the protection of the section unless the interest of such lessor or secured party is explicitly enumerated therein. It should be emphasized that under section 1110(a) a debtor in possession or trustee is given 60 days after the order for relief in a case under chapter 11, to have an opportunity to comply with the provisions of section 1110(a). During this time the automatic stay will apply and may not be lifted prior to the expiration of the 60-day period. Under section 1110(b), the debtor and secured party or lessor are given an opportunity to extend the 60-day period, but no right to reduce the period is intended. It should additionally be noted that under section 1110(a) the trustee or debtor in possession is not required to assume the executory contract or unexpired lease under section 1110; rather, if the trustee or debtor in possession complies with the requirements of section 1110(a), the trustee or debtor in possession is entitled to retain the aircraft or vessels subject to the normal requirements of section 365. The discussion regarding aircraft and vessels likewise applies with respect to railroad rolling stock in a railroad reorganization under section 1168. SENATE REPORT NO. 95-989 This section, to a large degree, preserves the protection given lessors and conditional vendors of aircraft to a certificated air carrier or of vessels to a certificated water carrier under section 116(5) and 116(6) of present Chapter X (section 516(5) and (6) of former title 11). It is modified to conform with the consolidation of Chapters X and XI (chapters 10 and 11 of former title 11) and with the new chapter 11 generally. It is also modified to give the trustee in a reorganization case an opportunity to continue in possession of the equipment in question by curing defaults and by making the required lease or purchase payments. This removes the absolute veto power over a reorganization that lessors and conditional vendors have under present law, while entitling them to protection of their investment. The section overrides the automatic stay or any power of the court to enjoin taking of possession of certain leased, conditionally sold, or liened equipment, unless, the trustee agrees to perform the debtor's obligations and cures all prior defaults (other than defaults under ipso facto or bankruptcy clauses) within 60 days after the order for relief. The trustee and the equipment financer are permitted to extend the 60-day period by agreement. During the first 60 days, the automatic stay will apply to prevent foreclosure unless the creditor gets relief from the stay. The effect of this section will be the same if the debtor has granted the security interest to the financer or if the debtor is leasing equipment from a financer that has leveraged the lease and leased the equipment subject to a security interest of a third party. -REFTEXT- REFERENCES IN TEXT Subsection B(4) of the Ship Mortgage Act, 1920 (46 U.S.C. 911(4)), referred to in subsec. (a), is subsec. B(4) of section 30 of act June 5, 1920, ch. 250, 41 Stat. 1000, as amended, which was classified to section 911(4) of former Title 46, Shipping, and was repealed by Pub. L. 100-710, title I, Sec. 106(b)(2), Nov. 23, 1988, 102 Stat. 4752, and reenacted by section 102(c) thereof in section 30101 of Title 46, Shipping. -TRANS- TERMINATION OF CIVIL AERONAUTICS BOARD AND TRANSFER OF CERTAIN FUNCTIONS All functions, powers, and duties of the Civil Aeronautics Board were terminated or transferred by section 1551 of Title 49, Appendix, Transportation, effective in part on Dec. 31, 1981, in part on Jan. 1, 1983, and in part on Jan. 1, 1985. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 348 of this title. ------DocID 14833 Document 178 of 646------ -CITE- 11 USC Sec. 1111 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- Sec. 1111. Claims and interests -STATUTE- (a) A proof of claim or interest is deemed filed under section 501 of this title for any claim or interest that appears in the schedules filed under section 521(1) or 1106(a)(2) of this title, except a claim or interest that is scheduled as disputed, contingent, or unliquidated. (b)(1)(A) A claim secured by a lien on property of the estate shall be allowed or disallowed under section 502 of this title the same as if the holder of such claim had recourse against the debtor on account of such claim, whether or not such holder has such recourse, unless - (i) the class of which such claim is a part elects, by at least two-thirds in amount and more than half in number of allowed claims of such class, application of paragraph (2) of this subsection; or (ii) such holder does not have such recourse and such property is sold under section 363 of this title or is to be sold under the plan. (B) A class of claims may not elect application of paragraph (2) of this subsection if - (i) the interest on account of such claims of the holders of such claims in such property is of inconsequential value; or (ii) the holder of a claim of such class has recourse against the debtor on account of such claim and such property is sold under section 363 of this title or is to be sold under the plan. (2) If such an election is made, then notwithstanding section 506(a) of this title, such claim is a secured claim to the extent that such claim is allowed. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2630.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS A discussion of section 1111(b) of the House amendment is best considered in the context of confirmation and will therefore, be discussed in connection with section 1129. SENATE REPORT NO. 95-989 This section dispenses with the need for every creditor and equity security holder to file a proof of claim or interest in a reorganization case. Usually the debtor's schedules are accurate enough that they will suffice to determine the claims or interests allowable in the case. Thus, the section specifies that any claim or interest included on the debtor's schedules is deemed filed under section 501. This does not apply to claims or interests that are scheduled as disputed, contingent, or unliquidated. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 901, 927, 1129 of this title. ------DocID 14834 Document 179 of 646------ -CITE- 11 USC Sec. 1112 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- Sec. 1112. Conversion or dismissal -STATUTE- (a) The debtor may convert a case under this chapter to a case under chapter 7 of this title unless - (1) the debtor is not a debtor in possession; (2) the case originally was commenced as an involuntary case under this chapter; or (3) the case was converted to a case under this chapter other than on the debtor's request. (b) Except as provided in subsection (c) of this section, on request of a party in interest or the United States trustee, and after notice and a hearing, the court may convert a case under this chapter to a case under chapter 7 of this title or may dismiss a case under this chapter, whichever is in the best interest of creditors and the estate, for cause, including - (1) continuing loss to or diminution of the estate and absence of a reasonable likelihood of rehabilitation; (2) inability to effectuate a plan; (3) unreasonable delay by the debtor that is prejudicial to creditors; (4) failure to propose a plan under section 1121 of this title within any time fixed by the court; (5) denial of confirmation of every proposed plan and denial of a request made for additional time for filing another plan or a modification of a plan; (6) revocation of an order of confirmation under section 1144 of this title, and denial of confirmation of another plan or a modified plan under section 1129 of this title; (7) inability to effectuate substantial consummation of a confirmed plan; (8) material default by the debtor with respect to a confirmed plan; (9) termination of a plan by reason of the occurrence of a condition specified in the plan; or (10) nonpayment of any fees or charges required under chapter 123 of title 28. (c) The court may not convert a case under this chapter to a case under chapter 7 of this title if the debtor is a farmer or a corporation that is not a moneyed, business, or commercial corporation, unless the debtor requests such conversion. (d) The court may convert a case under this chapter to a case under chapter 12 or 13 of this title only if - (1) the debtor requests such conversion; (2) the debtor has not been discharged under section 1141(d) of this title; and (3) if the debtor requests conversion to chapter 12 of this title, such conversion is equitable. (e) Except as provided in subsections (c) and (f), the court, on request of the United States trustee, may convert a case under this chapter to a case under chapter 7 of this title or may dismiss a case under this chapter, whichever is in the best interest of creditors and the estate if the debtor in a voluntary case fails to file, within fifteen days after the filing of the petition commencing such case or such additional time as the court may allow, the information required by paragraph (1) of section 521, including a list containing the names and addresses of the holders of the twenty largest unsecured claims (or of all unsecured claims if there are fewer than twenty unsecured claims), and the approximate dollar amounts of each of such claims. (f) Notwithstanding any other provision of this section, a case may not be converted to a case under another chapter of this title unless the debtor may be a debtor under such chapter. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2630; Pub. L. 98-353, title III, Sec. 505, July 10, 1984, 98 Stat. 384; Pub. L. 99-554, title II, Sec. 224, 256, Oct. 27, 1986, 100 Stat. 3102, 3114.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1112 of the House amendment represents a compromise between the House bill and Senate amendment with respect to the factors constituting cause for conversion of a case to chapter 7 or dismissal. The House amendment combines two separate factors contained in section 1112(b)(1) and section 1112(b)(2) of the Senate amendment. Section 1112(b)(1) of the House amendment permits the court to convert a case to a case under chapter 7 or to dismiss the case if there is both a continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation; requiring both factors to be present simultaneously represents a compromise from the House bill which eliminated both factors from the list of causes enumerated. Sections 1112(c) and 1112(d) of the House amendment is derived from the House bill which differs from the Senate amendment only as a matter of style. SENATE REPORT NO. 95-989 This section brings together all of the conversion and dismissal rules for chapter 11 cases. Subsection (a) gives the debtor an absolute right to convert a voluntarily commenced chapter 11 case in which the debtor remains in possession to a liquidation case. Subsection (b) gives wide discretion to the court to make an appropriate disposition of the case sua sponte or upon motion of a party in interest, or the court is permitted to convert a reorganization case to a liquidation case or to dismiss the case, whichever is in the best interest of creditors and the estate, but only for cause. Cause may include the continuing loss to or dimunition of the estate of an insolvent debtor, the absence of a reasonable likelihood of rehabilitation, the inability to effectuate a plan, unreasonable delay by the debtor that is prejudicial to creditors, failure to file a plan within the appropriate time limits, denial of confirmation and any opportunity to modify or propose a new plan, revocation of confirmation and denial of confirmation of a modified plan, inability to effectuate substantial consummation of a confirmed plan, material default by the debtor under the plan, and termination of the plan by reason of the occurrence of a condition specified in the plan. This list is not exhaustive. The court will be able to consider other factors as they arise, and to use its equitable powers to reach an appropriate result in individual cases. The power of the court to act sua sponte should be used sparingly and only in emergency situations. Subsection (c) prohibits the court from converting a case concerning a farmer or an eleemosynary institution to a liquidation case unless the debtor consents. Subsection (d) prohibits conversion of a reorganization case to a chapter 13 case unless the debtor requests conversion and his discharge has not been granted or has been revoked. Subsection (e) reinforces section 109 by prohibiting conversion of a chapter 11 case to a case under another chapter proceedings under which the debtor is not permitted to proceed. AMENDMENTS 1986 - Subsec. (b). Pub. L. 99-554, Sec. 224(1)(A), inserted 'or the United States trustee' after 'party in interest'. Subsec. (b)(10). Pub. L. 99-554, Sec. 224(1)(B)-(D), added par. (10). Subsec. (d). Pub. L. 99-554, Sec. 256, inserted reference to chapter 12 and added par. (3). Subsecs. (e), (f). Pub. L. 99-554, Sec. 224(2), (3), added subsec. (e) and redesignated former subsec. (e) as (f). 1984 - Subsec. (a)(2). Pub. L. 98-353, Sec. 505(a)(1), substituted 'originally was commenced as an involuntary case' for 'is an involuntary case originally commenced'. Subsec. (a)(3). Pub. L. 98-353, Sec. 505(a)(2), substituted 'other than on' for 'on other than'. Subsec. (b)(5). Pub. L. 98-353, Sec. 505(b)(1), inserted 'a request made for' before 'additional'. Subsec. (b)(8). Pub. L. 98-353, Sec. 505(b)(2), substituted 'or' for 'and'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by section 224 of Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 256 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 348, 365, 706, 726, 728, 1208, 1307 of this title. ------DocID 14835 Document 180 of 646------ -CITE- 11 USC Sec. 1113 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- Sec. 1113. Rejection of collective bargaining agreements -STATUTE- (a) The debtor in possession, or the trustee if one has been appointed under the provisions of this chapter, other than a trustee in a case covered by subchapter IV of this chapter and by title I of the Railway Labor Act, may assume or reject a collective bargaining agreement only in accordance with the provisions of this section. (b)(1) Subsequent to filing a petition and prior to filing an application seeking rejection of a collective bargaining agreement, the debtor in possession or trustee (hereinafter in this section 'trustee' shall include a debtor in possession), shall - (A) make a proposal to the authorized representative of the employees covered by such agreement, based on the most complete and reliable information available at the time of such proposal, which provides for those necessary modifications in the employees benefits and protections that are necessary to permit the reorganization of the debtor and assures that all creditors, the debtor and all of the affected parties are treated fairly and equitably; and (B) provide, subject to subsection (d)(3), the representative of the employees with such relevant information as is necessary to evaluate the proposal. (2) During the period beginning on the date of the making of a proposal provided for in paragraph (1) and ending on the date of the hearing provided for in subsection (d)(1), the trustee shall meet, at reasonable times, with the authorized representative to confer in good faith in attempting to reach mutually satisfactory modifications of such agreement. (c) The court shall approve an application for rejection of a collective bargaining agreement only if the court finds that - (1) the trustee has, prior to the hearing, made a proposal that fulfills the requirements of subsection (b)(1); (2) the authorized representative of the employees has refused to accept such proposal without good cause; and (3) the balance of the equities clearly favors rejection of such agreement. (d)(1) Upon the filing of an application for rejection the court shall schedule a hearing to be held not later than fourteen days after the date of the filing of such application. All interested parties may appear and be heard at such hearing. Adequate notice shall be provided to such parties at least ten days before the date of such hearing. The court may extend the time for the commencement of such hearing for a period not exceeding seven days where the circumstances of the case, and the interests of justice require such extension, or for additional periods of time to which the trustee and representative agree. (2) The court shall rule on such application for rejection within thirty days after the date of the commencement of the hearing. In the interests of justice, the court may extend such time for ruling for such additional period as the trustee and the employees' representative may agree to. If the court does not rule on such application within thirty days after the date of the commencement of the hearing, or within such additional time as the trustee and the employees' representative may agree to, the trustee may terminate or alter any provisions of the collective bargaining agreement pending the ruling of the court on such application. (3) The court may enter such protective orders, consistent with the need of the authorized representative of the employee to evaluate the trustee's proposal and the application for rejection, as may be necessary to prevent disclosure of information provided to such representative where such disclosure could compromise the position of the debtor with respect to its competitors in the industry in which it is engaged. (e) If during a period when the collective bargaining agreement continues in effect, and if essential to the continuation of the debtor's business, 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 a collective bargaining agreement. Any hearing under this paragraph shall be scheduled in accordance with the needs of the trustee. The implementation of such interim changes shall not render the application for rejection moot. (f) No provision of this title shall be construed to permit a trustee to unilaterally terminate or alter any provisions of a collective bargaining agreement prior to compliance with the provisions of this section. -SOURCE- (Added Pub. L. 98-353, title III, Sec. 541(a), July 10, 1984, 98 Stat. 390.) -REFTEXT- REFERENCES IN TEXT The Railway Labor Act, referred to in subsec. (a), is act May 20, 1926, ch. 347, 44 Stat. 577, as amended. Title I of the Railway Labor Act is classified principally to subchapter I (Sec. 151 et seq.) of chapter 8 of Title 45, Railroads. For complete classification of this Act to the Code, see section 151 of Title 45 and Tables. -MISC2- EFFECTIVE DATE Section 541(c) of Pub. L. 98-353 provided that: 'The amendments made by this section (enacting this section) shall become effective upon the date of enactment of this Act (July 10, 1984); provided that this section shall not apply to cases filed under title 11 of the United States Code which were commenced prior to the date of enactment of this section.' ------DocID 14836 Document 181 of 646------ -CITE- 11 USC Sec. 1114 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER I -HEAD- Sec. 1114. Payment of insurance benefits to retired employees -STATUTE- (a) For purposes of this section, the term 'retiree benefits' means payments to any entity or person for the purpose of providing or reimbursing payments for retired employees and their spouses and dependents, for medical, surgical, or hospital care benefits, or benefits in the event of sickness, accident, disability, or death under any plan, fund, or program (through the purchase of insurance or otherwise) maintained or established in whole or in part by the debtor prior to filing a petition commencing a case under this title. (b)(1) For purposes of this section, the term 'authorized representative' means the authorized representative designated pursuant to subsection (c) for persons receiving any retiree benefits covered by a collective bargaining agreement or subsection (d) in the case of persons receiving retiree benefits not covered by such an agreement. (2) Committees of retired employees appointed by the court pursuant to this section shall have the same rights, powers, and duties as committees appointed under sections 1102 and 1103 of this title for the purpose of carrying out the purposes of sections 1114 and 1129(a)(13) and, as permitted by the court, shall have the power to enforce the rights of persons under this title as they relate to retiree benefits. (c)(1) A labor organization shall be, for purposes of this section, the authorized representative of those persons receiving any retiree benefits covered by any collective bargaining agreement to which that labor organization is signatory, unless (A) such labor organization elects not to serve as the authorized representative of such persons, or (B) the court, upon a motion by any party in interest, after notice and hearing, determines that different representation of such persons is appropriate. (2) In cases where the labor organization referred to in paragraph (1) elects not to serve as the authorized representative of those persons receiving any retiree benefits covered by any collective bargaining agreement to which that labor organization is signatory, or in cases where the court, pursuant to paragraph (1) finds different representation of such persons appropriate, the court, upon a motion by any party in interest, and after notice and a hearing, shall appoint a committee of retired employees if the debtor seeks to modify or not pay the retiree benefits or if the court otherwise determines that it is appropriate, from among such persons, to serve as the authorized representative of such persons under this section. (d) The court, upon a motion by any party in interest, and after notice and a hearing, shall appoint a committee of retired employees if the debtor seeks to modify or not pay the retiree benefits or if the court otherwise determines that it is appropriate, to serve as the authorized representative, under this section, of those persons receiving any retiree benefits not covered by a collective bargaining agreement. (e)(1) Notwithstanding any other provision of this title, the debtor in possession, or the trustee if one has been appointed under the provisions of this chapter (hereinafter in this section 'trustee' shall include a debtor in possession), shall timely pay and shall not modify any retiree benefits, except that - (A) the court, on motion of the trustee or authorized representative, and after notice and a hearing, may order modification of such payments, pursuant to the provisions of subsections (g) and (h) of this section, or (B) the trustee and the authorized representative of the recipients of those benefits may agree to modification of such payments, after which such benefits as modified shall continue to be paid by the trustee. (2) Any payment for retiree benefits required to be made before a plan confirmed under section 1129 of this title is effective has the status of an allowed administrative expense as provided in section 503 of this title. (f)(1) Subsequent to filing a petition and prior to filing an application seeking modification of the retiree benefits, the trustee shall - (A) make a proposal to the authorized representative of the retirees, based on the most complete and reliable information available at the time of such proposal, which provides for those necessary modifications in the retiree benefits that are necessary to permit the reorganization of the debtor and assures that all creditors, the debtor and all of the affected parties are treated fairly and equitably; and (B) provide, subject to subsection (k)(3), the representative of the retirees with such relevant information as is necessary to evaluate the proposal. (2) During the period beginning on the date of the making of a proposal provided for in paragraph (1), and ending on the date of the hearing provided for in subsection (k)(1), the trustee shall meet, at reasonable times, with the authorized representative to confer in good faith in attempting to reach mutually satisfactory modifications of such retiree benefits. (g) The court shall enter an order providing for modification in the payment of retiree benefits if the court finds that - (1) the trustee has, prior to the hearing, made a proposal that fulfills the requirements of subsection (f); (2) the authorized representative of the retirees has refused to accept such proposal without good cause; and (3) such modification is necessary to permit the reorganization of the debtor and 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; except that in no case shall the court enter an order providing for such modification which provides for a modification to a level lower than that proposed by the trustee in the proposal found by the court to have complied with the requirements of this subsection and subsection (f): Provided, however, That at any time after an order is entered providing for modification in the payment of retiree benefits, or at any time after an agreement modifying such benefits is made between the trustee and the authorized representative of the recipients of such benefits, the authorized representative may apply to the court for an order increasing those benefits which order shall be granted if the increase in retiree benefits sought is consistent with the standard set forth in paragraph (3): Provided further, That neither the trustee nor the authorized representative is precluded from making more than one motion for a modification order governed by this subsection. (h)(1) Prior to a court issuing a final order under subsection (g) of this section, if essential to the continuation of the debtor's business, or in order to avoid irreparable damage to the estate, the court, after notice and a hearing, may authorize the trustee to implement interim modifications in retiree benefits. (2) Any hearing under this subsection shall be scheduled in accordance with the needs of the trustee. (3) The implementation of such interim changes does not render the motion for modification moot. (i) No retiree benefits paid between the filing of the petition and the time a plan confirmed under section 1129 of this title becomes effective shall be deducted or offset from the amounts allowed as claims for any benefits which remain unpaid, or from the amounts to be paid under the plan with respect to such claims for unpaid benefits, whether such claims for unpaid benefits are based upon or arise from a right to future unpaid benefits or from any benefits not paid as a result of modifications allowed pursuant to this section. (j) No claim for retiree benefits shall be limited by section 502(b)(7) of this title. (k)(1) Upon the filing of an application for modifying retiree benefits, the court shall schedule a hearing to be held not later than fourteen days after the date of the filing of such application. All interested parties may appear and be heard at such hearing. Adequate notice shall be provided to such parties at least ten days before the date of such hearing. The court may extend the time for the commencement of such hearing for a period not exceeding seven days where the circumstances of the case, and the interests of justice require such extension, or for additional periods of time to which the trustee and the authorized representative agree. (2) The court shall rule on such application for modification within ninety days after the date of the commencement of the hearing. In the interests of justice, the court may extend such time for ruling for such additional period as the trustee and the authorized representative may agree to. If the court does not rule on such application within ninety days after the date of the commencement of the hearing, or within such additional time as the trustee and the authorized representative may agree to, the trustee may implement the proposed modifications pending the ruling of the court on such application. (3) The court may enter such protective orders, consistent with the need of the authorized representative of the retirees to evaluate the trustee's proposal and the application for modification, as may be necessary to prevent disclosure of information provided to such representative where such disclosure could compromise the position of the debtor with respect to its competitors in the industry in which it is engaged. (l) This section shall not apply to any retiree, or the spouse or dependents of such retiree, if such retiree's gross income for the twelve months preceding the filing of the bankruptcy petition equals or exceeds $250,000, unless such retiree can demonstrate to the satisfaction of the court that he is unable to obtain health, medical, life, and disability coverage for himself, his spouse, and his dependents who would otherwise be covered by the employer's insurance plan, comparable to the coverage provided by the employer on the day before the filing of a petition under this title. -SOURCE- (Added Pub. L. 100-334, Sec. 2(a), June 16, 1988, 102 Stat. 610.) -MISC1- EFFECTIVE DATE Section 4 of Pub. L. 100-334 provided that: '(a) General Effective Date. - Except as provided in subsection (b), this Act and the amendments made by this Act (enacting this section, amending section 1129 of this title, enacting provisions set out as a note under section 101 of this title, and amending and repealing provisions set out as notes under section 1106 of this title) shall take effect on the date of the enactment of this Act (June 16, 1988). '(b) Application of Amendments. - The amendments made by section 2 (enacting this section and amending section 1129 of this title) shall not apply with respect to cases commenced under title 11 of the United States Code before the date of the enactment of this Act (June 16, 1988).' PAYMENT OF CERTAIN BENEFITS TO RETIRED FORMER EMPLOYEES For payment of benefits by bankruptcy trustee to retired employees in enumerated circumstances with respect to cases commenced under this chapter in which a plan for reorganization had not been confirmed by the court and in which any such benefit was still being paid on October 2, 1986, and in cases that became subject to this chapter after October 2, 1986, and before June 16, 1988, see section 101(b) (title VI, Sec. 608) of Pub. L. 99-500, and Pub. L. 99-591, as amended, set out as a note under section 1106 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1129 of this title. ------DocID 14837 Document 182 of 646------ -CITE- 11 USC SUBCHAPTER II -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER II -HEAD- SUBCHAPTER II - THE PLAN -SECREF- SUBCHAPTER REFERRED TO IN OTHER SECTIONS This subchapter is referred to in section 103 of this title. ------DocID 14838 Document 183 of 646------ -CITE- 11 USC Sec. 1121 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER II -HEAD- Sec. 1121. Who may file a plan -STATUTE- (a) The debtor may file a plan with a petition commencing a voluntary case, or at any time in a voluntary case or an involuntary case. (b) Except as otherwise provided in this section, only the debtor may file a plan until after 120 days after the date of the order for relief under this chapter. (c) Any party in interest, including the debtor, the trustee, a creditors' committee, an equity security holders' committee, a creditor, an equity security holder, or any indenture trustee, may file a plan if and only if - (1) a trustee has been appointed under this chapter; (2) the debtor has not filed a plan before 120 days after the date of the order for relief under this chapter; or (3) the debtor has not filed a plan that has been accepted, before 180 days after the date of the order for relief under this chapter, by each class of claims or interests that is impaired under the plan. (d) On request of a party in interest made within the respective periods specified in subsections (b) and (c) of this section and after notice and a hearing, the court may for cause reduce or increase the 120-day period or the 180-day period referred to in this section. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2631; Pub. L. 98-353, title III, Sec. 506, July 10, 1984, 98 Stat. 385; Pub. L. 99-554, title II, Sec. 283(u), Oct. 27, 1986, 100 Stat. 3118.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1121 of the House amendment is derived from section 1121 of the House bill; section 1121(c)(1) will be satisfied automatically in a case under subchapter IV of title 11. SENATE REPORT NO. 95-989 Subsection (a) permits the debtor to file a reorganization plan with a petition commencing a voluntary case or at any time during a voluntary or involuntary case. Subsection (b) gives the debtor the exclusive right to file a plan during the first 120 days of the case. There are exceptions, however, enumerated in subsection (c). If a trustee has been appointed, if the debtor does not meet the 120-day deadline, or if the debtor fails to obtain the required consent within 180 days after the filing of the petition, any party in interest may propose a plan. This includes the debtor, the trustee, a creditors' committee, an equity security holders' committee, a creditor, an equity security holder, and an indenture trustee. The list is not exhaustive. In the case of a public company, a trustee is appointed within 10 days of the petition. In such a case, for all practical purposes, any party in interest may file a plan. Subsection (d) permits the court, for cause, to increase or reduce the 120-day and 180-day periods specified. Since, the debtor has an exclusive privilege for 6 months during which others may not file a plan, the granted extension should be based on a showing of some promise of probable success. An extension should not be employed as a tactical device to put pressure on parties in interest to yield to a plan they consider unsatisfactory. AMENDMENTS 1986 - Subsec. (d). Pub. L. 99-554 inserted reference to subsection (b) of this section. 1984 - Subsec. (c)(3). Pub. L. 98-353, Sec. 506(a), substituted 'of claims or interests that is' for 'the claims or interests of which are'. Subsec. (d). Pub. L. 98-353, Sec. 506(b), inserted 'made within the respective periods specified in subsection (c) of this section'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 307, 348, 1106, 1112 of this title. ------DocID 14839 Document 184 of 646------ -CITE- 11 USC Sec. 1122 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER II -HEAD- Sec. 1122. Classification of claims or interests -STATUTE- (a) Except as provided in subsection (b) of this section, a plan may place a claim or an interest in a particular class only if such claim or interest is substantially similar to the other claims or interests of such class. (b) A plan may designate a separate class of claims consisting only of every unsecured claim that is less than or reduced to an amount that the court approves as reasonable and necessary for administrative convenience. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2631.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 This section codifies current case law surrounding the classification of claims and equity securities. It requires classification based on the nature of the claims or interests classified, and permits inclusion of claims or interests in a particular class only if the claim or interest being included is substantially similar to the other claims or interests of the class. Subsection (b), also a codification of existing practice, contains an exception. The plan may designate a separate class of claims consisting only of every unsecured claim that is less than or reduced to an amount that the court approves as reasonable and necessary for administrative convenience. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 901, 1123, 1127, 1222, 1322 of this title. ------DocID 14840 Document 185 of 646------ -CITE- 11 USC Sec. 1123 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER II -HEAD- Sec. 1123. Contents of plan -STATUTE- (a) Notwithstanding any otherwise applicable nonbankruptcy law, a plan shall - (1) designate, subject to section 1122 of this title, classes of claims, other than claims of a kind specified in section 507(a)(1), 507(a)(2), or 507(a)(7) of this title and classes of interests; (2) specify any class of claims or interests that is not impaired under the plan; (3) specify the treatment of any class of claims or interests that is impaired under the plan; (4) provide the same treatment for each claim or interest of a particular class, unless the holder of a particular claim or interest agrees to a less favorable treatment of such particular claim or interest; (5) provide adequate means for the plan's implementation, such as - (A) retention by the debtor of all or any part of the property of the estate; (B) transfer of all or any part of the property of the estate to one or more entities, whether organized before or after the confirmation of such plan; (C) merger or consolidation of the debtor with one or more persons; (D) sale of all or any part of the property of the estate, either subject to or free of any lien, or the distribution of all or any part of the property of the estate among those having an interest in such property of the estate; (E) satisfaction or modification of any lien; (F) cancellation or modification of any indenture or similar instrument; (G) curing or waiving of any default; (H) extension of a maturity date or a change in an interest rate or other term of outstanding securities; (I) amendment of the debtor's charter; or (J) issuance of securities of the debtor, or of any entity referred to in subparagraph (B) or (C) of this paragraph, for cash, for property, for existing securities, or in exchange for claims or interests, or for any other appropriate purpose; (6) provide for the inclusion in the charter of the debtor, if the debtor is a corporation, or of any corporation referred to in paragraph (5)(B) or (5)(C) of this subsection, of a provision prohibiting the issuance of nonvoting equity securities, and providing, as to the several classes of securities possessing voting power, an appropriate distribution of such power among such classes, including, in the case of any class of equity securities having a preference over another class of equity securities with respect to dividends, adequate provisions for the election of directors representing such preferred class in the event of default in the payment of such dividends; and (7) contain only provisions that are consistent with the interests of creditors and equity security holders and with public policy with respect to the manner of selection of any officer, director, or trustee under the plan and any successor to such officer, director, or trustee. (b) Subject to subsection (a) of this section, a plan may - (1) impair or leave unimpaired any class of claims, secured or unsecured, or of interests; (2) subject to section 365 of this title, provide for the assumption, rejection, or assignment of any executory contract or unexpired lease of the debtor not previously rejected under such section; (3) provide for - (A) the settlement or adjustment of any claim or interest belonging to the debtor or to the estate; or (B) the retention and enforcement by the debtor, by the trustee, or by a representative of the estate appointed for such purpose, of any such claim or interest; (4) provide for the sale of all or substantially all of the property of the estate, and the distribution of the proceeds of such sale among holders of claims or interests; and (5) include any other appropriate provision not inconsistent with the applicable provisions of this title. (c) In a case concerning an individual, a plan proposed by an entity other than the debtor may not provide for the use, sale, or lease of property exempted under section 522 of this title, unless the debtor consents to such use, sale, or lease. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2631; Pub. L. 98-353, title III, Sec. 507, July 10, 1984, 98 Stat. 385.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1123 of the House amendment represents a compromise between similar provisions in the House bill and Senate amendment. The section has been clarified to clearly indicate that both secured and unsecured claims, or either of them, may be impaired in a case under title 11. In addition assumption or rejection of an executory contract under a plan must comply with section 365 of title 11. Moreover, section 1123(a)(1) has been substantively modified to permit classification of certain kinds of priority claims. This is important for purposes of confirmation under section 1129(a)(9). Section 1123(a)(5) of the House amendment is derived from a similar provision in the House bill and Senate amendment but deletes the language pertaining to 'fair upset price' as an unnecessary restriction. Section 1123 is also intended to indicate that a plan may provide for any action specified in section 1123 in the case of a corporation without a resolution of the board of directors. If the plan is confirmed, then any action proposed in the plan may be taken notwithstanding any otherwise applicable nonbankruptcy law in accordance with section 1142(a) of title 11. SENATE REPORT NO. 95-989 Subsection (a) specifies what a plan of reorganization must contain. The plan must designate classes of claims and interests, and specify, by class, the claims or interests that are unimpaired under the plan. Priority claims are not required to be classified because they may not have arisen when the plan is filed. The plan must provide the same treatment for each claim or interest of a particular class, unless the holder of a particular claim or interest agrees to a different, but not better, treatment of his claim or interest. Paragraph (3) applies to claims, not creditors. Thus, if a creditor is undersecured, and thus has a secured claim and an unsecured claim, this paragraph will be applied independently to each of his claims. Paragraph (4) of subsection (a) is derived from section 216 of chapter X (section 616 of former title 11) with some modifications. It requires the plan to provide adequate means for the plans execution. These means may include retention by the debtor of all or any part of the property of the estate, transfer of all or any part of the property of the estate to one or more entities, whether organized pre- or postconfirmation, merger or consolidation of the debtor with one or more persons, sale and distribution of all or any part of the property of the estate, satisfaction or modification of any lien, cancellation or modification of any indenture or similar instrument, curing or waiving of any default, extension of maturity dates or change in interest rates of securities, amendment of the debtor's charter, and issuance of securities. Subparagraph (C), as it applies in railroad cases, has the effect of overruling St. Joe Paper Co. v. Atlantic Coast Line R. R., 347 U.S. 298 (1954). It will allow the trustee or creditors to propose a plan of merger with another railroad without the consent of the debtor, and the debtor will be bound under proposed 11 U.S.C. 1141(a). See Hearings, pt. 3, at 1616. 'Similar instrument' referred to in subparagraph (F) might include a deposit with an agent for distribution, other than an indenture trustee, such as an agent under an agreement in a railroad conditional sale or lease financing agreement. Paragraphs (5) and (6) and subsection (b) are derived substantially from Section 216 of Chapter X ((former) 11 U.S.C. 616). Paragraph (5) requires the plan to prohibit the issuance of nonvoting equity securities, and to provide for an appropriate distribution of voting power among the various classes of equity securities. Paragraph (6) requires that the plan contain only provisions that are consistent with the interests of creditors and equity security holders, and with public policy with respect to the selection of officers, directors, and trustees, and their successors. Subsection (b) specifies the matters that the plan may propose. The plan may impair or leave unimpaired any claim or interest. The plan may provide for the assumption or rejection of executory contracts or unexpired leases not previously rejected under section 365. The plan may also provide for the treatment of claims by the debtor against other entities that are not settled before the confirmation of the plan. The plan may propose settlement or adjustment of any claim or equity security belonging to the estate, or may propose retention and enforcement of such claim or interest by the debtor or by an agent appointed for that purpose. The plan may also propose the sale of all or substantially all of the property of the estate, and the distribution of the proceeds of the sale among creditors and equity security holders. This would be a liquidating plan. The subsection permits the plan to include any other appropriate provision not inconsistent with the applicable provisions of the bankruptcy code. Subsection (c) protects an individual debtor's exempt property by prohibiting its use, sale, or lease under a plan proposed by someone other than the debtor, unless the debtor consents. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353, Sec. 507(a)(1), in provisions preceding par. (1) substituted 'Notwithstanding any otherwise applicable nonbankruptcy law, a' for 'A'. Subsec. (a)(1). Pub. L. 98-353, Sec. 507(a)(2), inserted a comma after 'classes of claims' and substituted '507(a)(7) of this title,' for '507(a)(6) of this title'. Subsec. (a)(3). Pub. L. 98-353, Sec. 507(a)(3), struck out 'shall' before 'specify the treatment'. Subsec. (a)(5). Pub. L. 98-353, Sec. 507(a)(4), substituted 'implementation' for 'execution'. Subsec. (a)(5)(G). Pub. L. 98-353, Sec. 507(a)(5), inserted 'of' after 'waiving'. Subsec. (b)(2). Pub. L. 98-353, Sec. 507(b), substituted 'rejection, or assignment' for 'or rejection', and 'under such section' for 'under section 365 of this title'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 901, 1124, 1127, 1172 of this title. ------DocID 14841 Document 186 of 646------ -CITE- 11 USC Sec. 1124 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER II -HEAD- Sec. 1124. Impairment of claims or interests -STATUTE- Except as provided in section 1123(a)(4) of this title, a class of claims or interests is impaired under a plan unless, with respect to each claim or interest of such class, the plan - (1) leaves unaltered the legal, equitable, and contractual rights to which such claim or interest entitles the holder of such claim or interest; (2) notwithstanding any contractual provision or applicable law that entitles the holder of such claim or interest to demand or receive accelerated payment of such claim or interest after the occurrence of a default - (A) cures any such default that occurred before or after the commencement of the case under this title, other than a default of a kind specified in section 365(b)(2) of this title; (B) reinstates the maturity of such claim or interest as such maturity existed before such default; (C) compensates the holder of such claim or interest for any damages incurred as a result of any reasonable reliance by such holder on such contractual provision or such applicable law; and (D) does not otherwise alter the legal, equitable, or contractual rights to which such claim or interest entitles the holder of such claim or interest; or (3) provides that, on the effective date of the plan, the holder of such claim or interest receives, on account of such claim or interest, cash equal to - (A) with respect to a claim, the allowed amount of such claim; or (B) with respect to an interest, if applicable, the greater of - (i) any fixed liquidation preference to which the terms of any security representing such interest entitle the holder of such interest; or (ii) any fixed price at which the debtor, under the terms of such security, may redeem such security from such holder. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2633; Pub. L. 98-353, title III, Sec. 508, July 10, 1984, 98 Stat. 385.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1124 of the House amendment is derived from a similar provision in the House bill and Senate amendment. The section defines the new concept of 'impairment' of claims or interests; the concept differs significantly from the concept of 'materially and adversely affected' under the Bankruptcy Act (former title 11). Section 1124(3) of the House amendment provides that a holder of a claim or interest is not impaired, if the plan provides that the holder will receive the allowed amount of the holder's claim, or in the case of an interest with a fixed liquidation preference or redemption price, the greater of such price. This adopts the position contained in the House bill and rejects the contrary standard contained in the Senate amendment. Section 1124(3) of the House amendment rejects a provision contained in section 1124(3)(B)(iii) of the House bill which would have considered a class of interest not to be impaired by virtue of the fact that the plan provided cash or property for the value of the holder's interest in the debtor. The effect of the House amendment is to permit an interest not to be impaired only if the interest has a fixed liquidation preference or redemption price. Therefore, a class of interests such as common stock, must either accept a plan under section 1129(a)(8), or the plan must satisfy the requirements of section 1129(b)(2)(C) in order for a plan to be confirmed. A compromise reflected in section 1124(2)(C) of the House amendment indicates that a class of claims is not impaired under the circumstances of section 1124(2) if damages are paid to rectify reasonable reliance engaged in by the holder of a claim or interest arising from the prepetition breach of a contractual provision, such as an ipso facto or bankruptcy clause, or law. Where the rights of third parties are concerned, such as in the case of lease premises which have been rerented to a third party, it is not intended that there will be adequate damages to compensate the third party. SENATE REPORT NO. 95-989 The basic concept underlying this section is not new. It rests essentially on Section 107 of Chapter X ((former) 11 U.S.C. 507), which states that creditors or stockholders or any class thereof 'shall be deemed to be 'affected' by a plan only if their or its interest shall be materially and adversely affected thereby.' This section is designated to indicate when contractual rights of creditors or interest holders are not materially affected. It specifies three ways in which the plan may leave a claim or interest unimpaired. First, the plan may propose not to alter the legal, equitable, or contractual rights to which the claim or interest entitled its holder. Second, a claim or interest is unimpaired by curing the effect of a default and reinstating the original terms of an obligation when maturity was brought on or accelerated by the default. The intervention of bankruptcy and the defaults represent a temporary crisis which the plan of reorganization is intended to clear away. The holder of a claim or interest who under the plan is restored to his original position, when others receive less or get nothing at all, is fortunate indeed and has no cause to complain. Curing of the default and the assumption of the debt in accordance with its terms is an important reorganization technique for dealing with a particular class of claims, especially secured claims. Third, a claim or interest is unimpaired if the plan provides for their payment in cash. In the case of a debt liability, the cash payment is for the allowed amount of the claim, which does not include a redemption premium. If it is an equity security with a fixed liquidation preference, such as a preferred stock, the allowed amount is such liquidation preference, with no redemption premium. With respect to any other equity security, such as a common stock, cash payment must be equal to the 'value of such holder's interest in the debtor.' Section 1124 does not include payment 'in property' other than cash. Except for a rare case, claims or interests are not by their terms payable in property, but a plan may so provide and those affected thereby may accept or reject the proposed plan. They may not be forced to accept a plan declaring the holders' claims or interests to be 'unimpaired.' HOUSE REPORT NO. 95-595 This section is new. It is designed to indicate when contractual rights of creditors or interest holders are not materially affected. The section specifies three ways in which the plan may leave a claim or interest unimpaired. First, the plan may propose not to alter the legal, equitable, or contractual rights to which the claim or interest entitled its holder. Second, the plan is permitted to reinstate a claim or interest and thus leave it unimpaired. Reinstatement consists of curing any default (other than a default under an ipso facto or bankruptcy clause) and reinstatement of the maturity of the claim or interest. Further, the plan may not otherwise alter any legal, equitable, or contractual right to which the claim or interest entitles its holder. Third, the plan may leave a claim or interest unimpaired by paying its amount in full other than in securities of the debtor, an affiliate of the debtor participating in a joint plan, or a successor to the debtor. These securities are excluded because determination of their value would require a valuation of the business being reorganized. Use of them to pay a creditor or equity security holder without his consent may be done only under section 1129(b) and only after a valuation of the debtor. Under this paragraph, the plan must pay the allowed amount of the claim in full, in cash or other property, or, in the case of an equity security, must pay the greatest of any fixed liquidation preference to which the terms of the equity security entitle its holder, any fixed price at which the debtor, under the terms of the equity security may redeem such equity security, and the value, as of the effective date of the plan, of the holder's interest in the debtor. The value of the holder's interest need not be determined precisely by valuing the debtor's business if such value is clearly below redemption or liquidation preference values. If such value would require a full-scale valuation of the business, then such interest should be treated as impaired. But, if the debtor corporation is clearly insolvent, then the value of the common stock holder's interest in the debtor is zero, and offering them nothing under the plan of reorganization will not impair their rights. 'Value, as of the effective date of the plan,' as used in paragraph (3) and in proposed 11 U.S.C. 1179(a)(7)(B), 1129(a)(9), 1129(b), 1172(2), 1325(a)(4), 1325(a)(5)(B), and 1328(b), indicates that the promised payment under the plan must be discounted to present value as of the effective date of the plan. The discounting should be based only on the unpaid balance of the amount due under the plan, until that amount, including interest, is paid in full. AMENDMENTS 1984 - Par. (2)(A). Pub. L. 98-353, Sec. 508(1), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: 'cures any such default, other than a default of a kind specified in section 365(b)(2) of this title, that occurred before or after the commencement of the case under this title;'. Par. (3)(B)(i). Pub. L. 98-353, Sec. 508(2), substituted 'or' for 'and'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 901 of this title. ------DocID 14842 Document 187 of 646------ -CITE- 11 USC Sec. 1125 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER II -HEAD- Sec. 1125. Postpetition disclosure and solicitation -STATUTE- (a) In this section - (1) 'adequate information' means information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtor's books and records, that would enable a hypothetical reasonable investor typical of holders of claims or interests of the relevant class to make an informed judgment about the plan, but adequate information need not include such information about any other possible or proposed plan; and (2) 'investor typical of holders of claims or interests of the relevant class' means investor having - (A) a claim or interest of the relevant class; (B) such a relationship with the debtor as the holders of other claims or interests of such class generally have; and (C) such ability to obtain such information from sources other than the disclosure required by this section as holders of claims or interests in such class generally have. (b) An acceptance or rejection of a plan may not be solicited after the commencement of the case under this title from a holder of a claim or interest with respect to such claim or interest, unless, at the time of or before such solicitation, there is transmitted to such holder the plan or a summary of the plan, and a written disclosure statement approved, after notice and a hearing, by the court as containing adequate information. The court may approve a disclosure statement without a valuation of the debtor or an appraisal of the debtor's assets. (c) The same disclosure statement shall be transmitted to each holder of a claim or interest of a particular class, but there may be transmitted different disclosure statements, differing in amount, detail, or kind of information, as between classes. (d) Whether a disclosure statement required under subsection (b) of this section contains adequate information is not governed by any otherwise applicable nonbankruptcy law, rule, or regulation, but an agency or official whose duty is to administer or enforce such a law, rule, or regulation may be heard on the issue of whether a disclosure statement contains adequate information. Such an agency or official may not appeal from, or otherwise seek review of, an order approving a disclosure statement. (e) A person that solicits acceptance or rejection of a plan, in good faith and in compliance with the applicable provisions of this title, or that participates, in good faith and in compliance with the applicable provisions of this title, in the offer, issuance, sale, or purchase of a security, offered or sold under the plan, of the debtor, of an affiliate participating in a joint plan with the debtor, or of a newly organized successor to the debtor under the plan, is not liable, on account of such solicitation or participation, for violation of any applicable law, rule, or regulation governing solicitation of acceptance or rejection of a plan or the offer, issuance, sale, or purchase of securities. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2633; Pub. L. 98-353, title III, Sec. 509, July 10, 1984, 98 Stat. 385.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1125 of the House amendment is derived from section 1125 of the House bill and Senate amendment except with respect to section 1125(f) of the Senate amendment. It will not be necessary for the court to consider the report of the examiner prior to approval of a disclosure statement. The investigation of the examiner is to proceed on an independent basis from the procedure of the reorganization under chapter 11. In order to ensure that the examiner's report will be expeditious and fair, the examiner is precluded from serving as a trustee in the case or from representing a trustee if a trustee is appointed, whether the case remains in chapter 11 or is converted to chapter 7 or 13. SENATE REPORT NO. 95-989 This section extends disclosure requirements in connection with solicitations to all cases under chapter 11. Heretofore this subject was dealt with by the Bankruptcy Act (former title 11) mainly in the special contexts of railroad reorganizations and chapter X (chapter 10 of former title 11) cases. Subsection (a) defines (1) the subject matter of disclosure as 'adequate information' and relates the standard of adequacy to an (2) 'investor typical of holders or claims or interests of the relevant class.' 'Investor' is used broadly here, for it will almost always include a trade creditor or other creditors who originally had no investment intent or interest. It refers to the investment-type decision by those called upon to accept a plan to modify their claims or interests, which typically will involve acceptance of new securities or of a cash payment in lieu thereof. Both the kind and form of information are left essentially to the judicial discretion of the court, guided by the specification in subparagraph (a)(1) that it be of a kind and in sufficient detail that a reasonable and typical investor can make an informed judgment about the plan. The information required will necessarily be governed by the circumstances of the case. Reporting and audit standards devised for solvent and continuing businesses do not necessarily fit a debtor in reorganization. Subsection (a)(1) expressly incorporates consideration of the nature and history of the debtor and the condition of its books and records into the determination of what is reasonably practicable to supply. These factors are particularly pertinent to historical data and to discontinued operations of no future relevance. A plan is necessarily predicated on knowledge of the assets and liabilities being dealt with and on factually supported expectations as to the future course of the business sufficient to meet the feasibility standard in section 1130(a)(11) of this title. It may thus be necessary to provide estimates or judgments for that purpose. Yet it remains practicable to describe, in such detail as may be relevant and needed, the basis for the plan and the data on which supporters of the plan rely. Subsection (b) establishes the jurisdiction of the court over this subject by prohibiting solicitation of acceptance or rejection of a plan after the commencement of the case, unless the person solicited receives, before or at the time of the solicitation, a written disclosure statement approved by the court, after notice and hearing, as containing adequate information. As under present law, determinations of value, by appraisal or otherwise, are not required if not needed to accomplish the purpose specified in subsection (a)(1). Subsection (c) requires that the same disclosure statement be transmitted to each member of a class. It recognizes that the information needed for an informed judgment about the plan may differ among classes. A class whose rights under the plan center on a particular fund or asset would have no use for an extensive description of other matters that could not affect them. Subsection (d) relieves the court of the need to follow any otherwise applicable Federal or state law in determining the adequacy of the information contained in the disclosure statement submitted for its approval. It authorizes an agency or official, Federal or state, charged with administering cognate laws so preempted to advise the court on the adequacy of proposed disclosure statement. But they are not authorized to appeal the court's decision. Solicitations with respect to a plan do not involve just mere requests for opinions. Acceptance of the plan vitally affects creditors and shareholders, and most frequently the solicitation involves an offering of securities in exchange for claims or interests. The present bankruptcy statute (former title 11) has exempted such offerings under each of its chapters from the registration and disclosure requirements of the Securities Act of 1933 (15 U.S.C. 77a et seq.), an exemption also continued by section 1145(a)(2) of this title. The extension of the disclosure requirements to all chapter 11 cases justifies the coordinate extension of these exemptions. By the same token, no valid purpose is served not to exempt from the requirements of similar state laws in a matter under the exclusive jurisdiction of the Federal bankruptcy laws. Subsection (e) exonerates any person who, in good faith and in compliance with this title, solicits or participates in the offer, issuance, sale or purchase, under the plan, of a security from any liability, on account of such solicitation or participation, for violation of any law, rule, or regulation governing the offer, issuance, sale, or purchase of securities. This exoneration is coordinate with the exemption from Federal or State registration or licensing requirements provided by section 1145 of this title. In the nonpublic case, the court, when approving the disclosure statement, has before it the texts of the plan, a proposed disclosure document, and such other information the plan proponents and other interested parties may present at the hearing. In the final analysis the exoneration which subsection (e) grants must depend on the good faith of the plan proponents and of those who participate in the preparation of the disclosure statement and in the solicitation. Subsection (e) does not affect civil or criminal liability for defects and inadequacies that are beyond the limits of the exoneration that good faith provides. Section 1125 applies to public companies as well, subject to the qualifications of subsection (f). In case of a public company no solicitations of acceptance is permitted unless authorized by the court upon or after approval of the plan pursuant to section 1128(c). In addition to the documents specified in subsection (b), subsection (f) requires transmission of the opinion and order of the court approving the plan and, if filed, the advisory report of the Securities and Exchange Commission or a summary thereof prepared by the Commission. HOUSE REPORT NO. 95-595 This section is new. It is the heart of the consolidation of the various reorganization chapters found in current law. It requires disclosure before solicitation of acceptances of a plan or reorganization. Subsection (a) contains two definitions. First, 'adequate information' is defined to mean information of a kind, and insufficient detail, as far as is reasonably practical in light of the nature and history of the debtor and the condition of the debtor's books and records, that would enable a hypothetical reasonable investor typical of holders of claims or interests of the relevant class to make an informed judgment about the plan. Second, 'investor typical of holders of claims or interests of the relevant class' is defined to mean an investor having a claim or interest of the relevant class, having such a relationship with the debtor as the holders of other claims or interests of the relevant class have, and having such ability to obtain information from sources other than the disclosure statement as holders of claims or interests of the relevant class have, and having such ability to obtain information from sources other than the disclosure statement as holders of claims or interests of the relevant class have. That is, the hypothetical investor against which the disclosure is measured must not be an insider if other members of the class are not insiders, and so on. In other words, the adequacy of disclosure is measured against the typical investor, not an extraordinary one. The Supreme Court's rulemaking power will not extend to rulemaking that will prescribe what constitutes adequate information. That standard is a substantive standard. Precisely what constitutes adequate information in any particular instance will develop on a case-by-case basis. Courts will take a practical approach as to what is necessary under the circumstances of each case, such as the cost of preparation of the statements, the need for relative speed in solicitation and confirmation, and, of course, the need for investor protection. There will be a balancing of interests in each case. In reorganization cases, there is frequently great uncertainty. Therefore the need for flexibility is greatest. Subsection (b) is the operative subsection. It prohibits solicitation of acceptances or rejections of a plan after the commencement of the case unless, at the time of the solicitation or before, there is transmitted to the solicitee the plan or a summary of the plan, and a written disclosure statement approved by the court as containing adequate information. The subsection permits approval of the statement without the necessity of a valuation of the debtor or an appraisal of the debtor's assets. However, in some cases, a valuation or appraisal will be necessary to develop adequate information. The court will be able to determine what is necessary in light of the facts and circumstances of each particular case. Subsection (c) requires that the same disclosure statement go to all members of a particular class, but permits different disclosure to different classes. Subsection (d) excepts the disclosure statements from the requirements of the securities laws (such as section 14 of the 1934 Act (15 U.S.C. 78n) and section 5 of the 1933 Act (15 U.S.C. 77e)), and from similar State securities laws (blue sky laws, for example). The subsection permits an agency or official whose duty is to administer or enforce such laws (such as the Securities and Exchange Commission or State Corporation Commissioners) to appear and be heard on the issue of whether a disclosure statement contains adequate information, but the agencies and officials are not granted the right of appeal from an adverse determination in any capacity. They may join in an appeal by a true party in interest, however. Subsection (e) is a safe harbor provision, and is necessary to make the exemption provided by subsection (d) effective. Without it, a creditor that solicited an acceptance or rejection in reliance on the court's approval of a disclosure statement would be potentially liable under antifraud sections designed to enforce the very sections of the securities laws from which subsection (d) excuses compliance. The subsection protects only persons that solicit in good faith and in compliance with the applicable provisions of the reorganization chapter. It provides protection from legal liability as well as from equitable liability based on an injunctive action by the SEC or other agency or official. AMENDMENTS 1984 - Subsec. (a)(1). Pub. L. 98-353, Sec. 509(a)(1), inserted ', but adequate information need not include such information about any other possible or proposed plan'. Subsec. (a)(2)(B). Pub. L. 98-353, Sec. 509(a)(2), inserted 'the' after 'with'. Subsec. (a)(2)(C). Pub. L. 98-353, Sec. 509(a)(3), inserted 'of' after 'holders'. Subsec. (d). Pub. L. 98-353, Sec. 509(b), inserted 'required under subsection (b) of this section' and ', or otherwise seek review of,'. Subsec. (e). Pub. L. 98-353, Sec. 509(c), inserted 'acceptance or rejection of a plan' after 'solicits', and 'solicitation of acceptance or rejection of a plan or' after 'governing'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 901, 1126, 1127, 1145 of this title; title 28 section 586. ------DocID 14843 Document 188 of 646------ -CITE- 11 USC Sec. 1126 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER II -HEAD- Sec. 1126. Acceptance of plan -STATUTE- (a) The holder of a claim or interest allowed under section 502 of this title may accept or reject a plan. If the United States is a creditor or equity security holder, the Secretary of the Treasury may accept or reject the plan on behalf of the United States. (b) For the purposes of subsections (c) and (d) of this section, a holder of a claim or interest that has accepted or rejected the plan before the commencement of the case under this title is deemed to have accepted or rejected such plan, as the case may be, if - (1) the solicitation of such acceptance or rejection was in compliance with any applicable nonbankruptcy law, rule, or regulation governing the adequacy of disclosure in connection with such solicitation; or (2) if there is not any such law, rule, or regulation, such acceptance or rejection was solicited after disclosure to such holder of adequate information, as defined in section 1125(a) of this title. (c) A class of claims has accepted a plan if such plan has been accepted by creditors, other than any entity designated under subsection (e) of this section, that hold at least two-thirds in amount and more than one-half in number of the allowed claims of such class held by creditors, other than any entity designated under subsection (e) of this section, that have accepted or rejected such plan. (d) A class of interests has accepted a plan if such plan has been accepted by holders of such interests, other than any entity designated under subsection (e) of this section, that hold at least two-thirds in amount of the allowed interests of such class held by holders of such interests, other than any entity designated under subsection (e) of this section, that have accepted or rejected such plan. (e) On request of a party in interest, and after notice and a hearing, the court may designate any entity whose acceptance or rejection of such plan was not in good faith, or was not solicited or procured in good faith or in accordance with the provisions of this title. (f) Notwithstanding any other provision of this section, a class that is not impaired under a plan, and each holder of a claim or interest of such class, are conclusively presumed to have accepted the plan, and solicitation of acceptances with respect to such class from the holders of claims or interests of such class is not required. (g) Notwithstanding any other provision of this section, a class is deemed not to have accepted a plan if such plan provides that the claims or interests of such class do not entitle the holders of such claims or interests to receive or retain any property under the plan on account of such claims or interests. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2634; Pub. L. 98-353, title III, Sec. 510, July 10, 1984, 98 Stat. 386.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1126 of the House amendment deletes section 1126(e) as contained in the House bill. Section 105 of the bill constitutes sufficient power in the court to designate exclusion of a creditor's claim on the basis of a conflict of interest. Section 1126(f) of the House amendment adopts a provision contained in section 1127(f) of the Senate bill indicating that a class that is not impaired under a plan is deemed to have accepted a plan and solicitation of acceptances from such class is not required. SENATE REPORT NO. 95-989 Subsection (a) of this section permits the holder of a claim or interest allowed under section 502 to accept or reject a proposed plan of reorganization. The subsection also incorporates a provision now found in section 199 of chapter X (section 599 of former title 11) that authorizes the Secretary of the Treasury to accept or reject a plan on behalf of the United States when the United States is a creditor or equity security holder. Subsection (b) governs acceptances and rejections of plans obtained before commencement of a reorganization for a nonpublic company. Paragraph (3) expressly states that subsection (b) does not apply to a public company. Prepetition solicitation is a common practice under chapter XI (chapter 11 of former title 11) today, and chapter IX (chapter 9 of former title 11) current makes explicit provision for it. Section 1126(b) counts a prepetition acceptance or rejection toward the required amounts and number of acceptances only if the solicitation of the acceptance or rejection was in compliance with any applicable nonbankruptcy law, rule, or regulation governing the adequacy of disclosure in connection with such solicitation. If there is not any such applicable law, rule, or regulation, then the acceptance or rejection is counted only if it was solicited after disclosure of adequate information, to the holder, as defined in section 1125(a)(1). This permits the court to ensure that the requirements of section 1125 are not avoided by prepetition solicitation. Subsection (c) specifies the required amount and number of acceptances for a class of creditors. A class of creditors has accepted a plan if at least two-thirds in amount and more than one-half in number of the allowed claims of the class that are voted are cast in favor of the plan. The amount and number are computed on the basis of claims actually voted for or against the plan, not as under chapter X (chapter 10 of former title 11) on the basis of the allowed claims in the class. Subsection (f) excludes from all these calculations claims not voted in good faith, and claims procured or solicited not in good faith or not in accordance with the provisions of this title. Subsection (c) requires that the same disclosure statement be transmitted to each member of a class. It recognizes that the information needed for an informed judgment about the plan may differ among classes. A class whose rights under the plan center on a particular fund or asset would have no use for an extensive description of other matters that could not affect them. Subsection (d) relieves the court of the need to follow any otherwise applicable Federal or state law in determining the adequacy of the information contained in the disclosure statement submitted for its approval. It authorizes an agency or official, Federal or state, charged with administering cognate laws so pre-empted to advise the court on the adequacy of proposed disclosure statement. But they are not authorized to appeal the court's decision. Solicitations with respect to a plan do not involve just mere requests for opinions. Acceptance of the plan vitally affects creditors and shareholders, and most frequently the solicitation involves an offering of securities in exchange for claims or interests. The present Bankruptcy Act (former title 11) has exempted such offerings under each of its chapters from the registration and disclosure requirements of the Securities Act of 1933 (15 U.S.C. 77a et seq.), an exemption also continued by section 1145 of this title. The extension of the disclosure requirements to all chapter 11 cases is justified by the integration of the separate chapters into the single chapter 11. By the same token, no valid purpose is served by failing to provide exemption from the requirements of similar state laws in a matter under the exclusive jurisdiction of the Federal bankruptcy laws. Under subsection (d), with respect to a class of equity securities, it is sufficient for acceptance of the plan if the amount of securities voting for the plan is at least two-thirds of the total actually voted. Subsection (e) provides that no acceptances are required from any class whose claims or interests are unimpaired under the plan or in the order confirming the plan. Subsection (g) provides that any class denied participation under the plan is conclusively deemed to have rejected the plan. There is obviously no need to submit a plan for a vote by a class that is to receive nothing. But under subsection (g) the excluded class is like a class that has not accepted, and is a dissenting class for purposes of confirmation under section 1130. AMENDMENTS 1984 - Subsec. (b)(2). Pub. L. 98-353, Sec. 510(a), substituted '1125(a)' for '1125(a)(1)'. Subsec. (d). Pub. L. 98-353, Sec. 510(b), inserted a comma after 'such interests'. Subsec. (f). Pub. L. 98-353, Sec. 510(c), substituted ', and each holder of a claim or interest of such class, are conclusively presumed' for 'is deemed', 'solicitation' for 'solicititation', and 'interests' for 'interest'. Subsec. (g). Pub. L. 98-353, Sec. 510(d), substituted 'receive or retain any property' for 'any payment or compensation'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 901, 946 of this title. ------DocID 14844 Document 189 of 646------ -CITE- 11 USC Sec. 1127 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER II -HEAD- Sec. 1127. Modification of plan -STATUTE- (a) The proponent of a plan may modify such plan at any time before confirmation, but may not modify such plan so that such plan as modified fails to meet the requirements of sections 1122 and 1123 of this title. After the proponent of a plan files a modification of such plan with the court, the plan as modified becomes the plan. (b) The proponent of a plan or the reorganized debtor may modify such plan at any time after confirmation of such plan and before substantial consummation of such plan, but may not modify such plan so that such plan as modified fails to meet the requirements of sections 1122 and 1123 of this title. Such plan as modified under this subsection becomes the plan only if circumstances warrant such modification and the court, after notice and a hearing, confirms such plan as modified, under section 1129 of this title. (c) The proponent of a modification shall comply with section 1125 of this title with respect to the plan as modified. (d) Any holder of a claim or interest that has accepted or rejected a plan is deemed to have accepted or rejected, as the case may be, such plan as modified, unless, within the time fixed by the court, such holder changes such holder's previous acceptance or rejection. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2635; Pub. L. 98-353, title III, Sec. 511, July 10, 1984, 98 Stat. 386.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1127(a) of the House amendment adopts a provision contained in the House bill permitting only the proponent of a plan to modify the plan and rejecting the alternative of open modification contained in the Senate amendment. SENATE REPORT NO. 95-989 Under subsection (a) the proponent may file a proposal to modify a plan prior to confirmation. In the case of a public company the modifying proposal may be filed prior to approval. Subsection (b) provides that a party in interest eligible to file a plan may file instead of a plan a proposal to modify a plan filed by another. Under subsection (c) a party in interest objecting to some feature of a plan may submit a proposal to modify the plan to meet the objection. After a plan has been confirmed, but before its substantial consummation, a plan may be modified by leave of court, which subsection (d) provides shall be granted for good cause. Subsection (e) provides that a proposal to modify a plan is subject to the disclosure requirements of section 1125 and as provided in subsection (f). It provides that a creditor or stockholder who voted for or against a plan is deemed to have accepted or rejected the modifying proposal. But if the modification materially and adversely affects any of their interests, they must be afforded an opportunity to change their vote in accordance with the disclosure and solicitation requirements of section 1125. Under subsection (g) a plan, if modified prior to confirmation, shall be confirmed if it meets the requirements of section 1130. HOUSE REPORT NO. 95-595 Subsection (a) permits the proponent of a plan to modify it at any time before confirmation, subject, of course, to the requirements of sections 1122 and 1123, governing classification and contents of a plan. After the proponent of a plan files a modification with the court, the plan as modified becomes the plan, and is to be treated the same as an original plan. Subsection (b) permits modification of a plan after confirmation under certain circumstances. The modification must be proposed before substantial consummation of the plan. The requirements of sections 1122 and 1123 continue to apply. The plan as modified under this subsection becomes the plan only if the court confirms the plan as modified under section 1129 and the circumstances warrant the modification. Subsection (c) requires the proponent of a modification to comply with the disclosure provisions of section 1125. Of course, if the modification were sufficiently minor, the court might determine that additional disclosure was not required under the circumstances. Subsection (d) simplifies modification procedure by deeming any creditor or equity security holder that has already accepted or rejected the plan to have accepted or rejected the modification, unless, within the time fixed by the court, the creditor or equity security holder changes this previous acceptance or rejection. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353, Sec. 511(a), inserted 'of a plan' after 'After the proponent', and 'of such plan' after 'modification'. Subsec. (b). Pub. L. 98-353, Sec. 511(b), substituted 'circumstances warrant such modification and the court, after notice and a hearing, confirms such plan as modified, under section 1129 of this title' for 'the court, after notice and a hearing, confirms such plan, as modified, under section 1129 of this title, and circumstances warrant such modification'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 901, 1129 of this title. ------DocID 14845 Document 190 of 646------ -CITE- 11 USC Sec. 1128 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER II -HEAD- Sec. 1128. Confirmation hearing -STATUTE- (a) After notice, the court shall hold a hearing on confirmation of a plan. (b) A party in interest may object to confirmation of a plan. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2635.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 (Section 1129 (now section 1128)) Subsection (a) requires that there be a hearing in every case on the confirmation of the plan. Notice is required. Subsection (b) permits any party in interest to object to the confirmation of the plan. The Securities and Exchange Commission and indenture trustees, as parties in interest under section 1109, may object to confirmation of the plan. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 901 of this title; title 28 section 586. ------DocID 14846 Document 191 of 646------ -CITE- 11 USC Sec. 1129 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER II -HEAD- Sec. 1129. Confirmation of plan -STATUTE- (a) The court shall confirm a plan only if all of the following requirements are met: (1) The plan complies with the applicable provisions of this title. (2) The proponent of the plan complies with the applicable provisions of this title. (3) The plan has been proposed in good faith and not by any means forbidden by law. (4) Any payment made or to be made by the proponent, by the debtor, or by a person issuing securities or acquiring property under the plan, for services or for costs and expenses in or in connection with the case, or in connection with the plan and incident to the case, has been approved by, or is subject to the approval of, the court as reasonable; (FOOTNOTE 1) (FOOTNOTE 1) So in original. The semicolon probably should be a period. (5)(A)(i) The proponent of the plan has disclosed the identity and affiliations of any individual proposed to serve, after confirmation of the plan, as a director, officer, or voting trustee of the debtor, an affiliate of the debtor participating in a joint plan with the debtor, or a successor to the debtor under the plan; and (ii) the appointment to, or continuance in, such office of such individual, is consistent with the interests of creditors and equity security holders and with public policy; and (B) the proponent of the plan has disclosed the identity of any insider that will be employed or retained by the reorganized debtor, and the nature of any compensation for such insider. (6) Any governmental regulatory commission with jurisdiction, after confirmation of the plan, over the rates of the debtor has approved any rate change provided for in the plan, or such rate change is expressly conditioned on such approval. (7) With respect to each impaired class of claims or interests - (A) each holder of a claim or interest of such class - (i) has accepted the plan; or (ii) will receive or retain under the plan on account of such claim or interest property of a value, as of the effective date of the plan, that is not less than the amount that such holder would so receive or retain if the debtor were liquidated under chapter 7 of this title on such date; or (B) if section 1111(b)(2) of this title applies to the claims of such class, each holder of a claim of such class will receive or retain under the plan on account of such claim property of a value, as of the effective date of the plan, that is not less than the value of such holder's interest in the estate's interest in the property that secures such claims. (8) With respect to each class of claims or interests - (A) such class has accepted the plan; or (B) such class is not impaired under the plan. (9) Except to the extent that the holder of a particular claim has agreed to a different treatment of such claim, the plan provides that - (A) with respect to a claim of a kind specified in section 507(a)(1) or 507(a)(2) of this title, on the effective date of the plan, the holder of such claim will receive on account of such claim cash equal to the allowed amount of such claim; (B) with respect to a class of claims of a kind specified in section 507(a)(3), 507(a)(4), 507(a)(5) or 507(a)(6) of this title, each holder of a claim of such class will receive - (i) if such class has accepted the plan, deferred cash payments of a value, as of the effective date of the plan, equal to the allowed amount of such claim; or (ii) if such class has not accepted the plan, cash on the effective date of the plan equal to the allowed amount of such claim; and (C) with respect to a claim of a kind specified in section 507(a)(7) of this title, the holder of such claim will receive on account of such claim deferred cash payments, over a period not exceeding six years after the date of assessment of such claim, of a value, as of the effective date of the plan, equal to the allowed amount of such claim. (10) If a class of claims is impaired under the plan, at least one class of claims that is impaired under the plan has accepted the plan, determined without including any acceptance of the plan by any insider. (11) Confirmation of the plan 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 under the plan, unless such liquidation or reorganization is proposed in the plan. (12) All fees payable under section 1930, (FOOTNOTE 2) as determined by the court at the hearing on confirmation of the plan, have been paid or the plan provides for the payment of all such fees on the effective date of the plan. (FOOTNOTE 2) So in original. Probably should be section 1930 of title 28. (13) The plan provides for the continuation after its effective date of payment of all retiree benefits, as that term is defined in section 1114 of this title, at the level established pursuant to subsection (e)(1)(B) or (g) of section 1114 of this title, at any time prior to confirmation of the plan, for the duration of the period the debtor has obligated itself to provide such benefits. (b)(1) Notwithstanding section 510(a) of this title, if all of the applicable requirements of subsection (a) of this section other than paragraph (8) are met with respect to a plan, the court, on request of the proponent of the plan, shall confirm the plan notwithstanding the requirements of such paragraph if the plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted, the plan. (2) For the purpose of this subsection, the condition that a plan be fair and equitable with respect to a class includes the following requirements: (A) With respect to a class of secured claims, the plan provides - (i)(I) that the holders of such claims retain the liens securing such claims, whether the property subject to such liens is retained by the debtor or transferred to another entity, to the extent of the allowed amount of such claims; and (II) that each holder of a claim of such class receive on account of such claim deferred cash payments totaling at least the allowed amount of such claim, of a value, as of the effective date of the plan, of at least the value of such holder's interest in the estate's interest in such property; (ii) for the sale, subject to section 363(k) of this title, of any property that is subject to the liens securing such claims, free and clear of such liens, with such liens to attach to the proceeds of such sale, and the treatment of such liens on proceeds under clause (i) or (iii) of this subparagraph; or (iii) for the realization by such holders of the indubitable equivalent of such claims. (B) With respect to a class of unsecured claims - (i) the plan provides that each holder of a claim of such class receive or retain on account of such claim property of a value, as of the effective date of the plan, equal to the allowed amount of such claim; or (ii) the holder of any claim or interest that is junior to the claims of such class will not receive or retain under the plan on account of such junior claim or interest any property. (C) With respect to a class of interests - (i) the plan provides that each holder of an interest of such class receive or retain on account of such interest property of a value, as of the effective date of the plan, equal to the greatest of the allowed amount of any fixed liquidation preference to which such holder is entitled, any fixed redemption price to which such holder is entitled, or the value of such interest; or (ii) the holder of any interest that is junior to the interests of such class will not receive or retain under the plan on account of such junior interest any property. (c) Notwithstanding subsections (a) and (b) of this section and except as provided in section 1127(b) of this title, the court may confirm only one plan, unless the order of confirmation in the case has been revoked under section 1144 of this title. If the requirements of subsections (a) and (b) of this section are met with respect to more than one plan, the court shall consider the preferences of creditors and equity security holders in determining which plan to confirm. (d) Notwithstanding any other provision of this section, on request of a party in interest that is a governmental unit, the court may not confirm a plan if the principal purpose of the plan is the avoidance of taxes or the avoidance of the application of section 5 of the Securities Act of 1933 (15 U.S.C. 77e). In any hearing under this subsection, the governmental unit has the burden of proof on the issue of avoidance. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2635; Pub. L. 98-353, title III, Sec. 512, July 10, 1984, 98 Stat. 386; Pub. L. 99-554, title II, Sec. 225, 283(v), Oct. 27, 1986, 100 Stat. 3102, 3118; Pub. L. 100-334, Sec. 2(b), June 16, 1988, 102 Stat. 613.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1129 of the House amendment relates to confirmation of a plan in a case under chapter 11. Section 1129(a)(3) of the House amendment adopts the position taken in the Senate amendment and section 1129(a)(5) takes the position adopted in the House bill. Section 1129(a)(7) adopts the position taken in the House bill in order to insure that the dissenting members of an accepting class will receive at least what they would otherwise receive under the best interest of creditors test; it also requires that even the members of a class that has rejected the plan be protected by the best interest of creditors test for those rare cramdown cases where a class of creditors would receive more on liquidation than under reorganization of the debtor. Section 1129(a)(7)(C) is discussed in connection with section 1129(b) and section 1111(b). Section 1129(a)(8) of the House amendment adopts the provision taken in the House bill which permits confirmation of a plan as to a particular class without resort to the fair and equitable test if the class has accepted a plan or is unimpaired under the plan. Section 1129(a)(9) represents a compromise between a similar provision contained in the House bill and the Senate amendment. Under subparagraph (A) claims entitled to priority under section 507(a)(1) or (2) are entitled to receive cash on the effective date of the plan equal to the amount of the claim. Under subparagraph (B) claims entitled to priority under section 507(a)(3), (4), or (5), are entitled to receive deferred cash payments of a present value as of the effective date of the plan equal to the amount of the claims if the class has accepted the plan or cash payments on the effective date of the plan otherwise. Tax claims entitled to priority under section 507(a)(6) of different governmental units may not be contained in one class although all claims of one such unit may be combined and such unit may be required to take deferred cash payments over a period not to exceed 6 years after the date of assessment of the tax with the present value equal to the amount of the claim. Section 1129(a)(10) is derived from section 1130(a)(12) of the Senate amendment. Section 1129(b) is new. Together with section 1111(b) and section 1129(a)(7)(C), this section provides when a plan may be confirmed, notwithstanding the failure of an impaired class to accept the plan under section 1129(a)(8). Before discussing section 1129(b) an understanding of section 1111(b) is necessary. Section 1111(b)(1), the general rule that a secured claim is to be treated as a recourse claim in chapter 11 whether or not the claim is nonrecourse by agreement or applicable law. This preferred status for a nonrecourse loan terminates if the property securing the loan is sold under section 363 or is to be sold under the plan. The preferred status also terminates if the class of which the secured claim is a part elects application of section 1111(b)(2). Section 1111(b)(2) provides that an allowed claim is a secured claim to the full extent the claim is allowed rather than to the extent of the collateral as under section 506(a). A class may elect application of paragraph (2) only if the security is not of inconsequential value and, if the creditor is a recourse creditor, the collateral is not sold under section 363 or to be sold under the plan. Sale of property under section 363 or under the plan is excluded from treatment under section 1111(b) because of the secured party's right to bid in the full amount of his allowed claim at any sale of collateral under section 363(k) of the House amendment. As previously noted, section 1129(b) sets forth a standard by which a plan may be confirmed notwithstanding the failure of an impaired class to accept the plan. Paragraph (1) makes clear that this alternative confirmation standard, referred to as 'cram down,' will be called into play only on the request of the proponent of the plan. Under this cramdown test, the court must confirm the plan if the plan does not discriminate unfairly, and is 'fair and equitable,' with respect to each class of claims or interests that is impaired under, and has not accepted, the plan. The requirement of the House bill that a plan not 'discriminate unfairly' with respect to a class is included for clarity; the language in the House report interpreting that requirement, in the context of subordinated debentures, applies equally under the requirements of section 1129(b)(1) of the House amendment. Although many of the factors interpreting 'fair and equitable' are specified in paragraph (2), others, which were explicated in the description of section 1129(b) in the House report, were omitted from the House amendment to avoid statutory complexity and because they would undoubtedly be found by a court to be fundamental to 'fair and equitable' treatment of a dissenting class. For example, a dissenting class should be assured that no senior class receives more than 100 percent of the amount of its claims. While that requirement was explicitly included in the House bill, the deletion is intended to be one of style and not one of substance. Paragraph (2) provides guidelines for a court to determine whether a plan is fair and equitable with respect to a dissenting class. It must be emphasized that the fair and equitable requirement applies only with respect to dissenting classes. Therefore, unlike the fair and equitable rule contained in chapter X (chapter 10 of former title 11) and section 77 of the Bankruptcy Act (section 205 of former title 11) under section 1129(b)(2), senior accepting classes are permitted to give up value to junior classes as long as no dissenting intervening class receives less than the amount of its claims in full. If there is no dissenting intervening class and the only dissent is from a class junior to the class to which value have been given up, then the plan may still be fair and equitable with respect to the dissenting class, as long as no class senior to the dissenting class has received more than 100 percent of the amount of its claims. Paragraph (2) contains three subparagraphs, each of which applies to a particular kind of class of claims or interests that is impaired and has not accepted the plan. Subparagraph (A) applies when a class of secured claims is impaired and has not accepted the plan. The provision applies whether or not section 1111(b) applies. The plan may be crammed down notwithstanding the dissent of a secured class only if the plan complies with clause (i), (ii), or (iii). Clause (i) permits cramdown if the dissenting class of secured claims will retain its lien on the property whether the property is retained by the debtor or transferred. It should be noted that the lien secures the allowed secured claim held by such holder. The meaning of 'allowed secured claim' will vary depending on whether section 1111(b)(2) applies to such class. If section 1111(b)(2) applies then the 'electing' class is entitled to have the entire allowed amount of the debt related to such property secured by a lien even if the value of the collateral is less than the amount of the debt. In addition, the plan must provide for the holder to receive, on account of the allowed secured claims, payments, either present or deferred, of a principal face amount equal to the amount of the debt and of a present value equal to the value of the collateral. For example, if a creditor loaned $15,000,000 to a debtor secured by real property worth $18,000,000 and the value of the real property had dropped to $12,000,000 by the date when the debtor commenced a proceeding under chapter 11, the plan could be confirmed notwithstanding the dissent of the creditor as long as the lien remains on the collateral to secure a $15,000,000 debt, the face amount of present or extended payments to be made to the creditor under the plan is at least $15,000,000, and the present value of the present or deferred payments is not less than $12,000,000. The House report accompanying the House bill described what is meant by 'present value'. Clause (ii) is self explanatory. Clause (iii) requires the court to confirm the plan notwithstanding the dissent of the electing secured class if the plan provides for the realization by the secured class of the indubitable equivalents of the secured claims. The standard of 'indubitable equivalents' is taken from In re Murel Holding Corp., 75 F.2d 941 (2d Cir. 1935) (Learned Hand, Jr.). Abandonment of the collateral to the creditor would clearly satisfy indubitable equivalence, as would a lien on similar collateral. However, present cash payments less than the secured claim would not satisfy the standard because the creditor is deprived of an opportunity to gain from a future increase in value of the collateral. Unsecured notes as to the secured claim or equity securities of the debtor would not be the indubitable equivalent. With respect to an oversecured creditor, the secured claim will never exceed the allowed claim. Although the same language applies, a different result pertains with respect to a class of secured claims to which section 1111(b)(2) does not apply. This will apply to all claims secured by a right of setoff. The court must confirm the plan notwithstanding the dissent of such a class of secured claims if any of three alternative requirements is met. Under clause (i) the plan may be confirmed if the class retains a right of setoff or a lien securing the allowed secured claims of the class and the holders will receive payments of a present value equal to the allowed amount of their secured claims. Contrary to electing classes of secured creditors who retain a lien under subparagraph (A)(i)(I) to the extent of the entire claims secured by such lien, nonelecting creditors retain a lien on collateral only to the extent of their allowed secured claims and not to the extent of any deficiency, and such secured creditors must receive present or deferred payments with a present value equal to the allowed secured claim, which in turn is only the equivalent of the value of the collateral under section 506(a). Any deficiency claim of a nonelecting class of secured claims is treated as an unsecured claim and is not provided for under subparagraph (A). The plan may be confirmed under clause (ii) if the plan proposes to sell the property free and clear of the secured party's lien as long as the lien will attach to the proceeds and will receive treatment under clause (i) or (iii). Clause (iii) permits confirmation if the plan provides for the realization by the dissenting nonelecting class of secured claims of the indubitable equivalent of the secured claims of such class. Contrary to an 'electing' class to which section 1111(b)(2) applies, the nonelecting class need not be protected with respect to any future appreciation in value of the collateral since the secured claim of such a class is never undersecured by reason of section 506(a). Thus the lien secures only the value of interest of such creditor in the collateral. To the extent deferred payments exceed that amount, they represent interest. In the event of a subsequent default, the portion of the face amount of deferred payments representing unaccrued interest will not be secured by the lien. Subparagraph (B) applies to a dissenting class of unsecured claims. The court must confirm the plan notwithstanding the dissent of a class of impaired unsecured claims if the plan provides for such claims to receive property with a present value equal to the allowed amount of the claims. Unsecured claims may receive any kind of 'property,' which is used in its broadest sense, as long as the present value of the property given to the holders of unsecured claims is equal to the allowed amount of the claims. Some kinds of property, such as securities, may require difficult valuations by the court; in such circumstances the court need only determine that there is a reasonable likelihood that the property given the dissenting class of impaired unsecured claims equals the present value of such allowed claims. Alternatively, under clause (ii), the court must confirm the plan if the plan provides that holders of any claims or interests junior to the interests of the dissenting class of impaired unsecured claims will not receive any property under the plan on account of such junior claims or interests. As long as senior creditors have not been paid more than in full, and classes of equal claims are being treated so that the dissenting class of impaired unsecured claims is not being discriminated against unfairly, the plan may be confirmed if the impaired class of unsecured claims receives less than 100 cents on the dollar (or nothing at all) as long as no class junior to the dissenting class receives anything at all. Such an impaired dissenting class may not prevent confirmation of a plan by objection merely because a senior class has elected to give up value to a junior class that is higher in priority than the impaired dissenting class of unsecured claims as long as the above safeguards are met. Subparagraph (C) applies to a dissenting class of impaired interests. Such interests may include the interests of general or limited partners in a partnership, the interests of a sole proprietor in a proprietorship, or the interest of common or preferred stockholders in a corporation. If the holders of such interests are entitled to a fixed liquidation preference or fixed redemption price on account of such interests then the plan may be confirmed notwithstanding the dissent of such class of interests as long as it provides the holders property of a present value equal to the greatest of the fixed redemption price, or the value of such interests. In the event there is no fixed liquidation preference or redemption price, then the plan may be confirmed as long as it provides the holders of such interests property of a present value equal to the value of such interests. If the interests are 'under water' then they will be valueless and the plan may be confirmed notwithstanding the dissent of that class of interests even if the plan provides that the holders of such interests will not receive any property on account of such interests. Alternatively, under clause (ii), the court must confirm the plan notwithstanding the dissent of a class of interests if the plan provides that holders of any interests junior to the dissenting class of interests will not receive or retain any property on account of such junior interests. Clearly, if there are no junior interests junior to the class of dissenting interests, then the condition of clause (ii) is satisfied. The safeguards that no claim or interest receive more than 100 percent of the allowed amount of such claim or interest and that no class be discriminated against unfairly will insure that the plan is fair and equitable with respect to the dissenting class of interests. Except to the extent of the treatment of secured claims under subparagraph (A) of this statement, the House report remains an accurate description of confirmation of section 1129(b). Contrary to the example contained in the Senate report, a senior class will not be able to give up value to a junior class over the dissent of an intervening class unless the intervening class receives the full amount, as opposed to value, of its claims or interests. One last point deserves explanation with respect to the admittedly complex subject of confirmation. Section 1129(a)(7)(C) in effect exempts secured creditors making an election under section 1111(b)(2) from application of the best interest of creditors test. In the absence of an election the amount such creditors receive in a plan of liquidation would be the value of their collateral plus any amount recovered on the deficiency in the case of a recourse loan. However, under section 1111(b)(2), the creditors are given an allowed secured claim to the full extent the claim is allowed and have no unsecured deficiency. Since section 1129(b)(2)(A) makes clear that an electing class need receive payments of a present value only equal to the value of the collateral, it is conceivable that under such a 'cram down' the electing creditors would receive nothing with respect to their deficiency. The advantage to the electing creditors is that they have a lien securing the full amount of the allowed claim so that if the value of the collateral increases after the case is closed, the deferred payments will be secured claims. Thus it is both reasonable and necessary to exempt such electing class from application of section 1129(a)(7) as a logical consequence of permitting election under section 1111(b)(2). Section 1131 of the Senate amendment is deleted as unnecessary in light of the protection given a secured creditor under section 1129(b) of the House amendment. Payment of taxes in reorganizations: Under the provisions of section 1141 as revised by the House amendment, an individual in reorganization under chapter 11 will not be discharged from any debt, including prepetition tax liabilities, which are nondischargeable under section 523. Thus, an individual debtor whose plan of reorganization is confirmed under chapter 11 will remain liable for prepetition priority taxes, as defined in section 507, and for tax liabilities which receive no priority but are nondischargeable under section 523, including no return, late return, and fraud liabilities. In the case of a partnership or a corporation in reorganization under chapter 11 of title 11, section 1141(d)(1) of the House amendment adopts a provision limiting the taxes that must be provided for in a plan before a plan can be confirmed to taxes which receive priority under section 507. In addition, the House amendment makes dischargeable, in effect, tax liabilities attributable to no return, late return, or fraud situations. The amendment thus does not adopt a shareholder continuity test such as was contained in section 1141(d)(2)(A)(iii) of the Senate amendment. However, the House amendment amends section 1106, relating to duties of the trustee, to require the trustee to furnish, on request of a tax authority and without personal liability, information available to the trustee concerning potential prepetition tax liabilities for unfiled returns of the debtor. Depending on the condition of the debtor's books and records, this information may include schedules and files available to the business. The House amendment also does not prohibit a tax authority from disallowing any tax benefit claimed after the reorganization if the item originated in a deduction, credit, or other item improperly reported before the reorganization occurred. It may also be appropriate for the Congress to consider in the future imposing civil or criminal liability on corporate officers for preparing a false or fraudulent tax return. The House amendment also contemplates that the Internal Revenue Service will monitor the relief from liabilities under this provision and advise the Congress if, and to the extent, any significant tax abuse may be resulting from the provision. Medium of payment of taxes: Federal, State, and local taxes incurred during the administration period of the estate, and during the 'gap' period in an involuntary case, are to be paid solely in cash. Taxes relating to third priority wages are to be paid, under the general rules, in cash on the effective date of the plan, if the class has not accepted the plan, in an amount equal to the allowed amount of the claim. If the class has accepted the plan, the taxes must be paid in cash but the payments must be made at the time the wages are paid which may be paid in deferred periodic installments having a value, on the effective date of the plan, equal to the allowed amount of the tax claims. Prepetition taxes entitled to sixth priority under section 507(a)(6) also must be paid in cash, but the plan may also permit the debtor whether a corporation, partnership, or an individual, to pay the allowed taxes in installments over a period not to exceed 6 years following the date on which the tax authority assesses the tax liability, provided the value of the deferred payments representing principal and interest, as of the effective date of the plan, equals the allowed amount of the tax claim. The House amendment also modifies the provisions of both bills dealing with the time when tax liabilities of a debtor in reorganization may be assessed by the tax authority. The House amendment follows the Senate amendment in deleting the limitation in present law under which a priority tax assessed after a reorganization plan is confirmed must be assessed within 1 year after the date of the filing of the petition. The House amendment specifies broadly that after the bankruptcy court determines the liability of the estate for a prepetition tax or for an administration period tax, the governmental unit may thereafter assess the tax against the estate, debtor, or successor to the debtor. The party to be assessed will, of course, depend on whether the case is under chapter 7, 11, or 13, whether the debtor is an individual, partnership, or a corporation, and whether the court is determining an individual debtor's personal liability for a nondischargeable tax. Assessment of the tax may only be made, however, within the limits of otherwise applicable law, such as the statute of limitations under the tax law. Tax avoidance purpose: The House bill provided that no reorganization plan may be approved if the principal purpose of the plan is the avoidance of taxes. The Senate amendment modified the rule so that the bankruptcy court need make a determination of tax avoidance purpose only if it is asked to do so by the appropriate tax authority. Under the Senate amendment, if the tax authority does not request the bankruptcy court to rule on the purpose of the plan, the tax authority would not be barred from later asserting a tax avoidance motive with respect to allowance of a deduction or other tax benefit claimed after the reorganization. The House amendment adopts the substance of the Senate amendment, but does not provide a basis by which a tax authority may collaterally attack confirmation of a plan of reorganization other than under section 1144. SENATE REPORT NO. 95-989 (Section 1130 (now section 1129)) Subsection (a) enumerates the requirement governing confirmation of a plan. The court is required to confirm a plan if and only if all of the requirements are met. Paragraph (1) requires that the plan comply with the applicable provisions of chapter 11, such as sections 1122 and 1123, governing classification and contents of plan. Paragraph (2) requires that the proponent of the plan comply with the applicable provisions of chapter 11, such as section 1125 regarding disclosure. Paragraph (3) requires that the plan have been proposed in good faith, and not by any means forbidden by law. Paragraph (4) is derived from section 221 of chapter X (section 621 of former title 11). It requires that any payment made or promised by the proponent, the debtor, or person issuing securities or acquiring property under the plan, for services or for costs and expenses in, or in connection with the case, or in connection with the plan and incident to the case, be disclosed to the court. In addition, any payment made before confirmation must have been reasonable, and any payment to be fixed after confirmation must be subject to the approval of the court as reasonable. Paragraph (5) is also derived from section 221 of chapter X (section 621 of former title 11). It requires the plan to disclose the identity and affiliations of any individual proposed to serve, after confirmation, as a director, officer, or voting trustee of the reorganized debtor. The appointment to or continuance in one of these offices by the individual must be consistent with the interests of creditors and equity security holders and with public policy. The plan must also disclose the identity of any insider that will be employed or retained by the reorganized debtor, and the nature of any compensation to be paid to the insider. Paragraph (6) permits confirmation only if any regulatory commission that will have jurisdiction over the debtor after confirmation of the plan has approved any rate change provided for in the plan. As an alternative, the rate change may be conditioned on such approval. Paragraph (7) provides that in the case of a public company the court shall confirm the plan if it finds the plan to be fair and equitable and the plan either (1) has been accepted by classes of claims or interests as provided in section 1126, or (2), if not so accepted, satisfies the requirements of subsection (b) of this section. Paragraphs (8) and (9) apply only in nonpublic cases. Paragraph (8) does not apply the fair and equitable standards in two situations. The first occurs if there is unanimous consent of all affected holders of claims and interests. It is also sufficient for purposes of confirmation if each holder of a claim or interest receives or retains consideration of a value, as of the effective date of the plan, that is not less than each would have or receive if the debtor were liquidated under chapter 7 of this title. This standard adapts the test of 'best interest of creditors' as interpreted by the courts under chapter XI (chapter 11 of former title 11). It is given broader application in chapter 11 of this title since a plan under chapter 11 may affect not only unsecured claims but secured claims and stock as well. Under paragraph (9)(A), if a class of claims or interests has not accepted the plan, the court will confirm the plan if, for the dissenting class and any class of equal rank, the negotiated plan provides in value no less than under a plan that is fair and equitable. Such review and determination are not required for any other classes that accepted the plan. Paragraph 9(A) would permit a senior creditor to adjust his participation for the benefit of stockholders. In such a case, junior creditors, who have not been satisfied in full, may not object if, absent the 'give-up', they are receiving all that a fair and equitable plan would give them. To illustrate, suppose the estate is valued at $1.5 million and claims and stock are: --------------------------------------------------------------------- Claims and stock Equity (millions) (millions) --------------------------------------------------------------------- (1) Senior debt $1.2 $1.2 (2) Junior debt .5 .3 (3) Stock ( (FOOTNOTE 1) ) - -------------------------------------------- Total 1.7 1.5 ------------------------------- (FOOTNOTE 1) No value. Under the plan, the senior creditor gives up $100,000 in value for the benefit of stockholders as follows: --------------------------------------------------------------------- Millions --------------------------------------------------------------------- (1) Senior debt $1.1 (2) Junior debt .3 (3) Stock .1 ---------------------------------- Total 1.5 ------------------------------- If the junior creditors dissent, the court may nevertheless confirm the plan since under the fair and equitable standard they had an equity of only $300,000 and the allocation to equity security holders did not affect them. Paragraph 9(A) provides a special alternative with respect to secured claims. A plan may be confirmed against a dissenting class of secured claims if the plan or order of confirmation provides for the realization of their security (1) by the retention of the property subject to such security; (2) by a sale of the property and transfer of the claim to the proceeds of sale if the secured creditors were permitted to bid at the sale and set off against the purchase price up to the allowed amount of their claims; or (3) by such other method that will assure them the realization of the indubitable equivalent of the allowed amount of their secured claims. The indubitable equivalent language is intended to follow the strict approach taken by Judge Learned Hand in In Re Murel Holding Corp. 75, F.2d 941 (2nd Cir. 1935). Paragraph (9)(B) provides that, if a class of claims or interests is excluded from participation under the plan, the court may nevertheless confirm the plan if it determines that no class on a parity with or junior to such participates under the plan. In the previous illustration, no confirmation would be permitted if the negotiated plan would grant a participation to stockholders but nothing for junior creditors. As noted elsewhere, by reason of section 1126(g), an excluded class is a dissenting class under section 1130. Paragraph (10) states that, to be confirmed, the plan must provide that each holder of a claim under section 507 will receive property, as therein noted, of a value equal to the allowed amount of the claim. There are two exceptions: (A) The holder thereof may agree to a different settlement in part or in whole; (B) where a debtor's business is reorganized under chapter 11, this provision requires that taxes entitled to priority (including administrative claims or taxes) must be paid in cash not later than 120 days after the plan is confirmed, unless the Secretary of the Treasury agrees to other terms or kinds of payment. The bill, as introduced, required full payment in cash within 60 days after the plan is confirmed. Paragraph (11) requires a determination regarding feasibility of the plan. It is a slight elaboration of the law that has developed in the application of the word 'feasible' in Chapter X of the present Act (chapter 10 of former title 11). Paragraph (12) requires that at least one class must accept the plan, but any claims or interests held by insiders are not to be included for purposes of determining the number and amount of acceptances. Subsection (b) provides that if, in the case of a public company, the plan meets the requirements of subsection (a) (except paragraphs (8) and (9) which do not apply to such a company), the court is to confirm the plan if the plan or the order of confirmation provides adequate protection for the realization of the value of the claims or interests of each class not accepting the plan. The intent is to incorporate inclusively, as a guide to the meaning of subsection (a) the provisions of section 216(7) ((former) 11 U.S.C. 616(7)) with respect to claims and section 216(8) ((former) 11 U.S.C. 616(8)) with respect to equity security interests. Under subsection (c) the court may confirm only one plan, unless the order of confirmation has been revoked under section 1144. If the requirements for confirmation are met with respect to more than one plan, the court shall consider the preferences of creditors and stockholders in deciding which plan to confirm. Subsection (d) provides that the bankruptcy court may not confirm a plan of reorganization if its principal purpose is the avoidance of taxes or the avoidance of section 5 of the Securities Act of 1933 (15 U.S.C. 77e). This rules modifies a similar provision of present law (section 269 of the Bankruptcy Act (section 669 of former title 11)). HOUSE REPORT NO. 95-595 Paragraph (7) (of subsec. (a)) incorporates the former 'best interest of creditors' test found in chapter 11, but spells out precisely what is intended. With respect to each class, the holders of the claims or interests of that class must receive or retain under the plan on account of those claims or interest property of a value, as of the effective date of the plan, that is not less than the amount that they would so receive or retain if the debtor were liquidated under chapter 7 on the effective date of the plan. In order to determine the hypothetical distribution in a liquidation, the court will have to consider the various subordination provisions of proposed 11 U.S.C. 510, 726(a)(3), 726(a)(4), and the postponement provisions of proposed 11 U.S.C. 724. Also applicable in appropriate cases will be the rules governing partnership distributions under proposed 11 U.S.C. 723, and distributions of community property under proposed 11 U.S.C. 726(c). Under subparagraph (A), a particular holder is permitted to accept less than liquidation value, but his acceptance does not bind the class. Property under subparagraph (B) may include securities of the debtor. Thus, the provision will apply in cases in which the plan is confirmed under proposed 11 U.S.C. 1129(b). Paragraph (8) is central to the confirmation standards. It requires that each class either have accepted the plan or be unimpaired. Paragraph (9) augments the requirements of paragraph (8) by requiring payment of each priority claim in full. It permits payments over time and payment other than in cash, but payment in securities is not intended to be permitted without consent of the priority claimant even if the class has consented. It also permits a particular claimant to accept less than full payment. Subsection (b) permits the court to confirm a plan notwithstanding failure of compliance with paragraph (8) of subsection (a). The plan must comply with all other paragraphs of subsection (a), including paragraph (9). This subsection contains the so-called cramdown. It requires simply that the plan meet certain standards of fairness to dissenting creditors or equity security holders. The general principle of the subsection permits confirmation notwithstanding nonacceptance by an impaired class if that class and all below it in priority are treated according to the absolute priority rule. The dissenting class must be paid in full before any junior class may share under the plan. If it is paid in full, then junior classes may share. Treatment of classes of secured creditors is slightly different because they do not fall in the priority ladder, but the principle is the same. Specifically, the court may confirm a plan over the objection of a class of secured claims if the members of that class are unimpaired or if they are to receive under the plan property of a value equal to the allowed amount of their secured claims, as determined under proposed 11 U.S.C. 506(a). The property is to be valued as of the effective date of the plan, thus recognizing the time-value of money. As used throughout this subsection, 'property' includes both tangible and intangible property, such as a security of the debtor or a successor to the debtor under a reorganization plan. The court may confirm over the dissent of a class of unsecured claims, including priority claims, only if the members of the class are unimpaired, if they will receive under the plan property of a value equal to the allowed amount of their unsecured claims, or if no class junior will share under the plan. That is, if the class is impaired, then they must be paid in full or, if paid less than in full, then no class junior may receive anything under the plan. This codifies the absolute priority rule from the dissenting class on down. With respect to classes of equity, the court may confirm over a dissent if the members of the class are unimpaired, if they receive their liquidation preference or redemption rights, if any, or if no class junior shares under the plan. This, too, is a codification of the absolute priority rule with respect to equity. If a partnership agreement subordinates limited partners to general partners to any degree, then the general principles of paragraph (3) of this subsection would apply to prevent the general partners from being squeezed out. One requirement applies generally to all classes before the court may confirm under this subsection. No class may be paid more than in full. The partial codification of the absolute priority rule here is not intended to deprive senior creditor of compensation for being required to take securities in the reorganized debtor that are of an equal priority with the securities offered to a junior class. Under current law, seniors are entitled to compensation for their loss of priority, and the increased risk put upon them by being required to give up their priority will be reflected in a lower value of the securities given to them than the value of comparable securities given to juniors that have not lost a priority position. Finally, the proponent must request use of this subsection. The court may not confirm notwithstanding nonacceptance unless the proponent requests and the court may then confirm only if subsection (b) is complied with. The court may not rewrite the plan. A more detailed explanation follows: The test to be applied by the court is set forth in the various paragraphs of section 1129(b). The elements of the test are new(,) departing from both the absolute priority rule and the best interests of creditors tests found under the Bankruptcy Act (former title 11). The court is not permitted to alter the terms of the plan. It must merely decide whether the plan complies with the requirements of section 1129(b). If so, the plan is confirmed, if not the plan is denied confirmation. The procedure followed is simple. The court examines each class of claims or interests designated under section 1123(a)(1) to see if the requirements of section 1129(b) are met. If the class is a class of secured claims, then paragraph (1) contains two tests that must be complied with in order for confirmation to occur. First, under subparagraph (A), the court must be able to find that the consideration given under the plan on account of the secured claim does not exceed the allowed amount of the claim. This condition is not prescribed as a matter of law under section 1129(a), because if the secured claim is compensated in securities of the debtor, a valuation of the business would be necessary to determine the value of the consideration. While section 1129(a) does not contemplate a valuation of the debtor's business, such a valuation will almost always be required under section 1129(b) in order to determine the value of the consideration to be distributed under the plan. Once the valuation is performed, it becomes a simple matter to impose the criterion that no claim will be paid more than in full. Application of the test under subparagraph (A) also requires a valuation of the consideration 'as of the effective date of the plan'. This contemplates a present value analysis that will discount value to be received in the future; of course, if the interest rate paid is equivalent to the discount rate used, the present value and face future value will be identical. On the other hand, if no interest is proposed to be paid, the present value will be less than the face future value. For example, consider an allowed secured claim of $1,000 in a class by itself. One plan could propose to pay $1,000 on account of this claim as of the effective date of the plan. Another plan could propose to give a note with a $1,000 face amount due five years after the effective date of the plan on account of this claim. A third plan could propose to give a note in a face amount of $1,000 due five years from the effective date of the plan plus six percent annual interest commencing on the effective date of the plan on account of this claim. The first plan clearly meets the requirements of subparagraph (A) because the amount received on account of the second claim has an equivalent present value as of the effective date of the plan equal to the allowed amount of such claim. The second plan also meets the requirements of subparagraph (A) because the present value of the five years note as of the effective date of the plan will never exceed the allowed amount of the secured claim; the higher the discount rate, the less present value the note will have. Whether the third plan complies with subparagraph (A) depends on whether the discount rate is less than six percent. Normally, the interest rate used in the plan will be prima facie evidence of the discount rate because the interest rate will reflect an arms length determination of the risk of the security involved and feasibility considerations will tend to understate interest payments. If the court found the discount rate to be greater than or equal to the interest rate used in the plan, then subparagraph (A) would be complied with because the value of the note as of the effective date of the plan would not exceed the allowed amount of the second claim. If, however, the court found the discount rate to be less than the interest rate proposed under the plan, then the present value of the note would exceed $1,000 and the plan would fail of confirmation. On the other hand, it is important to recognize that the future principal amount of a note in excess of the allowed amount of a secured claim may have a present value less than such allowed amount, if the interest rate under the plan is correspondingly less than the discount rate. Even if the requirements of subparagraph (A) are complied with, the class of secured claims must satisfy one of the three clauses in paragraph (B) in order to pass muster. It is sufficient for confirmation if the class has accepted the plan, or if the claims of the class are unimpaired, or if each holder of a secured claim in the class will receive property of a value as of the effective date of the plan equal to the allowed amount of such claim (unless he has agreed to accept less). It is important to note that under section 506(a), the allowed amount of the secured claim will not include any extent to which the amount of such claim exceeds the value of the property securing such claim. Thus, instead of focusing on secured creditors or unsecured creditors, the statute focuses on secured claims and unsecured claims. After the court has applied paragraph (1) to each class of secured claims, it then applies paragraph (2) to each class of unsecured claims. Again two separate components must be tested. Subparagraph (A) is identical with the test under section 1129(b)(1)(A) insofar as the holder of an unsecured claim is not permitted to receive property of a value as of the effective date of the plan on account of such claim that is greater than the allowed amount of such claim. In addition, subparagraph (B) requires compliance with one of four conditions. The conditions in clauses (i)-(iii) mirror the conditions of acceptance unimpairment, or full value found in connection with secured claims in section 1129(b)(1)(B). The condition contained in section 1129(b)(2)(B)(iv) provides another basis for confirming the plan with respect to a class of unsecured claims. It will be of greatest use when an impaired class that has not accepted the plan is to receive less than full value under the plan. The plan may be confirmed under clause (iv) in those circumstances if the class is not unfairly discriminated against with respect to equal classes and if junior classes will receive nothing under the plan. The second criterion is the easier to understand. It is designed to prevent a senior class from giving up consideration to a junior class unless every intermediate class consents, is paid in full, or is unimpaired. This gives intermediate creditors a great deal of leverage in negotiating with senior or secured creditors who wish to have a plan that gives value to equity. One aspect of this test that is not obvious is that whether one class is senior, equal, or junior to another class is relative and not absolute. Thus from the perspective of trade creditors holding unsecured claims, claims of senior and subordinated debentures may be entitled to share on an equal basis with the trade claims. However, from the perspective of the senior unsecured debt, the subordinated debentures are junior. This point illustrates the lack of precision in the first criterion which demands that a class not be unfairly discriminated against with respect to equal classes. From the perspective of unsecured trade claims, there is no unfair discrimination as long as the total consideration given all other classes of equal rank does not exceed the amount that would result from an exact aliquot distribution. Thus if trade creditors, senior debt, and subordinate debt are each owed $100 and the plan proposes to pay the trade debt $15, the senior debt $30, and the junior debt $0, the plan would not unfairly discriminate against the trade debt nor would any other allocation of consideration under the plan between the senior and junior debt be unfair as to the trade debt as long as the aggregate consideration is less than $30. The senior debt could take $25 and give up $5 to the junior debt and the trade debt would have no cause to complain because as far as it is concerned the junior debt is an equal class. However, in this latter case the senior debt would have been unfairly discriminated against because the trade debt was being unfairly over-compensated; of course the plan would also fail unless the senior debt was unimpaired, received full value, or accepted the plan, because from its perspective a junior class received property under the plan. Application of the test from the perspective of senior debt is best illustrated by the plan that proposes to pay trade debt $15, senior debt $25, and junior debt $0. Here the senior debt is being unfairly discriminated against with respect to the equal trade debt even though the trade debt receives less than the senior debt. The discrimination arises from the fact that the senior debt is entitled to the rights of the junior debt which in this example entitle the senior debt to share on a 2:1 basis with the trade debt. Finally, it is necessary to interpret the first criterion from the perspective of subordinated debt. The junior debt is subrogated to the rights of senior debt once the senior debt is paid in full. Thus, while the plan that pays trade debt $15, senior debt $25, and junior debt $0 is not unfairly discriminatory against the junior debt, a plan that proposes to pay trade debt $55, senior debt $100, and junior debt $1, would be unfairly discriminatory. In order to avoid discriminatory treatment against the junior debt, at least $10 would have to be received by such debt under those facts. The criterion of unfair discrimination is not derived from the fair and equitable rule or from the best interests of creditors test. Rather it preserves just treatment of a dissenting class from the class's own perspective. If each class of secured claims satisfies the requirements of section 1129(b)(1) and each class of unsecured claims satisfies the requirements of section 1129(b)(2), then the court must still see if each class of interests satisfies section 1129(b)(3) before the plan may be confirmed. Again, two separate criteria must be met. Under subparagraph (A) if the interest entitles the holder thereof to a fixed liquidation preference or if such interest may be redeemed at a fixed price, then the holder of such interest must not receive under the plan on account of such interest property of a value as of the effective date of the plan greater than the greater of these two values of the interest. Preferred stock would be an example of an interest likely to have liquidation preference or redemption price. If an interest such as most common stock or the interest of a general partnership has neither a fixed liquidation preference nor a fixed redemption price, then the criterion in subparagraph (A) is automatically fulfilled. In addition subparagraph (B) contains five clauses that impose alternative conditions of which at least one must be satisfied in order to warrant confirmation. The first two clauses contain requirements of acceptance or unimpairment similar to the first two clauses in paragraphs (1)(B) and (2)(B). Clause (iii) is similar to the unimpairment test contained in section 1124(3)(B), except that it will apply to cover the issuance securities of the debtor of a value as of the effective date of the plan equal to the greater of any fixed liquidation preference or redemption price. The fourth clause allows confirmation if junior interests are not compensated under the plan and the fifth clause allows confirmation if there are no junior interests. These clauses recognized that as long as senior classes receive no more than full payment, the objection of a junior class will not defeat confirmation unless a class junior to it is receiving value under the plan and the objecting class is impaired. While a determination of impairment may be made under section 1124(3)(B)(iii) without a precise valuation of the business when common stock is clearly under water, once section 1129(b) is used, a more detailed valuation is a necessary byproduct. Thus, if no property is given to a holder of an interest under the plan, the interest should be clearly worthless in order to find unimpairment under section 1124(3)(B)(iii) and section 1129(a)(8); otherwise, since a class of interests receiving no property is deemed to object under section 1126(g), the more precise valuation of section 1129(b) should be used. If all of the requirements of section 1129(b) are complied with, then the court may confirm the plan subject to other limitations such as those found in section 1129(a) and (d). Subsection (c) of section 1129 governs confirmation when more than one plan meets the requirements of the section. The court must consider the preferences of creditors and equity security holders in determining which plan to confirm. Subsection (d) requires the court to deny confirmation if the principal purpose of the plan is the avoidance of taxes (through use of sections 346 and 1146, and applicable provisions of State law or the Internal Revenue Code (title 26) governing bankruptcy reorganizations) or the avoidance of section 5 of the Securities Act of 1933 (15 U.S.C. 77e) (through use of section 1145). AMENDMENTS 1988 - Subsec. (a)(13). Pub. L. 100-334 added par. (13). 1986 - Subsec. (a)(7). Pub. L. 99-554, Sec. 283(v)(1), struck out 'of' after 'to'. Subsec. (a)(9)(B). Pub. L. 99-554, Sec. 283(v)(2), inserted reference to section 507(a)(6). Subsec. (a)(9)(C). Pub. L. 99-554, Sec. 283(v)(3), substituted '507(a)(7)' for '507(a)(6)'. Subsec. (a)(12). Pub. L. 99-554, Sec. 225, added par. (12). 1984 - Subsec. (a)(1), (2). Pub. L. 98-353, Sec. 512(a)(1), (2), substituted 'title' for 'chapter'. Subsec. (a)(4). Pub. L. 98-353, Sec. 512(a)(3), amended par. (4) generally. Prior to amendment, par. (4) read as follows: '(A) Any payment made or promised by the proponent, by the debtor, or by a person issuing securities or acquiring property under the plan, for services or for costs and expenses in, or in connection with, the case, or in connection with the plan and incident to the case, has been disclosed to the court; and (B)(i) any such payment made before confirmation of the plan is reasonable; or (ii) if such payment is to be fixed after confirmation of the plan, such payment is subject to the approval of the court as reasonable.' Subsec. (a)(5)(A)(ii). Pub. L. 98-353, Sec. 512(a)(4), substituted '; and' for the period at the end. Subsec. (a)(5)(B). Pub. L. 98-353, Sec. 512(a)(5), substituted 'the' for 'The'. Subsec. (a)(6). Pub. L. 98-353, Sec. 512(a)(6), inserted 'governmental' after 'Any'. Subsec. (a)(7). Pub. L. 98-353, Sec. 512(a)(7)(A), substituted 'of each impaired class of claims or interests' for 'each class'. Subsec. (a)(7)(B). Pub. L. 98-353, Sec. 512(a)(7)(B), substituted 'holder's' for 'creditor's'. Subsec. (a)(8). Pub. L. 98-353, Sec. 512(a)(8), inserted 'of claims or interests' after 'each class'. Subsec. (a)(10). Pub. L. 98-353, Sec. 512(a)(9), substituted 'If a class of claims is impaired under the plan, at least one class of claims that is impaired under the plan has accepted the plan, determined without including any acceptance of the plan by any insider' for 'At least one class of claims has accepted the plan, determined without including any acceptance of the plan by any insider holding a claim of such class'. Subsec. (b)(2)(A)(i)(I), (ii). Pub. L. 98-353, Sec. 512(b)(1), substituted 'liens' for 'lien' wherever appearing. Subsec. (b)(2)(B)(ii). Pub. L. 98-353, Sec. 512(b)(2), inserted 'under the plan' after 'retain'. Subsec. (b)(2)(C)(i). Pub. L. 98-353, Sec. 512(b)(3), substituted 'interest' for 'claim', and 'or the value' for 'and the value'. Subsec. (d). Pub. L. 98-353, Sec. 512(c), inserted 'the application of' and provisions requiring that in any hearing under this subsection, the governmental unit has the burden of proof on the issue of avoidance. EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100-334 effective June 16, 1988, but not applicable to cases commenced under this title before that date, see section 4 of Pub. L. 100-334, set out as an Effective Date note under section 1114 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by section 225 of Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 283 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 347, 901, 1112, 1114, 1127, 1146, 1161, 1173 of this title. ------DocID 14847 Document 192 of 646------ -CITE- 11 USC SUBCHAPTER III -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER III -HEAD- SUBCHAPTER III - POSTCONFIRMATION MATTERS -SECREF- SUBCHAPTER REFERRED TO IN OTHER SECTIONS This subchapter is referred to in section 103 of this title. ------DocID 14848 Document 193 of 646------ -CITE- 11 USC Sec. 1141 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER III -HEAD- Sec. 1141. Effect of confirmation -STATUTE- (a) Except as provided in subsections (d)(2) and (d)(3) of this section, the provisions of a confirmed plan bind the debtor, any entity issuing securities under the plan, any entity acquiring property under the plan, and any creditor, equity security holder, or general partner in the debtor, whether or not the claim or interest of such creditor, equity security holder, or general partner is impaired under the plan and whether or not such creditor, equity security holder, or general partner has accepted the plan. (b) Except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor. (c) Except as provided in subsections (d)(2) and (d)(3) of this section and except as otherwise provided in the plan or in the order confirming the plan, after confirmation of a plan, the property dealt with by the plan is free and clear of all claims and interests of creditors, equity security holders, and of general partners in the debtor. (d)(1) Except as otherwise provided in this subsection, in the plan, or in the order confirming the plan, the confirmation of a plan - (A) discharges the debtor from any debt that arose before the date of such confirmation, and any debt of a kind specified in section 502(g), 502(h), or 502(i) of this title, whether or not - (i) a proof of the claim based on such debt is filed or deemed filed under section 501 of this title; (ii) such claim is allowed under section 502 of this title; or (iii) the holder of such claim has accepted the plan; and (B) terminates all rights and interests of equity security holders and general partners provided for by the plan. (2) The confirmation of a plan does not discharge an individual debtor from any debt excepted from discharge under section 523 of this title. (3) The confirmation of a plan does not discharge a debtor if - (A) the plan provides for the liquidation of all or substantially all of the property of the estate; (B) the debtor does not engage in business after consummation of the plan; and (C) the debtor would be denied a discharge under section 727(a) of this title if the case were a case under chapter 7 of this title. (4) The court may approve a written waiver of discharge executed by the debtor after the order for relief under this chapter. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2638; Pub. L. 98-353, title III, Sec. 513, July 10, 1984, 98 Stat. 387.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1141(d) of the House amendment is derived from a comparable provision contained in the Senate amendment. However, section 1141(d)(2) of the House amendment is derived from the House bill as preferable to the Senate amendment. It is necessary for a corporation or partnership undergoing reorganization to be able to present its creditors with a fixed list of liabilities upon which the creditors or third parties can make intelligent decisions. Retaining an exception for discharge with respect to nondischargeable taxes would leave an undesirable uncertainty surrounding reorganizations that is unacceptable. Section 1141(d)(3) is derived from the Senate amendment. Section 1141(d)(4) is likewise derived from the Senate amendment. SENATE REPORT NO. 95-989 Subsection (a) of this section makes the provisions of a confirmed plan binding on the debtor, any entity issuing securities under the plan, any entity acquiring property under the plan, and any creditor, equity security holder, or general partner in the debtor, whether or not the claim or interest of the creditor, equity security holder, or partner is impaired under the plan and whether or not he has accepted the plan. There are two exceptions, enumerated in paragraph (2) and (3) of subsection (d). Unless the plan or the order confirming the plan provides otherwise, the confirmation of a plan vests all of the property of the estate in the debtor and releases it from all claims and interests of creditors, equity security holders and general partners. Subsection (d) contains the discharge for a reorganized debtor. Paragraph (1) specifies that the confirmation of a plan discharges the debtor from any debt that arose before the date of the order for relief unless the plan or the order confirming the plan provides otherwise. The discharge is effective against those claims whether or not proof of the claim is filed (or deemed filed), and whether or not the claim is allowed. The discharge also terminates all rights and interests of equity security holders and general partners provided for by the plan. The paragraph permits the plan or the order confirming the plan to provide otherwise, and excepts certain debts from the discharge as provided in paragraphs (2) and (3). Paragraph (2) of subsection (d) makes clear what taxes remain nondischargeable in the case of a corporate debtor emerging from a reorganization under chapter 11. Nondischargeable taxes in such a reorganization are the priority taxes (under section 507) and tax payments which come due during and after the proceeding under a deferred or part-payment agreement which the debtor had entered into with the tax authority before the bankruptcy proceedings began. On the other hand, a corporation which is taken over by its creditors through a plan of reorganization will not continue to be liable for nonpriority taxes arising from the corporation's prepetition fraud, failure to file a return, or failure to file a timely return, since the creditors who take over the reorganized company should not bear the burden of acts for which the creditors were not at fault. Paragraph (3) specifies that the debtor is not discharged by the confirmation of a plan if the plan is a liquidating plan and if the debtor would be denied discharge in a liquidation case under section 727. Specifically, if all or substantially all of the distribution under the plan is of all or substantially all of the property of the estate or the proceeds of it, if the business, if any, of the debtor does not continue, and if the debtor would be denied a discharge under section 727 (such as if the debtor were not an individual or if he had committed an act that would lead to a denial of discharge), the chapter 11 discharge is not granted. Paragraph (4) authorizes the court to approve a waiver of discharge by the debtor. HOUSE REPORT NO. 95-595 Paragraph (2) (of subsec. (d)) makes applicable to an individual debtor the general exceptions to discharge that are enumerated in section 523(a) of the bankruptcy code. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353, Sec. 513(a), substituted 'any creditor, equity security holder, or general partner in' for 'any creditor or equity security holder of, or general partner in,'. Subsec. (c). Pub. L. 98-353, Sec. 513(b), amended subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: 'After confirmation of a plan, the property dealt with by the plan is free and clear of all claims and interests of creditors, of equity security holders, and of general partners in the debtor, except as otherwise provided in the plan or in the order confirming the plan.' EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 348, 523, 524, 727, 1112 of this title; title 12 section 1715z-1a. ------DocID 14849 Document 194 of 646------ -CITE- 11 USC Sec. 1142 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER III -HEAD- Sec. 1142. Implementation of plan -STATUTE- (a) Notwithstanding any otherwise applicable nonbankruptcy law, rule, or regulation relating to financial condition, the debtor and any entity organized or to be organized for the purpose of carrying out the plan shall carry out the plan and shall comply with any orders of the court. (b) The court may direct the debtor and any other necessary party to execute or deliver or to join in the execution or delivery of any instrument required to effect a transfer of property dealt with by a confirmed plan, and to perform any other act, including the satisfaction of any lien, that is necessary for the consummation of the plan. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2639; Pub. L. 98-353, title III, Sec. 514(a), (c), (d), July 10, 1984, 98 Stat. 387.) -MISC1- AMENDMENTS 1984 - Pub. L. 98-353, Sec. 514(a), substituted 'Implementation' for 'Execution' in section catchline. Subsec. (a). Pub. L. 98-353, Sec. 514(c), struck out the comma after 'shall carry out the plan'. Subsec. (b). Pub. L. 98-353, Sec. 514(d), inserted 'a' after 'by'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 901 of this title. ------DocID 14850 Document 195 of 646------ -CITE- 11 USC Sec. 1143 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER III -HEAD- Sec. 1143. Distribution -STATUTE- If a plan requires presentment or surrender of a security or the performance of any other act as a condition to participation in distribution under the plan, such action shall be taken not later than five years after the date of the entry of the order of confirmation. Any entity that has not within such time presented or surrendered such entity's security or taken any such other action that the plan requires may not participate in distribution under the plan. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2639.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 1143 fixes a 5-year limitation on presentment or surrender of securities or the performance of any other act that is a condition to participation in distribution under the plan. The 5 years runs from the date of the entry of the order of confirmation. Any entity that does not take the appropriate action with the 5-year period is barred from participation in the distribution under the plan. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 901 of this title. ------DocID 14851 Document 196 of 646------ -CITE- 11 USC Sec. 1144 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER III -HEAD- Sec. 1144. Revocation of an order of confirmation -STATUTE- On request of a party in interest at any time before 180 days after the date of the entry of the order of confirmation, and after notice and a hearing, the court may revoke such order if and only if such order was procured by fraud. An order under this section revoking an order of confirmation shall - (1) contain such provisions as are necessary to protect any entity acquiring rights in good faith reliance on the order of confirmation; and (2) revoke the discharge of the debtor. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2639; Pub. L. 98-353, title III, Sec. 515, July 10, 1984, 98 Stat. 387.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 If an order of confirmation was procured by fraud, then the court may revoke the order on request of a party in interest if the request is made before 180 days after the date of the entry of the order of confirmation. The order revoking the order of confirmation must revoke the discharge of the debtor, and contain such provisions as are necessary to protect any entity acquiring rights in good faith reliance on the order of confirmation. AMENDMENTS 1984 - Pub. L. 98-353 inserted 'if and only' after 'revoke such order'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 901, 1112, 1129 of this title. ------DocID 14852 Document 197 of 646------ -CITE- 11 USC Sec. 1145 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER III -HEAD- Sec. 1145. Exemption from securities laws -STATUTE- (a) Except with respect to an entity that is an underwriter as defined in subsection (b) of this section, section 5 of the Securities Act of 1933 (15 U.S.C. 77e) and any State or local law requiring registration for offer or sale of a security or registration or licensing of an issuer of, underwriter of, or broker or dealer in, a security does not apply to - (1) the offer or sale under a plan of a security of the debtor, of an affiliate participating in a joint plan with the debtor, or of a successor to the debtor under the plan - (A) in exchange for a claim against, an interest in, or a claim for an administrative expense in the case concerning, the debtor or such affiliate; or (B) principally in such exchange and partly for cash or property; (2) the offer of a security through any warrant, option, right to subscribe, or conversion privilege that was sold in the manner specified in paragraph (1) of this subsection, or the sale of a security upon the exercise of such a warrant, option, right, or privilege; (3) the offer or sale, other than under a plan, of a security of an issuer other than the debtor or an affiliate, if - (A) such security was owned by the debtor on the date of the filing of the petition; (B) the issuer of such security is - (i) required to file reports under section 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (ii) in compliance with the disclosure and reporting provision of such applicable section; and (C) such offer or sale is of securities that do not exceed - (i) during the two-year period immediately following the date of the filing of the petition, four percent of the securities of such class outstanding on such date; and (ii) during any 180-day period following such two-year period, one percent of the securities outstanding at the beginning of such 180-day period; or (4) a transaction by a stockbroker in a security that is executed after a transaction of a kind specified in paragraph (1) or (2) of this subsection in such security and before the expiration of 40 days after the first date on which such security was bona fide offered to the public by the issuer or by or through an underwriter, if such stockbroker provides, at the time of or before such transaction by such stockbroker, a disclosure statement approved under section 1125 of this title, and, if the court orders, information supplementing such disclosure statement. (b)(1) Except as provided in paragraph (2) of this subsection and except with respect to ordinary trading transactions of an entity that is not an issuer, an entity is an underwriter under section 2(11) of the Securities Act of 1933 (15 U.S.C. 77b(11)), if such entity - (A) purchases a claim against, interest in, or claim for an administrative expense in the case concerning, the debtor, if such purchase is with a view to distribution of any security received or to be received in exchange for such a claim or interest; (B) offers to sell securities offered or sold under the plan for the holders of such securities; (C) offers to buy securities offered or sold under the plan from the holders of such securities, if such offer to buy is - (i) with a view to distribution of such securities; and (ii) under an agreement made in connection with the plan, with the consummation of the plan, or with the offer or sale of securities under the plan; or (D) is an issuer, as used in such section 2(11), with respect to such securities. (2) An entity is not an underwriter under section 2(11) of the Securities Act of 1933 or under paragraph (1) of this subsection with respect to an agreement that provides only for - (A)(i) the matching or combining of fractional interests in securities offered or sold under the plan into whole interests; or (ii) the purchase or sale of such fractional interests from or to entities receiving such fractional interests under the plan; or (B) the purchase or sale for such entities of such fractional or whole interests as are necessary to adjust for any remaining fractional interests after such matching. (3) An entity other than an entity of the kind specified in paragraph (1) of this subsection is not an underwriter under section 2(11) of the Securities Act of 1933 with respect to any securities offered or sold to such entity in the manner specified in subsection (a)(1) of this section. (c) An offer or sale of securities of the kind and in the manner specified under subsection (a)(1) of this section is deemed to be a public offering. (d) The Trust Indenture Act of 1939 (15 U.S.C. 77aaa et seq.) does not apply to a note issued under the plan that matures not later than one year after the effective date of the plan. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2639; Pub. L. 98-353, title III, Sec. 516, July 10, 1984, 98 Stat. 387.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1145 of the House amendment deletes a provision contained in section 1145(a)(1) of the House bill in favor of a more adequate provision contained in section 364(f) of the House amendment. In addition, section 1145(d) has been added to indicate that the Trust Indenture Act (15 U.S.C. 77aaa et seq.) does not apply to a commercial note issued under a plan, if the note matures not later than 1 year after the effective date of the plan. Some commercial notes receive such an exemption under 304(a)(4) of the Trust Indenture Act of 1939 (15 U.S.C. Sec. 77ddd(a)(4)) and others may receive protection by incorporation by reference into the Trust Indenture Act of securities exempt under section 3a(3), (7), (9), or (10) of the Securities Act of 1933 (15 U.S.C. 77c(a)(3), (7), (9), (10)). In light of the amendments made to the Securities Act of 1933 (15 U.S.C. 77a et seq.) in title III of the House amendment to H.R. 8200, a specific exemption from the Trust Indenture Act (15 U.S.C. 77aaa et seq.) is required in order to create certainty regarding plans of reorganization. Section 1145(d) is not intended to imply that commercial notes issued under a plan that matures more than 1 year after the effective date of the plan are automatically covered by the Trust Indenture Act of 1939 since such notes may fall within another exemption thereto. One other point with respect to Section 1145 deserves comment. Section 1145(a)(3) grants a debtor in possession or trustee in chapter 11 an extremely narrow portfolio security exemption from section 5 of the Securities Act of 1933 (15 U.S.C. 77e) or any comparable State law. The provision was considered by Congress and adopted after much study. The exemption is reasonable and is more restrictive than comparable provisions under the Securities Act (15 U.S.C. 77a et seq.) relating to the estates of decedents. Subsequent to passage of H.R. 8200 by the House of Representatives, the Securities and Exchange Commission promulgated Rule 148 to treat with this problem under existing law. Members of Congress received opinions from attorneys indicating dissatisfaction with the Commission's rule although the rule has been amended, the ultimate limitation of 1 percent promulgated by the Commission is wholly unacceptable. The Commission rule would permit a trustee or debtor in possession to distribute securities at the rate of 1 percent every 6 months. Section 1145(a)(3) permits the trustee to distribute 4 percent of the securities during the 2-year period immediately following the date of the filing of the petition. In addition, the security must be of a reporting company under section 13 of the Securities and Exchange Act of 1934 (15 U.S.C. 78m), and must be in compliance with all applicable requirements for the continuing of trading in the security on the date that the trustee offers or sells the security. With these safeguards the trustee or debtor in possession should be able to distribute 4 percent of the securities of a class at any time during the 2-year period immediately following the date of the filing of the petition in the interests of expediting bankruptcy administration. The same rationale that applies in expeditiously terminating decedents' estates applies no less to an estate under title 11. SENATE REPORT NO. 95-989 This section, derived from similar provisions found in sections 264, 393, and 518 of the Bankruptcy Act (sections 664, 793, and 918 of former title 11), provides a limited exemption from the securities laws for securities issued under a plan of reorganization and for certain other securities. Subsection (a) exempts from the requirements of section 5 of the Securities Act of 1933 (15 U.S.C. 77e) and from any State or local law requiring registration or licensing of an issuer of, underwriter of, or broker or dealer in, a security, the offer or sale of certain securities. Paragraph (1) of subsection (a) exempts the offer or sale under section 364 of any security that is not an equity security or convertible into an equity security. This paragraph is designed to facilitate the issuance of certificates of indebtedness, and should be read in light of the amendment made in section 306 of title III to section 3(a)(7) of the 1933 act (15 U.S.C. 77c(a)(7)). Paragraph (2) of subsection (a) exempts the offer or sale of any security of the debtor, a successor to the debtor, or an affiliate in a joint plan, distributed under a plan if such security is exchanged in principal part for securities of the debtor or for allowed claims or administrative expenses. This exemption is carried over from present law, except as to administrative claims, but is limited to prevent distribution of securities to other than claim holders or equity security holders of the debtor or the estate. Paragraph (3) of subsection (a) exempts the offer or sale of any security that arises from the exercise of a subscription right or from the exercise of a conversion privilege when such subscription right or conversion privilege was issued under a plan. This exemption is necessary in order to enhance the marketability of subscription rights or conversion privileges, including warrants, offered or sold under a plan. This is present law. Paragraph (4) of subsection (a) exempts sales of portfolio securities, excluding securities of the debtor or its affiliate, owned by the debtor on the date of the filing of the petition. The purpose of this exemption is to allow the debtor or trustee to sell or distribute, without allowing manipulation schemes, restricted portfolio securities held or acquired by the debtor. Subparagraph (B) of section 1145(a)(4) limits the exemption to securities of a company that is required to file reports under section 13 of the Securities Act (15 U.S.C. 78m) and that is in compliance with all requirements for the continuance of trading those securities. This limitation effectively prevents selling into the market 'cats and dogs' of a nonreporting company. Subparagraph (C) places a limitation on the amount of restricted securities that may be distributed. During the case, the trustee may sell up to 4 percent of each class of restricted securities at any time during the first 2 years and 1 percent during any 180-day period thereafter. This relaxation of the resale rules for debtors in holding restricted securities is similar to but less extensive than the relaxation in SEC Rule 114(c)(3)(v) for the estates of deceased holders of securities. Paragraph (5) contains an exemption for brokers and dealers (stockbrokers, as defined in title 11) akin to the exemption provided by section 4(3)(A) of the Securities Act of 1933 (15 U.S.C. 77d(3)(A)). Instead of being required to supply a prospectus, however, the stockbroker is required to supply the approved disclosure statement, and if the court orders, information supplementing the disclosure statement. Under present law, the stockholder is not required to supply anything. Subsection (b) is new. The subsection should be read in light of the amendment in section 306 of title III to the 1933 act (15 U.S.C. 77c(a)(7), (9), (10)). It specifies the standards under which a creditor, equity security holder, or other entity acquiring securities under the plan may resell them. The Securities Act places limitations on sales by underwriters. This subsection defines who is an underwriter, and thus restricted, and who is free to resell. Paragraph (1) enumerates real underwriters that participate in a classical underwriting. A person is an underwriter if he purchases a claim against, interest in, or claim for an administrative expense in the case concerning, the debtor, with a view to distribution or interest. This provision covers the purchase of a certificate of indebtedness issued under proposed 11 U.S.C. 364 and purchased from the debtor, if the purchase of the certificate was with a view to distribution. A person is also an underwriter if he offers to sell securities offered or sold under the plan for the holders of such securities, or offers to buy securities offered or sold under the plan from the holders of such securities, if the offer to buy is with a view to distribution of the securities and under an agreement made in connection with the plan, with the consummation of the plan or with the offer or sale of securities under the plan. Finally, a person is an underwriter if he is an issuer, as used in section 2(11) of the Securities Act of 1933 (15 U.S.C. 77b(11)). Paragraph (2) of subsection (b) exempts from the definition of underwriter any entity to the extent that any agreement that would bring the entity under the definition in paragraph (1) provides only for the matching combination of fractional interests in the covered securities or the purchase or sale of fractional interests. This paragraph and paragraph (1) are modeled after former rule 133 of the Securities and Exchange Commission. Paragraph (3) specifies that if an entity is not an underwriter under the provisions of paragraph (1), as limited by paragraph (2), then the entity is not an underwriter for the purposes of the Securities Act of 1933 (15 U.S.C. 77a et seq.) with respect to the covered securities, that is, those offered or sold in an exempt transaction specified in subsection (a)(2). This makes clear that the current definition of underwriter in section 2(11) of the Securities Act of 1933 (15 U.S.C. 77b(11)) does not apply to such a creditor. The definition in that section technically applies to any person that purchases securities with 'a view to distribution.' If literally applied, it would prevent any creditor in a bankruptcy case from selling securities received without filing a registration statement or finding another exemption. Subsection (b) is a first run transaction exemption and does not exempt a creditor that, for example, some years later becomes an underwriter by reacquiring securities originally issued under a plan. Subsection (c) makes an offer or sale of securities under the plan in an exempt transaction (as specified in subsection (a)(2)) a public offering, in order to prevent characterization of the distribution as a 'private placement' which would result in restrictions, under rule 144 of the SEC, on the resale of the securities. -REFTEXT- REFERENCES IN TEXT Section 2(11) of the Securities Act of 1933, referred to in subsec. (b)(1)(D), (2), (3), is section 2(11) of act May 27, 1933, ch. 38, title I, 48 Stat. 74, which is classified to section 77b(11) of Title 15, Commerce and Trade. The Trust Indenture Act of 1939 (15 U.S.C. 77aaa et seq.), referred to in subsec. (d), is title III of act May 27, 1933, ch. 38, as added Aug. 3, 1939, ch. 411, 53 Stat. 1149, as amended, which is classified generally to subchapter III (Sec. 77aaa et seq.) of chapter 2A of Title 15. For complete classification of this Act to the Code, see section 77aaa of Title 15 and Tables. -MISC2- AMENDMENTS 1984 - Subsec. (a)(3)(B)(i). Pub. L. 98-353, Sec. 516(a)(1), inserted 'or 15(d)' after '13', and 'or 78o(d)' after '78m'. Subsec. (a)(3)(B)(ii). Pub. L. 98-353, Sec. 516(a)(2), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: 'in compliance with all applicable requirements for the continuance of trading in such security on the date of such offer or sale; and'. Subsec. (a)(4). Pub. L. 98-353, Sec. 516(a)(3), substituted 'stockbroker' for 'stockholder' in two places. Subsec. (b)(1). Pub. L. 98-353, Sec. 516(b)(1), inserted 'and except with respect to ordinary trading transactions of an entity that is not an issuer'. Subsec. (b)(1)(C). Pub. L. 98-353, Sec. 516(b)(2), substituted 'from' for 'for'. Subsec. (b)(2)(A)(i). Pub. L. 98-353, Sec. 516(b)(3), substituted 'or combining' for 'combination'. Subsec. (b)(2)(A)(ii). Pub. L. 98-353, Sec. 516(b)(4), substituted 'from or to' for 'among'. Subsec. (d). Pub. L. 98-353, Sec. 516(c), struck out 'commercial' before 'note'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 364, 901 of this title. ------DocID 14853 Document 198 of 646------ -CITE- 11 USC Sec. 1146 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER III -HEAD- Sec. 1146. Special tax provisions -STATUTE- (a) For the purposes of any State or local law imposing a tax on or measured by income, the taxable period of a debtor that is an individual shall terminate on the date of the order for relief under this chapter, unless the case was converted under section 706 of this title. (b) The trustee shall make a State or local tax return of income for the estate of an individual debtor in a case under this chapter for each taxable period after the order for relief under this chapter during which the case is pending. (c) The issuance, transfer, or exchange of a security, or the making or delivery of an instrument of transfer under a plan confirmed under section 1129 of this title, may not be taxed under any law imposing a stamp tax or similar tax. (d) The court may authorize the proponent of a plan to request a determination, limited to questions of law, by a State or local governmental unit charged with responsibility for collection or determination of a tax on or measured by income, of the tax effects, under section 346 of this title and under the law imposing such tax, of the plan. In the event of an actual controversy, the court may declare such effects after the earlier of - (1) the date on which such governmental unit responds to the request under this subsection; or (2) 270 days after such request. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2641; Pub. L. 98-353, title III, Sec. 517, July 10, 1984, 98 Stat. 388.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1146 of the House amendment represents a compromise between the House bill and Senate amendment. Special tax provisions: reorganization: The House bill provided rules on the effect of bankruptcy on the taxable year of the debtor and on tax return filing requirements for State and local taxes only. The House bill also exempted from State or local stamp taxes the issuance, transfer, or exchange of a security, or the making or delivery of an instrument of transfer under a plan. The House bill also authorized the bankruptcy court to declare the tax effects of a reorganization plan after the proponent of the plan had requested a ruling from State or local tax authority and either had received an unfavorable ruling or the tax authority had not issued a ruling within 270 days. The Senate amendment deleted the rules concerning the taxable years of the debtor and tax return filing requirements since the Federal rules were to be considered in the next Congress. It broadened the rule exempting transfers of securities to include Federal stamp or similar taxes, if any. In addition, the Senate amendment deleted the provision which permitted the bankruptcy court to determine the tax effects of a plan. The House amendment retains the State and local rules in the House bill with one modification. Under the House amendment, the power of the bankruptcy court to declare the tax effects of the plan is limited to issues of law and not to questions of fact such as the allowance of specific deductions. Thus, the bankruptcy court could declare whether the reorganization qualified for taxfree status under State or local tax rules, but it could not declare the dollar amount of any tax attributes that survive the reorganization. SENATE REPORT NO. 95-989 Section 1146 provides special tax rules applicable to Title 11 reorganizations. Subsection (a) provides that the taxable period of an individual debtor terminates on the date of the order for relief, unless the case has been converted into a reorganization from a liquidation proceeding. Subsection (b) requires the trustee of the estate of an individual debtor in a reorganization to file a tax return for each taxable period while the case is pending after the order for relief. For corporations in chapter 11, the trustee is required to file the tax returns due while the case is pending (sec. 346(c)(2)). Subsection (c) exempts from Federal, State, or local stamp taxes the issuance, transfer, or exchange of a security, or the making or delivery of an instrument of transfer under a plan. This subsection is derived from section 267 of the present Bankruptcy Act (section 667 of former title 11). Subsection (d) permits the court to authorize the proponent of a reorganization plan to request from the Internal Revenue Service (or State or local tax authority) an advance ruling on the tax effects of the proposed plan. If a ruling is not obtained within 270 days after the request was made, or if a ruling is obtained but the proponent of the plan disagrees with the ruling, the bankruptcy court may resolve the dispute and determine the tax effects of the proposed plan. Subsection (e) provides that prepetition taxes which are nondischargeable in a reorganization, and all taxes arising during the administration period of the case, may be assessed and collected from the debtor or the debtor's successor in a reorganization (see sec. 505(c) of the bill). HOUSE REPORT NO. 95-595 Section 1146 of title 11 specifies five subsections which embody special tax provisions that apply in a case under chapter 11 of title 11. Subsection (a) indicates that the tax year of an individual debtor terminates on the date of the order for relief under chapter 11. Termination of the taxable year of the debtor commences the tax period of the estate. If the case was converted from chapter 7 of title 11 then the estate is created as a separate taxable entity dating from the order for relief under chapter 7. If multiple conversion of the case occurs, then the estate is treated as a separate taxable entity on the date of the order for relief under the first chapter under which the estate is a separate taxable entity. Subsection (d) permits the court to authorize the proponent of a plan to request a taxing authority to declare the tax effects of such plan. In the event of an actual controversy, the court may declare the tax effects of the plan of reorganization at any time after the earlier of action by such taxing authority or 270 days after the request. Such a declaration, unless appealed, becomes a final judgment and binds any tax authority that was requested by the proponent to determine the tax effects of the plan. AMENDMENTS 1984 - Subsec. (c). Pub. L. 98-353, Sec. 517(a), struck out 'State or local' before 'law imposing a stamp tax'. Subsec. (d)(1). Pub. L. 98-353, Sec. 517(b), substituted 'or' for 'and'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 346, 348 of this title; title 28 section 2201. ------DocID 14854 Document 199 of 646------ -CITE- 11 USC SUBCHAPTER IV -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- SUBCHAPTER IV - RAILROAD REORGANIZATION -SECREF- SUBCHAPTER REFERRED TO IN OTHER SECTIONS This subchapter is referred to in sections 103, 1113 of this title; title 45 sections 915, 1015, 1017. ------DocID 14855 Document 200 of 646------ -CITE- 11 USC Sec. 1161 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- Sec. 1161. Inapplicability of other sections -STATUTE- Sections 341, 343, 1102(a)(1), 1104, 1105, 1107, 1129(a)(7), and 1129(c) of this title do not apply in a case concerning a railroad. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2641.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 This section makes inapplicable sections of the bill which are either inappropriate in railroad reorganizations, or relate to matters which are otherwise dealt with in subchapter IV. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 103 of this title. ------DocID 14856 Document 201 of 646------ -CITE- 11 USC Sec. 1162 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- Sec. 1162. Definition -STATUTE- In this subchapter, 'Commission' means Interstate Commerce Commission. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2641.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1162 of the House amendment is derived from section 1162(1) of the Senate bill. SENATE REPORT NO. 95-989 Two definitions are provided: That 'Commission' means the Interstate Commerce Commission, and that 'person' includes a governmental unit for purposes of the subchapter. The latter definition is made necessary because governmental unit is excluded from the definition of person in section 101(30). ------DocID 14857 Document 202 of 646------ -CITE- 11 USC Sec. 1163 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- Sec. 1163. Appointment of trustee -STATUTE- As soon as practicable after the order for relief the Secretary of Transportation shall submit a list of five disinterested persons that are qualified and willing to serve as trustees in the case. The United States trustee shall appoint one of such persons to serve as trustee in the case. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2641; Pub. L. 99-554, title II, Sec. 226, Oct. 27, 1986, 100 Stat. 3102.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1163 of the House amendment represents a compromise between the House bill and Senate amendment with respect to the appointment of a trustee in a railroad reorganization. As soon as practicable after the order for relief, the Secretary of Transportation is required to submit a list of five disinterested persons who are qualified to serve as trustee and the court will than appoint one trustee from the list to serve as trustee in the case. The House amendment deletes section 1163 of the Senate amendment in order to cover intrastate railroads in a case under subchapter IV of chapter 11. The bill does not confer jurisdiction on the Interstate Commerce Commission with respect to intrastate railroads. SENATE REPORT NO. 95-989 (Section 1166 (now section 1163)) Requires the court to appoint a trustee in every case. Since the trustee may employ whatever help he needs, multiple trusteeships are unnecessary and add to the cost of administration. The present requirement of section 77(c)(1) (section 205(c)(1) of former title 11) that the trustee be approved by the Interstate Commerce Commission is unnecessary, since the trustee will be selected either from the panel established under section 606(f) of title 28, or someone certified by the Director of the Administrative Office of the United States Courts as qualified to become a member of that panel. HOUSE REPORT NO. 95-595 (Section 1162) This section (now section 1163) requires the appointment of an independent trustee in a railroad reorganization case. The court may appoint one or more disinterested persons to serve as trustee in the case. AMENDMENTS 1986 - Pub. L. 99-554 amended section generally, substituting 'relief the Secretary' for 'relief, the Secretary' and 'The United States trustee shall appoint' for 'The court shall appoint'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 322, 546 of this title. ------DocID 14858 Document 203 of 646------ -CITE- 11 USC Sec. 1164 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- Sec. 1164. Right to be heard -STATUTE- The Commission, the Department of Transportation, and any State or local commission having regulatory jurisdiction over the debtor may raise and may appear and be heard on any issue in a case under this chapter, but may not appeal from any judgment, order, or decree entered in the case. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2641.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1164 of the Senate amendment is deleted as a matter to be left to the Rules of Bankruptcy Procedure. It is anticipated that the rules will require a petition in a railroad reorganization to be filed with the Interstate Commerce Commission and the Secretary of Transportation in a case concerning an interstate railroad. Section 1164 of the House amendment is derived from section 1163 of the House bill. The section makes clear that the Interstate Commerce Commission, the Department of Transportation, and any State or local commission having regulatory jurisdiction over the debtor may raise and appear and be heard on any issue in a case under subchapter IV of chapter 11, but may not appeal from any judgment, order, or decree in the case. As under section 1109 of title 11, such intervening parties are not parties in interest. HOUSE REPORT NO. 95-595 (Section 1163) This section (now section 1164) gives the same right to raise, and appear and be heard on, any issue in a railroad reorganization case to the Interstate Commerce Commission, the Department of Transportation, and any State or local commission having regulatory jurisdiction over the debtor as is given to the SEC and indenture trustees under section 1109 in ordinary reorganization cases. The right of appeal is denied the ICC, the Department of Transportation, and State and local regulatory agencies, the same as it is denied the SEC. ------DocID 14859 Document 204 of 646------ -CITE- 11 USC Sec. 1165 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- Sec. 1165. Protection of the public interest -STATUTE- In applying sections 1166, 1167, 1169, 1170, 1171, 1172, 1173, and 1174 of this title, the court and the trustee shall consider the public interest in addition to the interests of the debtor, creditors, and equity security holders. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2641.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1165 of the House amendment represents a modification of sections 1165 and 1167 of the Senate amendment requiring the court and the trustee to consider the broad, general public interest in addition to the interests of the debtor, creditors, and equity security holders in applying specific sections of the subchapter. SENATE REPORT NO. 95-989 Section 1165 requires the court, in consideration of the relief to be granted upon the filing of an involuntary petition, to take into account the 'public interest' in the preservation of the debtor's rail service. This is an important factor in railroad reorganization, which distinguishes them from other business reorganizations. Hence, this section modifies the provisions in sections 303 and 305 that govern generally when the business of a debtor may continue to operate, when relief under the Act sought should be granted, and when the petition should be dismissed. Section 1167 (now section 1165) imposes on the trustee the obligations, in addition to his other duties and responsibilities, to take into account the 'public interest' in the preservation of the debtor's rail service. ------DocID 14860 Document 205 of 646------ -CITE- 11 USC Sec. 1166 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- Sec. 1166. Effect of subtitle IV of title 49 and of Federal, State, or local regulations -STATUTE- Except with respect to abandonment under section 1170 of this title, or merger, modification of the financial structure of the debtor, or issuance or sale of securities under a plan, the trustee and the debtor are subject to the provisions of subtitle IV of title 49 that are applicable to railroads, and the trustee is subject to orders of any Federal, State, or local regulatory body to the same extent as the debtor would be if a petition commencing the case under this chapter had not been filed, but - (1) any such order that would require the expenditure, or the incurring of an obligation for the expenditure, of money from the estate is not effective unless approved by the court; and (2) the provisions of this chapter are subject to section 601(b) of the Regional Rail Reorganization Act of 1973 (45 U.S.C. 791(b)). -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2642; Pub. L. 97-449, Sec. 5(a)(2), Jan. 12, 1983, 96 Stat. 2442; Pub. L. 98-353, title III, Sec. 518, July 10, 1984, 98 Stat. 388.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1166 of the House amendment is derived from sections 1164 and 1165 of the House bill. An alternative proposal contained in section 1168(1) of the Senate bill is rejected as violative of the principle of equal treatment of all creditors under title 11. SENATE REPORT NO. 95-989 Section 1168 (now section 1166) makes the trustee subject to the Interstate Commerce Act (49 U.S.C. 10101 et seq.) and to lawful orders of the Interstate Commerce Commission, the U.S. Department of Transportation, and State and regulatory bodies. The approval of the court is required, however, if the order requires the expenditure of money or the incurring of an expenditure other than the payment of certain interline accounts. The limitation of 'lawful orders' of State commissions to those involving 'safety, location of tracks, and terminal facilities,' which is contained in present section 77(c)(2) (section 205(c)(2) of former title 11), is eliminated. Subsection (1) further provides that the debtor must pay in cash all amounts owed other carriers for current balances owed for interline freight, passenger and per diem, including incentive per diem, for periods both prior and subsequent to the filing of the petition, without the necessity of court approval. Subsection (2) makes the provisions of the chapter subject to section 601(b) of the Regional Rail Reorganization Act (45 U.S.C. 791(b)), which excludes the Interstate Commerce Commission from any participation in the reorganization of certain northeast railroads that have transferred their rail properties to Consolidated Rail Corporation (Conrail). HOUSE REPORT NO. 95-595 Section 1164 (now section 1166) makes the debtor railroad subject to the provisions of the Interstate Commerce Act (49 U.S.C. 10101 et seq.) that are applicable to railroads, and the trustee subject to the orders of the Interstate Commerce Commission to the same extent as the debtor would have been if the case had not been commenced. There are several exceptions. The section does not apply with respect to abandonment of rail lines, which is provided for under section 1169, or with respect to merger under a plan, modification of the financial structure of the debtor by reason of the plan, or the issuance or sale of securities under a plan. Further, the orders of the ICC are not effective if the order would require the expenditure or the incurring of an obligation for the expenditure of money from the estate, unless approved by the court, and the provisions of this chapter are subject to section 601(b) of the Regional Rail Reorganization Act of 1973 (45 U.S.C. 791(b)). (Section 1165 (now section 1166)) The same rules apply with respect to Federal, State, or local regulations. The trustee is subject to the orders of a Federal, State, or local regulatory body to the same extent as the debtor would be if the case had not been commenced. However, any order that would require the expenditure, or the incurring of an obligation for the expenditure, of money is not effective under (until) approved by the court. AMENDMENTS 1984 - Pub. L. 98-353 directed substitution of 'subtitle IV of title 49' for 'the Interstate Commerce Act (49 U.S.C. 1 et seq.)', which substitution had previously been made by Pub. L. 97-449. 1983 - Pub. L. 97-449 substituted 'subtitle IV of title 49' for 'Interstate Commerce Act' in section catchline, and 'subtitle IV of title 49' for 'the Interstate Commerce Act (49 U.S.C. 1 et seq.)' in text. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1165 of this title; title 28 section 959. ------DocID 14861 Document 206 of 646------ -CITE- 11 USC Sec. 1167 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- Sec. 1167. Collective bargaining agreements -STATUTE- Notwithstanding section 365 of this title, neither the court nor the trustee may change the wages or working conditions of employees of the debtor established by a collective bargaining agreement that is subject to the Railway Labor Act (45 U.S.C. 151 et seq.) except in accordance with section 6 of such Act (45 U.S.C. 156). -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2642.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Section 1176 (now section 1167) is derived from present section 77(n) (section 205(n) of former title 11). It provides that notwithstanding the general section governing the rejection of executory contracts (section 365), neither the court nor the trustee may change the wages or working conditions of employees of the debtor established by a collective bargaining agreement that is subject to the Railway Labor Act (45 U.S.C. 151 et seq.), except in accordance with section 6 of that Act (45 U.S.C. 156). As reported by the subcommittee this section provided that wages and salaries of rail employees could not be affected by the trustee, but that work rules could be rejected by the trustee. The reorganization court was given the authority to review the trustee's decisions and to settle any disputes arising from the rejection. This provision was withdrawn by the full committee, and hearings will be conducted next year by the Human Resources Committee in the area of rail labor contracts and the trustee's ability to reject them in a bankruptcy situation. HOUSE REPORT NO. 95-595 Section 1167 is derived from present section 77(n) (section 205(n) of former title 11). It provides that notwithstanding the general section governing the rejection of executory contracts (section 365), neither the court nor the trustee may change the wages or working conditions of employees of the debtor established by a collective bargaining agreement that is subject to the Railway Labor Act (45 U.S.C. 151 et seq.), except in accordance with section 6 of that Act (45 U.S.C. 156). The subject of railway labor is too delicate and has too long a history for this code to upset established relationships. The balance has been struck over the years. This provision continues that balance unchanged. -REFTEXT- REFERENCES IN TEXT The Railway Labor Act (45 U.S.C. 151 et seq.), referred to in text, is act May 20, 1926, ch. 347, 44 Stat. 577, as amended, which is classified principally to chapter 8 (Sec. 151 et seq.) of Title 45, Railroads. For complete classification of this Act to the Code, see section 151 of Title 45 and Tables. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1165 of this title. ------DocID 14862 Document 207 of 646------ -CITE- 11 USC Sec. 1168 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- Sec. 1168. Rolling stock equipment -STATUTE- (a) The right of a secured party with a purchase-money equipment security interest in, or of a lessor or conditional vendor of, whether as trustee or otherwise, rolling stock equipment or accessories used on such equipment, including superstructures and racks, that are subject to a purchase-money equipment security interest granted by, leased to, or conditionally sold to, the debtor to take possession of such equipment in compliance with the provisions of a purchase-money equipment security agreement, lease, or conditional sale contract, as the case may be, is not affected by section 362 or 363 of this title or by any power of the court to enjoin such taking of possession, unless - (1) before 60 days after the date of the commencement of a case under this chapter, the trustee, subject to the court's approval, agrees to perform all obligations of the debtor under such security agreement, lease, or conditional sale contract, as the case may be; and (2) any default, other than a default of a kind specified in section 365(b)(2) of this title, under such security agreement, lease, or conditional sale contract, as the case may be - (A) that occurred before such date and is an event of default therewith is cured before the expiration of such 60-day period; and (B) that occurs or becomes an event of default after such date is cured before the later of - (i) 30 days after the date of such default or event of default; and (ii) the expiration of such 60-day period. (b) The trustee and the secured party, lessor, or conditional vendor, as the case may be, whose right to take possession is protected under subsection (a) of this section, may agree, subject to the court's approval, to extend the 60-day period specified in subsection (a)(1) of this section. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2642; Pub. L. 98-353, title III, Sec. 519, July 10, 1984, 98 Stat. 388.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1168 of the House amendment incorporates a provision contained in section 1166 of the House bill instead of the provision contained in section 1175 of the Senate amendment for the reasons stated in connection with the discussion of section 1110 of the House amendment. SENATE REPORT NO. 95-989 Section 1175 (now section 1168) continues the protection accorded in present section 77(j) (section 205(j) of former title 11) to the rights of holders of purchase-money equipment security, and of lessors or conditional vendors of railroad rolling stock, but accords to the trustee a limited period within which to assume the debtor's obligation and to cure any defaults. The rights of such lenders are not affected by the automatic stay and related provisions of sections 362 and 363, or by any power of the court, unless (1) within 60 days after the commencement of the case (or such longer period as may be agreed to by the secured party, lessor or conditional vendor) the trustees, with the approval of the court, agrees to perform all of the debtor's obligations under the security agreement, lease or conditional sale contract, and (2) all defaults are cured within the 60-day period. Defaults described in section 365(b)(2) - defaults which are breaches of provisions relating to the insolvency or financial condition of the debtor, or the commencement of a case under this title, or the appointment of a trustee - are for obvious reasons, excepted. HOUSE REPORT NO. 95-595 (Section 1166) This section (now section 1168), derived with changes from the last sentence of present section 77(j) (section 205(j) of former title 11), protects the interests of rolling stock equipment financers, while providing the trustee with some opportunity to cure defaults, agree to make payments, and retain and use the equipment. The provision is parallel to section 1110, concerning aircraft equipment and vessels. AMENDMENTS 1984 - Subsec. (b). Pub. L. 98-353 inserted a comma after 'approval'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in title 45 section 586. ------DocID 14863 Document 208 of 646------ -CITE- 11 USC Sec. 1169 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- Sec. 1169. Effect of rejection of lease of railroad line -STATUTE- (a) Except as provided in subsection (b) of this section, if a lease of a line of railroad under which the debtor is the lessee is rejected under section 365 of this title, and if the trustee, within such time as the court fixes, and with the court's approval, elects not to operate the leased line, the lessor under such lease, after such approval, shall operate the line. (b) If operation of such line by such lessor is impracticable or contrary to the public interest, the court, on request of such lessor, and after notice and a hearing, shall order the trustee to continue operation of such line for the account of such lessor until abandonment is ordered under section 1170 of this title, or until such operation is otherwise lawfully terminated, whichever occurs first. (c) During any such operation, such lessor is deemed a carrier subject to the provisions of subtitle IV of title 49 that are applicable to railroads. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2643; Pub. L. 97-449, Sec. 5(a)(3), Jan. 12, 1983, 96 Stat. 2442; Pub. L. 98-353, title III, Sec. 520, July 10, 1984, 98 Stat. 388.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1169 of the Senate amendment is deleted from the House amendment as unnecessary since 28 U.S.C. 1407 treating with the judicial panel on multi-district litigation will apply by its terms to cases under title 11. SENATE REPORT NO. 95-989 Section 1177 (now section 1169) continues, essentially without change, the provisions relating to the rejection by the trustee of a lease of a line of railroad now contained in section 77(c)(6) (section 205(c)(6) of former title 11). Subsection (a) requires the lessor of a line of railroad to operate it if the lease is rejected by the trustee and the trustee, with the approval of the court, elects not to operate the leased line. Subsection (b), however, further provides that if operation by the lessor is impractical or contrary to the public interest, the court shall require the trustee to operate the line for the account of the lessor until the operation is lawfully terminated. Subsection (c) provides that during such operation, the lessor is a carrier subject to the Interstate Commerce Act (49 U.S.C. 10101 et seq.). HOUSE REPORT NO. 95-595 (Section 1168) This section (now section 1169) governs the effect of the rejection by the trustee of an unexpired lease of railroad line under which the debtor is the lessee. If the trustee rejects such a lease, and if the trustee, within such time as the court allows, and with the approval of the court, elects not to operate the leased line, then the lessor under the lease must operate the line. Subsection (b) excuses the lessor from the requirement to operate the line under certain circumstances. If operation of the line by the lessor is impracticable or contrary to the public interest, the court, on request of the lessor, must order the trustee to continue operation of the line for the account of the lessor until abandonment is ordered under section 1169, governing abandonments generally, or until the operation is otherwise lawfully terminated, such as by an order of the ICC. Subsection (c) deems the lessor a carrier subject to the provisions of the Interstate Commerce Act (49 U.S.C. 10101 et seq.) during the operation of the line before abandonment. AMENDMENTS 1984 - Subsec. (c). Pub. L. 98-353 directed substitution of 'subtitle IV of title 49' for 'the Interstate Commerce Act (49 U.S.C. 1 et seq.)', which substitution had previously been made by Pub. L. 97-449. 1983 - Subsec. (c). Pub. L. 97-449 substituted 'subtitle IV of title 49' for 'the Interstate Commerce Act (49 U.S.C. Sec. 1 et seq.)'. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1165 of this title. ------DocID 14864 Document 209 of 646------ -CITE- 11 USC Sec. 1170 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- Sec. 1170. Abandonment of railroad line -STATUTE- (a) The court, after notice and a hearing, may authorize the abandonment of all or a portion of a railroad line if such abandonment is - (1)(A) in the best interest of the estate; or (B) essential to the formulation of a plan; and (2) consistent with the public interest. (b) If, except for the pendency of the case under this chapter, such abandonment would require approval by the Commission under a law of the United States, the trustee shall initiate an appropriate application for such abandonment with the Commission. The court may fix a time within which the Commission shall report to the court on such application. (c) After the court receives the report of the Commission, or the expiration of the time fixed under subsection (b) of this section, whichever occurs first, the court may authorize such abandonment, after notice to the Commission, the Secretary of Transportation, the trustee, any party in interest that has requested notice, any affected shipper or community, and any other entity prescribed by the court, and a hearing. (d)(1) Enforcement of an order authorizing such abandonment shall be stayed until the time for taking an appeal has expired, or, if an appeal is timely taken, until such order has become final. (2) If an order authorizing such abandonment is appealed, the court, on request of a party in interest, may authorize suspension of service on a line or a portion of a line pending the determination of such appeal, after notice to the Commission, the Secretary of Transportation, the trustee, any party in interest that has requested notice, any affected shipper or community, and any other entity prescribed by the court, and a hearing. An appellant may not obtain a stay of the enforcement of an order authorizing such suspension by the giving of a supersedeas bond or otherwise, during the pendency of such appeal. (e)(1) In authorizing any abandonment of a railroad line under this section, the court shall require the rail carrier to provide a fair arrangement at least as protective of the interests of employees as that established under section 11347 of title 49. (2) Nothing in this subsection shall be deemed to affect the priorities or timing of payment of employee protection which might have existed in the absence of this subsection. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2643; Pub. L. 96-448, title II, Sec. 227(a), Oct. 14, 1980, 94 Stat. 1931; Pub. L. 98-353, title III, Sec. 521, July 10, 1984, 98 Stat. 388.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Subsection (a) of section 1178 (now section 1170) permits the court to authorize the abandonment of a railroad line if the abandonment is consistent with the public interest and either in the best interest of the estate or essential to the formulation of a plan. This avoids the normal abandonment requirements of generally applicable railroad regulatory law. Subsection (b) permits some participation by the Interstate Commerce Commission in the abandonment process. The Commission's role, however, is only advisory. The Commission will represent the public interest, while the trustee and various creditors and equity security holders will represent the interests of those who have invested money in the enterprise. The court will balance the various interests and make an appropriate decision. The subsection specifies that if, except for the pendency of the railroad reorganization case, the proposed abandonment would require Commission approval, then the trustee, with the approval of the court, must initiate an application for the abandonment with the Commission. The court may then fix a time within which the Commission must report to the court on the application. Subsection (c) permits the court to act after it has received the report of the Commission or the time fixed under subsection (b) has expired, whichever occurs first. The court may then authorize the abandonment after notice and a hearing. The notice must go to the Commission, the Secretary of Transportation, the trustee, and party in interest that has requested notice, any affected shipper or community, and any other entity that the court specifies. Subsection (d) stays the enforcement of an abandonment until the time for taking an appeal has expired, or if an appeal has been taken, until the order has become final. However, the court may, and after notice and a hearing, on request of a party in interest authorize termination of service on the line or a portion of the line pending the determination of the appeal. The notice required is the same as that required under subsection (c). If the court authorizes termination of service pending determination of the appeal, an appellant may not obtain a stay of the enforcement of the order authorizing termination, either by the giving of a supersedeas bond or otherwise, during the pendency of the appeal. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353, Sec. 521(a), inserted 'of all or a portion' after 'the abandonment'. Subsec. (c). Pub. L. 98-353, Sec. 521(b), inserted a comma after 'abandonment'. Subsec. (d)(2). Pub. L. 98-353, Sec. 521(c), substituted 'such abandonment' for 'the abandonment of a railroad line', and 'suspension' for 'termination' in two places. 1980 - Subsec. (e). Pub. L. 96-448 added subsec. (e). EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1980 AMENDMENT Amendment by Pub. L. 96-448 effective Oct. 1, 1980, see section 710(a) of Pub. L. 96-448, set out as a note under section 10101 of Title 49, Transportation. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1165, 1166, 1169, 1172 of this title; title 45 sections 904, 915. ------DocID 14865 Document 210 of 646------ -CITE- 11 USC Sec. 1171 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- Sec. 1171. Priority claims -STATUTE- (a) There shall be paid as an administrative expense any claim of an individual or of the personal representative of a deceased individual against the debtor or the estate, for personal injury to or death of such individual arising out of the operation of the debtor or the estate, whether such claim arose before or after the commencement of the case. (b) Any unsecured claim against the debtor that would have been entitled to priority if a receiver in equity of the property of the debtor had been appointed by a Federal court on the date of the order for relief under this title shall be entitled to the same priority in the case under this chapter. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2643; Pub. L. 98-353, title III, Sec. 522, July 10, 1984, 98 Stat. 388.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1171 of the House amendment is derived from section 1170 of the House bill in lieu of section 1173(a)(9) of the Senate amendment. HOUSE REPORT NO. 95-595 (Section 1170) This section (now section 1171) is derived from current law. Subsection (a) grants an administrative expense priority to the claim of any individual (or of the personal representative of a deceased individual) against the debtor or the estate for personal injury to or death of the individual arising out of the operation of the debtor railroad or the estate, whether the claim arose before or after commencement of the case. The priority under current law, found in section 77(n) (section 205(n) of former title 11), applies only to employees of the debtor. This subsection expands the protection provided. Subsection (b) follows present section 77(b) of the Bankruptcy Act (section 205(b) of former title 11) by giving priority to any unsecured claims that would be entitled to priority if a receiver in equity of the property of the debtor had been appointed by a Federal court on the date of the order for relief under the bankruptcy laws. As under current law, the courts will determine the precise contours of the priority recognized by this subsection in each case. AMENDMENTS 1984 - Subsec. (b). Pub. L. 98-353 substituted 'the same' for 'such'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1165 of this title. ------DocID 14866 Document 211 of 646------ -CITE- 11 USC Sec. 1172 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- Sec. 1172. Contents of plan -STATUTE- (a) In addition to the provisions required or permitted under section 1123 of this title, a plan - (1) shall specify the extent to and the means by which the debtor's rail service is proposed to be continued, and the extent to which any of the debtor's rail service is proposed to be terminated; and (2) may include a provision for - (A) the transfer of any or all of the operating railroad lines of the debtor to another operating railroad; or (B) abandonment of any railroad line in accordance with section 1170 of this title. (b) If, except for the pendency of the case under this chapter, transfer of, or operation of or over, any of the debtor's rail lines by an entity other than the debtor or a successor to the debtor under the plan would require approval by the Commission under a law of the United States, then a plan may not propose such a transfer or such operation unless the proponent of the plan initiates an appropriate application for such a transfer or such operation with the Commission and, within such time as the court may fix, not exceeding 180 days, the Commission, with or without a hearing, as the Commission may determine, and with or without modification or condition, approves such application, or does not act on such application. Any action or order of the Commission approving, modifying, conditioning, or disapproving such application is subject to review by the court only under sections 706(2)(A), 706(2)(B), 706(2)(C), and 706(2)(D) of title 5. (c)(1) In approving an application under subsection (b) of this section, the Commission shall require the rail carrier to provide a fair arrangement at least as protective of the interests of employees as that established under section 11347 of title 49. (2) Nothing in this subsection shall be deemed to affect the priorities or timing of payment of employee protection which might have existed in the absence of this subsection. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2644; Pub. L. 96-448, title II, Sec. 227(b), Oct. 14, 1980, 94 Stat. 1931.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1172 of the House amendment is derived from section 1171 of the House bill in preference to section 1170 of the Senate amendment with the exception that section 1170(4) of the Senate amendment is incorporated into section 1172(a)(1) of the House amendment. Section 1172(b) of the House amendment is derived from section 1171(c) of the Senate amendment. The section gives the Interstate Commerce Commission the exclusive power to approve or disapprove the transfer of, or operation of or over, any of the debtor's rail lines over which the Commission has jurisdiction, subject to review under the Administrative Procedures Act (5 U.S.C. 551 et seq. and 701 et seq.). The section does not apply to a transfer of railroad lines to a successor of the debtor under a plan of reorganization by merger or otherwise. The House amendment deletes section 1171(a) of the Senate amendment as a matter to be determined by the Rules of Bankruptcy Procedure. It is anticipated that the rules will specify the period of time, such as 18 months, within which a trustee must file with the court a proposed plan of reorganization for the debtor or a report why a plan cannot be formulated. Incorporation by reference of section 1121 in section 1161 of title 11 means that a party in interest will also have a right to file a plan of reorganization. This differs from the position taken in the Senate amendment which would have permitted the Interstate Commerce Commission to file a plan of reorganization. SENATE REPORT NO. 95-989 Section 1170 adds to the general provisions required or permitted in reorganization plans by section 1123. Subsection (1) requires that a reorganization plan under the railroad subchapter specify the means by which the value of the claims of creditors and the interests of equity holders which are materially and adversely affected by the plan are to be realized. Subsection (2) permits a plan to include provisions for the issuance of warrants. Subsection (3) requires that the plan provide for fixed charges by probable earnings for their payment. Subsection (4) requires that the plan specify the means by which, and the extent to which, the debtor's rail service is to be continued, and shall identify any rail service to be terminated. Subsection (5) permits other appropriate provisions not inconsistent with the chapter. With the exception of subsection (4), the requirements are comparable to those of present section 77(b) (section 205(b) of former title 11); subsection (4) emphasizes the public interest in the preservation of rail transportation. Section 1171 imposes on the court, rather than the Interstate Commerce Commission, as in present section 77 (section 205 of former title 11), the responsibility for the plan of reorganization. The Commission is empowered to make final decisions subject only to review by the court under the standards of the Administrative Procedure Act (5 U.S.C. 551 et seq. and 701 et seq.) as to any part of the plan which deals with transportation matters, such as the grant of operating rights of or over, or transfer of, the debtor's rail lines to other carriers. Subsection (a) requires the trustee to file a plan of reorganization within 18 months after the petition is filed, and permits the court, for good cause shown, to extend such time limit. Subsection (b) permits a plan to be proposed by any interested person, and permits the trustee to revise his plan at any time before it is approved by the court. Subsections (c), (d) and (e) require the court, when a plan is submitted by the trustee or, if the court deems it worthy of consideration, a plan submitted is proposed by any other person proposes the transfer of, or operation of or over, any of the debtor's lines by other carriers, to refer to such provisions of the plan to the Interstate Commerce Commission. The Commission, within 240 days, and after a hearing if the Commission so determines, is to report to the court the effects of such provisions of the plan in the light of national transportation policy and sections 5(3)(f)(A), (B), and (D), (F)-(I) of the Interstate Commerce Act (49 U.S.C. 11350(b)(1), (2), (4), (6)-(9)). The report of the Commission is conclusive in all further hearings on the plan by the court, subject only to review pursuant to 5 U.S.C. 706(2)(A)-(D). HOUSE REPORT NO. 95-595 (Section 1171 (now section 1172)) A plan in a railroad reorganization case may include provisions in addition to those required and permitted under an ordinary reorganization plan. It may provide for the transfer of any or all of the operating railroad lines of the debtor to another operating railroad. Paragraph (1) contemplates a liquidating plan for the debtor's rail lines, much as occurred in the Penn Central case by transfer of operating lines to ConRail. Such a liquidating plan is not per se contrary to the public interest, and the court will have to determine on a case-by-case basis, with the guidance of the Interstate Commerce Commission and of other parties in interest, whether the particular plan proposed is in the public interest, as required under proposed 11 U.S.C. 1172(3). The plan may also provide for abandonment in accordance with section 1169, governing abandonment generally. Neither of these provisions in a plan, transfer or abandonment of lines, requires ICC approval. Confirmation of the plan by the court authorizes the debtor to comply with the plan in accordance with section 1142(a) notwithstanding any bankruptcy law to the contrary. AMENDMENTS 1980 - Subsec. (c). Pub. L. 96-448 added subsec. (c). EFFECTIVE DATE OF 1980 AMENDMENT Amendment by Pub. L. 96-448 effective Oct. 1, 1980, see section 710(a) of Pub. L. 96-448, set out as a note under section 10101 of Title 49, Transportation. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1165 of this title. ------DocID 14867 Document 212 of 646------ -CITE- 11 USC Sec. 1173 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- Sec. 1173. Confirmation of plan -STATUTE- (a) The court shall confirm a plan if - (1) the applicable requirements of section 1129 of this title have been met; (2) each creditor or equity security holder will receive or retain under the plan property of a value, as of the effective date of the plan, that is not less than the value of property that each such creditor or equity security holder would so receive or retain if all of the operating railroad lines of the debtor were sold, and the proceeds of such sale, and the other property of the estate, were distributed under chapter 7 of this title on such date; (3) in light of the debtor's past earnings and the probable prospective earnings of the reorganized debtor, there will be adequate coverage by such prospective earnings of any fixed charges, such as interest on debt, amortization of funded debt, and rent for leased railroads, provided for by the plan; and (4) the plan is consistent with the public interest. (b) If the requirements of subsection (a) of this section are met with respect to more than one plan, the court shall confirm the plan that is most likely to maintain adequate rail service in the public interest. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2644; Pub. L. 98-353, title III, Sec. 523, July 10, 1984, 98 Stat. 388.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1173 of the House amendment concerns confirmation of a plan of railroad reorganization and is derived from section 1172 of the House bill as modified. In particular, section 1173(a)(3) of the House amendment is derived from section 1170(3) of the Senate amendment. Section 1173(b) is derived from section 1173(a)(8) of the Senate amendment. SENATE REPORT NO. 95-989 Section 1173 adapts the provisions dealing with reorganization plans generally contained in section 1130 to the particular requirements of railroad reorganization plans, as set out in present section 77(e) (section 205(e) of former title 11). Subsection (a) specifies the findings which the court must make before approving a plan: (1) The plan complies with the applicable provisions of the chapter; (2) the proponent of the plan complies with the applicable provisions of the chapter; (3) the plan has been proposed in good faith; (4) any payments for services or for costs or expenses in connection with the case or the plan are disclosed to the court and are reasonable, or, if to be paid later, are subject to the approval of the court as reasonable; (5) the proponent of the plan has disclosed the identity and affiliations of the individuals who will serve as directors, officers, or voting trustees, such appointments or continuations in office are consistent with the interests of creditors, equity security holders, and the proponent the public, and has disclosed the identity and compensation of any insider who will be employed or retained under the plan; (6) that rate changes proposed in the plan have been approved by the appropriate regulatory commission, or that the plan is contingent on such approval; (7) that confirmation of the plan is not likely to be followed by further reorganization or liquidation, unless it is contemplated by the plan; (8) that the plan, if there is more than one, is the one most likely to maintain adequate rail service and (9) that the plan provides the priority traditionally accorded by section 77(b) (section 205(b) of former title 11) to claims by rail creditors for necessary services rendered during the 6 months preceding the filing of the petition in bankruptcy. Subsection (b) continues the present power of the court in section 77(e) (section 205(e) of former title 11) to confirm a plan over the objections of creditors or equity security holders who are materially and adversely affected. The subsection also confirms the authority of the court to approve a transfer of all or part of a debtor's property or its merger over the objections of equity security holders if it finds (1) that the 'public interest' in continued rail transportation outweighs any adverse effect on creditors and equity security holders, and (2) that the plan is fair and equitable, affords due recognition to the rights of each class, and does not discriminate unfairly against any class. Subsection (c) permits modification of a plan confirmed by a final order only for fraud. HOUSE REPORT NO. 95-595 (Section 1172) This section (now section 1173) requires the court to confirm a plan if the applicable requirements of section 1129 (relating to confirmation of reorganization plans generally) are met, if the best interest test is met, and if the plan is compatible with the public interest. The test in this paragraph is similar to the test prescribed for ordinary corporate reorganizations. However, since a railroad cannot liquidate its assets and sell them for scrap to satisfy its creditors, the test focuses on the value of the railroad as a going concern. That is, the test is based on what the assets, sold as operating rail lines, would bring. The public interest requirement, found in current law, will now be decided by the court, with the ICC representing the public interest before the court, rather than in the first instance by the ICC. Liquidation of the debtor is not, per se, contrary to the public interest. AMENDMENTS 1984 - Subsec. (a)(4). Pub. L. 98-353 substituted 'consistent' for 'compatible'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 347, 1165, 1174 of this title; title 26 section 354. ------DocID 14868 Document 213 of 646------ -CITE- 11 USC Sec. 1174 -EXPCITE- TITLE 11 CHAPTER 11 SUBCHAPTER IV -HEAD- Sec. 1174. Liquidation -STATUTE- On request of a party in interest and after notice and a hearing, the court may, or, if a plan has not been confirmed under section 1173 of this title before five years after the date of the order for relief, the court shall, order the trustee to cease the debtor's operation and to collect and reduce to money all of the property of the estate in the same manner as if the case were a case under chapter 7 of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2644.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1174 of the House amendment represents a compromise between the House bill and Senate amendment on the issue of liquidation of a railroad. The provision permits a party in interest at any time to request liquidation. In addition, if a plan has not been confirmed under section 1173 of the House amendment before 5 years after the date of order for relief, the court must order the trustee to cease the debtor's operation and to collect and reduce to money all of the property of the estate in the same manner as if the case were a case under chapter 7 of title 11. The approach differs from the conversion to chapter 7 under section 1174 of the Senate bill in order to make special provisions contained in subchapter IV of chapter 11 applicable to liquidation. However, maintaining liquidation in the context of chapter 11 is not intended to delay liquidation of the railroad to a different extent than if the case were converted to chapter 7. Although the House amendment does not adopt provisions contained in sections 1170(1), (2), (3), or (5), of the Senate amendment such provisions are contained explicitly or implicitly in section 1123 of the House amendment. SENATE REPORT NO. 95-989 Section 1174 permits the court to convert the case to a liquidation under chapter 7 if the court finds that the debtor cannot be reorganized, or if various time limits specified in the subchapter are not met. Section 77 (section 205 of former title 11) does not authorize a liquidation of a railroad under the Bankruptcy Act (former title 11). If the railroad is not reorganizable, the only action open to the court is to dismiss the petition, which would in all likelihood be followed by a State court receivership, with all of its attendant disadvantages. If reorganization is impossible, the debtor should be liquidated under the Bankruptcy Act. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1165 of this title. ------DocID 14869 Document 214 of 646------ -CITE- 11 USC CHAPTER 12 -EXPCITE- TITLE 11 CHAPTER 12 -HEAD- CHAPTER 12 - ADJUSTMENT OF DEBTS OF A FAMILY FARMER WITH REGULAR ANNUAL INCOME -MISC1- SUBCHAPTER I - OFFICERS, ADMINISTRATION, AND THE ESTATE Sec. 1201. Stay of action against codebtor. 1202. Trustee. 1203. Rights and powers of debtor. 1204. Removal of debtor as debtor in possession. 1205. Adequate protection. 1206. Sales free of interests. 1207. Property of the estate. 1208. Conversion or dismissal. SUBCHAPTER II - THE PLAN 1221. Filing of plan. 1222. Contents of plan. 1223. Modification of plan before confirmation. 1224. Confirmation hearing. 1225. Confirmation of plan. 1226. Payments. 1227. Effect of confirmation. 1228. Discharge. 1229. Modification of plan after confirmation. 1230. Revocation of an order of confirmation. 1231. Special tax provisions. REPEAL OF CHAPTER Pub. L. 99-554, title III, Sec. 302(f), Oct. 27, 1986, 100 Stat. 3124, provided that, effective Oct. 1, 1993, this chapter is repealed, that all cases commenced or pending under this chapter, and all matters and proceedings in or relating to such cases, shall be conducted and determined under this chapter as if such chapter had not been repealed, and that the substantive rights of parties in connection with such cases, matters, and proceedings shall continue to be governed under the laws applicable to such cases, matters, and proceedings as if such chapter had not been repealed. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in sections 101, 103, 109, 321, 326, 327, 329, 330, 346, 347, 362, 363, 365, 502, 706, 1106, 1112, 1306, 1307 of this title; title 7 section 2005; title 28 sections 157, 586, 1930. ------DocID 14870 Document 215 of 646------ -CITE- 11 USC SUBCHAPTER I -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER I -HEAD- SUBCHAPTER I - OFFICERS, ADMINISTRATION, AND THE ESTATE ------DocID 14871 Document 216 of 646------ -CITE- 11 USC Sec. 1201 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER I -HEAD- Sec. 1201. Stay of action against codebtor -STATUTE- (a) Except as provided in subsections (b) and (c) of this section, after the order for relief under this chapter, a creditor may not act, or commence or continue any civil action, to collect all or any part of a consumer debt of the debtor from any individual that is liable on such debt with the debtor, or that secured such debt, unless - (1) such individual became liable on or secured such debt in the ordinary course of such individual's business; or (2) the case is closed, dismissed, or converted to a case under chapter 7 of this title. (b) A creditor may present a negotiable instrument, and may give notice of dishonor of such an instrument. (c) On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided by subsection (a) of this section with respect to a creditor, to the extent that - (1) as between the debtor and the individual protected under subsection (a) of this section, such individual received the consideration for the claim held by such creditor; (2) the plan filed by the debtor proposes not to pay such claim; or (3) such creditor's interest would be irreparably harmed by continuation of such stay. (d) Twenty days after the filing of a request under subsection (c)(2) of this section for relief from the stay provided by subsection (a) of this section, such stay is terminated with respect to the party in interest making such request, unless the debtor or any individual that is liable on such debt with the debtor files and serves upon such party in interest a written objection to the taking of the proposed action. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3105.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -MISC1- EFFECTIVE DATE Chapter effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 108, 348 of this title. ------DocID 14872 Document 217 of 646------ -CITE- 11 USC Sec. 1202 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER I -HEAD- Sec. 1202. Trustee -STATUTE- (a) If the United States trustee has appointed an individual under section 586(b) of title 28 to serve as standing trustee in cases under this chapter and if such individual qualifies as a trustee under section 322 of this title, then such individual shall serve as trustee in any case filed under this chapter. Otherwise, the United States trustee shall appoint one disinterested person to serve as trustee in the case or the United States trustee may serve as trustee in the case if necessary. (b) The trustee shall - (1) perform the duties specified in sections 704(2), 704(3), 704(5), 704(6), 704(7), and 704(9) of this title; (2) perform the duties specified in section 1106(a)(3) and 1106(a)(4) of this title if the court, for cause and on request of a party in interest, the trustee, or the United States trustee, so orders; (3) appear and be heard at any hearing that concerns - (A) the value of property subject to a lien; (B) confirmation of a plan; (C) modification of the plan after confirmation; or (D) the sale of property of the estate; (4) ensure that the debtor commences making timely payments required by a confirmed plan; and (5) if the debtor ceases to be a debtor in possession, perform the duties specified in sections 704(8), 1106(a)(1), 1106(a)(2), 1106(a)(6), 1106(a)(7), and 1203. -SOURCE- (Added and amended Pub. L. 99-554, title II, Sec. 227, 255, Oct. 27, 1986, 100 Stat. 3103, 3106.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -MISC1- AMENDMENTS 1986 - Subsecs. (c), (d). Pub. L. 99-554, Sec. 227, struck out subsecs. (c) and (d) which read as follows: '(c) If the number of cases under this chapter commenced in a particular judicial district so warrants, the court may appoint one or more individuals to serve as standing trustee for such district in cases under this chapter. '(d)(1) A court that has appointed an individual under subsection (a) of this section to serve as standing trustee in cases under this chapter shall set for such individual - '(A) a maximum annual compensation not to exceed the lowest annual rate of basic pay in effect for grade GS-16 of the General Schedule prescribed under section 5332 of title 5; and '(B) a percentage fee not to exceed the sum of - '(i) not to exceed ten percent of the payments made under the plan of such debtor, with respect to payments in an aggregate amount not to exceed $450,000; and '(ii) three percent of payments made under the plan of such debtor, with respect to payments made after the aggregate amount of payments made under the plan exceeds $450,000; based on such maximum annual compensation and the actual, necessary expenses incurred by such individual as standing trustee. '(2) Such individual shall collect such percentage fee from all payments under plans in the cases under this chapter for which such individual serves as standing trustee. Such individual shall pay annually to the Treasury - '(A) any amount by which the actual compensation received by such individual exceeds five percent of all such payments made under plans in cases under this chapter for which such individual serves as standing trustee; and '(B) any amount by which the percentage fee fixed under paragraph (1)(B) of this subsection for all such cases exceeds - '(i) such individual's actual compensation for such cases, as adjusted under subparagraph (A) of this paragraph; plus '(ii) the actual, necessary expenses incurred by such individual as standing trustee in such cases.' See section 586(b) and (e) of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE Section effective 30 days after Oct. 27, 1986, and before the amendment by section 227 of Pub. L. 99-554, see section 302(c)(2) of Pub. L. 99-554, set out as an Effective Date of 1986 Amendment note under section 581 of Title 28, Judiciary and Judicial Procedure. Effective date and applicability of amendment by section 227 of Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554. REFERENCES IN SUBSECTION (A) TEMPORARILY DEEMED TO BE REFERENCES TO OTHER PROVISIONS Until the amendments made by subtitle A (Sec. 201 to 231) of title II of Pub. L. 99-554 become effective in a district and apply to a case, in subsec. (a) of this section - (1) the first two references to the United States trustee are deemed to be references to the court, and (2) any reference to section 586(b) of Title 28, Judiciary and Judicial Procedure, is deemed to be a reference to subsec. (c) of this section, see section 302(c)(3)(B), (d), (e) of Pub. L. 99-554, set out as an Effective Date note under section 581 of Title 28. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 322, 326, 327, 557, 1226 of this title. ------DocID 14873 Document 218 of 646------ -CITE- 11 USC Sec. 1203 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER I -HEAD- Sec. 1203. Rights and powers of debtor -STATUTE- Subject to such limitations as the court may prescribe, a debtor in possession shall have all the rights, other than the right to compensation under section 330, and powers, and shall perform all the functions and duties, except the duties specified in paragraphs (3) and (4) of section 1106(a), of a trustee serving in a case under chapter 11, including operating the debtor's farm. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3107.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 363, 364, 1202 of this title. ------DocID 14874 Document 219 of 646------ -CITE- 11 USC Sec. 1204 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER I -HEAD- Sec. 1204. Removal of debtor as debtor in possession -STATUTE- (a) On request of a party in interest, and after notice and a hearing, the court shall order that the debtor shall not be a debtor in possession for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor, either before or after the commencement of the case. (b) On request of a party in interest, and after notice and a hearing, the court may reinstate the debtor in possession. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3107.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 363, 364, 1207 of this title. ------DocID 14875 Document 220 of 646------ -CITE- 11 USC Sec. 1205 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER I -HEAD- Sec. 1205. Adequate protection -STATUTE- (a) Section 361 does not apply in a case under this chapter. (b) In a case under this chapter, when adequate protection is required under section 362, 363, or 364 of this title of an interest of an entity in property, such adequate protection may be provided by - (1) requiring the trustee to make a cash payment or periodic cash payments to such entity, to the extent that the stay under section 362 of this title, use, sale, or lease under section 363 of this title, or any grant of a lien under section 364 of this title results in a decrease in the value of property securing a claim or of an entity's ownership interest in property; (2) providing to such entity an additional or replacement lien to the extent that such stay, use, sale, lease, or grant results in a decrease in the value of property securing a claim or of an entity's ownership interest in property; (3) paying to such entity for the use of farmland the reasonable rent customary in the community where the property is located, based upon the rental value, net income, and earning capacity of the property; or (4) granting such other relief, other than entitling such entity to compensation allowable under section 503(b)(1) of this title as an administrative expense, as will adequately protect the value of property securing a claim or of such entity's ownership interest in property. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3107.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. ------DocID 14876 Document 221 of 646------ -CITE- 11 USC Sec. 1206 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER I -HEAD- Sec. 1206. Sales free of interests -STATUTE- After notice and a hearing, in addition to the authorization contained in section 363(f), the trustee in a case under this chapter may sell property under section 363(b) and (c) free and clear of any interest in such property of an entity other than the estate if the property is farmland or farm equipment, except that the proceeds of such sale shall be subject to such interest. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3108.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. ------DocID 14877 Document 222 of 646------ -CITE- 11 USC Sec. 1207 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER I -HEAD- Sec. 1207. Property of the estate -STATUTE- (a) Property of the estate includes, in addition to the property specified in section 541 of this title - (1) all property of the kind specified in such section that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7 of this title, whichever occurs first; and (2) earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7 of this title, whichever occurs first. (b) Except as provided in section 1204, a confirmed plan, or an order confirming a plan, the debtor shall remain in possession of all property of the estate. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3108.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1230 of this title. ------DocID 14878 Document 223 of 646------ -CITE- 11 USC Sec. 1208 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER I -HEAD- Sec. 1208. Conversion or dismissal -STATUTE- (a) The debtor may convert a case under this chapter to a case under chapter 7 of this title at any time. Any waiver of the right to convert under this subsection is unenforceable. (b) On request of the debtor at any time, if the case has not been converted under section 706 or 1112 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable. (c) On request of a party in interest, and after notice and a hearing, the court may dismiss a case under this chapter for cause, including - (1) unreasonable delay, or gross mismanagement, by the debtor that is prejudicial to creditors; (2) nonpayment of any fees and charges required under chapter 123 of title 28; (3) failure to file a plan timely under section 1221 of this title; (4) failure to commence making timely payments required by a confirmed plan; (5) denial of confirmation of a plan under section 1225 of this title and denial of a request made for additional time for filing another plan or a modification of a plan; (6) material default by the debtor with respect to a term of a confirmed plan; (7) revocation of the order of confirmation under section 1230 of this title, and denial of confirmation of a modified plan under section 1229 of this title; (8) termination of a confirmed plan by reason of the occurrence of a condition specified in the plan; or (9) continuing loss to or diminution of the estate and absence of a reasonable likelihood of rehabilitation. (d) On request of a party in interest, and after notice and a hearing, the court may dismiss a case under this chapter or convert a case under this chapter to a case under chapter 7 of this title upon a showing that the debtor has committed fraud in connection with the case. (e) Notwithstanding any other provision of this section, a case may not be converted to a case under another chapter of this title unless the debtor may be a debtor under such chapter. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3108.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 348, 365, 706, 726, 728, 1307 of this title. ------DocID 14879 Document 224 of 646------ -CITE- 11 USC SUBCHAPTER II -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER II -HEAD- SUBCHAPTER II - THE PLAN ------DocID 14880 Document 225 of 646------ -CITE- 11 USC Sec. 1221 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER II -HEAD- Sec. 1221. Filing of plan -STATUTE- The debtor shall file a plan not later than 90 days after the order for relief under this chapter, except that the court may extend such period if an extension is substantially justified. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3109.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 348, 1208 of this title. ------DocID 14881 Document 226 of 646------ -CITE- 11 USC Sec. 1222 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER II -HEAD- Sec. 1222. Contents of plan -STATUTE- (a) The plan shall - (1) provide for the submission of all or such portion of future earnings or other future income of the debtor to the supervision and control of the trustee as is necessary for the execution of the plan; (2) provide for the full payment, in deferred cash payments, of all claims entitled to priority under section 507 of this title, unless the holder of a particular claim agrees to a different treatment of such claim; and (3) if the plan classifies claims and interests, provide the same treatment for each claim or interest within a particular class unless the holder of a particular claim or interest agrees to less favorable treatment. (b) Subject to subsections (a) and (c) of this section, the plan may - (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 treat claims for a consumer debt of the debtor if an individual is liable on such consumer debt with the debtor differently than other unsecured claims; (2) modify the rights of holders of secured claims, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims; (3) provide for the curing or waiving of any default; (4) provide for payments on any unsecured claim to be made concurrently with payments on any secured claim or any other unsecured claim; (5) provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any unsecured claim or secured claim on which the last payment is due after the date on which the final payment under the plan is due; (6) subject to section 365 of this title, provide for the assumption, rejection, or assignment of any executory contract or unexpired lease of the debtor not previously rejected under such section; (7) provide for the payment of all or part of a claim against the debtor from property of the estate or property of the debtor; (8) provide for the sale of all or any part of the property of the estate or the distribution of all or any part of the property of the estate among those having an interest in such property; (9) provide for payment of allowed secured claims consistent with section 1225(a)(5) of this title, over a period exceeding the period permitted under section 1222(c); (10) provide for the vesting of property of the estate, on confirmation of the plan or at a later time, in the debtor or in any other entity; and (11) include any other appropriate provision not inconsistent with this title. (c) Except as provided in subsections (b)(5) and (b)(9), the plan may not provide for payments over a period that is longer than three years unless the court for cause approves a longer period, but the court may not approve a period that is longer than five years. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3109.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1223, 1225, 1228, 1229 of this title. ------DocID 14882 Document 227 of 646------ -CITE- 11 USC Sec. 1223 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER II -HEAD- Sec. 1223. Modification of plan before confirmation -STATUTE- (a) The debtor may modify the plan at any time before confirmation, but may not modify the plan so that the plan as modified fails to meet the requirements of section 1222 of this title. (b) After the debtor files a modification under this section, the plan as modified becomes the plan. (c) Any holder of a secured claim that has accepted or rejected the plan is deemed to have accepted or rejected, as the case may be, the plan as modified, unless the modification provides for a change in the rights of such holder from what such rights were under the plan before modification, and such holder changes such holder's previous acceptance or rejection. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3110.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1229 of this title. ------DocID 14883 Document 228 of 646------ -CITE- 11 USC Sec. 1224 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER II -HEAD- Sec. 1224. Confirmation hearing -STATUTE- After expedited notice, the court shall hold a hearing on confirmation of the plan. A party in interest, the trustee, or the United States trustee may object to the confirmation of the plan. Except for cause, the hearing shall be concluded not later than 45 days after the filing of the plan. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3110.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in title 28 section 586. ------DocID 14884 Document 229 of 646------ -CITE- 11 USC Sec. 1225 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER II -HEAD- Sec. 1225. Confirmation of plan -STATUTE- (a) Except as provided in subsection (b), the court shall confirm a plan if - (1) the plan complies with the provisions of this chapter and with the other applicable provisions of this title; (2) any fee, charge, or amount required under chapter 123 of title 28, or by the plan, to be paid before confirmation, has been paid; (3) the plan has been proposed in good faith and not by any means forbidden by law; (4) the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under chapter 7 of this title on such date; (5) with respect to each allowed secured claim provided for by the plan - (A) the holder of such claim has accepted the plan; (B)(i) the plan provides that the holder of such claim retain the lien securing such claim; and (ii) the value, as of the effective date of the plan, of property to be distributed by the trustee or the debtor under the plan on account of such claim is not less than the allowed amount of such claim; or (C) the debtor surrenders the property securing such claim to such holder; and (6) the debtor will be able to make all payments under the plan and to comply with the plan. (b)(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan - (A) the value of the property to be distributed under the plan on account of such claim is not less than the amount of such claim; or (B) the plan provides that all of the debtor's projected disposable income to be received in the three-year period, or such longer period as the court may approve under section 1222(c), beginning on the date that the first payment is due under the plan will be applied to make payments under the plan. (2) For purposes of this subsection, 'disposable income' means income which is received by the debtor and which is not reasonably necessary to be expended - (A) for the maintenance or support of the debtor or a dependent of the debtor; or (B) for the payment of expenditures necessary for the continuation, preservation, and operation of the debtor's business. (c) After confirmation of a plan, the court may order any entity from whom the debtor receives income to pay all or any part of such income to the trustee. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3110.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 347, 1208, 1222, 1229, 1230, 1231 of this title. ------DocID 14885 Document 230 of 646------ -CITE- 11 USC Sec. 1226 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER II -HEAD- Sec. 1226. Payments -STATUTE- (a) Payments and funds received by the trustee shall be retained by the trustee until confirmation or denial of confirmation of a plan. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan. If a plan is not confirmed, the trustee shall return any such payments to the debtor, after deducting - (1) any unpaid claim allowed under section 503(b) of this title; and (2) if a standing trustee is serving in the case, the percentage fee fixed for such standing trustee. (b) Before or at the time of each payment to creditors under the plan, there shall be paid - (1) any unpaid claim of the kind specified in section 507(a)(1) of this title; and (2) if a standing trustee appointed under section 1202(d) (FOOTNOTE 1) of this title is serving in the case, the percentage fee fixed for such standing trustee under section 1202(e) (FOOTNOTE 1) of this title. (FOOTNOTE 1) See References in Text note below. (c) Except as otherwise provided in the plan or in the order confirming the plan, the trustee shall make payments to creditors under the plan. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3111.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -REFTEXT- REFERENCES IN TEXT Section 1202 of this title, referred to in subsec. (b)(2), does not contain a subsec. (e), but did contain a subsec. (c) relating to appointment of standing trustees and a subsec. (d) relating to fixing percentage fees for standing trustees. However, subsecs. (c) and (d) of section 1202 were repealed by section 227 of Pub. L. 99-554, and provisions relating to appointment of and fixing percentage fees for standing trustees are contained in section 586(b) and (e) of Title 28, Judiciary and Judicial Procedure, as amended by section 113(b), (c) of Pub. L. 99-554. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 347 of this title. ------DocID 14886 Document 231 of 646------ -CITE- 11 USC Sec. 1227 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER II -HEAD- Sec. 1227. Effect of confirmation -STATUTE- (a) Except as provided in section 1228(a) of this title, the provisions of a confirmed plan bind the debtor, each creditor, each equity security holder, and each general partner in the debtor, whether or not the claim of such creditor, such equity security holder, or such general partner in the debtor is provided for by the plan, and whether or not such creditor, such equity security holder, or such general partner in the debtor has objected to, has accepted, or has rejected the plan. (b) Except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor. (c) Except as provided in section 1228(a) of this title and except as otherwise provided in the plan or in the order confirming the plan, the property vesting in the debtor under subsection (b) of this section is free and clear of any claim or interest of any creditor provided for by the plan. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3112.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. ------DocID 14887 Document 232 of 646------ -CITE- 11 USC Sec. 1228 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER II -HEAD- Sec. 1228. Discharge -STATUTE- (a) As soon as practicable after completion by the debtor of all payments under the plan, other than payments to holders of allowed claims provided for under section 1222(b)(5) or 1222(b)(10) of this title, unless the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter, the court shall grant the debtor a discharge of all debts provided for by the plan allowed under section 503 of this title or disallowed under section 502 of this title, except any debt - (1) provided for under section 1222(b)(5) or 1222(b)(10) of this title; or (2) of the kind specified in section 523(a) of this title. (b) At any time after the confirmation of the plan and after notice and a hearing, the court may grant a discharge to a debtor that has not completed payments under the plan only if - (1) the debtor's failure to complete such payments is due to circumstances for which the debtor should not justly be held accountable; (2) the value, as of the effective date of the plan, of property actually distributed under the plan on account of each allowed unsecured claim is not less than the amount that would have been paid on such claim if the estate of the debtor had been liquidated under chapter 7 of this title on such date; and (3) modification of the plan under section 1229 of this title is not practicable. (c) A discharge granted under subsection (b) of this section discharges the debtor from all unsecured debts provided for by the plan or disallowed under section 502 of this title, except any debt - (1) provided for under section 1222(b)(5) or 1222(b)(10) of this title; or (2) of a kind specified in section 523(a) of this title. (d) On request of a party in interest before one year after a discharge under this section is granted, and after notice and a hearing, the court may revoke such discharge only if - (1) such discharge was obtained by the debtor through fraud; and (2) the requesting party did not know of such fraud until after such discharge was granted. (e) After the debtor is granted a discharge, the court shall terminate the services of any trustee serving in the case. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3112.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 348, 523, 524, 727, 1227 of this title. ------DocID 14888 Document 233 of 646------ -CITE- 11 USC Sec. 1229 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER II -HEAD- Sec. 1229. Modification of plan after confirmation -STATUTE- (a) At any time after confirmation of the plan but before the completion of payments under such plan, the plan may be modified, on request of the debtor, the trustee, or the holder of an allowed unsecured claim, to - (1) increase or reduce the amount of payments on claims of a particular class provided for by the plan; (2) extend or reduce the time for such payments; or (3) alter the amount of the distribution to a creditor whose claim is provided for by the plan to the extent necessary to take account of any payment of such claim other than under the plan. (b)(1) Sections 1222(a), 1222(b), and 1223(c) of this title and the requirements of section 1225(a) of this title apply to any modification under subsection (a) of this section. (2) The plan as modified becomes the plan unless, after notice and a hearing, such modification is disapproved. (c) A plan modified under this section may not provide for payments over a period that expires after three years after the time that the first payment under the original confirmed plan was due, unless the court, for cause, approves a longer period, but the court may not approve a period that expires after five years after such time. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3113.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1208, 1228, 1230 of this title; title 28 section 586. ------DocID 14889 Document 234 of 646------ -CITE- 11 USC Sec. 1230 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER II -HEAD- Sec. 1230. Revocation of an order of confirmation -STATUTE- (a) On request of a party in interest at any time within 180 days after the date of the entry of an order of confirmation under section 1225 of this title, and after notice and a hearing, the court may revoke such order if such order was procured by fraud. (b) If the court revokes an order of confirmation under subsection (a) of this section, the court shall dispose of the case under section 1207 of this title, unless, within the time fixed by the court, the debtor proposes and the court confirms a modification of the plan under section 1229 of this title. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3113.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1208 of this title. ------DocID 14890 Document 235 of 646------ -CITE- 11 USC Sec. 1231 -EXPCITE- TITLE 11 CHAPTER 12 SUBCHAPTER II -HEAD- Sec. 1231. Special tax provisions -STATUTE- (a) For the purpose of any State or local law imposing a tax on or measured by income, the taxable period of a debtor that is an individual shall terminate on the date of the order for relief under this chapter, unless the case was converted under section 706 of this title. (b) The trustee shall make a State or local tax return of income for the estate of an individual debtor in a case under this chapter for each taxable period after the order for relief under this chapter during which the case is pending. (c) The issuance, transfer, or exchange of a security, or the making or delivery of an instrument of transfer under a plan confirmed under section 1225 of this title, may not be taxed under any law imposing a stamp tax or similar tax. (d) The court may authorize the proponent of a plan to request a determination, limited to questions of law, by a State or local governmental unit charged with responsibility for collection or determination of a tax on or measured by income, of the tax effects, under section 346 of this title and under the law imposing such tax, of the plan. In the event of an actual controversy, the court may declare such effects after the earlier of - (1) the date on which such governmental unit responds to the request under this subsection; or (2) 270 days after such request. -SOURCE- (Added Pub. L. 99-554, title II, Sec. 255, Oct. 27, 1986, 100 Stat. 3113.) -STATAMEND- REPEAL OF SECTION Section repealed effective Oct. 1, 1993, see note set out preceding section 1201 of this title. ------DocID 14891 Document 236 of 646------ -CITE- 11 USC CHAPTER 13 -EXPCITE- TITLE 11 CHAPTER 13 -HEAD- CHAPTER 13 - ADJUSTMENT OF DEBTS OF AN INDIVIDUAL WITH REGULAR INCOME -MISC1- SUBCHAPTER I - OFFICERS, ADMINISTRATION, AND THE ESTATE Sec. 1301. Stay of action against codebtor. 1302. Trustee. 1303. Rights and powers of debtor. 1304. Debtor engaged in business. 1305. Filing and allowance of postpetition claims. 1306. Property of the estate. 1307. Conversion or dismissal. SUBCHAPTER II - THE PLAN 1321. Filing of plan. 1322. Contents of plan. 1323. Modification of plan before confirmation. 1324. Confirmation hearing. 1325. Confirmation of plan. 1326. Payments. 1327. Effect of confirmation. 1328. Discharge. 1329. Modification of plan after confirmation. 1330. Revocation of an order of confirmation. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in sections 101, 103, 109, 321, 326, 329, 330, 346, 347, 362, 363, 365, 502, 706, 1106, 1112 of this title; title 15 section 1673; title 28 sections 157, 586, 1930. ------DocID 14892 Document 237 of 646------ -CITE- 11 USC SUBCHAPTER I -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER I -HEAD- SUBCHAPTER I - OFFICERS, ADMINISTRATION, AND THE ESTATE ------DocID 14893 Document 238 of 646------ -CITE- 11 USC Sec. 1301 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER I -HEAD- Sec. 1301. Stay of action against codebtor -STATUTE- (a) Except as provided in subsections (b) and (c) of this section, after the order for relief under this chapter, a creditor may not act, or commence or continue any civil action, to collect all or any part of a consumer debt of the debtor from any individual that is liable on such debt with the debtor, or that secured such debt, unless - (1) such individual became liable on or secured such debt in the ordinary course of such individual's business; or (2) the case is closed, dismissed, or converted to a case under chapter 7 or 11 of this title. (b) A creditor may present a negotiable instrument, and may give notice of dishonor of such an instrument. (c) On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided by subsection (a) of this section with respect to a creditor, to the extent that - (1) as between the debtor and the individual protected under subsection (a) of this section, such individual received the consideration for the claim held by such creditor; (2) the plan filed by the debtor proposes not to pay such claim; or (3) such creditor's interest would be irreparably harmed by continuation of such stay. (d) Twenty days after the filing of a request under subsection (c)(2) of this section for relief from the stay provided by subsection (a) of this section, such stay is terminated with respect to the party in interest making such request, unless the debtor or any individual that is liable on such debt with the debtor files and serves upon such party in interest a written objection to the taking of the proposed action. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2645; Pub. L. 98-353, title III, Sec. 313, 524, July 10, 1984, 98 Stat. 355, 388.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1301 of the House amendment is identical with the provision contained in section 1301 of the House bill and adopted by the Senate amendment. Section 1301(c)(1) indicates that a basis for lifting the stay is that the debtor did not receive consideration for the claim by the creditor, or in other words, the debtor is really the 'codebtor.' As with other sections in title 11, the standard of receiving consideration is a general rule, but where two co-debtors have agreed to share liabilities in a different manner than profits it is the individual who does not ultimately bear the liability that is protected by the stay under section 1301. SENATE REPORT NO. 95-989 Subsection (a) automatically stays the holder of a claim based on a consumer debt of the chapter 13 debtor from acting or proceeding in any way, except as authorized pursuant to subsections (b) and (c), against an individual or the property of an individual liable with the chapter 13 debtor, unless such codebtor became liable in the ordinary course of his business, or unless the case is closed, dismissed, or converted to another chapter. Under the terms of the agreement with the codebtor who is not in bankruptcy, the creditor has a right to collect all payments to the extent they are not made by the debtor at the time they are due. To the extent to which a chapter 13 plan does not propose to pay a creditor his claims, the creditor may obtain relief from the court from the automatic stay and collect such claims from the codebtor. Conversely, a codebtor obtains the benefit of any payments made to the creditor under the plan. If a debtor defaults on scheduled payments under the plan, then the codebtor would be liable for the remaining deficiency; otherwise, payments not made under the plan may never be made by the codebtor. The obligation of the codebtor to make the creditor whole at the time payments are due remains. The automatic stay under this section pertains only to the collection of a consumer debt, defined by section 101(7) of this title to mean a debt incurred by an individual primarily for a personal, family, or household purpose. Therefore, not all debts owed by a chapter 13 debtor will be subject to the stay of the codebtor, particularly those business debts incurred by an individual with regular income, as defined by section 101(24) of this title, engaged in business, that is permitted by virtue of section 109(b) and section 1304 to obtain chapter 13 relief. Subsection (b) excepts the giving of notice of dishonor of a negotiable instrument from the reach of the codebtor stay. Under subsection (c), if the codebtor has property out of which the creditor's claim can be satisfied, the court can grant relief from the stay absent the transfer of a security interest in that property by the codebtor to the creditor. Correspondingly, if there is reasonable cause to believe that property is about to be disposed of by the codebtor which could be used to satisfy his obligation to the creditor, the court should lift the stay to allow the creditor to perfect his rights against such property. Likewise, if property is subject to rapid depreciation or decrease in value the stay should be lifted to allow the creditor to protect his rights to reach such property. Otherwise, the creditor's interest would be irreparably harmed by such stay. Property which could be used to satisfy the claim could be disposed of or encumbered and placed beyond the reach of the creditor. The creditor should be allowed to protect his rights to reach property which could satisfy his claim and prevent its erosion in value, disposal, or encumbrance. HOUSE REPORT NO. 95-595 This section is new. It is designed to protect a debtor operating under a chapter 13 individual repayment plan case by insulating him from indirect pressures from his creditors exerted through friends or relatives that may have cosigned an obligation of the debtor. The protection is limited, however, to ensure that the creditor involved does not lose the benefit of the bargain he made for a cosigner. He is entitled to full compensation, including any interest, fees, and costs provided for by the agreement under which the debtor obtained his loan. The creditor is simply required to share with other creditors to the extent that the debtor will repay him under the chapter 13 plan. The creditor is delayed, but his substantive rights are not affected. Subsection (a) is the operative subsection. It stays action by a creditor after an order for relief under chapter 13. The creditor may not act, or commence or continue any civil action, to collect all or any part of a consumer debt of the debtor from any individual that is liable on such debt with the debtor, or that has secured the debt, unless the individual became liable or secured the debt in the ordinary course of his business, or the case is closed, dismissed, or converted to chapter 7 or 11. Subsection (b) permits the creditor, notwithstanding the stay, to present a negotiable instrument and to give notice of dishonor of the instrument, in order to preserve his substantive rights against the codebtor as required by applicable nonbankruptcy law. Subsection (c) requires the court to grant relief from the stay in certain circumstances. The court must grant relief to the extent that the debtor does not propose to pay, under the plan, the amount owed to the creditor. The court must also grant relief to the extent that the debtor was really the codebtor in the transaction, that is, to the extent that the nondebtor party actually received the consideration for the claim held by the creditor. Finally, the court must grant relief to the extent that the creditor's interest would be irreparably harmed by the stay, for example, where the codebtor filed bankruptcy himself, or threatened to leave the locale, or lost his job. AMENDMENTS 1984 - Subsec. (c)(3). Pub. L. 98-353, Sec. 524, inserted 'continuation of' after 'by'. Subsec. (d). Pub. L. 98-353, Sec. 313, added subsec. (d). EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 108, 348 of this title. ------DocID 14894 Document 239 of 646------ -CITE- 11 USC Sec. 1302 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER I -HEAD- Sec. 1302. Trustee -STATUTE- (a) If the United States trustee appoints an individual under section 586(b) of title 28 to serve as standing trustee in cases under this chapter and if such individual qualifies under section 322 of this title, then such individual shall serve as trustee in the case. Otherwise, the United States trustee shall appoint one disinterested person to serve as trustee in the case or the United States trustee may serve as a trustee in the case. (b) The trustee shall - (1) perform the duties specified in sections 704(2), 704(3), 704(4), 704(5), 704(6), 704(7), and 704(9) of this title; (2) appear and be heard at any hearing that concerns - (A) the value of property subject to a lien; (B) confirmation of a plan; or (C) modification of the plan after confirmation; (3) dispose of, under regulations issued by the Director of the Administrative Office of the United States Courts, moneys received or to be received in a case under chapter XIII of the Bankruptcy Act; and (FOOTNOTE 1) (FOOTNOTE 1) So in original, 'and' probably should be deleted. (4) advise, other than on legal matters, and assist the debtor in performance under the plan; and (5) ensure that the debtor commences making timely payments under section 1326 of this title. (c) If the debtor is engaged in business, then in addition to the duties specified in subsection (b) of this section, the trustee shall perform the duties specified in sections 1106(a)(3) and 1106(a)(4) of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2645; Pub. L. 98-353, title III, Sec. 314, 525, July 10, 1984, 98 Stat. 356, 388; Pub. L. 99-554, title II, Sec. 228, 283(w), Oct. 27, 1986, 100 Stat. 3103, 3118.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1302 of the House amendment adopts a provision contained in the Senate amendment instead of the position taken in the House bill. Sections 1302(d) and (e) are modeled on the standing trustee system contained in the House bill with the court assuming supervisory functions in districts not under the pilot program. SENATE REPORT NO. 95-989 The principal administrator in a chapter 13 case is the chapter 13 trustee. Experience under chapter XIII of the Bankruptcy Act (chapter 13 of former title 11) has shown that the more efficient and effective wage earner programs have been conducted by standing chapter XIII trustees who exercise a broad range of responsibilities in both the design and the effectuation of debtor plans. Subsection (a) provides administrative flexibility by permitting the bankruptcy judge to appoint an individual from the panel of trustees established pursuant to 28 U.S.C. Sec. 604(f) and qualified under section 322 of title 11, either to serve as a standing trustee in all chapter 13 cases filed in the district or a portion thereof, or to serve in a single case. Subsection (b)(1) makes it clear that the chapter 13 trustee is no mere disbursing agent of the monies paid to him by the debtor under the plan (section 1322(a)(1)), by imposing upon him certain relevant duties of a liquidation trustee prescribed by section 704 of this title. Subsection (b)(2) requires the chapter 13 trustee to appear before and be heard by the bankruptcy court whenever the value of property secured by a lien or the confirmation or modification of a plan after confirmation as provided by sections 1323-1325 is considered by the court. Subsection (b)(3) requires the chapter 13 trustee to advise and counsel the debtor while under chapter 13, except on matters more appropriately left to the attorney for the debtor. The chapter 13 trustee must also assist the debtor in performance under the plan by attempting to tailor the requirements of the plan to the changing needs and circumstances of the debtor during the extension period. Subsection (c) imposes on the trustee in a chapter 13 case filed by a debtor engaged in business the investigative and reporting duties normally required of a chapter 11 debtor or trustee as prescribed by section 1106(a)(3) and (4). HOUSE REPORT NO. 95-595 Subsection (d) gives the trustee an additional duty if the debtor is engaged in business, as defined in section 1304. The trustee must perform the duties specified in sections 1106(a)(3) and 1106(a)(4), relating to investigation of the debtor. -REFTEXT- REFERENCES IN TEXT Chapter XIII of the Bankruptcy Act, referred to in subsec. (b)(3), is chapter XIII of act July 1, 1898, ch. 541, as added June 22, 1938, ch. 575, Sec. 1, 52 Stat. 930, which was classified to chapter 13 (Sec. 1001 et seq.) of former Title 11. -MISC2- AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554, Sec. 228(1), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: 'If the court has appointed an individual under subsection (d) of this section to serve as standing trustee in cases under this chapter and if such individual qualifies under section 322 of this title, then such individual shall serve as trustee in the case. Otherwise, the court shall appoint a person to serve as trustee in the case.' Subsec. (d). Pub. L. 99-554, Sec. 228(2), struck out subsec. (d) which read as follows: 'If the number of cases under this chapter commenced in a particular judicial district so warrant, the court may appoint one or more individuals to serve as standing trustee for such district in cases under this chapter.' Subsec. (e). Pub. L. 99-554, Sec. 283(w), which directed the amendment of par. (1) by substituting 'set for such individual' for 'fix' could not be executed in view of the repeal of subsec. (e) by section 228(2) of Pub. L. 99-554. See 1984 Amendment note below. Pub. L. 99-554, Sec. 228(2), struck out subsec. (e) which read as follows: '(1) A court that has appointed an individual under subsection (d) of this section to serve as standing trustee in cases under this chapter shall set for such individual - '(A) a maximum annual compensation, not to exceed the lowest annual rate of basic pay in effect for grade GS-16 of the General Schedule prescribed under section 5332 of title 5; and '(B) a percentage fee, not to exceed ten percent, based on such maximum annual compensation and the actual, necessary expenses incurred by such individual as standing trustee. '(2) Such individual shall collect such percentage fee from all payments under plans in the cases under this chapter for which such individual serves as standing trustee. Such individual shall pay annually to the Treasury - '(A) any amount by which the actual compensation received by such individual exceeds five percent of all such payments made under plans in cases under this chapter for which such individual serves as standing trustee; and '(B) any amount by which the percentage fee fixed under paragraph (1)(B) of this subsection for all such cases exceeds - '(i) such individual's actual compensation for such cases, as adjusted under subparagraph (A) of this paragraph; plus '(ii) the actual, necessary expenses incurred by such individual as standing trustee in such cases.' 1984 - Subsec. (b)(1). Pub. L. 98-353, Sec. 314(1), substituted '704(7), and 704(9) of this title' for 'and 704(8) of this title'. Subsec. (b)(2). Pub. L. 98-353, Sec. 314(2), struck out 'and' at the end. Subsec. (b)(3) to (5). Pub. L. 98-353, Sec. 525(a), added par. (3) and redesignated former pars. (3) and (4) as (4) and (5), respectively. Pub. L. 98-353, Sec. 314(3), (4), substituted '; and' for the period at end of par. (3) and added par. (4). Subsec. (e)(1). Pub. L. 98-353, Sec. 525(b)(1), which directed the amendment of par. (4) by substituting 'set for such individual' for 'fix' was executed to par. (1) as the probable intent of Congress. Subsec. (e)(1)(A). Pub. L. 98-353, Sec. 525(b)(2), struck out 'for such individual' after 'a maximum annual compensation'. Subsec. (e)(2)(A). Pub. L. 98-353, Sec. 525(b)(3), substituted 'received by' for 'of', and 'of all such payments made' for 'upon all payments'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by section 228 of Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 283 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 322, 326, 546, 557 of this title. ------DocID 14895 Document 240 of 646------ -CITE- 11 USC Sec. 1303 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER I -HEAD- Sec. 1303. Rights and powers of debtor -STATUTE- Subject to any limitations on a trustee under this chapter, the debtor shall have, exclusive of the trustee, the rights and powers of a trustee under sections 363(b), 363(d), 363(e), 363(f), and 363(l), of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2646.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1303 of the House amendment specifies rights and powers that the debtor has exclusive of the trustees. The section does not imply that the debtor does not also possess other powers concurrently with the trustee. For example, although section 1323 is not specified in section 1303, certainly it is intended that the debtor has the power to sue and be sued. SENATE REPORT NO. 95-989 A chapter 13 debtor is vested with the identical rights and powers, and is subject to the same limitations in regard to their exercise, as those given a liquidation trustee by virtue of section 363(b), (d), (e), (f), and (h) of title 11, relating to the sale, use or lease of property. ------DocID 14896 Document 241 of 646------ -CITE- 11 USC Sec. 1304 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER I -HEAD- Sec. 1304. Debtor engaged in business -STATUTE- (a) A debtor that is self-employed and incurs trade credit in the production of income from such employment is engaged in business. (b) Unless the court orders otherwise, a debtor engaged in business may operate the business of the debtor and, subject to any limitations on a trustee under sections 363(c) and 364 of this title and to such limitations or conditions as the court prescribes, shall have, exclusive of the trustee, the rights and powers of the trustee under such sections. (c) A debtor engaged in business shall perform the duties of the trustee specified in section 704(8) of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2646; Pub. L. 98-353, title III, Sec. 311(b)(2), 526, July 10, 1984, 98 Stat. 355, 389.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1304(b) of the House amendment adopts the approach taken in the comparable section of the Senate amendment as preferable to the position taken in the House bill. SENATE REPORT NO. 95-989 Increased access to the simpler, speedier, and less expensive debtor relief provisions of chapter 13 is accomplished by permitting debtors engaged in business to proceed under chapter 13, provided their income is sufficiently stable and regular to permit compliance with a chapter 13 plan (section 101(24)) and that the debtor (or the debtor and spouse) do not owe liquidated, noncontingent unsecured debts of $50,000, or liquidated, noncontingent secured debts of $200,000 (Sec. 109(d)). Section 1304(a) states that a self-employed individual who incurs trade credit in the production of income is a debtor engaged in business. Subsection (b) empowers a chapter 13 debtor engaged in business to operate his business, subject to the rights, powers and limitations that pertain to a trustee under sections 363(c) and 364 of title 11, and subject to such further limitations and conditions as the court may prescribe. Subsection (c) requires a chapter 13 debtor engaged in business to file with the court certain financial statements relating to the operation of the business. AMENDMENTS 1984 - Subsec. (b). Pub. L. 98-353, Sec. 526, struck out the comma after 'of the debtor'. Subsec. (c). Pub. L. 98-353, Sec. 311(b)(2), substituted 'section 704(8)' for 'section 704(7)'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 363, 364 of this title. ------DocID 14897 Document 242 of 646------ -CITE- 11 USC Sec. 1305 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER I -HEAD- Sec. 1305. Filing and allowance of postpetition claims -STATUTE- (a) A proof of claim may be filed by any entity that holds a claim against the debtor - (1) for taxes that become payable to a governmental unit while the case is pending; or (2) that is a consumer debt, that arises after the date of the order for relief under this chapter, and that is for property or services necessary for the debtor's performance under the plan. (b) Except as provided in subsection (c) of this section, a claim filed under subsection (a) of this section shall be allowed or disallowed under section 502 of this title, but shall be determined as of the date such claim arises, and shall be allowed under section 502(a), 502(b), or 502(c) of this title, or disallowed under section 502(d) or 502(e) of this title, the same as if such claim had arisen before the date of the filing of the petition. (c) A claim filed under subsection (a)(2) of this section shall be disallowed if the holder of such claim knew or should have known that prior approval by the trustee of the debtor's incurring the obligation was practicable and was not obtained. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2647.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1305(a)(2) of the House amendment modifies similar provisions contained in the House and Senate bills by restricting application of the paragraph to a consumer debt. Debts of the debtor that are not consumer debts should not be subjected to section 1305(c) or section 1328(d) of the House amendment. Section 1305(b) of the House amendment represents a technical modification of similar provisions contained in the House bill and Senate amendment. The House amendment deletes section 1305(d) of the Senate amendment as unnecessary. Section 502(b)(1) is sufficient to disallow any claim to the extent the claim represents the usurious interest or any other charge forbidden by applicable law. It is anticipated that the Rules of Bankruptcy Procedure may require a creditor filing a proof of claim in a case under chapter 13 to include an affirmative statement as contemplated by section 1305(d) of the Senate amendment. SENATE REPORT NO. 95-989 Section 1305, exclusively applicable in chapter 13 cases, supplements the provisions of sections 501-511 of title 11, dealing with the filing and allowance of claims. Sections 501-511 apply in chapter 13 cases by virtue of section 103(a) of this title. Section 1305(a) provides for the filing of a proof of claim for taxes and other obligations incurred after the filing of the chapter 13 case. Subsection (b) prescribes that section 502 of title 11 governs the allowance of section 1305(a) claims, except that its standards shall be applied as of the date of allowance of the claim, rather than the date of filing of the petition. Subsection (c) requires the disallowance of a postpetition claim for property or services necessary for the debtor's performance under the plan, if the holder of the claim knew or should have known that prior approval by the trustee of the debtor's incurring of the obligation was practicable and was not obtained. HOUSE REPORT NO. 95-595 Subsection (a) permits the filing of a proof of a claim against the debtor that is for taxes that become payable to a governmental unit while the case is pending, or that arises after the date of the filing of the petition for property or services that are necessary for the debtor's performance under the plan, such as auto repairs in order that the debtor will be able to get to work, or medical bills. The effect of the latter provision, in paragraph (2), is to treat postpetition credit extended to a chapter 13 debtor the same as a prepetition claim for purposes of allowance, distribution, and so on. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 348, 1322, 1328 of this title. ------DocID 14898 Document 243 of 646------ -CITE- 11 USC Sec. 1306 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER I -HEAD- Sec. 1306. Property of the estate -STATUTE- (a) Property of the estate includes, in addition to the property specified in section 541 of this title - (1) all property of the kind specified in such section that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first; and (2) earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first. (b) Except as provided in a confirmed plan or order confirming a plan, the debtor shall remain in possession of all property of the estate. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2647; Pub. L. 99-554, title II, Sec. 257(u), Oct. 27, 1986, 100 Stat. 3116.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1306(a)(2) adopts a provision contained in the Senate amendment in preference to a similar provision contained in the House bill. SENATE REPORT NO. 95-989 Section 541 is expressly made applicable to chapter 13 cases by section 103(a). Section 1306 broadens the definition of property of the estate for chapter 13 purposes to include all property acquired and all earnings from services performed by the debtor after the commencement of the case. Subsection (b) nullifies the effect of section 521(3), otherwise applicable, by providing that a chapter 13 debtor need not surrender possession of property of the estate, unless required by the plan or order of confirmation. AMENDMENTS 1986 - Subsec. (a). Pub. L. 99-554 inserted reference to chapter 12 in pars. (1) and (2). EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. ------DocID 14899 Document 244 of 646------ -CITE- 11 USC Sec. 1307 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER I -HEAD- Sec. 1307. Conversion or dismissal -STATUTE- (a) The debtor may convert a case under this chapter to a case under chapter 7 of this title at any time. Any waiver of the right to convert under this subsection is unenforceable. (b) On request of the debtor at any time, if the case has not been converted under section 706, 1112, or 1208 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable. (c) Except as provided in subsection (e) of this section, on request of a party in interest or the United States trustee and after notice and a hearing, the court may convert a case under this chapter to a case under chapter 7 of this title, or may dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, for cause, including - (1) unreasonable delay by the debtor that is prejudicial to creditors; (2) nonpayment of any fees and charges required under chapter 123 of title 28; (3) failure to file a plan timely under section 1321 of this title; (4) failure to commence making timely payments under section 1326 of this title; (5) denial of confirmation of a plan under section 1325 of this title and denial of a request made for additional time for filing another plan or a modification of a plan; (6) material default by the debtor with respect to a term of a confirmed plan; (7) revocation of the order of confirmation under section 1330 of this title, and denial of confirmation of a modified plan under section 1329 of this title; (8) termination of a confirmed plan by reason of the occurrence of a condition specified in the plan other than completion of payments under the plan; (9) only on request of the United States trustee, failure of the debtor to file, within fifteen days, or such additional time as the court may allow, after the filing of the petition commencing such case, the information required by paragraph (1) of section 521; or (10) only on request of the United States trustee, failure to timely file the information required by paragraph (2) of section 521. (d) Except as provided in subsection (e) of this section, at any time before the confirmation of a plan under section 1325 of this title, on request of a party in interest or the United States trustee and after notice and a hearing, the court may convert a case under this chapter to a case under chapter 11 or 12 of this title. (e) The court may not convert a case under this chapter to a case under chapter 7, 11, or 12 of this title if the debtor is a farmer, unless the debtor requests such conversion. (f) Notwithstanding any other provision of this section, a case may not be converted to a case under another chapter of this title unless the debtor may be a debtor under such chapter. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2647; Pub. L. 98-353, title III, Sec. 315, 527, July 10, 1984, 98 Stat. 356, 389; Pub. L. 99-554, title II, Sec. 229, 257(v), Oct. 27, 1986, 100 Stat. 3103, 3116.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1307(a) is derived from the Senate amendment in preference to a comparable provision contained in the House bill. SENATE REPORT NO. 95-989 Subsections (a) and (b) confirm, without qualification, the rights of a chapter 13 debtor to convert the case to a liquidating bankruptcy case under chapter 7 of title 11, at any time, or to have the chapter 13 case dismissed. Waiver of any such right is unenforceable. Subsection (c) specifies various conditions for the exercise of the power of the court to convert a chapter 13 case to one under chapter 7 or to dismiss the case. Subsection (d) deals with the conversion of a chapter 13 case to one under chapter 11. Subsection (e) prohibits conversion of the chapter 13 case filed by a farmer to chapter 7 or 11 except at the request of the debtor. No case is to be converted from chapter 13 to any other chapter, unless the debtor is an eligible debtor under the new chapter. HOUSE REPORT NO. 95-595 Subsection (f) reinforces section 109 by prohibiting conversion to a chapter under which the debtor is not eligible to proceed. AMENDMENTS 1986 - Subsec. (b). Pub. L. 99-554, Sec. 257(v)(1), inserted reference to section 1208 of this title. Subsec. (c). Pub. L. 99-554, Sec. 229(1)(A), inserted 'or the United States trustee' after 'party in interest' in provisions preceding par. (1). Subsec. (c)(9), (10). Pub. L. 99-554, Sec. 229(1)(B)-(D), added pars. (9) and (10). Subsec. (d). Pub. L. 99-554, Sec. 257(v)(2), inserted reference to chapter 12. Pub. L. 99-554, Sec. 229(2), inserted 'or the United States trustee' after 'party in interest'. Subsec. (e). Pub. L. 99-554, Sec. 257(v)(3), inserted reference to chapter 12. 1984 - Subsec. (b). Pub. L. 98-353, Sec. 527(a), inserted a comma after 'time'. Subsec. (c)(4). Pub. L. 98-353, Sec. 315(2), added par. (4). Former par. (4) redesignated (5). Subsec. (c)(5). Pub. L. 98-353, Sec. 315(1), 527(b)(1), redesignated former par. (4) as (5) and inserted 'a request made for' before 'additional'. Former par. (5) redesignated (6). Subsec. (c)(6). Pub. L. 98-353, Sec. 315(1), redesignated former par. (5) as (6). Former par. (6) redesignated (7). Subsec. (c)(7). Pub. L. 98-353, Sec. 315(1), 527(b)(2), redesignated former par. (6) as (7) and substituted 'or' for 'and'. Former par. (7) redesignated (8). Subsec. (c)(8). Pub. L. 98-353, Sec. 315(1), 527(b)(3), redesignated former par. (7) as (8) and inserted 'other than completion of payments under the plan' after 'in the plan'. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by section 229 of Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 257 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 348, 365, 706, 726, 1330 of this title. ------DocID 14900 Document 245 of 646------ -CITE- 11 USC SUBCHAPTER II -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER II -HEAD- SUBCHAPTER II - THE PLAN ------DocID 14901 Document 246 of 646------ -CITE- 11 USC Sec. 1321 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER II -HEAD- Sec. 1321. Filing of plan -STATUTE- The debtor shall file a plan. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2648.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Chapter 13 contemplates the filing of a plan only by the debtor. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1307 of this title. ------DocID 14902 Document 247 of 646------ -CITE- 11 USC Sec. 1322 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER II -HEAD- Sec. 1322. Contents of plan -STATUTE- (a) The plan shall - (1) provide for the submission of all or such portion of future earnings or other future income of the debtor to the supervision and control of the trustee as is necessary for the execution of the plan; (2) provide for the full payment, in deferred cash payments, of all claims entitled to priority under section 507 of this title, unless the holder of a particular claim agrees to a different treatment of such claim; and (3) if the plan classifies claims, provide the same treatment for each claim within a particular class. (b) Subject to subsections (a) and (c) of this section, the plan may - (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 treat claims for a consumer debt of the debtor if an individual is liable on such consumer debt with the debtor differently than other unsecured claims; (2) modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor's principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims; (3) provide for the curing or waiving of any default; (4) provide for payments on any unsecured claim to be made concurrently with payments on any secured claim or any other unsecured claim; (5) notwithstanding paragraph (2) of this subsection, provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any unsecured claim or secured claim on which the last payment is due after the date on which the final payment under the plan is due; (6) provide for the payment of all or any part of any claim allowed under section 1305 of this title; (7) subject to section 365 of this title, provide for the assumption, rejection, or assignment of any executory contract or unexpired lease of the debtor not previously rejected under such section; (8) provide for the payment of all or part of a claim against the debtor from property of the estate or property of the debtor; (9) provide for the vesting of property of the estate, on confirmation of the plan or at a later time, in the debtor or in any other entity; and (10) include any other appropriate provision not inconsistent with this title. (c) The plan may not provide for payments over a period that is longer than three years, unless the court, for cause, approves a longer period, but the court may not approve a period that is longer than five years. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2648; Pub. L. 98-353, title III, Sec. 316, 528, July 10, 1984, 98 Stat. 356, 389.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1322(b)(2) of the House amendment represents a compromise agreement between similar provisions in the House bill and Senate amendment. Under the House amendment, the plan may modify the rights of holders of secured claims other than a claim secured by a security interest in real property that is the debtor's principal residence. It is intended that a claim secured by the debtor's principal residence may be treated with under section 1322(b)(5) of the House amendment. Section 1322(c) adopts a 5-year period derived from the House bill in preference to a 4-year period contained in the Senate amendment. A conforming change is made in section 1329(c) adopting the provision in the House bill in preference to a comparable provision in the Senate amendment. Tax payments in wage earner plans: The House bill provided that a wage earner plan had to provide that all priority claims would be paid in full. The Senate amendment contained a special rule in section 1325(c) requiring that Federal tax claims must be paid in cash, but that such tax claims can be paid in deferred cash installments under the general rules applicable to the payment of debts in a wage earner plan, unless the Internal Revenue Service negotiates with the debtor for some different medium or time for payment of the tax liability. The House bill adopts the substance of the Senate amendment rule under section 1322(a)(2) of the House amendment. A wage earner plan must provide for full payment in deferred cash payments, of all priority claims, unless the holder of a particular claim agrees with a different treatment of such claim. SENATE REPORT NO. 95-989 Chapter 13 is designed to serve as a flexible vehicle for the repayment of part or all of the allowed claims of the debtor. Section 1322 emphasizes that purpose by fixing a minimum of mandatory plan provisions. Subsection (a) requires that the plan submit whatever portion of the future income of the debtor is necessary to implement the plan to the control of the trustee, mandates payment in full of all section 507 priority claims, and requires identical treatment for all claims of a particular class. Subsection (b) permits a chapter 13 plan to (1) divide unsecured claims not entitled to priority under section 507 into classes in the manner authorized for chapter 11 claims; (2) modify the rights of holders of secured and unsecured claims, except claims wholly secured by real estate mortgages; (3) cure or waive any default; (4) propose payments on unsecured claims concurrently with payments on any secured claim or any other class of unsecured claims; (5) provide for curing any default on any secured or unsecured claim on which the final payment is due after the proposed final payment under the plan; (6) provide for payment of any allowed postpetition claim; (7) assume or reject any previously unrejected executory contract or unexpired lease of the debtor; (8) propose the payment of all or any part of any claim from property of the estate or of the debtor; (9) provide for the vesting of property of the estate; and (10) include any other provision not inconsistent with other provisions of title 11. Subsection (c) limits the payment period under the plan to 3 years, except that a 4-year payment period may be permitted by the court. AMENDMENTS 1984 - Subsec. (a)(2). Pub. L. 98-353, Sec. 528(a), inserted a comma after 'payments'. Subsec. (b)(1). Pub. L. 98-353, Sec. 316, inserted '; however, such plan may treat claims for a consumer debt of the debtor if an individual is liable on such consumer debt with the debtor differently than other unsecured claims'. Subsec. (b)(2). Pub. L. 98-353, Sec. 528(b)(1), inserted ', or leave unaffected the rights of the holders of any class of claims'. Subsec. (b)(4). Pub. L. 98-353, Sec. 528(b)(2), inserted 'other' after 'claim or any'. Subsec. (b)(7). Pub. L. 98-353, Sec. 528(b)(3), inserted 'subject to section 365 of this title,' before 'provide', substituted ', rejection, or assignment' for 'or rejection', and substituted 'under such section' for 'under section 365 of this title'. Subsec. (b)(8). Pub. L. 98-353, Sec. 528(b)(4), struck out 'any' before 'part of a claim'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1323, 1328, 1329 of this title. ------DocID 14903 Document 248 of 646------ -CITE- 11 USC Sec. 1323 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER II -HEAD- Sec. 1323. Modification of plan before confirmation -STATUTE- (a) The debtor may modify the plan at any time before confirmation, but may not modify the plan so that the plan as modified fails to meet the requirements of section 1322 of this title. (b) After the debtor files a modification under this section, the plan as modified becomes the plan. (c) Any holder of a secured claim that has accepted or rejected the plan is deemed to have accepted or rejected, as the case may be, the plan as modified, unless the modification provides for a change in the rights of such holder from what such rights were under the plan before modification, and such holder changes such holder's previous acceptance or rejection. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2649.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 The debtor is permitted to modify the plan before confirmation without court approval so long as the modified plan, which becomes the plan on filing, complies with the requirements of section 1322. The original acceptance or rejection of a plan by the holder of a secured claim remains binding unless the modified plan changes the rights of the holder and the holder withdraws or alters its earlier acceptance or rejection. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1329 of this title. ------DocID 14904 Document 249 of 646------ -CITE- 11 USC Sec. 1324 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER II -HEAD- Sec. 1324. Confirmation hearing -STATUTE- After notice, the court shall hold a hearing on confirmation of the plan. A party in interest may object to confirmation of the plan. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2649; Pub. L. 98-353, title III, Sec. 529, July 10, 1984, 98 Stat. 389; Pub. L. 99-554, title II, Sec. 283(x), Oct. 27, 1986, 100 Stat. 3118.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Any party in interest may object to the confirmation of a plan, as distinguished from merely rejecting a plan. An objection to confirmation is predicated on failure of the plan or the procedures employed prior to confirmation to conform with the requirements of chapter 13. The bankruptcy judge is required to provide notice and an opportunity for hearing any such objection to confirmation. AMENDMENTS 1986 - Pub. L. 99-554 struck out 'the' after 'object to'. 1984 - Pub. L. 98-353 struck out 'the' before 'confirmation of the plan'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in title 28 section 586. ------DocID 14905 Document 250 of 646------ -CITE- 11 USC Sec. 1325 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER II -HEAD- Sec. 1325. Confirmation of plan -STATUTE- (a) Except as provided in subsection (b), the court shall confirm a plan if - (1) The plan complies with the provisions of this chapter and with the other applicable provisions of this title; (2) any fee, charge, or amount required under chapter 123 of title 28, or by the plan, to be paid before confirmation, has been paid; (3) the plan has been proposed in good faith and not by any means forbidden by law; (4) the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under chapter 7 of this title on such date; (5) with respect to each allowed secured claim provided for by the plan - (A) the holder of such claim has accepted the plan; (B)(i) the plan provides that the holder of such claim retain the lien securing such claim; and (ii) the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim; or (C) the debtor surrenders the property securing such claim to such holder; and (6) the debtor will be able to make all payments under the plan and to comply with the plan. (b)(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan - (A) the value of the property to be distributed under the plan on account of such claim is not less than the amount of such claim; or (B) the plan provides that all of the debtor's projected disposable income to be received in the three-year period beginning on the date that the first payment is due under the plan will be applied to make payments under the plan. (2) For purposes of this subsection, 'disposable income' means income which is received by the debtor and which is not reasonably necessary to be expended - (A) for the maintenance or support of the debtor or a dependent of the debtor; and (B) if the debtor is engaged in business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business. (c) After confirmation of a plan, the court may order any entity from whom the debtor receives income to pay all or any part of such income to the trustee. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2649; Pub. L. 98-353, title III, Sec. 317, 530, July 10, 1984, 98 Stat. 356, 389; Pub. L. 99-554, title II, Sec. 283(y), Oct. 27, 1986, 100 Stat. 3118.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1325(a)(5)(B) of the House amendment modifies the House bill and Senate amendment to significantly protect secured creditors in chapter 13. Unless the secured creditor accepts the plan, the plan must provide that the secured creditor retain the lien securing the creditor's allowed secured claim in addition to receiving value, as of the effective date of the plan of property to be distributed under the plan on account of the claim not less than the allowed amount of the claim. To this extent, a secured creditor in a case under chapter 13 is treated identically with a recourse creditor under section 1111(b)(1) of the House amendment except that the secured creditor in a case under chapter 13 may receive any property of a value as of the effective date of the plan equal to the allowed amount of the creditor's secured claim rather than being restricted to receiving deferred cash payments. Of course, the secured creditors' lien only secures the value of the collateral and to the extent property is distributed of a present value equal to the allowed amount of the creditor's secured claim the creditor's lien will have been satisfied in full. Thus the lien created under section 1325(a)(5)(B)(i) is effective only to secure deferred payments to the extent of the amount of the allowed secured claim. To the extent the deferred payments exceed the value of the allowed amount of the secured claim and the debtor subsequently defaults, the lien will not secure unaccrued interest represented in such deferred payments. SENATE REPORT NO. 95-989 The bankruptcy court must confirm a plan if (1) the plan satisfies the provisions of chapter 13 and other applicable provisions of title 11; (2) it is proposed in good faith; (3) it is in the best interests of creditors, and defined by subsection (a)(4) of Section 1325; (4) it has been accepted by the holder of each allowed secured claim provided for the plan or where the holder of any such secured claim is to receive value under the plan not less than the amount of the allowed secured claim, or where the debtor surrenders to the holder the collateral securing any such allowed secured claim; (5) the plan is feasible; and (6) the requisite fees and charges have been paid. Subsection (b) authorizes the court to order an entity, as defined by Section 101(15), to pay any income of the debtor to the trustee. Any governmental unit is an entity subject to such an order. AMENDMENTS 1986 - Subsec. (b)(2)(A). Pub. L. 99-554 substituted '; and' for '; or'. 1984 - Subsec. (a). Pub. L. 98-353, Sec. 317(1), substituted 'Except as provided in subsection (b), the' for 'The'. Subsec. (a)(1). Pub. L. 98-353, Sec. 530, inserted 'the' before 'other'. Subsecs. (b), (c). Pub. L. 98-353, Sec. 317(2), (3), added subsec. (b) and redesignated former subsec. (b) as (c). EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1307, 1329, 1330 of this title. ------DocID 14906 Document 251 of 646------ -CITE- 11 USC Sec. 1326 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER II -HEAD- Sec. 1326. Payments -STATUTE- (a)(1) Unless the court orders otherwise, the debtor shall commence making the payments proposed by a plan within 30 days after the plan is filed. (2) A payment made under this subsection shall be retained by the trustee until confirmation or denial of confirmation of a plan. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan. If a plan is not confirmed, the trustee shall return any such payment to the debtor, after deducting any unpaid claim allowed under section 503(b) of this title. (b) Before or at the time of each payment to creditors under the plan, there shall be paid - (1) any unpaid claim of the kind specified in section 507(a)(1) of this title; and (2) if a standing trustee appointed under section 586(b) of title 28 is serving in the case, the percentage fee fixed for such standing trustee under section 586(e)(1)(B) of title 28. (c) Except as otherwise provided in the plan or in the order confirming the plan, the trustee shall make payments to creditors under the plan. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2650; Pub. L. 98-353, title III, Sec. 318(a), 531, July 10, 1984, 98 Stat. 357, 389; Pub. L. 99-554, title II, Sec. 230, 283(z), Oct. 27, 1986, 100 Stat. 3103, 3118.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1326(a)(2) of the House amendment adopts a comparable provision contained in the House bill providing for standing trustees. SENATE REPORT NO. 95-989 Section 1326 supplements the priorities provisions of section 507. Subsection (a) requires accrued costs of administration and filing fees, as well as fees due the chapter 13 trustee, to be disbursed before payments to creditors under the plan. Subsection (b) makes it clear that the chapter 13 trustee is normally to make distribution to creditors of the payments made under the plan by the debtor. HOUSE REPORT NO. 95-595 Subsection (a) requires that before or at the time of each payment any outstanding administrative expenses (and) any percentage fee due for a private standing chapter 13 trustee be paid in full. AMENDMENTS 1986 - Subsec. (a)(2). Pub. L. 99-554, Sec. 283(z), substituted 'payment' for 'payments' in last sentence. Subsec. (b). Pub. L. 99-554, Sec. 230, amended subsec. (b) generally, substituting '586(b) of title 28' for '1302(d) of this title' and '586(e)(1)(B) of title 28' for '1302(e) of this title' in par. (2). 1984 - Subsec. (a). Pub. L. 98-353, Sec. 318(a)(2), added subsec. (a). Former subsec. (a) redesignated (b). Subsec. (b). Pub. L. 98-353, Sec. 318(a)(1), redesignated subsec. (a) as (b). Former subsec. (b) redesignated (c). Subsec. (b)(2). Pub. L. 98-353, Sec. 531, inserted 'of this title' after '1302(d)'. Subsec. (c). Pub. L. 98-353, Sec. 318(a)(1), redesignated former subsec. (b) as (c). EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by section 230 of Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 283 of Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 347, 1302, 1307 of this title. ------DocID 14907 Document 252 of 646------ -CITE- 11 USC Sec. 1327 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER II -HEAD- Sec. 1327. Effect of confirmation -STATUTE- (a) The provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan. (b) Except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor. (c) Except as otherwise provided in the plan or in the order confirming the plan, the property vesting in the debtor under subsection (b) of this section is free and clear of any claim or interest of any creditor provided for by the plan. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2650.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 Subsection (a) binds the debtor and each creditor to the provisions of a confirmed plan, whether or not the claim of the creditor is provided for by the plan and whether or not the creditor has accepted, rejected, or objected to the plan. Unless the plan itself or the order confirming the plan otherwise provides, confirmation is deemed to vest all property of the estate in the debtor, free and clear of any claim or interest of any creditor provided for by the plan. ------DocID 14908 Document 253 of 646------ -CITE- 11 USC Sec. 1328 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER II -HEAD- Sec. 1328. Discharge -STATUTE- (a) As soon as practicable after completion by the debtor of all payments under the plan, unless the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter, the court shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title, except any debt - (1) provided for under section 1322(b)(5) of this title; (2) of the kind specified in paragraph (5) or (8) of section 523(a) or 523(a)(9) (FOOTNOTE 1) of this title; or (FOOTNOTE 1) See 1990 Amendment note below. (3) for restitution included in a sentence on the debtor's conviction of a crime. (b) At any time after the confirmation of the plan and after notice and a hearing, the court may grant a discharge to a debtor that has not completed payments under the plan only if - (1) the debtor's failure to complete such payments is due to circumstances for which the debtor should not justly be held accountable; (2) the value, as of the effective date of the plan, of property actually distributed under the plan on account of each allowed unsecured claim is not less than the amount that would have been paid on such claim if the estate of the debtor had been liquidated under chapter 7 of this title on such date; and (3) modification of the plan under section 1329 of this title is not practicable. (c) A discharge granted under subsection (b) of this section discharges the debtor from all unsecured debts provided for by the plan or disallowed under section 502 of this title, except any debt - (1) provided for under section 1322(b)(5) of this title; or (2) of a kind specified in section 523(a) of this title. (d) Notwithstanding any other provision of this section, a discharge granted under this section does not discharge the debtor from any debt based on an allowed claim filed under section 1305(a)(2) of this title if prior approval by the trustee of the debtor's incurring such debt was practicable and was not obtained. (e) On request of a party in interest before one year after a discharge under this section is granted, and after notice and a hearing, the court may revoke such discharge only if - (1) such discharge was obtained by the debtor through fraud; and (2) the requesting party did not know of such fraud until after such discharge was granted. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2650; Pub. L. 98-353, title III, Sec. 532, July 10, 1984, 98 Stat. 389; Pub. L. 101-508, title III, Sec. 3007(b)(1), Nov. 5, 1990, 104 Stat. 1388-28; Pub. L. 101-581, Sec. 2(b), 3, Nov. 15, 1990, 104 Stat. 2865; Pub. L. 101-647, title XXXI, Sec. 3102(b), 3103, Nov. 29, 1990, 104 Stat. 4916.) -STATAMEND- AMENDMENT OF SECTION For termination of amendment by section 3008 of Pub. L. 101-508, see Effective and Termination Dates of 1990 Amendments note below. -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1328(a) adopts a provision contained in the Senate amendment permitting the court to approve a waiver of discharge by the debtor. It is anticipated that such a waiver must be in writing executed after the order for relief in a case under chapter 13. SENATE REPORT NO. 95-989 The court is to enter a discharge, unless waived, as soon as practicable after completion of payments under the plan. The debtor is to be discharged of all debts provided for by the plan or disallowed under section 502, except a debt provided for under the plan the last payment on which was not due until after the completion of the plan, or a debt incurred for willful and malicious conversion of or injury to the property or person of another. Subsection (b) is the successor to Bankruptcy Act Section 661 (section 1061 of former title 11). This subsection permits the bankruptcy judge to grant the debtor a discharge at any time after confirmation of a plan, if the court determines, after notice and hearing, that the failure to complete payments under the plan is due to circumstances for which the debtor should not justly be held accountable, the distributions made to each creditor under the plan equal in value the amount that would have been paid to the creditor had the estate been liquidated under chapter 7 of title 11 at the date of the hearing under this subsection, and that modification of the plan is impracticable. The discharge granted under subsection (b) relieves the debtor from all unsecured debts provided for by the plan or disallowed under section 502, except nondischargeable debts described in section 523(a) of title 11 or debts of the type covered by section 1322(b)(5). Subsection (d) excepts from any chapter 13 discharge a debt based on an allowed section 1305(a)(2) postpetition claim, if prior trustee approval of the incurring of the debt was practicable but was not obtained. A chapter 13 discharge obtained through fraud and before the moving party gained knowledge of the fraud may be revoked by the court under subsection (e), after notice and hearing, at the request of any party in interest made within 1 year after the discharge was granted. AMENDMENTS 1990 - Subsec. (a)(1). Pub. L. 101-581, Sec. 3(1), and Pub. L. 101-647, Sec. 3103(1), made identical amendments striking 'or' at end. Subsec. (a)(2). Pub. L. 101-581, Sec. 3(2), and Pub. L. 101-647, Sec. 3103(2), made identical amendments substituting '; or' for period at end. Pub. L. 101-581, Sec. 2(b), and Pub. L. 101-647, Sec. 3102(b), which directed identical insertions of 'or 523(a)(9)' after '523(a)(5)', were executed by inserting 'or 523(a)(9)' after 'paragraph (5) or (8) of section 523(a)' to reflect the probable intent of Congress in view of prior amendment by Pub. L. 101-508. See below. Pub. L. 101-508, Sec. 3007(b)(1), 3008, temporarily substituted 'paragraph (5) or (8) of section 523(a)' for 'section 523(a)(5)'. See Effective and Termination Dates of 1990 Amendments note below. Subsec. (a)(3). Pub. L. 101-581, Sec. 3(3), and Pub. L. 101-647, Sec. 3103(3), made identical amendments adding par. (3). 1984 - Subsec. (e)(1). Pub. L. 98-353, Sec. 532(1), inserted 'by the debtor' after 'obtained'. Subsec. (e)(2). Pub. L. 98-353, Sec. 532(2), substituted 'the requesting party did not know of such fraud until' for 'knowledge of such fraud came to the requesting party'. EFFECTIVE AND TERMINATION DATES OF 1990 AMENDMENTS Amendment by Pub. L. 101-647 effective Nov. 29, 1990, but not applicable with respect to cases commenced under this title before Nov. 29, 1990, see section 3104 of Pub. L. 101-647, set out as an Effective Date of 1990 Amendment note under section 523 of this title. Amendment by Pub. L. 101-581 effective Nov. 15, 1990, but not applicable with respect to cases commenced under this title before Nov. 15, 1990, see section 4 of Pub. L. 101-581, set out as an Effective Date of 1990 Amendment note under section 523 of this title. Section 3007(b)(2) of Pub. L. 101-508 provided that: 'The amendment made by paragraph (1) (amending this section) shall not apply to any case under the provisions of title 11, United States Code, commenced before the date of the enactment of this Act (Nov. 5, 1990).' Amendment by Pub. L. 101-508 to cease to be effective Oct. 1, 1996, see section 3008 of Pub. L. 101-508, set out as a note under section 362 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 523, 524 of this title; title 12 section 1715z-1a; title 26 sections 6327, 7434. ------DocID 14909 Document 254 of 646------ -CITE- 11 USC Sec. 1329 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER II -HEAD- Sec. 1329. Modification of plan after confirmation -STATUTE- (a) At any time after confirmation of the plan but before the completion of payments under such plan, the plan may be modified, upon request of the debtor, the trustee, or the holder of an allowed unsecured claim, to - (1) increase or reduce the amount of payments on claims of a particular class provided for by the plan; (2) extend or reduce the time for such payments; or (3) alter the amount of the distribution to a creditor whose claim is provided for by the plan to the extent necessary to take account of any payment of such claim other than under the plan. (b)(1) Sections 1322(a), 1322(b), and 1323(c) of this title and the requirements of section 1325(a) of this title apply to any modification under subsection (a) of this section. (2) The plan as modified becomes the plan unless, after notice and a hearing, such modification is disapproved. (c) A plan modified under this section may not provide for payments over a period that expires after three years after the time that the first payment under the original confirmed plan was due, unless the court, for cause, approves a longer period, but the court may not approve a period that expires after five years after such time. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2651; Pub. L. 98-353, title III, Sec. 319, 533, July 10, 1984, 98 Stat. 357, 389.) -MISC1- HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95-989 At any time prior to the completion of payments under a confirmed plan, the plan may be modified, after notice and hearing, to change the amount of payments to creditors or a particular class of creditors and to extend or reduce the payment period. A modified plan may not contain any provision which could not be included in an original plan as prescribed by section 1322. A modified plan may not call for payments to be made beyond four years as measured from the date of the commencement of payments under the original plan. AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-353, Sec. 319, 533(1), (2), inserted 'of the plan' after 'confirmation', substituted 'such plan' for 'a plan', and inserted provisions respecting requests by the debtor, the trustee, or the holder of an allowed unsecured claim for modification. Subsec. (a)(3). Pub. L. 98-353, Sec. 533(3), substituted 'plan to' for 'plan, to'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1307, 1328, 1330 of this title; title 28 section 586. ------DocID 14910 Document 255 of 646------ -CITE- 11 USC Sec. 1330 -EXPCITE- TITLE 11 CHAPTER 13 SUBCHAPTER II -HEAD- Sec. 1330. Revocation of an order of confirmation -STATUTE- (a) On request of a party in interest at any time within 180 days after the date of the entry of an order of confirmation under section 1325 of this title, and after notice and a hearing, the court may revoke such order if such order was procured by fraud. (b) If the court revokes an order of confirmation under subsection (a) of this section, the court shall dispose of the case under section 1307 of this title, unless, within the time fixed by the court, the debtor proposes and the court confirms a modification of the plan under section 1329 of this title. -SOURCE- (Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2651.) -MISC1- HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 1331 of the House bill and Senate amendment is deleted in the House amendment. Special tax provision: Section 1331 of title 11 of the House bill and the comparable provisions in sections 1322 and 1327(d) of the Senate amendment, pertaining to assessment and collection of taxes in wage earner plans, are deleted, and the governing rule is placed in section 505(c) of the House amendment. The provisions of both bills allowing assessment and collection of taxes after confirmation of the wage-earner plan are modified to allow assessment and collection after the court fixes the fact and amount of a tax liability, including administrative period taxes, regardless of whether this occurs before or after confirmation of the plan. The provision of the House bill limiting the collection of taxes to those assessed before one year after the filing of the petition is eliminated, thereby leaving the period of limitations on assessment of these nondischargeable tax liabilities the usual period provided by the Internal Revenue Code (Title 26). SENATE REPORT NO. 95-989 The court may revoke an order of confirmation procured by fraud, after notice and hearing, on application of a party in interest filed within 180 days after the entry of the order. Thereafter, unless a modified plan is confirmed, the court is to convert or dismiss the chapter 13 case as provided in section 1307. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1307 of this title. ------DocID 14911 Document 256 of 646------ -CITE- 11 USC (CHAPTER 15 -EXPCITE- TITLE 11 (CHAPTER 15 -HEAD- (CHAPTER 15 - REPEALED) ------DocID 14912 Document 257 of 646------ -CITE- 11 USC Sec. 1501 to 151326 -EXPCITE- TITLE 11 (CHAPTER 15 -HEAD- (Sec. 1501 to 151326. Repealed. Pub. L. 99-554, title II, Sec. 231, Oct. 27, 1986, 100 Stat. 3103) -MISC1- Section 1501, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2652, related to applicability of chapter which provided a pilot program for a United States trustee system. Section 15101, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2652, related to definitions. Section 15102, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2652, related to a rule of construction. Section 15103, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2652; Pub. L. 98-353, title III, Sec. 311(b)(3), 318(b), July 10, 1984, 98 Stat. 355, 357, related to applicability of subchapters and sections. Section 15303, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2653, related to involuntary cases. Section 15321, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2653, related to eligibility to serve as trustee. Section 15322, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2653, related to qualification of trustee. Section 15324, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2653, related to removal of trustee or examiner. Section 15326, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2653, related to limitation on compensation of trustee. Section 15330, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2653, related to compensation of officers. Section 15343, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2653, related to examination of debtor. Section 15345, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2654; Pub. L. 97-258, Sec. 3(c), Sept. 13, 1982, 96 Stat. 1064, related to money of estates. Section 15701, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2654, related to interim trustee. Section 15703, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2654, related to successor trustee. Section 15704, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2655, related to duties of trustee. Section 15727, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2655, related to discharge. Section 151102, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2655, related to creditors' and equity security holders' committees. Section 151104, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2655, related to appointment of trustee or examiner. Section 151105, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2656, related to termination of trustee's appointment. Section 151163, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2656, related to appointment of trustee. Section 151302, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2656; Pub. L. 98-353, title III, Sec. 311(b)(4), 534, July 10, 1984, 98 Stat. 355, 390, related to trustees. Section 151326, Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2657, related to payments. EFFECTIVE DATE OF REPEAL Effective date and applicability of repeal by Pub. L. 99-554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99-554, set out as an Effective Date note under section 581 of Title 28, Judiciary and Judicial Procedure. Pub. L. 95-598, title IV, Sec. 408(c), Nov. 6, 1978, 92 Stat. 2687, as amended Pub. L. 98-166, title II, Sec. 200, Nov. 28, 1983, 97 Stat. 1081; Pub. L. 98-353, title III, Sec. 323, July 10, 1984, 98 Stat. 358; Pub. L. 99-429, Sept. 30, 1986, 100 Stat. 985; Pub. L. 99-500, Sec. 101(b) (title II, Sec. 200), Oct. 18, 1986, 100 Stat. 1783-39, 1783-45, and Pub. L. 99-591, Sec. 101(b) (title II, Sec. 200), Oct. 30, 1986, 100 Stat. 3341-39, 3341-45; Pub. L. 99-554, title III, Sec. 307(a), Oct. 27, 1986, 100 Stat. 3125, which provided for the repeal of this chapter at a prospective date, was repealed by Pub. L. 99-554, title III, Sec. 307(b), Oct. 27, 1986, 100 Stat. 3125. ------DocID 14913 Document 258 of 646------ -CITE- 11 USC APPENDIX -EXPCITE- TITLE 11 APPENDIX -HEAD- TITLE 11 - APPENDIX ------DocID 14914 Document 259 of 646------ -CITE- 11 USC BANKRUPTCY RULES AND OFFICIAL FORMS -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS -HEAD- BANKRUPTCY RULES AND OFFICIAL FORMS -MISC1- (EFFECTIVE AUGUST 1, 1983, AS AMENDED TO JANUARY 2, 1991) Part Rule I. Commencement of Case; Proceedings Relating to Petition and Order for Relief 1002 II. Officers and Administration; Notices; Meetings; Examinations; Elections; Attorneys and Accountants 2001 III. Claims and Distribution to Creditors and Equity Interest Holders; Plans 3001 IV. The Debtor: Duties and Benefits 4001 V. Bankruptcy Courts and Clerks 5001 VI. Collection and Liquidation of the Estate 6001 VII. Adversary Proceedings 7001 VIII. Appeals to District Court or Bankruptcy Appellate Panel 8001 IX. General Provisions 9001 X. United States Trustees X-1001 Official Forms BANKRUPTCY RULES Rule 1001. Scope of Rules and Forms; Short Title. PART I. COMMENCEMENT OF CASE; PROCEEDINGS RELATING TO PETITION AND ORDER FOR RELIEF 1002. Commencement of Case. 1003. Involuntary Petition. 1004. Partnership Petition. 1005. Caption of Petition. 1006. Filing Fee. 1007. Lists, Schedules and Statements; Time Limits. 1008. Verification of Petitions and Accompanying Papers. 1009. Amendments of Voluntary Petitions, Lists, Schedules and Statements. 1010. Service of Involuntary Petition and Summons; Petition Commencing Ancillary Case. 1011. Responsive Pleading or Motion in Involuntary and Ancillary Cases. 1012. Abrogated. 1013. Hearing and Disposition of Petition in Involuntary Cases. 1014. Dismissal and Change of Venue. 1015. Consolidation or Joint Administration of Cases Pending in Same Court. 1016. Death or Insanity of Debtor. 1017. Dismissal of Case; Suspension. 1018. Contested Involuntary Petitions; Contested Petitions Commencing Ancillary Cases; Proceedings To Vacate Order for Relief; Applicability of Rules in Part VII Governing Adversary Proceedings. 1019. Conversion of Chapter 11 Reorganization Case or Chapter 13 Individual's Debt Adjustment Case to Chapter 7 Liquidation Case. PART II. OFFICERS AND ADMINISTRATION; NOTICES; MEETINGS; EXAMINATIONS; ELECTIONS; ATTORNEYS AND ACCOUNTANTS 2001. Appointment of Interim Trustee Before Order for Relief in a Chapter 7 Liquidation Case. 2002. Notices to Creditors, Equity Security Holders, and United States. 2003. Meeting of Creditors or Equity Security Holders. 2004. Examination. 2005. Apprehension and Removal of Debtor to Compel Attendance for Examination. 2006. Solicitation and Voting of Proxies in Chapter 7 Liquidation Cases. 2007. Appointment of Creditors' Committee Organized Before Commencement of the Case. 2008. Notice to Trustee of Selection. 2009. Trustees for Estates When Joint Administration Ordered. 2010. Qualification by Trustee; Proceeding on Bond. 2011. Evidence of Debtor in Possession. 2012. Substitution of Trustee or Successor Trustee; Accounting. 2013. Limitation on Appointment or Employment of Trustees, Examiners, Appraisers and Auctioneers. 2014. Employment of Professional Persons. 2015. Duty of Trustee or Debtor in Possession to Keep Records, Make Reports, and Give Notice of Case. 2016. Compensation for Services Rendered and Reimbursement of Expenses. 2017. Examination of Debtor's Transactions with Debtor's Attorney. 2018. Intervention; Right to be Heard. 2019. Representation of Creditors and Equity Security Holders in Chapter 9 Municipality and Chapter 11 Reorganization Cases. PART III. CLAIMS AND DISTRIBUTION TO CREDITORS AND EQUITY INTEREST HOLDERS; PLANS 3001. Proof of Claim. 3002. Filing Proof of Claim or Interest. 3003. Filing Proof of Claim or Equity Security Interest in Chapter 9 Municipality or Chapter 11 Reorganization Cases. 3004. Filing of Claims by Debtor or Trustee. 3005. Filing of Claim, Acceptance, or Rejection by Guarantor, Surety, Indorser, or Other Codebtor. 3006. Withdrawal of Claim or Acceptance or Rejection of Plan. 3007. Objections to Claims. 3008. Reconsideration of Claims. 3009. Declaration and Payment of Dividends in Chapter 7 Liquidation Cases. 3010. Small Dividends and Payments in Chapter 7 Liquidation and Chapter 13 Individual's Debt Adjustment Cases. 3011. Unclaimed Funds in Chapter 7 Liquidation and Chapter 13 Individual's Debt Adjustment Cases. 3012. Valuation of Security. 3013. Classification of Claims and Interests. 3014. Election Pursuant to Sec. 1111(b) by Secured Creditor in Chapter 9 Municipality and Chapter 11 Reorganization Cases. 3015. Filing of Plan in Chapter 13 Individual's Debt Adjustment Cases. 3016. Filing of Plan and Disclosure Statement in Chapter 9 Municipality and Chapter 11 Reorganization Cases. 3017. Court Consideration of Disclosure Statement in Chapter 9 Municipality and Chapter 11 Reorganization Cases. 3018. Acceptance or Rejection of Plans. 3019. Modification of Accepted Plan Before Confirmation. 3020. Deposit; Confirmation of Plan. 3021. Distribution Under Plan. 3022. Final Decree. PART IV. THE DEBTOR: DUTIES AND BENEFITS 4001. Relief from Automatic Stay; Use of Collateral; Obtaining Credit; Agreements. 4002. Duties of Debtor. 4003. Exemptions. 4004. Grant or Denial of Discharge. 4005. Burden of Proof in Objecting to Discharge. 4006. Notice of No Discharge. 4007. Determination of Dischargeability of a Debt. 4008. Discharge and Reaffirmation Hearing. PART V. COURTS AND CLERKS 5001. Courts and Clerks' Offices. 5002. Restrictions on Appointments. 5003. Records Kept by the Clerk. 5004. Disqualification. 5005. Filing of Papers. 5006. Certification of Copies of Papers. 5007. Record of Proceedings and Transcripts. 5008. Funds of the Estate. 5009. Closing Cases. 5010. Reopening Cases. 5011. Withdrawal and Abstention from Hearing a Proceeding. PART VI. COLLECTION AND LIQUIDATION OF THE ESTATE 6001. Burden of Proof As to Validity of Postpetition Transfer. 6002. Accounting by Prior Custodian of Property of the Estate. 6003. Disbursement of Money of the Estate. 6004. Use, Sale, or Lease of Property. 6005. Appraisers and Auctioneers. 6006. Assumption, Rejection and Assignment of Executory Contracts. 6007. Abandonment or Disposition of Property. 6008. Redemption of Property from Lien or Sale. 6009. Prosecution and Defense of Proceedings by Trustee or Debtor in Possession. 6010. Proceeding to Avoid Indemnifying Lien or Transfer to Surety. PART VII. ADVERSARY PROCEEDINGS 7001. Scope of Rules of Part VII. 7002. References to Federal Rules of Civil Procedure. 7003. Commencement of Adversary Proceeding. 7004. Process; Service of Summons, Complaint. 7005. Service and Filing of Pleadings and Other Papers. 7007. Pleadings Allowed. 7008. General Rules of Pleading. 7009. Pleading Special Matters. 7010. Form of Pleadings. 7012. Defenses and Objections - When and How Presented - By Pleading or Motion - Motion for Judgment on the Pleadings. 7013. Counterclaim and Cross-Claim. 7014. Third-Party Practice. 7015. Amended and Supplemental Pleadings. 7016. Pre-Trial Procedure; Formulating Issues. 7017. Parties Plaintiff and Defendant; Capacity. 7018. Joinder of Claims and Remedies. 7019. Joinder of Persons Needed for Just Determination. 7020. Permissive Joinder of Parties. 7021. Misjoinder and Non-Joinder of Parties. 7022. Interpleader. 7023. Class Proceedings. 7023.1. Derivative Proceedings by Shareholders. 7023.2. Adversary Proceedings Relating to Unincorporated Associations. 7024. Intervention. 7025. Substitution of Parties. 7026. General Provisions Governing Discovery. 7027. Depositions Before Adversary Proceedings or Pending Appeal. 7028. Persons Before Whom Depositions May Be Taken. 7029. Stipulations Regarding Discovery Procedure. 7030. Depositions Upon Oral Examination. 7031. Deposition Upon Written Questions. 7032. Use of Depositions in Adversary Proceedings. 7033. Interrogatories to Parties. 7034. Production of Documents and Things and Entry Upon Land for Inspection and Other Purposes. 7035. Physical and Mental Examination of Persons. 7036. Requests for Admission. 7037. Failure to Make Discovery: Sanctions. 7040. Assignment of Cases for Trial. 7041. Dismissal of Adversary Proceedings. 7042. Consolidation of Adversary Proceedings; Separate Trials. 7052. Findings by the Court. 7054. Judgments; Costs. 7055. Default. 7056. Summary Judgment. 7062. Stay of Proceedings to Enforce a Judgment. 7064. Seizure of Person or Property. 7065. Injunctions. 7067. Deposit in Court. 7068. Offer of Judgment. 7069. Execution. 7070. Judgment for Specific Acts; Vesting Title. 7071. Process in Behalf of and Against Persons Not Parties. 7087. Transfer of Adversary Proceeding. PART VIII. APPEALS TO DISTRICT COURT OR BANKRUPTCY APPELLATE PANEL 8001. Manner of Taking Appeal; Voluntary Dismissal. 8002. Time for Filing Notice of Appeal. 8003. Leave to Appeal. 8004. Service of the Notice of Appeal. 8005. Stay Pending Appeal. 8006. Record and Issues on Appeal. 8007. Completion and Transmission of the Record; Docketing of the Appeal. 8008. Filing and Service. 8009. Briefs and Appendix; Filing and Service. 8010. Form of Briefs; Length. 8011. Motions. 8012. Oral Argument. 8013. Disposition of Appeal; Weight Accorded Bankruptcy Judge's Findings of Fact. 8014. Costs. 8015. Motion for Rehearing. 8016. Duties of Clerk of District Court and Bankruptcy Appellate Panel. 8017. Stay of Judgment of District Court or Bankruptcy Appellate Panel. 8018. Rules by Circuit Councils and District Courts. 8019. Suspension of Rules in Part VIII. PART IX. GENERAL PROVISIONS 9001. General Definitions. 9002. Meanings of Words in the Federal Rules of Civil Procedure When Applicable to Cases under the Code. 9003. Prohibition of Ex Parte Contacts. 9004. General Requirements of Form. 9005. Harmless Error. 9006. Time. 9007. General Authority to Regulate Notices. 9008. Service or Notice by Publication. 9009. Forms. 9010. Representation and Appearances; Powers of Attorney. 9011. Signing and Verification of Papers. 9012. Oaths and Affirmations. 9013. Motions: Form and Service. 9014. Contested Matters. 9015. Abrogated. 9016. Subpoena. 9017. Evidence. 9018. Secret Confidential, Scandalous, or Defamatory Matter. 9019. Compromise and Arbitration. 9020. Contempt Proceedings. 9021. Entry of Judgment. 9022. Notice of Judgment or Order. 9023. New Trials; Amendment of Judgments. 9024. Relief from Judgment or Order. 9025. Security: Proceedings Against Sureties. 9026. Exceptions Unnecessary. 9027. Removal. 9028. Disability of a Judge. 9029. Local Bankruptcy Rules. 9030. Jurisdiction and Venue Unaffected. 9031. Masters Not Authorized. 9032. Effect of Amendment of Federal Rules of Civil Procedure. 9033. Review of Proposed Findings of Fact and Conclusions of Law in Non-Core Proceedings. PART X. UNITED STATES TRUSTEES X-1001. Applicability of Rules. X-1002. Petitions, Lists, Schedules and Statements. X-1003. Appointment of Interim Trustee before Order for Relief in a Chapter 7 Liquidation Case. X-1004. Notification to Trustee of Selection; Blanket Bond. X-1005. Trustees for Estates When Joint Administration Ordered. X-1006. Meetings of Creditors or Equity Security Holders. X-1007. Duty of Trustee or Debtor in Possession to Make Reports, Furnish Information, and Cooperate with United States Trustee. X-1008. Notices to United States Trustee. X-1009. Right to be Heard; Filing Papers. X-1010. Prohibition of Ex Parte Contacts. OFFICIAL FORMS Form No. 1. Voluntary Petition. No. 2. Application to Pay Filing Fee in Installments. No. 3. Order for Payment of Filing Fee in Installments. No. 4. Unsworn Declaration under Penalty of Perjury on Behalf of a Corporation or Partnership. No. 5. Certificate of Commencement of Case. No. 6. Schedules of Assets and Liabilities. No. 7. Statement of Financial Affairs for Debtor Not Engaged in Business. No. 8. Statement of Financial Affairs for Debtor Engaged in Business. No. 9. List of Creditors Holding 20 Largest Unsecured Claims. No. 10. Chapter 13 Statement. No. 11. Involuntary Case: Creditors' Petition. No. 12. Involuntary Case Against Partnership: Partner's Petition. No. 13. Summons to Debtor. No. 14. Order for Relief. No. 15. Appointment of Committee of Unsecured Creditors in a Chapter 9 Municipality or Chapter 11 Reorganization Case. No. 16. Order for Meeting of Creditors and Related Orders, Combined with Notice Thereof and of Automatic Stay. No. 17. General Power of Attorney. No. 18. Special Power of Attorney. No. 19. Proof of Claim. No. 20. Proof of Claim for Wages, Salary, or Commissions. No. 21. Proof of Multiple Claims for Wages, Salary, or Commissions. No. 22. Order Appointing Interim Trustee and Fixing Amount of Bond. No. 23. Order Approving Election of Trustee and Fixing Amount of Bond. No. 24. Notice to Trustee of Selection and of Time Fixed for Filing a Complaint Objecting to Discharge of Debtor. No. 25. Bond and Order Approving Bond of Trustee. No. 26. Certificate of Retention of Debtor in Possession. No. 27. Discharge of Debtor. No. 28. Order and Notice for Hearing on Disclosure Statement. No. 29. Order Approving Disclosure Statement and Fixing Time for Filing Acceptances or Rejections of Plan, Combined with Notice Thereof. No. 30. Ballot for Accepting or Rejecting Plan. No. 31. Order Confirming Plan. No. 32. Notice of Filing Final Account. No. 33. Final Decree. No. 34. Caption of Adversary Proceedings. No. 35. Notice of Appeal to a District Court or Bankruptcy Appellate Panel from a Judgment of a Bankruptcy Court Entered in an Adversary Proceeding. ------DocID 14915 Document 260 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS BANKRUPTCY RULES -HEAD- BANKRUPTCY RULES -MISC1- EFFECTIVE DATE; APPLICATION; SUPERSEDURE OF PRIOR RULES; TRANSMISSION TO CONGRESS Sections 2 to 4 of the Order of the Supreme Court, dated Apr. 25, 1983, provided: '2. That the aforementioned Bankruptcy Rules shall take effect on August 1, 1983, and shall be applicable to proceedings then pending, except to the extent that in the opinion of the court their application in a pending proceeding would not be feasible or would work injustice, in which event the former procedure applies. '3. That the Bankruptcy Rules, heretofore prescribed by this Court, be, and they hereby are, superseded by the new rules, effective August 1, 1983. '4. That the Chief Justice be, and he hereby is, authorized to transmit these new Bankruptcy Rules to the Congress in accordance with the provisions of Section 2075 of Title 28, United States Code.' ------DocID 14916 Document 261 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1001 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS BANKRUPTCY RULES -HEAD- Rule 1001. Scope of Rules and Forms; Short Title -STATUTE- The Bankruptcy Rules and Forms govern procedure in cases under title 11 of the United States Code. The rules shall be cited as the Bankruptcy Rules and the forms as the Official Bankruptcy Forms. These rules shall be construed to secure the just, speedy, and inexpensive determination of every case and proceeding. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Section 247 of Public Law 95-598, 92 Stat. 2549 amended 28 U.S.C. Sec. 2075 by omitting the last sentence. The effect of the amendment is to require that procedural rules promulgated pursuant to 28 U.S.C. Sec. 2075 be consistent with the bankruptcy statute, both titles 11 and 28 U.S.C. Thus, although Rule 1001 sets forth the scope of the bankruptcy rules and forms, any procedural matters contained in title 11 or 28 U.S.C. with respect to cases filed under 11 U.S.C. would control. See 1 Collier, Bankruptcy 3.04 (2)(c) (15th ed. 1980). 28 U.S.C. Sec. 151 establishes a United States Bankruptcy Court in each district as an adjunct to the district court. This provision does not, however, become effective until April 1, 1984. Public Law 95-598, Sec. 402(b). From October 1, 1979 through March 31, 1984, the courts of bankruptcy as defined in Sec. 1(10) of the Bankruptcy Act, and created in Sec. 2a of that Act continue to be the courts of bankruptcy. Public Law 95-598, Sec. 404(a). From their effective date these rules and forms are to be applicable in cases filed under chapters 7, 9, 11 and 13 of title 11 regardless of whether the court is established by the Bankruptcy Act or by 28 U.S.C. Sec. 151. Rule 9001 contains a broad and general definition of 'bankruptcy court,' 'court' and 'United States Bankruptcy Court' for this purpose. 'Bankruptcy Code' or 'Code' as used in these rules means title 11 of the United States Code, the codification of the bankruptcy law. Public Law 95-598, Sec. 101. See Rule 9001. 'Bankruptcy Act' as used in the notes to these rules means the Bankruptcy Act of 1898 as amended which was repealed by Sec. 401(a) of Public Law 95-598. These rules apply to all cases filed under the Code except as otherwise specifically stated. The final sentence of the rule is derived from former Bankruptcy Rule 903. The objective of 'expeditious and economical administration' of cases under the Code has frequently been recognized by the courts to be 'a chief purpose of the bankruptcy laws.' See Katchen v. Landy, 382 U.S. 323, 328 (1966): Bailey v. Glover, 88 U.S. (21 Wall.) 342, 346-47 (1874): Ex parte Christy, 44 U.S. (3 How.) 292, 312-14, 320-22 (1845). The rule also incorporates the wholesome mandate of the last sentence of Rule 1 of the Federal Rules of Civil Procedure. 2 Moore, Federal Practice 1.13 (2d ed. 1980); 4 Wright & Miller, Federal Practice and Procedure-Civil Sec. 1029 (1969). NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Title I of the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. L. No. 98-353, 98 Stat. 333 (hereinafter the 1984 amendments), created a new bankruptcy judicial system in which the role of the district court was substantially increased. 28 U.S.C. Sec. 1334 confers on the United States district courts original and exclusive jurisdiction over all cases under title 11 of the United States Code and original but not exclusive jurisdiction over civil proceedings arising under title 11 and civil proceedings arising in or related to a case under title 11. Pursuant to 28 U.S.C. Sec. 157(a) the district court may but need not refer cases and proceedings within the district court's jurisdiction to the bankruptcy judges for the district. Judgments or orders of the bankruptcy judges entered pursuant to 28 U.S.C. Sec. 157(b)(1) and (c)(2) are subject to appellate review by the district courts or bankruptcy appellate panels under 28 U.S.C. Sec. 158(a). Rule 81(a)(1) F.R.Civ.P. provides that the civil rules do not apply to proceedings in bankruptcy, except as they may be made applicable by rules promulgated by the Supreme Court, e.g., Part VII of these rules. This amended Bankruptcy Rule 1001 makes the Bankruptcy Rules applicable to cases and proceedings under title 11, whether before the district judges or the bankruptcy judges of the district. ------DocID 14917 Document 262 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES PART I -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- PART I - COMMENCEMENT OF CASE; PROCEEDINGS RELATING TO PETITION AND ORDER FOR RELIEF ------DocID 14918 Document 263 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1002 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1002. Commencement of Case -STATUTE- A petition commencing a case under the Code shall be filed with the clerk. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Under Sec. 301-303 of the Code, a voluntary or involuntary case is commenced by filing a petition with the bankruptcy court. The voluntary petition may request relief under chapter 7, 9, 11, or 13 whereas an involuntary petition may be filed only under chapter 7 or 11. Section 109 of the Code specifies the types of debtors for whom the different forms of relief are available and Sec. 303(a) indicates the persons against whom involuntary petitions may be filed. The rule in subdivision (a) is in harmony with the Code in that it requires the filing to be with the bankruptcy court. The number of copies of the petition to be filed is specified in this rule but a local rule may require additional copies. This rule provides for filing sufficient copies for the court's files and for the trustee in a chapter 7 or 13 case. Official Form No. 1 may be used to seek relief voluntarily under any of the chapters. Only the original need be signed and verified, but the copies must be conformed to the original. See Rules 1008 and 9011(c). As provided in Sec. 362(a) of the Code, the filing of a petition acts as a stay of certain acts and proceedings against the debtor, property of the debtor, and property of the estate. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Rules 1002(a), governing a voluntary petition, 1003(a), governing an involuntary petition, and 1003(e), governing a petition in a case ancillary to a foreign proceeding, are combined into this Rule 1002. If a bankruptcy clerk has been appointed for the district, the petition is filed with the bankruptcy clerk. Otherwise, the petition is filed with the clerk of the district court. The elimination of the reference to the Official Forms of the petition is not intended to change the practice. Rule 9009 provides that the Official Forms 'shall be observed and used' in cases and proceedings under the Code. Subdivision (b) which provided for the distribution of copies of the petition to agencies of the United States has been deleted. Some of these agencies no longer wish to receive copies of the petition, while others not included in subdivision (b) have now requested copies. The Director of the Administrative Office will determine on an ongoing basis which government agencies will be provided a copy of the petition. The number of copies of a petition that must be filed is a matter for local rule. ------DocID 14919 Document 264 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1003 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1003. Involuntary Petition -STATUTE- (a) Transferor or Transferee of Claim A transferor or transferee of a claim shall annex to the original and each copy of the petition a copy of all documents evidencing the transfer, whether transferred unconditionally, for security, or otherwise, and a signed statement that the claim was not transferred for the purpose of commencing the case and setting forth the consideration for and terms of the transfer. An entity that has transferred or acquired a claim for the purpose of commencing a case for liquidation under chapter 7 or for reorganization under chapter 11 shall not be a qualified petitioner. (b) Joinder of Petitioners After Filing If the answer to an involuntary petition filed by fewer than three creditors avers the existence of 12 or more creditors, the debtor shall file with the answer a list of all creditors with their addresses, a brief statement of the nature of their claims, and the amounts thereof. If it appears that there are 12 or more creditors as provided in Sec. 303(b) of the Code, the court shall afford a reasonable opportunity for other creditors to join in the petition before a hearing is held thereon. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a). Official Form No. 11 (Involuntary Case: Creditors' Petition), is prescribed for use by petitioning creditors to have a debtor's assets liquidated under chapter 7 of the Code or the business reorganized under chapter 11. It contains the required allegations as specified in Sec. 303(b) of the Code. Official Form 12 is prescribed for use by fewer than all the general partners to obtain relief for the partnership as governed by Sec. 303(b)(3) of the Code and Rule 1004(b). Although the number of copies to be filed is specified in Rule 1002, a local rule may require additional copies. Only the original need be signed and verified, but the copies must be conformed to the original. See Rules 1008 and 9011(c). The petition must be filed with the bankruptcy court. This provision implements Sec. 303(b) which provides that an involuntary case is commenced by filing the petition with the court. As provided in Sec. 362 of the Code, the filing of the petition acts as a stay of certain acts and proceedings against the debtor, the debtor's property and property of the estate. Subdivision (c) retains the explicitness of former Bankruptcy Rule 104(d) that a transfer of a claim for the purpose of commencing a case under the Code is a ground for disqualification of a party to the transfer as a petitioner. Section 303(b) 'is not intended to overrule Bankruptcy Rule 104(d), which places certain restrictions on the transfer of claims for the purpose of commencing an involuntary case.' House Report No. 95-595, 95th Cong., 1st Sess. (1977) 322; Senate Report No. 95-989, 95th Cong., 2d Sess. (1978) 33. The subdivision requires disclosure of any transfer of the petitioner's claim as well as a transfer to the petitioner and applies to transfers for security as well as unconditional transfers, Cf. In re 69th & Crandon Bldg. Corp., 97 F.2d 392, 395 (7th Cir.), cert. denied, 305 U.S. 629 (1938), recognizing the right of a creditor to sign a bankruptcy petition notwithstanding a prior assignment of his claim for the purpose of security. This rule does not, however, qualify the requirement of Sec. 303(b)(1) that a petitioning creditor must have a claim not contingent as to liability. Subdivision (d). Section 303(c) of the Code permits a creditor to join in the petition at any time before the case is dismissed or relief is ordered. While this rule does not require the court to give all creditors notice of the petition, the list of creditors filed by the debtor affords a petitioner the information needed to enable him to give notice for the purpose of obtaining the co-petitioners required to make the petition sufficient. After a reasonable opportunity has been afforded other creditors to join in an involuntary petition, the hearing on the petition should be held without further delay. Subdivision (e). This subdivision implements Sec. 304. A petition for relief under Sec. 304 may only be filed by a foreign representative who is defined in Sec. 101(20) generally as a representative of an estate in a foreign proceeding. The term 'foreign proceeding' is defined in Sec. 101(19). Section 304(b) permits a petition filed thereunder to be contested by a party in interest. Subdivision (e)(2) therefore requires that the summons and petition be served on any person against whom the relief permitted by Sec. 304(b) is sought as well as on any other party the court may direct. The rules applicable to the procedure when an involuntary petition is filed are made applicable generally when a case ancillary to a foreign proceeding is commenced. These rules include Rule 1010 with respect to issuance and service of a summons, Rule 1011 concerning responsive pleadings and motions, and Rule 1018 which makes various rules in Part VII applicable in proceedings on contested petitions. The venue for a case ancillary to a foreign proceeding is provided in 28 U.S.C. Sec. 1474. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The subject matter of subdivisions (a), (b), and (e) has been incorporated in Rules 1002, 1010, 1011, and 1018. ------DocID 14920 Document 265 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1004 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1004. Partnership Petition -STATUTE- (a) Voluntary Petition A voluntary petition may be filed on behalf of the partnership by one or more general partners if all general partners consent to the petition. (b) Involuntary Petition; Notice and Summons After filing of an involuntary petition under Sec. 303(b)(3) of the Code, (1) the petitioning partners or other petitioners shall cause forthwith a copy of the petition to be sent to or served on each general partner who is not a petitioner; and (2) the clerk shall issue forthwith a summons for service on each general partner who is not a petitioner. Rule 1010 applies to the form and service of the summons. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is adapted from former Bankruptcy Rule 105 and complements Sec. 301 and 303(b)(3) of the Code. Subdivision (a) specifies that while all general partners must consent to the filing of a voluntary petition, it is not necessary that they all execute the petition. It may be executed and filed on behalf of the partnership by fewer than all. Subdivision (b) implements Sec. 303(b)(3) of the Code which provides that an involuntary petition may be filed by fewer than all the general partners or, when all the general partners are debtors, by a general partner, trustee of the partner or creditors of the partnership. Rule 1010, which governs service of a petition and summons in an involuntary case, specifies the time and mode of service on the partnership. When a petition is filed against a partnership under Sec. 303(b)(3), this rule requires an additional service on the nonfiling general partners. It is the purpose of this subdivision to protect the interests of the nonpetitioning partners and the partnership. ------DocID 14921 Document 266 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1005 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1005. Caption of Petition -STATUTE- The caption of a petition commencing a case under the Code shall contain the name of the court, the title of the case, and the docket number. The title of the case shall include the name, social security number and employer's tax identification number of the debtor and all other names used by the debtor within six years before filing the petition. If the petition is not filed by the debtor, it shall include all names used by the debtor which are known to petitioners. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES The title of the case should include all names used by the debtor, such as trade names, former married names and maiden name. See also Official Form No. 1 and the Advisory Committee Note to that Form. Additional names of the debtor are also required to appear in the caption of each notice to creditors. See Rule 2002(m). ------DocID 14922 Document 267 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1006 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1006. Filing Fee -STATUTE- (a) General Requirement Every petition shall be accompanied by the prescribed filing fee except as provided in subdivision (b) of this rule. (b) Payment of Filing Fee in Installments (1) Application for Permission to Pay Filing Fee in Installments. A voluntary petition by an individual shall be accepted for filing if accompanied by the debtor's signed application stating that the debtor is unable to pay the filing fee except in installments. The application shall state the proposed terms of the installment payments and that the applicant has neither paid any money nor transferred any property to an attorney for services in connection with the case. (2) Action on Application. Prior to the meeting of creditors, the court may order the filing fee paid to the clerk or grant leave to pay in installments and fix the number, amount and dates of payment. The number of installments shall not exceed four, and the final installment shall be payable not later than 120 days after filing the petition. For cause shown, the court may extend the time of any installment, provided the last installment is paid not later than 180 days after filing the petition. (3) Postponement of Attorney's Fees. The filing fee must be paid in full before the debtor or chapter 13 trustee may pay an attorney or any other person who renders services to the debtor in connection with the case. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES 28 U.S.C. Sec. 1930 specifies the filing fees for petitions under chapters 7, 9, 11 and 13 of the Code. It also permits the payment in installments by individual debtors. Subdivision (b) is adapted from former Bankruptcy Rule 107. The administrative cost of installments in excess of four is disproportionate to the benefits conferred. Prolonging the period beyond 180 days after the commencement of the case causes undesirable delays in administration. Paragraph (2) accordingly continues the imposition of a maximum of four on the number of installments and retains the maximum period of installment payments allowable on an original application at 120 days. Only in extraordinary cases should it be necessary to give an applicant an extension beyond the four months. The requirement of paragraph (3) that filing fees be paid in full before the debtor may pay an attorney for services in connection with the case codifies the rule declared in In re Latham, 271 Fed. 538 (N.D.N.Y. 1921), and In re Darr, 232 Fed. 415 (N.D. Cal. 1916). NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (b)(3) is expanded to prohibit payments by the debtor or the chapter 13 trustee not only to attorneys but to any person who renders services to the debtor in connection with the case. ------DocID 14923 Document 268 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1007 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1007. Lists, Schedules and Statements; Time Limits -STATUTE- (a) List of Creditors and Equity Security Holders (1) Voluntary Case. In a voluntary case, the debtor shall file with the petition a list containing the name and address of each creditor unless the petition is accompanied by a schedule of liabilities or a Chapter 13 Statement. (2) Involuntary Case. In an involuntary case, the debtor shall file within 15 days after entry of the order for relief, a list containing the name and address of each creditor unless a schedule of liabilities has been filed. (3) Equity Security Holders. In a chapter 11 reorganization case, unless the court orders otherwise, the debtor shall file within 15 days after entry of the order for relief a list of the debtor's equity security holders of each class showing the number and kind of interests registered in the name of each holder, and the last known address or place of business of each holder. (4) Extension of Time. Any extension of time for the filing of the lists required by this subdivision may be granted only on motion for cause shown and on notice to any trustee, committee appointed under the Code, or other party as the court may direct. (b) Schedules and Statements Required (1) The debtor in a chapter 7 liquidation case or chapter 11 reorganization case, unless the court orders otherwise, shall file with the court schedules of assets and liabilities, prepared as prescribed by Official Form No. 6, a schedule of current income and expenditures, prepared as prescribed by Official Form No. 6A, if appropriate, a statement of financial affairs, prepared as prescribed by Official Form No. 7 or No. 8, whichever is appropriate, and a statement of executory contracts. (2) The debtor in a chapter 13 individual's debt adjustment case, unless the court orders otherwise, shall file with the court a Chapter 13 Statement conforming to Official Form No. 10 and, if the debtor is engaged in business, a statement of financial affairs prepared as prescribed by Official Form No. 8. The budget included in the Chapter 13 Statement shall constitute the schedule of current income and current expenditures. (3) An individual debtor in a chapter 7 case shall file a statement of intention as required by Sec. 521(2) of the Code, prepared as prescribed by Official Form No. 8A. A copy of the statement of intention shall be served on the trustee and the creditors named in the statement on or before the filing of the statement. (c) Time Limits The schedules and statements, other than the statement of intention, shall be filed with the petition in a voluntary case, or if the petition is accompanied by a list of all the debtor's creditors and their addresses, within 15 days thereafter, except as otherwise provided in subdivisions (d), (e), and (h) of this rule. In an involuntary case the schedules and statements, other than the statement of intention, shall be filed by the debtor within 15 days after entry of the order for relief. Schedules and statements previously filed in a pending chapter 7 case shall be deemed filed in a superseding case unless the court directs otherwise. Any extension of time for the filing of the schedules and statements may be granted only on motion for cause shown and on notice to any committee, trustee, examiner, or other party as the court may direct. Notice of an extension shall be given to any committee, trustee, or other party as the court may direct. (d) List of 20 Largest Creditors in Chapter 9 Municipality Case or Chapter 11 Reorganization Case In addition to the list required by subdivision (a) of this rule, a debtor in a chapter 9 municipality case or a debtor in a voluntary chapter 11 reorganization case shall file with the petition a list containing the name, address and claim of the creditors that hold the 20 largest unsecured claims, excluding insiders, as prescribed by Official Form No. 9. In an involuntary chapter 11 reorganization case, such list shall be filed by the debtor within 2 days after entry of the order for relief under Sec. 303(h) of the Code. (e) List in Chapter 9 Municipality Cases The list required by subdivision (a) of this rule shall be filed by the debtor in a chapter 9 municipality case within such time as the court shall fix. If a proposed plan requires a revision of assessments so that the proportion of special assessments or special taxes to be assessed against some real property will be different from the proportion in effect at the date the petition is filed, the debtor shall also file with the court a list showing the name and address of each known holder of title, legal or equitable, to real property adversely affected. On motion for cause shown, the court may modify the requirements of this subdivision and subdivision (a) of this rule. ((f) Number of Copies) (Abrogated Mar. 30, 1987, eff. Aug. 1, 1987) (g) Partnership and Partners The general partners of a debtor partnership shall prepare and file the schedules of the assets and liabilities, schedule of current income and expenditures, statement of financial affairs, and statement of executory contracts of the partnership. The court may order any general partner to file a statement of personal assets and liabilities with the court within such time as the court may fix. (h) Interests Acquired or Arising After Petition If, as provided by Sec. 541(a)(5) of the Code, the debtor acquires or becomes entitled to acquire any interest in property, the debtor shall within 10 days after the information comes to the debtor's knowledge or within such further time the court may allow, file a supplemental schedule in the chapter 7 liquidation case, chapter 11 reorganization case, or chapter 13 individual debt adjustment case. If any of the property required to be reported under this subdivision is claimed by the debtor as exempt, the debtor shall claim the exemptions in the supplemental schedule. The duty to file a supplemental schedule in accordance with this subdivision continues notwithstanding the closing of the case, except that the schedule need not be filed in a chapter 11 or chapter 13 case with respect to property acquired after entry of the order confirming a chapter 11 plan or discharging the debtor in a chapter 13 case. (i) Disclosure of List of Security Holders After notice and hearing and for cause shown, the court may direct an entity other than the debtor or trustee to disclose any list of security holders of the debtor in its possession or under its control, indicating the name, address and security held by any of them. The entity possessing this list may be required either to produce the list or a true copy thereof, or permit inspection or copying, or otherwise disclose the information contained on the list. (j) Impounding of Lists On motion of a party in interest and for cause shown the court may direct the impounding of the lists filed under this rule, and may refuse to permit inspection by any entity. The court may permit inspection or use of the lists, however, by any party in interest on terms prescribed by the court. (k) Preparation of List, Schedules, or Statements on Default of Debtor If a list, schedule, or statement, other than a statement of intention, is not prepared and filed as required by this rule, the court may order the trustee, a petitioning creditor, committee, or other party to prepare and file any of these papers within a time fixed by the court. The court may approve reimbursement of the cost incurred in complying with such an order as an administrative expense. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is an adaptation of former Rules 108, 8-106, 10-108 and 11-11. As specified in the rule, it is applicable in all types of cases filed under the Code. Subdivision (a) requires at least a list of creditors with their names and addresses to be filed with the petition. This list is needed for notice of the meeting of creditors (Rule 2002) and notice of the order for relief (Sec. 342 of the Code). The list will also serve to meet the requirements of Sec. 521(1) of the Code. Subdivision (a) recognizes that it may be impossible to file the schedules required by Sec. 521(1) and subdivision (b) of the rule at the time the petition is filed but in order for the case to proceed expeditiously and efficiently it is necessary that the clerk have the names and addresses of creditors. It should be noted that subdivision (d) of the rule requires a special list of the 20 largest unsecured creditors in chapter 9 and 11 cases. That list is for the purpose of selecting a committee of unsecured creditors. Subdivision (b) is derived from former Rule 11-11 and conforms with Sec. 521. This subdivision indicates the forms to be used. The court may dispense with the filing of schedules and the statement of affairs pursuant to Sec. 521. Subdivisions (c) and (f) specify the time periods for filing the papers required by the rule as well as the number of copies. The provisions dealing with an involuntary case are derived from former Bankruptcy Rule 108. Under the Code, a chapter 11 case may be commenced by an involuntary petition (Sec. 303(a)), whereas under the Act, a Chapter XI case could have been commenced only by a voluntary petition. A motion for an extension of time to file the schedules and statements is required to be made on notice to parties, as the court may direct, including a creditors' committee if one has been appointed under Sec. 1102 of the Code and a trustee or examiner if one has been appointed pursuant to Sec. 1104 of the Code. Although written notice is preferable, it is not required by the rule; in proper circumstances the notice may be by telephone or otherwise. Subdivision (d) is new and requires that a list of the 20 largest unsecured creditors, excluding insiders as defined in Sec. 101(25) of the Code, be filed with the petition. The court, pursuant to Sec. 1102 of the Code, is required to appoint a committee of unsecured creditors as soon as practicable after the order for relief. That committee generally is to consist of the seven largest unsecured creditors who are willing to serve. The list should, as indicated on Official Form No. 9, specify the nature and amount of the claim. It is important for the court to be aware of the different types of claims existing in the case and this form should supply such information. Subdivision (e) applies only in chapter 9 municipality cases. It gives greater discretion to the court to determine the time for filing a list of creditors and any other matter related to the list. A list of creditors must at some point be filed since one is required by Sec. 924 of the Code. When the plan affects special assessments, the definitions in Sec. 902(2) and (3) for 'special tax payer' and 'special tax payer affected by the plan' become relevant. Subdivision (g) is derived from former Rules 108(c) and 11-11. Nondebtor general partners are liable to the partnership's trustee for any deficiency in the partnership's estate to pay creditors in full as provided by Sec. 723 of the Code. Subdivision (g) authorizes the court to require a partner to file a statement of personal assets and liabilities to provide the trustee with the relevant information. Subdivision (h) is derived from former Bankruptcy Rule 108(e) for chapter 7, 11 and 13 purposes. It implements the provisions in and language of Sec. 541(a)(5) of the Code. Subdivisions (i) and (j) are adapted from Sec. 165 and 166 of the Act and former Rule 10-108(b) and (c) without change in substance. The term 'party in interest' is not defined in the Code or the rules, but reference may be made to Sec. 1109(b) of the Code. In the context of this subdivision, the term would include the debtor, the trustee, any indenture trustee, creditor, equity security holder or committee appointed pursuant to Sec. 1102 of the Code. Subdivision (k) is derived from former Rules 108(d) and 10-108(a). NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivisions (b), (c), and (g) are amended to provide for the filing of a schedule of current income and current expenditures and the individual debtor's statement of intention. These documents are required by the 1984 amendments to Sec. 521 of the Code. Official Form No. 6A is prescribed for use by an individual debtor for filing a schedule of current income and current expenditures in a chapter 7 or chapter 11 case. Although a partnership or corporation is also required by Sec. 521(1) to file a schedule of current income and current expenditures, no Official Form is prescribed therefor. The time for filing the statement of intention is governed by Sec. 521(2)(A). A copy of the statement of intention must be served on the trustee and the creditors named in the statement within the same time. The provisions of subdivision (c) governing the time for filing when a chapter 11 or chapter 13 case is converted to a chapter 7 case have been omitted from subdivision (c) as amended. Filing after conversion is now governed exclusively by Rule 1019. Subdivision (f) has been abrogated. The number of copies of the documents required by this rule will be determined by local rule. Subdivision (h) is amended to include a direct reference to Sec. 541(a)(5). Subdivision (k) provides that the court may not order an entity other than the debtor to prepare and file the statement of intention. ------DocID 14924 Document 269 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1008 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1008. Verification of Petitions and Accompanying Papers -STATUTE- All petitions, lists, schedules, statements of financial affairs, statements of executory contracts, Chapter 13 Statements and amendments thereto shall be verified or contain an unsworn declaration as provided in 28 U.S.C. Sec. 1746. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule retains the requirement under the Bankruptcy Act and rules that petitions and accompanying papers must be verified. Only the original need be signed and verified, but the copies must be conformed to the original. See Rule 9011(c). The verification may be replaced by an unsworn declaration as provided in 28 U.S.C. Sec. 1746. See also, Official Form No. 1 and Advisory Committee Note. ------DocID 14925 Document 270 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1009 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1009. Amendments of Voluntary Petitions, Lists, Schedules and Statements -STATUTE- (a) General Right To Amend A voluntary petition, list, schedule, statement of financial affairs, statement of executory contracts, or Chapter 13 Statement may be amended by the debtor as a matter of course at any time before the case is closed. The debtor shall give notice of the amendment to the trustee and to any entity affected thereby. On motion of a party in interest, after notice and a hearing, the court may order any voluntary petition, list, schedule, statement of financial affairs, statement of executory contracts, or Chapter 13 Statement to be amended and the clerk shall give notice of the amendment to entities designated by the court. (b) Statement of Intention The statement of intention may be amended by the debtor at any time before the expiration of the period provided in Sec. 521(2)(B) of the Code. The debtor shall give notice of the amendment to the trustee and to any entity affected thereby. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule continues the permissive approach adopted by former Bankruptcy Rule 110 to amendments of voluntary petitions and accompanying papers. Notice of any amendment is required to be given to the trustee. This is particularly important with respect to any amendment of the schedule of property affecting the debtor's claim of exemptions. Notice of any amendment of the schedule of liabilities is to be given to any creditor whose claim is changed or newly listed. The rule does not continue the provision permitting the court to order an amendment on its own initiative. Absent a request in some form by a party in interest, the court should not be involved in administrative matters affecting the estate. If a list or schedule is amended to include an additional creditor, the effect on the dischargeability of the creditor's claim is governed by the provisions of Sec. 523(a)(3) of the Code. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a) is amended to require notice and a hearing in the event a party in interest other than the debtor seeks to amend. The number of copies of the amendment will be determined by local rule of court. Subdivision (b) is added to treat amendments of the statement of intention separately from other amendments. The intention of the individual debtor must be performed within 45 days of the filing of the statement, unless the court extends the period. Subdivision (b) limits the time for amendment to the time for performance under Sec. 521(2)(B) of the Code or any extension granted by the court. ------DocID 14926 Document 271 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1010 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1010. Service of Involuntary Petition and Summons; Petition Commencing Ancillary Case -STATUTE- On the filing of an involuntary petition or a petition commencing a case ancillary to a foreign proceeding the clerk shall forthwith issue a summons for service. When an involuntary petition is filed, service shall be made on the debtor. When a petition commencing an ancillary case is filed, service shall be made on the parties against whom relief is sought pursuant to Sec. 304(b) of the Code and on such other parties as the court may direct. The summons shall conform to Official Form No. 13 and a copy shall be served with a copy of the petition in the manner provided for service of a summons and complaint by Rule 7004(a) or (b). If service cannot be so made, the court may order the summons and petition to be served by mailing copies to the party's last known address, and by not less than one publication in a manner and form directed by the court. The summons and petition may be served on the party anywhere. Rule 7004(f) and Rule 4(g) and (h) F.R.Civ.P. apply when service is made or attempted under this rule. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule provides the procedure for service of the involuntary petition and summons. It does not deal with service of a summons and complaint instituting an adversary proceeding pursuant to Part VII. While this rule is similar to former Bankruptcy Rule 111, it substitutes the clerk of the bankruptcy court for the clerk of the district court as the person who is to issue the summons. The modes of service prescribed by the rule are personal or by mail, when service can be effected in one of these ways in the United States. Such service is to be made in the manner prescribed in adversary proceedings by Rule 7004(a) and (b). If service must be made in a foreign country, the mode of service is one of that set forth in Rule 4(i) F.R.Civ.P. When the methods set out in Rule 7004(a) and (b) cannot be utilized, service by publication coupled with mailing to the last known address is authorized. Cf. Rule 7004(c). The court determines the form and manner of publication as provided in Rule 9007. The publication need not set out the petition or the order directing service by publication. In order to apprise the debtor fairly, however, the publication should include all the information required to be in the summons by Official Form No. 13 and a notice indicating how service is being effected and how a copy of the petition may be obtained. There are no territorial limits on the service authorized by this rule, which continues the practice under the former rules and Act. There must, however, be a basis for jurisdiction pursuant to Sec. 109(a) of the Code for the court to order relief. Venue provisions are set forth in 28 U.S.C. Sec. 1472. Subdivision (f) of Rule 7004 and subdivisions (g) and (h) of Rule 4 F.R.Civ.P. govern time and proof of service and amendment of process or of proof of service. Rule 1004 provides for transmission to nonpetitioning partners of a petition filed against the partnership by fewer than all the general partners. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The rule has been broadened to include service of a petition commencing a case ancillary to a foreign proceeding, previously included in Rule 1003(e)(2). -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in text, are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 14927 Document 272 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1011 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1011. Responsive Pleading or Motion in Involuntary and Ancillary Cases -STATUTE- (a) Who May Contest Petition The debtor named in an involuntary petition or a party in interest to a petition commencing a case ancillary to a foreign proceeding may contest the petition. In the case of a petition against a partnership under Rule 1004(b), a nonpetitioning general partner, or a person who is alleged to be a general partner but denies the allegation, may contest the petition. (b) Defenses and Objections; When Presented Defenses and objections to the petition shall be presented in the manner prescribed by Rule 12 F.R.Civ.P. and shall be filed and served within 20 days after service of the summons, except that if service is made by publication on a party or partner not residing or found within the state in which the court sits, the court shall prescribe the time for filing and serving the response. (c) Effect of Motion Service of a motion under Rule 12(b) F.R.Civ.P. shall extend the time for filing and serving a responsive pleading as permitted by Rule 12(a) F.R.Civ.P. (d) Claims Against Petitioners A claim against a petitioning creditor may not be asserted in the answer except for the purpose of defeating the petition. (e) Other Pleadings No other pleadings shall be permitted, except that the court may order a reply to an answer and prescribe the time for filing and service. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Bankruptcy Rule 112. A petition filed by fewer than all the general partners under Rule 1004(b) to have an order for relief entered with respect to the partnership is referred to as a petition against the partnership because of the adversary character of the proceeding it commences. Cf. Sec. 303(b)(3) of the Code; 2 Collier Bankruptcy 303.05(5)(a) (15th ed. 1981); 2 id. 18.33(2), 18.46 (14th ed. 1966). One who denies an allegation of membership in the firm is nevertheless recognized as a party entitled to contest a petition filed against a partnership under subdivision (b) of Rule 1004 in view of the possible consequences to him of an order for relief against the entity alleged to include him as a member. See Sec. 723 of the Code; Francis v. McNeal, 228 U.S. 695 (1913); Manson v. Williams, 213 U.S. 453 (1909); Carter v. Whisler, 275 Fed. 743, 746-747 (8th Cir. 1921). The rule preserves the features of the former Act and Rule 112 and the Code permitting no response by creditors to an involuntary petition or petition against a partnership under Rule 1004(b). Subdivision (b): Rule 12 F.R.Civ.P. has been looked to by the courts as prescribing the mode of making a defense or objection to a petition in bankruptcy. See Fada of New York, Inc. v. Organization Service Co., Inc., 125 F.2d 120. (2d Cir. 1942); In the Matter of McDougald, 17 F.R.D. 2, 5 (W.D. Ark. 1955); In the Matter of Miller, 6 Fed. Rules Serv. 12f.26, Case No. 1 (N.D. Ohio 1942); Tatum v. Acadian Production Corp. of La., 35 F. Supp. 40, 50 (E.D. La. 1940); 2 Collier, supra 303.07 (15th ed. 1981); 2 id. at 134-40 (14th ed. 1966). As pointed out in the Note accompanying former Bankruptcy Rule 915 an objection that a debtor is neither entitled to the benefits of the Code nor amenable to an involuntary petition goes to jurisdiction of the subject matter and may be made at any time consistent with Rule 12(h)(3) F.R.Civ.P. Nothing in this rule recognizes standing in a creditor or any other person not authorized to contest a petition to raise an objection that a person eligible to file a voluntary petition cannot be the subject of an order for relief on an involuntary petition. See Seligson & King, Jurisdiction and Venue in Bankruptcy, 36 Ref.J. 36, 38-40 (1962). As Collier has pointed out with respect to the Bankruptcy Act, 'the mechanics of the provisions in Sec. 18a and b relating to time for appearance and pleading are unnecessarily confusing. . . . It would seem, though, to be more straightforward to provide, as does Federal Rule 12(a), that the time to respond runs from the date of service rather than the date of issuance of process.' 2 Collier, supra at 119. The time normally allowed for the service and filing of an answer or motion under Rule 1011 runs from the date of the issuance of the summons. Compare Rule 7012. Service of the summons and petition will ordinarily be made by mail under Rule 1010 and must be made within 10 days of the issuance of the summons under Rule 7004(e), which governs the time of service. When service is made by publication, the court should fix the time for service and filing of the response in the light of all the cirumstances so as to afford a fair opportunity to the debtor to enter a defense or objection without unduly delaying the hearing on the petition. Cf. Rule 12(a) F.R.Civ.P. Subdivision (c): Under subdivision (c), the timely service of a motion permitted by Rule 12(b), (e), (f), or (h) F.R.Civ.P. alters the time within which an answer must be filed. If the court denies a motion or postpones its disposition until trial on the merits, the answer must be served within 10 days after notice of the court's action. If the court grants a motion for a more definite statement, the answer may be served any time within 10 days after the service of the more definite statement. Many of the rules governing adversary proceedings apply to proceedings on a contested petition unless the court otherwise directs as provided in Rule 1018. The specific provisions of this Rule 1011 or 7005, however, govern the filing of an answer or motion responsive to a petition. The rules of Part VII are adaptations of the corresponding Federal Rules of Civil Procedure, and the effect of Rule 1018 is thus to make the provisions of Civil Rules 5, 8, 9, 15, and 56, inter alia, generally applicable to the making of defenses and objections to the petition. Rule 1018 follows prior law and practice in this respect. See 2 Collier, Bankruptcy 18.39-18.41 (14th ed. 1966). Subdivision (d). This subdivision adopts the position taken in many cases that an affirmative judgment against a petitioning creditor cannot be sought by a counterclaim filed in an answer to an involuntary petition. See, e.g., Georgia Jewelers, Inc. v. Bulova Watch Co., 302 F.2d 362, 369-70 (5th Cir. 1962); Associated Electronic Supply Co. of Omaha v. C.B.S. Electronic Sales Corp., 288 F.2d 683, 684-85 (8th Cir. 1961). The subdivision follows Harris v. Capehart-Farnsworth Corp., 225 F.2d 268 (8th Cir. 1955), in permitting the debtor to challenge the standing of a petitioner by filing a counterclaim against him. It does not foreclose the court from rejecting a counterclaim that cannot be determined without unduly delaying the decision upon the petition. See In the Matter of Bichel Optical Laboratories, Inc., 299 F. Supp. 545 (D. Minn. 1969). Subdivision (e). This subdivision makes it clear that no reply needs to be made to an answer, including one asserting a counterclaim, unless the court orders otherwise. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The rule has been broadened to make applicable in ancillary cases the provisions concerning responsive pleadings to involuntary petitions. -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in subds. (b) and (c), are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 14928 Document 273 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES (Rule 1012 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- (Rule 1012. Examination of Debtor, Including Discovery, on Issue of Nonpayment of Debts in Involuntary Cases.) (Abrogated Mar. 30, 1987, eff. Aug. 1, 1987) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is abrogated. The discovery rules apply whenever an involuntary petition is contested. Rule 1018. ------DocID 14929 Document 274 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1013 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1013. Hearing and Disposition of Petition in Involuntary Cases -STATUTE- (a) Contested Petition The court shall determine the issues of a contested petition at the earliest practicable time and forthwith enter an order for relief, dismiss the petition, or enter other appropriate orders. (b) Default If no pleading or other defense to a petition is filed within the time provided by Rule 1011, the court, on the next day, or as soon thereafter as practicable, shall enter an order for the relief prayed for in the petition. (c) Order for Relief An order for relief shall conform substantially to Official Form No. 14. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is adapted from former Bankruptcy Rule 115(a) and (c) and applies in chapter 7 and 11 cases. The right to trial by jury under Sec. 19a of the Bankruptcy Act has been abrogated and the availability of a trial by jury is within the discretion of the bankruptcy judge pursuant to 28 U.S.C. Sec. 1480(b). Rule 9015 governs the demand for a jury trial. Subdivision (b) of Rule 1013 is derived from former Bankruptcy Rule 115(c) and Sec. 18(e) of the Bankruptcy Act. If an order for relief is not entered on default, dismissal will ordinarily be appropriate but the court may postpone definitive action. See also Rule 9024 with respect to setting aside an order for relief on default for cause. Subdivision (e) of former Bankruptcy Rule 115 has not been carried over because its provisions are covered by Sec. 303(i) of the Code. ------DocID 14930 Document 275 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1014 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1014. Dismissal and Change of Venue -STATUTE- (a) Dismissal and Transfer of Cases (1) Cases Filed in Proper District. If a petition is filed in a proper district, on timely motion of a party in interest, and after hearing on notice to the petitioners and other entities as directed by the court, the case may be transferred to any other district if the court determines that the transfer is in the interest of justice or for the convenience of the parties. (2) Cases Filed in Improper District. If a petition is filed in an improper district, on timely motion of a party in interest and after hearing on notice to the petitioners and other entities as directed by the court, the case may be dismissed or transferred to any other district if the court determines that transfer is in the interest of justice or for the convenience of the parties. (b) Procedure When Petitions Involving the Same Debtor or Related Debtors Are Filed in Different Courts If petitions commencing cases under the Code are filed in different districts by or against (1) the same debtor, or (2) a partnership and one or more of its general partners, or (3) two or more general partners, or (4) a debtor and an affiliate, on motion filed in the district in which the first petition is filed and after hearing on notice to the petitioners and other entities as directed by the court, the court may determine, in the interest of justice or for the convenience of the parties, the district or districts in which the case or cases should proceed. Except as otherwise ordered by the court in the district in which the first petition is filed, the proceedings on the other petitions shall be stayed by the courts in which they have been filed until the determination is made. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Bankruptcy Rule 116 which contained venue as well as transfer provisions. Public Law 95-598, however, placed the venue provisions in 28 U.S.C. Sec. 1472, and no purpose is served by repeating them in this rule. Transfer of cases is provided in 28 U.S.C. Sec. 1475 but this rule adds the procedure for obtaining transfer. Pursuant to 28 U.S.C. Sec. 1472, proper venue for cases filed under the Code is either the district of domicile, residence, principal place of business, or location of principal assets for 180 days or the longer portion thereof immediately preceding the petition. 28 U.S.C. Sec. 1475 permits the court to transfer a case in the interest of justice and for the convenience of the parties. If the venue is improper, the court may retain or transfer the case in the interest of justice and for the convenience of the parties pursuant to 28 U.S.C. Sec. 1477. Subdivision (a) of the rule is derived from former Bankruptcy Rule 116(b). It implements 28 U.S.C. Sec. 1475 and 1477 and clarifies the procedure to be followed in requesting and effecting transfer of a case. Subdivision (a) protects the parties against being subjected to a transfer except on a timely motion of a party in interest. If the transfer would result in fragmentation or duplication of administration, increase expense, or delay closing the estate, such a factor would bear on the timeliness of the motion as well as on the propriety of the transfer under the standards prescribed in subdivision (a). Subdivision (a) of the rule requires the interest of justice and the convenience of the parties to be the grounds of any transfer of a case or of the retention of a case filed in an improper district as does 28 U.S.C. Sec. 1477. Cf. 28 U.S.C. Sec. 1404(a) (district court may transfer any civil action '(f)or the convenience of parties and witnesses, in the interest of justice'). It also expressly requires a hearing on notice to the petitioner or petitioners before the transfer of any case may be ordered. Under this rule, a motion by a party in interest is necessary. There is no provision for the court to act on its own initiative. Subdivision (b) is derived from former Bankruptcy Rule 116(c). It authorizes the court in which the first petition is filed under the Code by or against a debtor to entertain a motion seeking a determination whether the case so commenced should continue or be transferred and consolidated or administered jointly with another case commenced by or against the same or related person in another court under a different chapter of the Code. Subdivision (b) is correlated with 28 U.S.C. Sec. 1472 which authorizes petitioners to file cases involving a partnership and partners or affiliated debtors. The reference in subdivision (b) to petitions filed 'by' a partner or 'by' any other of the persons mentioned is to be understood as referring to voluntary petitions. It is not the purpose of this subdivision to permit more than one case to be filed in the same court because a creditor signing an involuntary petition happens to be a partner, a partnership, or an affiliate of a debtor. Transfers of adversary proceedings in cases under title 11 are governed by Rule 7087 and 28 U.S.C. Sec. 1475. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Both paragraphs 1 and 2 of subdivision (a) are amended to conform to the standard for transfer in 28 U.S.C. Sec. 1412. Formerly, 28 U.S.C. Sec. 1477 authorized a court either to transfer or retain a case which had been commenced in a district where venue was improper. However, 28 U.S.C. Sec. 1412, which supersedes 28 U.S.C. Sec. 1477, authorizes only the transfer of a case. The rule is amended to delete the reference to retention of a case commenced in the improper district. Dismissal of a case commenced in the improper district as authorized by 28 U.S.C. Sec. 1406 has been added to the rule. If a timely motion to dismiss for improper venue is not filed, the right to object to venue is waived. The last sentence of the rule has been deleted as unnecessary. ------DocID 14931 Document 276 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1015 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1015. Consolidation or Joint Administration of Cases Pending in Same Court -STATUTE- (a) Cases Involving Same Debtor If two or more petitions are pending in the same court by or against the same debtor, the court may order consolidation of the cases. (b) Cases Involving Two or More Related Debtors If a joint petition or two or more petitions are pending in the same court by or against (1) a husband and wife, or (2) a partnership and one or more of its general partners, or (3) two or more general partners, or (4) a debtor and an affiliate, the court may order a joint administration of the estates. Prior to entering an order the court shall give consideration to protecting creditors of different estates against potential conflicts of interest. An order directing joint administration of individual cases of a husband and wife shall, if one spouse has elected the exemptions under Sec. 522(b)(1) of the Code and the other has elected the exemptions under Sec. 522(b)(2), fix a reasonable time within which either may amend the election so that both shall have elected the same exemptions. The order shall notify the debtors that unless they elect the same exemptions within the time fixed by the court, they will be deemed to have elected the exemptions provided by Sec. 522(b)(1). (c) Expediting and Protective Orders When an order for consolidation or joint administration of a joint case or two or more cases is entered pursuant to this rule, while protecting the rights of the parties under the Code, the court may enter orders as may tend to avoid unnecessary costs and delay. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a) of this rule is derived from former Bankruptcy Rule 117(a). It applies to cases when the same debtor is named in both voluntary and involuntary petitions, when husband and wife have filed a joint petition pursuant to Sec. 302 of the Code, and when two or more involuntary petitions are filed against the same debtor. It also applies when cases are pending in the same court by virtue of a transfer of one or more petitions from another court. Subdivision (c) allows the court discretion regarding the order of trial of issues raised by two or more involuntary petitions against the same debtor. Subdivision (b) recognizes the propriety of joint administration of estates in certain kinds of cases. The election or appointment of one trustee for two or more jointly administered estates is authorized by Rule 2009. The authority of the court to order joint administration under subdivision (b) extends equally to the situation when the petitions are filed under different sections, e.g., when one petition is voluntary and the other involuntary, and when all of the petitions are filed under the same section of the Code. Consolidation of cases implies a unitary administration of the estate and will ordinarily be indicated under the circumstances to which subdivision (a) applies. This rule does not deal with the consolidation of cases involving two or more separate debtors. Consolidation of the estates of separate debtors may sometimes be appropriate, as when the affairs of an individual and a corporation owned or controlled by that individual are so intermingled that the court cannot separate their assets and liabilities. Consolidation, as distinguished from joint administration, is neither authorized nor prohibited by this rule since the propriety of consolidation depends on substantive considerations and affects the substantive rights of the creditors of the different estates. For illustrations of the substantive consolidation of separate estates, see Sampsell v. Imperial Paper & Color Corp., 313 U.S. 215 (1941). See also Chemical Bank N.Y. Trust Co. v. Kheel, 369 F.2d 845 (2d Cir. 1966); Seligson & Mandell, Multi-Debtor Petition - Consolidation of Debtors and Due Process of Law, 73 Com.L.J. 341 (1968); Kennedy, Insolvency and the Corporate Veil in the United States in Proceedings of the 8th International Symposium on Comparative Law 232, 248-55 (1971). Joint administration as distinguished from consolidation may include combining the estates by using a single docket for the matters occurring in the administration, including the listing of filed claims, the combining of notices to creditors of the different estates, and the joint handling of other purely administrative matters that may aid in expediting the cases and rendering the process less costly. Subdivision (c) is an adaptation of the provisions of Rule 42(a) F.R.Civ.P. for the purposes of administration of estates under this rule. The rule does not deal with filing fees when an order for the consolidation of cases or joint administration of estates is made. A joint petition of husband and wife, requiring the payment of a single filing fee, is permitted by Sec. 302 of the Code. Consolidation of such a case, however, rests in the discretion of the court; see Sec. 302(b) of the Code. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The amendment to subdivision (b) implements the provisions of Sec. 522(b) of the Code, as enacted by the 1984 amendments. ------DocID 14932 Document 277 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1016 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1016. Death or Insanity of Debtor -STATUTE- Death or insanity of the debtor shall not abate a liquidation case under chapter 7 of the Code. In such event the estate shall be administered and the case concluded in the same manner, so far as possible, as though the death or insanity had not occurred. If a reorganization or individual's debt adjustment case is pending under chapter 11 or chapter 13, the case may be dismissed; or if further administration is possible and in the best interest of the parties, the case may proceed and be concluded in the same manner, so far as possible, as though the death or insanity had not occurred. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Rules 118 and 11-16. In a chapter 11 reorganization case or chapter 13 individual's debt adjustment case, the likelihood is that the case will be dismissed. ------DocID 14933 Document 278 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1017 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1017. Dismissal of Case; Suspension -STATUTE- (a) Voluntary Dismissal; Dismissal for Want of Prosecution Except as provided in Sec. 707(b) and 1307(b) of the Code, a petition shall not be dismissed on motion of the petitioner or for want of prosecution or other cause or by consent of the parties prior to a hearing on notice to all creditors as provided in Rule 2002(a). For such notice the debtor shall file a list of all creditors with their addresses within the time fixed by the court unless the list was previously filed. If the debtor fails to file the list, the court may order the preparing and filing by the debtor or other entity. (b) Dismissal for Failure To Pay Filing Fee (1) For failure to pay any installment of the filing fee, the court may after hearing on notice to the debtor and the trustee dismiss the petition. (2) If the petition is dismissed or the case closed without full payment of the filing fee, the installments collected shall be distributed in the same manner and proportions as if the filing fee had been paid in full. (3) Notice of dismissal for failure to pay the filing fee shall be given within 30 days after the dismissal to creditors appearing on the list of creditors and to those who have filed claims, in the manner provided in Rule 2002. (c) Suspension A petition shall not be dismissed or proceedings suspended pursuant to Sec. 305 of the Code prior to a hearing on notice as provided in Rule 2002(a). (d) Procedure for Dismissal or Conversion A proceeding to dismiss a case or convert a case to another chapter, except pursuant to Sec. 706(a), 707(b), 1112(a), or 1307(a) or (b), is governed by Rule 9014. Conversion or dismissal pursuant to Sec. 706(a), 1112(a), or 1307(b) shall be on motion filed and served as required by Rule 9013. A chapter 13 case shall be converted without court order on the filing by the debtor of a notice of conversion pursuant to Sec. 1307(a). (e) Dismissal of Individual Debtor's Chapter 7 Case for Substantial Abuse An individual debtor's case under chapter 7 may be dismissed for substantial abuse only after a hearing on notice to the debtor and the trustee and such other parties in interest as the court directs. The notice shall advise the debtor of all matters which the court will consider at the hearing. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a) of this rule is derived from former Bankruptcy Rule 120(a). While the rule applies to voluntary and involuntary cases, the 'consent of the parties' referred to is that of petitioning creditors and the debtor in an involuntary case. The last sentence recognizes that the court should not be confined to petitioning creditors in its choice of parties on whom to call for assistance in preparing the list of creditors when the debtor fails to do so. This subdivision implements Sec. 303(j), 707, 1112 and 1307 of the Code by specifying the manner of and persons to whom notice shall be given and requiring the court to hold a hearing on the issue of dismissal. Subdivision (b) is derived from former Bankruptcy Rule 120(b). A dismissal under this subdivision can occur only when the petition has been permitted to be filed pursuant to Rule 1006(b). The provision for notice in paragraph (3) is correlated with the provision in Rule 4006 when there is a waiver, denial, or revocation of a discharge. As pointed out in the Note accompanying Rule 4008, the purpose of notifying creditors of a debtor that no discharge has been granted is to correct their assumption to the contrary so that they can take appropriate steps to protect their claims. Subdivision (c) is new and specifies the notice required for a hearing on dismissal or suspension pursuant to Sec. 305 of the Code. The suspension to which this subdivision refers is that of the case; it does not concern abstention of the court in hearing an adversary proceeding pursuant to 28 U.S.C. Sec. 1478(b). Subdivision (d). Any proceeding, whether by a debtor or other party, to dismiss or convert a case under Sec. 706, 707, 1112, or 1307 is commenced by a motion pursuant to Rule 9014. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (d) is amended to provide that dismissal or conversion pursuant to Sec. 706(a), 707(b), 1112(a), and 1307(b) is not automatically a contested matter under Rule 9014. Conversion or dismissal under these sections is initiated by the filing and serving of a motion as required by Rule 9013. No hearing is required on these motions unless the court directs. Conversion of a chapter 13 case to a chapter 7 case as authorized by Sec. 1307(a) is accomplished by the filing of a notice of conversion. The notice of conversion procedure is modeled on the voluntary dismissal provision of Rule 41(a)(1) F.R.Civ.P. Conversion occurs on the filing of the notice. No court order is required. Subdivision (e) is new and provides the procedure to be followed when a court on its own motion has made a preliminary determination that an individual debtor's chapter 7 case may be dismissed pursuant to Sec. 707(b) of the Code, which was added by the 1984 amendments. A debtor's failure to attend the hearing is not a ground for dismissal pursuant to Sec. 707(b). ------DocID 14934 Document 279 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1018 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1018. Contested Involuntary Petitions; Contested Petitions Commencing Ancillary Cases; Proceedings to Vacate Order for Relief; Applicability of Rules in Part VII Governing Adversary Proceedings -STATUTE- The following rules in Part VII apply to all proceedings relating to a contested involuntary petition, to proceedings relating to a contested petition commencing a case ancillary to a foreign proceeding, and to all proceedings to vacate an order for relief: Rules 7005, 7008-7010, 7015, 7016, 7024-7026, 7028-7037, 7052, 7054, 7056, and 7062, except as otherwise provided in Part I of these rules and unless the court otherwise directs. The court may direct that other rules in Part VII shall also apply. For the purposes of this rule a reference in the Part VII rules to adversary proceedings shall be read as a reference to proceedings relating to a contested involuntary petition, or contested ancillary petition, or proceedings to vacate an order for relief. Reference in the Federal Rules of Civil Procedure to the complaint shall be read as a reference to the petition. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES The rules in Part VII to which this rule refers are adaptations of the Federal Rules of Civil Procedure for the purpose of governing the procedure in adversary proceedings in cases under the Code. See the Note accompanying Rule 7001 infra. Because of the special need for dispatch and expedition in the determination of the issues in an involuntary petition, see Acme Harvester Co. v. Beekman Lumber Co., 222 U.S. 300, 309 (1911), the objective of some of the Federal Rules of Civil Procedure and their adaptations in Part VII to facilitate the settlement of multiple controversies involving many persons in a single lawsuit is not compatible with the exigencies of bankruptcy administration. See United States F. & G. Co. v. Bray, 225 U.S. 205, 218 (1912). For that reason Rules 7013, 7014 and 7018-7023 will rarely be appropriate in a proceeding on a contested petition. Certain terms used in the Federal Rules of Civil Procedure have altered meanings when they are made applicable in cases under the Code by these rules. See Rule 9002 infra. This Rule 1018 requires that the terms 'adversary proceedings' when used in the rules in Part VII and 'complaint' when used in the Federal Rules of Civil Procedure be given altered meanings when they are made applicable to proceedings relating to a contested petition or proceedings to vacate any order for relief. A motion to vacate an order for relief, whether or not made on a petition that was or could have been contested, is governed by the rules in Part VII referred to in this Rule 1018. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Rule 1018 is amended to include within its terms a petition commencing an ancillary case when it is contested. This provision was formerly included in Rule 1003(e)(4). Although this rule does not contain an explicit authorization for the entry of an order for relief when a debtor refuses to cooperate in discovery relating to a contested involuntary petition, the court has ample power under Rule 37(b) F.R.Civ.P., as incorporated by Rule 7037, to enter an order for relief under appropriate circumstances. Rule 37(b) authorizes the court to enter judgment by default or an order that 'facts shall be taken as established.' ------DocID 14935 Document 280 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 1019 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART I -HEAD- Rule 1019. Conversion of Chapter 11 Reorganization Case or Chapter 13 Individual's Debt Adjustment Case to Chapter 7 Liquidation Case -STATUTE- When a chapter 11 or chapter 13 case has been converted or reconverted to a chapter 7 case: (1) Filing of Lists, Inventories, Schedules, Statements. (A) Lists, inventories, schedules, statements of financial affairs, and statements of executory contracts theretofore filed shall be deemed to be filed in the chapter 7 case, unless the court directs otherwise. If they have not been previously filed, the debtor shall comply with Rule 1007 as if an order for relief had been entered on an involuntary petition on the date of the entry of the order directing that the case continue under chapter 7. (B) The statement of intention, if required, shall be filed within 30 days following entry of the order of conversion or before the first date set for the meeting of creditors, whichever is earlier. An extension of time may be granted for cause only on motion made before the time has expired. Notice of an extension shall be given to any committee, trustee, or other party as the court may direct. (2) Notice of Order of Conversion. Within 20 days after entry of the order converting the case to a chapter 7 case, notice of the order shall be given to any trustee in the superseded case and to all creditors in the manner provided by Rule 2002 and shall be included in the notice of the meeting of creditors. (3) New Filing Periods. A new time period for filing claims, a complaint objecting to discharge, or a complaint to obtain a determination of dischargeability of any debt shall commence pursuant to Rules 3002, 4004, or 4007, provided that a new time period shall not commence if a chapter 7 case had been converted to a chapter 11 or 13 case and thereafter reconverted to a chapter 7 case and the time for filing claims, a complaint objecting to discharge, or a complaint to obtain a determination of the dischargeability of any debt, or any extension thereof, expired in the original chapter 7 case. (4) Claims Filed in Superseded Case. All claims actually filed by a creditor in the superseded case shall be deemed filed in the chapter 7 case. (5) Turnover of Records and Property. After qualification of, or assumption of duties by the chapter 7 trustee, any debtor in possession or trustee previously acting in the chapter 11 or 13 case shall, forthwith, unless otherwise ordered, turn over to the chapter 7 trustee all records and property of the estate in the possession or control of the debtor in possession or trustee. (6) Filing Final Report and Schedule of Postpetition Debts. Each debtor in possession or trustee in the superseded case shall file with the court a final report and account within 30 days following the entry of the order of conversion, unless the court directs otherwise. The report shall include a schedule of unpaid debts incurred after commencement of the chapter 11 case. A chapter 13 debtor shall file a schedule of unpaid debts incurred after the commencement of a chapter 13 case. If the conversion order is entered after confirmation of a plan, the debtor shall file with the court (A) a schedule of property not listed in the final report and account acquired after the filing of the original petition but before entry of the conversion order; (B) a schedule of unpaid debts not listed in the final report and account incurred after confirmation but before entry of the conversion order; and (C) a schedule of executory contracts entered into or assumed after the filing of the original petition but before entry of the conversion order. (7) Filing of Postpetition Claims; Notice. On the filing of the schedule of unpaid debts, the court shall order that written notice be given to those entities, including the United States, any state, or any subdivision thereof, that their claims may be filed within 60 days from the entry of the order, pursuant to Rule 3001(a)-(d). The court shall fix the time for filing claims arising from debts not so scheduled or arising from rejection of executory contracts under Sec. 348(c) and 365(d) of the Code. (8) Extension of Time to File Claims Against Surplus. Any extension of time for the filing of claims against a surplus granted pursuant to Rule 3002(c)(6), shall apply to holders of claims who failed to file their claims within the time prescribed, or fixed by the court pursuant to paragraph (7) of this rule, and notice shall be given as provided in Rule 2002. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Bankruptcy Rule 122 and implements Sec. 348 of the Code. The rule applies to proceedings in a chapter 7 case following supersession of a case commenced under chapter 11 or 13, whether the latter was initiated by an original petition or was converted from a pending chapter 7 or another chapter case. The rule is not intended to invalidate any action taken in the superseded case before its conversion to chapter 7. Paragraph (1): If requirements applicable in the superseded case respecting the filing of schedules of debts and property, or lists of creditors and inventory, and of statements of financial affairs have been complied with before the order directing conversion to liquidation, these documents will ordinarily provide all the information about the debts, property, financial affairs, and contracts of the debtor needed for the administration of the estate. If the information submitted in the superseded case is inadequate for the purposes of administration, however, the court may direct the preparation of further informational material and the manner and time of its submission pursuant to paragraph (1). If no schedules, lists, inventories, or statements were filed in the superseded case, this paragraph imposes the duty on the debtor to file schedules and a statement of affairs pursuant to Rule 1007 as if an involuntary petition had been filed on the date when the court directed the conversion of the case to a liquidation case. Paragraphs (2) and (3). Paragraph (2) requires notice to be given to all creditors of the order of conversion. The notice is to be included in the notice of the meeting of creditors and Official Form No. 16 may be adapted for use. A meeting of creditors may have been held in the superseded case as required by Sec. 341(a) of the Code but that would not dispense with the need to hold one in the ensuing liquidation case. Section 701(a) of the Code permits the court to appoint the trustee acting in the chapter 11 or 13 case as interim trustee in the chapter 7 case. Section 702(a) of the Code allows creditors to elect a trustee but only at the meeting of creditors held under Sec. 341. The right to elect a trustee is not lost because the chapter 7 case follows a chapter 11 or 13 case. Thus a meeting of creditors is necessary. The date fixed for the meeting of creditors will control at least the time for filing claims pursuant to Rule 3002(c). That time will remain applicable in the ensuing chapter 7 case except as paragraph (3) provides, if that time had expired in an earlier chapter 7 case which was converted to the chapter 11 or 13 case, it is not revived in the subsequent chapter 7 case. The same is true if the time for filing a complaint objecting to discharge or to determine nondischargeability of a debt had expired. Paragraph (3), however, recognizes that such time may be extended by the court under Rule 4004 or 4007 on motion made within the original prescribed time. Paragraph (4) renders it unnecessary to file anew claims that had been filed in the chapter 11 or 13 case before conversion to chapter 7. Paragraph (5) contemplates that typically, after the court orders conversion of a chapter case to liquidation, a trustee under chapter 7 will forthwith take charge of the property of the estate and proceed expeditiously to liquidate it. The court may appoint the interim trustee in the chapter 7 case pursuant to Sec. 701(a) of the Code. If creditors do not elect a trustee under Sec. 702, the interim trustee becomes the trustee. Paragraph (6) requires the trustee or debtor in possession acting in the chapter 11 or 13 case to file a final report and schedule of debts incurred in that case. This schedule will provide the information necessary for giving the notice required by paragraph (7) of the rule. Paragraph (7) requires that claims that arose in the chapter 11 or 13 case be filed within 60 days after entry of the order converting the case to one under chapter 7. Claims not scheduled pursuant to paragraph (6) of the rule or arising from the rejection of an executory contract entered into during the chapter case may be filed within a time fixed by the court. Pursuant to Sec. 348(c) of the Code, the conversion order is treated as the order for relief to fix the time for the trustee to assume or reject executory contracts under Sec. 365(d). Paragraph (8) permits the extension of the time for filing claims when claims are not timely filed but only with respect to any surplus that may remain in the estate. See also Sec. 726(a)(2)(C) and (3) of the Code. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Paragraph (1) is amended to provide for the filing of a statement of intention in a case converted to chapter 7. Paragraph (1)(B) is added to provide for the filing of the statement of intention when a case is converted to chapter 7. The time for filing the statement of intention and for an extension of that time is governed by Sec. 521(2)(A) of the Code. An extension of time for other required filings is governed by Rule 1007(c), which paragraph (1)(A) incorporates by reference. Because of the amendment to Rule 1007(c), the filing of new lists, schedules, and statements is now governed exclusively by Rule 1019(1). Paragraph (3) of the rule is expanded to include the effect of conversion of a chapter 11 or 13 case to a chapter 7 case. On conversion of a case from chapter 11 or 13 to a chapter 7 case, parties have a new period within which to file claims or complaints relating to the granting of the discharge or the dischargeability of a debt. This amendment is consistent with the holding and reasoning of the court in F & M Marquette Nat'l Bank v. Richards, 780 F.2d 24 (8th Cir. 1985). Paragraph (4) is amended to deal directly with the status of claims which are properly listed on the schedules filed in a chapter 11 case and deemed filed pursuant to Sec. 1111(a) of the Code. Section 1111(a) is only applicable to the chapter 11 case. On conversion of the chapter 11 case to a chapter 7 case, paragraph (4) governs the status of claims filed in the chapter 11 case. The Third Circuit properly construed paragraph (4) as applicable to claims deemed filed in the superseded chapter 11 case. In re Crouthamel Potato Chip Co., 786 F.2d 141 (3d Cir. 1986). The amendment to paragraph (4) changes that result by providing that only claims that are actually filed in the chapter 11 case are treated as filed in the superseding chapter 7 case. When chapter 11 cases are converted to chapter 7 cases, difficulties in obtaining and verifying the debtors' records are common. It is unfair to the chapter 7 trustee and creditors to require that they be bound by schedules which may not be subject to verification. Paragraph (6) is amended to place the obligation on the chapter 13 debtor to file a schedule of unpaid debts incurred during the superseded chapter 13 case. ------DocID 14936 Document 281 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES PART II -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- PART II - OFFICERS AND ADMINISTRATION; NOTICES; MEETINGS; EXAMINATIONS; ELECTIONS; ATTORNEYS AND ACCOUNTANTS ------DocID 14937 Document 282 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2001 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2001. Appointment of Interim Trustee Before Order for Relief in a Chapter 7 Liquidation Case -STATUTE- (a) Appointment At any time following the commencement of an involuntary liquidation case and before an order for relief, the court on written motion of a party in interest may appoint an interim trustee under Sec. 303(g) of the Code. The motion shall set forth the necessity for the appointment and may be granted only after hearing on notice to the debtor, the petitioning creditors and other parties in interest as the court may designate. (b) Bond of Movant An interim trustee may not be appointed under this rule unless the movant furnishes a bond in an amount approved by the court, conditioned to indemnify the debtor for costs, attorney's fee, expenses, and damages allowable under Sec. 303(i) of the Code. (c) Order of Appointment The order appointing the interim trustee shall state the reason the appointment is necessary and shall specify the trustee's duties. (d) Turnover and Report Following qualification of the trustee selected under Sec. 702 of the Code, the interim trustee, unless otherwise ordered, shall (1) forthwith deliver to the trustee all the records and property of the estate in possession or subject to control of the interim trustee and, (2) within 30 days thereafter file a final report and account. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is adapted from former Bankruptcy Rule 201. See also former Chapter X Rule 10-201. In conformity with title 11 of the United States Code, this rule substitutes 'interim trustee' for 'receiver.' Subdivision (a) and (e) of Rule 201 are not included because the provisions contained therein are found in detail in Sec. 303(g) of the Code, or they are inconsistent with Sec. 701 of the Code. Similarly, the provisions in Rule 201(d) relating to a debtor's counterbond are not included because of their presence in Sec. 303(g). Subdivision (a) makes it clear that the court may not on its own motion order the appointment of an interim trustee before an order for relief is entered. Appointment may be ordered only on motion of a party in interest. Subdivision (b) requires those seeking the appointment of an interim trustee to furnish a bond. The bond may be the same one required of petitioning creditors under Sec. 303(e) of the Code to indemnify the debtor for damages allowed by the court under Sec. 303(i). Subdivision (c) requires that the order specify which duties enumerated in Sec. 303(g) shall be performed by the interim trustee. Reference should be made to Rule 2015 for additional duties required of an interim trustee including keeping records and filing periodic reports with the court. Subdivision (d) requires turnover of records and property to the trustee selected under Sec. 702 of the Code, after qualification. That trustee may be the interim trustee who becomes the trustee because of the failure of creditors to elect one under Sec. 702(d) or the trustee elected by creditors under Sec. 702(b), (c). ------DocID 14938 Document 283 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2002 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2002. Notices to Creditors, Equity Security Holders, and United States -STATUTE- (a) Twenty-Day Notices to Parties in Interest Except as provided in subdivisions (h), (i) and (k) of this rule, the clerk, or some other person as the court may direct, shall give the debtor, the trustee, all creditors and indenture trustees not less than 20 days notice by mail of (1) the meeting of creditors pursuant to Sec. 341 of the Code; (2) a proposed use, sale, or lease of property of the estate other than in the ordinary course of business, unless the court for cause shown shortens the time or directs another method of giving notice; (3) the hearing on approval of a compromise or settlement of a controversy, unless the court for cause shown directs that notice not be sent; (4) the date fixed for the filing of claims against a surplus in an estate as provided in Rule 3002(c)(6); (5) in a chapter 7 liquidation and a chapter 11 reorganization case, the hearing on the dismissal or conversion of a case to another chapter; (6) the time fixed to accept or reject a proposed modification of a plan; (7) hearings on all applications for compensation or reimbursement of expenses totalling in excess of $500; and (8) the time fixed for filing proofs of claims pursuant to Rule 3003(c). (b) Twenty-Five-Day Notices to Parties in Interest Except as provided in subdivisions (h), (i) and (k) of this rule, the clerk, or some other person as the court may direct, shall give the debtor, the trustee, all creditors and indenture trustees not less than 25 days notice by mail of (1) the time fixed for filing objections and the hearing to consider approval of a disclosure statement; and (2) the time fixed for filing objections and the hearing to consider confirmation of a plan. (c) Content of Notice (1) Proposed Use, Sale, or Lease of Property. Subject to Rule 6004 the notice of a proposed use, sale, or lease of property required by subdivision (a)(2) of this rule shall include the time and place of any public sale, the terms and conditions of any private sale and the time fixed for filing objections. The notice of a proposed use, sale, or lease of property, including real estate, is sufficient if it generally describes the property. (2) Notice of Hearing on Compensation. The notice of a hearing on an application for compensation or reimbursement of expenses required by subdivision (a)(7) of this rule shall identify the applicant and the amounts requested. (d) Notice to Equity Security Holders In a chapter 11 reorganization case, unless otherwise ordered by the court, the clerk, or some other person as the court may direct, shall in the manner and form directed by the court give notice to all equity security holders of (1) the order for relief; (2) any meeting of equity security holders ordered by the court pursuant to Sec. 341 of the Code; (3) the hearing on the proposed sale of all or substantially all of the debtor's assets; (4) the hearing on the dismissal or conversion of a case to another chapter; (5) the time fixed for filing objections to and the hearing to consider approval of a disclosure statement; (6) the time fixed for filing objections to and the hearing to consider confirmation of a plan; and (7) the time fixed to accept or reject a proposed modification of a plan. (e) Notice of No Dividend In a chapter 7 liquidation case, if it appears from the schedules that there are no assets from which a dividend can be paid, the notice of the meeting of creditors may include a statement to that effect; that it is unnecessary to file claims; and that if sufficient assets become available for the payment of a dividend, further notice will be given for the filing of claims. (f) Other Notices Except as provided in subdivision (k) of this rule, the clerk, or some other person as the court may direct, shall give the debtor, all creditors, and indenture trustees notice by mail of (1) the order for relief; (2) dismissal of the case; (3) the time allowed for filing claims pursuant to Rule 3002; (4) the entry of an order directing that the case be converted to a case under a different chapter; (5) the time fixed for filing a complaint objecting to the debtor's discharge pursuant to Sec. 727 of the Code as provided in Rule 4004; (6) the time fixed for filing a complaint to determine the dischargeability of a debt pursuant to Sec. 523 of the Code as provided in Rule 4007; (7) the waiver, denial, or revocation of a discharge as provided in Rule 4006; (8) entry of an order confirming a chapter 9 or 11 plan; and (9) a summary of the trustee's final report and account in a chapter 7 case if the net proceeds realized exceed $250. Notice of the time fixed for accepting or rejecting a plan pursuant to Rule 3017(c) shall be given in accordance with Rule 3017(d). (g) Addresses of Notices All notices required to be mailed under this rule to a creditor, equity security holder, or indenture trustee shall be addressed as such entity or an authorized agent may direct in a request filed with the court; otherwise, to the address shown in the list of creditors or the schedule whichever is filed later. If a different address is stated in a proof of claim duly filed, that address shall be used unless a notice of no dividend has been given. (h) Notices to Creditors Whose Claims are Filed In a chapter 7 case, the court may, after 90 days following the first date set for the meeting of creditors pursuant to Sec. 341 of the Code, direct that all notices required by subdivision (a) of this rule, except clause (4) thereof, be mailed only to creditors whose claims have been filed and creditors, if any, who are still permitted to file claims by reason of an extension granted under Rule 3002(c)(6). (i) Notices to Committees Copies of all notices required to be mailed under this rule shall be mailed to the committees appointed pursuant to the Code or to their authorized agents. Notwithstanding the foregoing subdivisions, the court may order that notices required by subdivision (a)(2), (3) and (7) of this rule be mailed only to the committees or to their authorized agents and to the creditors and equity security holders who serve on the trustee or debtor in possession and file with the clerk a request that all notices be mailed to them. (j) Notices to the United States Copies of notices required to be mailed to all creditors under this rule shall be mailed (1) in a chapter 11 reorganization case to the Securities and Exchange Commission at Washington, D.C., and at any other place the Commission designates in writing filed with the court if the Commission has filed a notice of appearance in the case or has made a request in writing filed with the court; (2) in a commodity broker case, to the Commodity Futures Trading Commission at Washington, D.C.; (3) in a chapter 11 case to the District Director of Internal Revenue for the district in which the case is pending; (4) if the papers in the case disclose a debt to the United States other than for taxes, to the United States attorney for the district in which the case is pending and to the department, agency, or instrumentality of the United States through which the debtor became indebted; or if the filed papers disclose a stock interest of the United States, to the Secretary of the Treasury at Washington, D.C. (k) Notice by Publication The court may order notice by publication if it finds that notice by mail is impracticable or that it is desirable to supplement the notice. (l) Orders Designating Matter of Notices The court may from time to time enter orders designating the matters in respect to which, the entity to whom, and the form and manner in which notices shall be sent except as otherwise provided by these rules. (m) Caption The caption of every notice given under this rule shall comply with Rule 1005. (n) (FOOTNOTE 1) In a voluntary case commenced by an individual debtor whose debts are primarily consumer debts, the clerk, or some other person as the court may direct, shall give the trustee and all creditors notice by mail of the order for relief within 20 days from the date thereof. (FOOTNOTE 1) So in original. Subsec. (n) enacted without a catchline. -SOURCE- (As amended Aug. 30, 1983, Pub. L. 98-91, Sec. 2(a), 97 Stat. 607; July 10, 1984, Pub. L. 98-353, title III, Sec. 321, 98 Stat. 357; Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Some of the notices required by this rule may be given either by the clerk or as the court may otherwise direct. For example, the court may order the trustee or debtor in possession to transmit one or more of the notices required by this rule, such as, notice of a proposed sale of property. See Sec. 363(b) of the Code. When publication of notices is required or desirable, reference should be made to Rule 9008. Notice of the order for relief is required to be given by Sec. 342 of the Code and by subdivision (f)(1) of this rule. That notice may be combined with the notice of the meeting of creditors as indicated in Official Form No. 16, the notice and order of the meeting of creditors. Subdivision (a) sets forth the requirement that 20 days notice be given of the significant events in a case under the Bankruptcy Code. The former Act and Rules provided a ten day notice in bankruptcy and Chapter XI cases, and a 20 day notice in a Chapter X case. This rule generally makes uniform the 20 day notice provision except that subdivision (b) contains a 25 day period for certain events in a chapter 9, 11, or 13 case. Generally, Rule 9006 permits reduction of time periods. Since notice by mail is complete on mailing, the requirement of subdivision (a) is satisfied if the notices are deposited in the mail at least 20 days before the event. See Rule 9006(e). The exceptions referred to in the introductory phrase include the modifications in the notice procedure permitted by subdivision (h) as to non-filing creditors, subdivision (i) as to cases where a committee is functioning, and subdivision (k) where compliance with subdivision (a) is impracticable. The notice of a proposed sale affords creditors an opportunity to object to the sale and raise a dispute for the court's attention. Section 363(b) of the Code permits the trustee or debtor in possession to sell property, other than in the ordinary course of business, only after notice and hearing. If no objection is raised after notice, Sec. 102(1) provides that there need not be an actual hearing. Thus, absent objection, there would be no court involvement with respect to a trustee's sale. Once an objection is raised, only the court may pass on it. Prior to the Code the court could shorten the notice period for a proposed sale of property or dispense with notice. This subdivision (a), permits the 20 day period to be shortened in appropriate circumstances but the rule does not contain a provision allowing the court to dispense with notice. The rule is thus consistent with the Code, Sec. 363(b) and 102(1)(A) of the Code. See 28 U.S.C. Sec. 2075. It may be necessary, in certain circumstances, however, to use a method of notice other than mail. Subdivision (a)(2) vests the court with discretion, on cause shown, to order a different method. Reference should also be made to Rule 6004 which allows a different type of notice of proposed sales when the property is of little value. Notice of the hearing on an application for compensation or reimbursement of expenses totalling $100 or less need not be given. In chapter 13 cases relatively small amounts are sometimes allowed for post-confirmation services and it would not serve a useful purpose to require advance notice. Subdivision (b) is similar to subdivision (a) but lengthens the notice time to 25 days with respect to those events particularly significant in chapter 9, 11 and 13 cases. The additional time may be necessary to formulate objections to a disclosure statement or confirmation of a plan and preparation for the hearing on approval of the disclosure statement or confirmation. The disclosure statement and hearing thereon is only applicable in chapter 9 cases (Sec. 901(a) of the Code), and chapter 11 cases (Sec. 1125 of the Code). Subdivision (c) specifies certain matters that should be included in the notice of a proposed sale of property and notice of the hearing on an application for allowances. Rule 6004 fixes the time within which parties in interest may file objections to a proposed sale of property. Subdivision (d) relates exclusively to the notices given to equity security holders in chapter 11 cases. Under chapter 11, a plan may impair the interests of the debtor's shareholders or a plan may be a relatively simple restructuring of unsecured debt. In some cases, it is necessary that equity interest holders receive various notices and in other cases there is no purpose to be served. This subdivision indicates that the court is not mandated to order notices but rather that the matter should be treated with some flexibility. The court may decide whether notice is to be given and how it is to be given. Under Sec. 341(b) of the Code, a meeting of equity security holders is not required in each case, only when it is ordered by the court. Thus subdivision (d)(2) requires notice only when the court orders a meeting. In addition to the notices specified in this subdivision, there may be other events or matters arising in a case as to which equity security holders should receive notice. These are situations left to determination by the court. Subdivision (e), authorizing a notice of the apparent insufficiency of assets for the payment of any dividend, is correlated with Rule 3002(c)(5), which provides for the issuance of an additional notice to creditors if the possibility of a payment later materializes. Subdivision (f) provides for the transmission of other notices to which no time period applies. Clause (1) requires notice of the order for relief; this complements the mandate of Sec. 342 of the Code requiring such notice as is appropriate of the order for relief. This notice may be combined with the notice of the meeting of creditors to avoid the necessity of more than one mailing. See Official Form No. 16, notice of meeting of creditors. Subdivision (g) recognizes that an agent authorized to receive notices for a creditor may, without a court order, designate where notices to the creditor he represents should be addressed. Agent includes an officer of a corporation, an attorney at law, or an attorney in fact if the requisite authority has been given him. It should be noted that Official Forms Nos. 17 and 18 do not include an authorization of the holder of a power of attorney to receive notices for the creditor. Neither these forms nor this rule carries any implication that such an authorization may not be given in a power of attorney or that a request for notices to be addressed to both the creditor or his duly authorized agent may not be filed. Subdivision (h). After the time for filing claims has expired in a chapter 7 case, creditors who have not filed their claims in accordance with Rule 3002(c) are not entitled to share in the estate except as they may come within the special provisions of Sec. 726 of the Code or Rule 3002(c)(6). The elimination of notice to creditors who have no recognized stake in the estate may permit economies in time and expense. Reduction of the list of creditors to receive notices under this subdivision is discretionary. This subdivision does not apply to the notice of the meeting of creditors. Subdivision (i) contains a list of matters of which notice may be given a creditors' committee or to its authorized agent in lieu of notice to the creditors. Such notice may serve every practical purpose of a notice to all the creditors and save delay and expense. In re Schulte-United, Inc., 59 F.2d 553, 561 (8th Cir. 1932). Subdivision (j). The premise for the requirement that the district director of internal revenue receive copies of notices that all creditors receive in a chapter 11 case is that every debtor is potentially a tax debtor of the United States. Notice to the district director alerts him to the possibility that a tax debtor's estate is about to be liquidated or reorganized and that the debtor may be discharged. When other indebtedness to the United States is indicated, the United States attorney is notified as the person in the best position to protect the interests of the government. In addition, the provision requires notice by mail to the head of any department, agency, or instrumentality of the United States through whose action the debtor became indebted to the United States. This rule is not intended to preclude a local rule from requiring a state or local tax authority to receive some or all of the notices to creditors under these rules. Subdivision (k) specifies two kinds of situations in which notice by publication may be appropriate: (1) when notice by mail is impracticable; and (2) when notice by mail alone is less than adequate. Notice by mail may be impracticable when, for example, the debtor has disappeared or his records have been destroyed and the names and addresses of his creditors are unavailable, or when the number of creditors with nominal claims is very large and the estate to be distributed may be insufficient to defray the costs of issuing the notices. Supplementing notice by mail is also indicated when the debtor's records are incomplete or inaccurate and it is reasonable to believe that publication may reach some of the creditors who would otherwise be missed. Rule 9008 applies when the court directs notice by publication under this rule. Neither clause (2) of subdivision (a) nor subdivision (k) of this rule is concerned with the publication of advertisement to the general public of a sale of property of the estate at public auction under Rule 6004(b). See 3 Collier, Bankruptcy 522-23 (14th ed. 1971); 4B id. 1165-67 (1967); 2 id. 363.03 (15th ed. 1981). Subdivision (m). Inclusion in notices to creditors of information as to other names used by the debtor as required by Rule 1005 will assist them in the preparation of their proofs of claim and in deciding whether to file a complaint objecting to the debtor's discharge. Additional names may be listed by the debtor on his statement of affairs when he did not file the petition. The mailing of notices should not be postponed to await a delayed filing of the statement of financial affairs. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a) is amended to provide that notice of a hearing on an application for compensation must be given only when the amount requested is in excess of $500. Subdivision (d). A new notice requirement is added as clause (3). When a proposed sale is of all or substantially all of the debtor's assets, it is appropriate that equity security holders be given notice of the proposed sale. The clauses of subdivision (d) are renumbered to accommodate this addition. Subdivision (f). Clause (7) is eliminated. Mailing of a copy of the discharge order is governed by Rule 4004(g). Subdivision (g) is amended to relieve the clerk of the duty to mail notices to the address shown in a proof of claim when a notice of no dividend has been given pursuant to Rule 2002. This amendment avoids the necessity of the clerk searching proofs of claim which are filed in no dividend cases to ascertain whether a different address is shown. Subdivision (n) was enacted by Sec. 321 of the 1984 amendments. 1984 AMENDMENT Subd. (n). Pub. L. 98-353 added subd. (n). 1983 AMENDMENT Subd. (f). Pub. L. 98-91 inserted ', or some other person as the Court may direct,' after 'clerk'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1983 AMENDMENT Section 1 of Pub. L. 98-91 provided: 'That rule 2002(f) of the Bankruptcy Rules, as proposed by the United States Supreme Court in the order of April 25, 1983, of the Court, shall take effect on August 1, 1983, except as otherwise provided in section 2 (amending subd. (f) of this rule and enacting a provision set out as a note below).' Section 2(b) of Pub. L. 98-91 provided that: 'The amendment made by subsection (a) (amending subd. (f) of this rule) shall take effect on August 1, 1983.' ------DocID 14939 Document 284 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2003 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2003. Meeting of Creditors or Equity Security Holders -STATUTE- (a) Date and Place The court shall call a meeting of creditors to be held not less than 20 nor more than 40 days after the order for relief. If there is an appeal from or a motion to vacate the order for relief, or if there is a motion to dismiss the case, the court may set a later time for the meeting. The meeting may be held at a regular place for holding court or at any other place designated by the court within the district convenient for the parties in interest. If the court designates a place for the meeting which is not regularly staffed by a clerk who may preside at the meeting, the meeting may be held not more than 60 days after the order for relief. (b) Order of Meeting (1) Meeting of Creditors. The clerk shall preside at the meeting of creditors unless (1) the court designates a different person, or (2) the creditors who may vote for a trustee under Sec. 702(a) of the Code and who hold a majority in amount of claims that vote designate a presiding officer. In a chapter 11 reorganization case, if a chairperson has been selected by a creditors' committee appointed pursuant to Sec. 1102(a)(1), the chairperson or the chairperson's designee shall preside. The business of the meeting shall include the examination of the debtor under oath and, in a chapter 7 liquidation case, may include the election of a trustee or of a creditors' committee. The presiding officer shall have the authority to administer oaths. When a trustee is elected, the creditors may recommend the amount of the trustee's bond to be fixed by the court. (2) Meeting of Equity Security Holders. If the court orders a meeting of equity security holders pursuant to Sec. 341(b) of the Code, the clerk shall preside unless the holders of equity security interests present at the meeting who hold a majority in amount of the interests at the meeting designate a presiding officer. (3) Right to Vote. In a chapter 7 liquidation case, a creditor is entitled to vote at a meeting if, at or before the meeting, the creditor has filed a proof of claim or a writing setting forth facts evidencing a right to vote pursuant to Sec. 702(a) of the Code unless objection is made to the claim or the proof of claim is insufficient on its face. If the court orders an election of a separate trustee for a general partner's estate under Rule 2009(e)(1), a creditor of the partnership may file a proof of claim or writing evidencing a right to vote for that trustee notwithstanding that a trustee for the partnership has previously qualified. Notwithstanding objection to the amount or allowability of a claim for the purpose of voting, the court may, after such notice and hearing as it may direct, temporarily allow it for that purpose in an amount that seems proper to the court. (c) Minutes and Record of Meeting Minutes of the meeting of creditors or equity security holders shall be prepared by the presiding officer. Any examination under oath shall be recorded verbatim by electronic sound recording equipment or other means of recording. (d) Report to the Court The presiding officer shall transmit to the court the name and address of any person elected trustee or entity elected a member of a creditors' committee. If an election is disputed, the presiding officer shall promptly inform the court in writing that a dispute exists. Pending disposition by the court of a disputed election for trustee, the interim trustee shall continue in office. If no motion for the resolution of such election dispute is made to the court within 10 days after the date of the creditors' meeting, the interim trustee shall serve as trustee in the case. (e) Adjournment The meeting may be adjourned from time to time by announcement at the meeting of the adjourned date and time without further written notice. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Section 341(a) of the Code requires a meeting of creditors in a chapter 7, 11 or 13 case, and Sec. 341(b) permits the court to order a meeting of equity security holders. A major change from prior law, however, prohibits the judge from attending or presiding over the meeting. Section 341(c). This rule does not apply either in a case for the reorganization of a railroad or for the adjustment of debts of a municipality. Sections 1161 and 901 render Sec. 341 and 343 inapplicable in these types of cases. Section 341 sets the requirement for a meeting of creditors and Sec. 343 provides for the examination of the debtor. Subdivision (a). The meeting is to be held between 20 and 40 days after the date of the order for relief. In a voluntary case, the date of the order for relief is the date of the filing of the petition (Sec. 301 of the Code); in an involuntary case, it is the date of an actual order (Sec. 303(i) of the Code). Subdivision (b) provides flexibility as to who will preside at the meeting of creditors. The court may designate a person to serve as presiding officer, such as the interim trustee appointed under Sec. 701 of the Code. If the court does not designate anyone, the clerk will preside. In either case, creditors may elect a person of their own choosing. In any event, the clerk may remain to record the proceedings and take appearances. Use of the clerk is not contrary to the legislative policy of Sec. 341(c). The judge remains insulated from any information coming forth at the meeting and any information obtained by the clerk must not be relayed to the judge. Although the clerk may preside at the meeting, the clerk is not performing any kind of judicial role, nor should the clerk give any semblance of performing such a role. It would be pretentious for the clerk to ascend the bench, don a robe or be addressed as 'your honor'. The clerk should not appear to parties or others as any type of judicial officer. In a chapter 11 case, if a committee of unsecured creditors has been appointed pursuant to Sec. 1102(a)(1) of the Code and a chairman has been selected, the chairman will preside or a person, such as the attorney for the committee, may be designated to preside by the chairman. Since the judge must fix the bond of the trustee but cannot be present at the meeting, the rule allows the creditors to recommend the amount of the bond. They should be able to obtain relevant information concerning the extent of assets of the debtor at the meeting. Paragraph (1) authorizes the presiding officer to administer oaths. This is important because the debtor's examination must be under oath. Paragraph (3) of subdivision (b) has application only in a chapter 7 case. That is the only type of case under the Code that permits election of a trustee or committee. In all other cases, no vote is taken at the meeting of creditors. If it is necessary for the court to make a determination with respect to a claim, the meeting may be adjourned until the objection or dispute is resolved. The second sentence recognizes that partnership creditors may vote for a trustee of a partner's estate along with the separate creditors of the partner. Although Sec. 723(c) gives the trustee of a partnership a claim against a partner's estate for the full amount of partnership creditors' claims allowed, the purpose and function of this provision are to simplify distribution and prevent double proof, not to disfranchise partnership creditors in electing a trustee of an estate against which they hold allowable claims. Subdivision (c) requires minutes and a record of the meeting to be maintained by the presiding officer. A verbatim record must be made of the debtor's examination but the rule is flexible as to the means used to record the examination. Subdivision (d) recognizes that the court must be informed immediately about the election or nonelection of a trustee in a chapter 7 case. Pursuant to Rule 2008, the clerk officially informs the trustee of his election or appointment and how he is to qualify. The presiding person has no authority to resolve a disputed election. For purposes of expediency, the results of the election should be obtained for each alternative presented by the dispute and immediately reported to the court. Thus, when an interested party presents the dispute to the court, its prompt resolution by the court will determine the dispute and a new or adjourned meeting to conduct the election may be avoided. The clerk is not an interested party. A creditors' committee may be elected only in a chapter 7 case. In chapter 11 cases, a creditors' committee is appointed pursuant to Sec. 1102. While a final meeting is not required, Rule 2002(f)(10) provides for the trustee's final account to be sent to creditors. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a). Many courts schedule meetings of creditors at various locations in the district. Because the clerk must schedule meetings at those locations, an additional 20 days for scheduling the meetings is provided under the amended rule. ------DocID 14940 Document 285 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2004 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2004. Examination -STATUTE- (a) Examination on Motion On motion of any party in interest, the court may order the examination of any entity. (b) Scope of Examination The examination of an entity under this rule or of the debtor under Sec. 343 of the Code may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge. In an individual's debt adjustment case under chapter 13 or a reorganization case under chapter 11 of the Code, other than for the reorganization of a railroad, the examination may also relate to the operation of any business and the desirability of its continuance, the source of any money or property acquired or to be acquired by the debtor for purposes of consummating a plan and the consideration given or offered therefor, and any other matter relevant to the case or to the formulation of a plan. (c) Compelling Attendance and Production of Documentary Evidence The attendance of an entity for examination and the production of documentary evidence may be compelled in the manner provided in Rule 9016 for the attendance of witnesses at a hearing or trial. (d) Time and Place of Examination of Debtor The court may for cause shown and on terms as it may impose order the debtor to be examined under this rule at any time or place it designates, whether within or without the district wherein the case is pending. (e) Mileage An entity other than a debtor shall not be required to attend as a witness unless lawful mileage and witness fee for one day's attendance shall be first tendered. If the debtor resides more than 100 miles from the place of examination when required to appear for an examination under this rule, the mileage allowed by law to a witness shall be tendered for any distance more than 100 miles from the debtor's residence at the date of the filing of the first petition commencing a case under the Code or the residence at the time the debtor is required to appear for the examination, whichever is the lesser. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a) of this rule is derived from former Bankruptcy Rule 205(a). See generally 2 Collier, Bankruptcy 343.02, 343.08, 343.13 (15th ed. 1981). It specifies the manner of moving for an examination. The motion may be heard ex parte or it may be heard on notice. Subdivision (b) is derived from former Bankruptcy Rules 205(d) and 11-26. Subdivision (c) specifies the mode of compelling attendance of a witness or party for an examination and for the production of evidence under this rule. The subdivision is substantially declaratory of the practice that had developed under Sec. 21a of the Act. See 2 Collier, supra 343.11. This subdivision will be applicable for the most part to the examination of a person other than the debtor. The debtor is required to appear at the meeting of creditors for examination. The word 'person' includes the debtor and this subdivision may be used if necessary to obtain the debtor's attendance for examination. Subdivision (d) is derived from former Bankruptcy Rule 205(f) and is not a limitation on subdivision (c). Any person, including the debtor, served with a subpoena within the range of a subpoena must attend for examination pursuant to subdivision (c). Subdivision (d) applies only to the debtor and a subpoena need not be issued. There are no territorial limits on the service of an order on the debtor. See, e.g., In re Totem Lodge & Country Club, Inc., 134 F. Supp. 158 (S.D.N.Y. 1955). Subdivision (e) is derived from former Bankruptcy Rule 205(g). The lawful mileage and fee for attendance at a United States court as a witness are prescribed by 28 U.S.C. Sec. 1821. Definition of debtor. The word 'debtor' as used in this rule includes the persons specified in the definition in Rule 9001(5). Spousal privilege. The limitation on the spousal privilege formerly contained in Sec. 21a of the Act is not carried over in the Code. For privileges generally, see Rule 501 of the Federal Rules of Evidence made applicable in cases under the Code by Rule 1101 thereof. ------DocID 14941 Document 286 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2005 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2005. Apprehension and Removal of Debtor to Compel Attendance for Examination -STATUTE- (a) Order To Compel Attendance for Examination On motion of any party in interest supported by an affidavit alleging (1) that the examination of the debtor is necessary for the proper administration of the estate and that there is reasonable cause to believe that the debtor is about to leave or has left the debtor's residence or principal place of business to avoid examination, or (2) that the debtor has evaded service of a subpoena or of an order to attend for examination, or (3) that the debtor has willfully disobeyed a subpoena or order to attend for examination, duly served, the court may issue to the marshal, or some other officer authorized by law, an order directing the officer to bring the debtor before the court without unnecessary delay. If, after hearing, the court finds the allegations to be true, the court shall thereupon cause the debtor to be examined forthwith. If necessary, the court shall fix conditions for further examination and for the debtor's obedience to all orders made in reference thereto. (b) Removal Whenever any order to bring the debtor before the court is issued under this rule and the debtor is found in a district other than that of the court issuing the order, the debtor may be taken into custody under the order and removed in accordance with the following rules: (1) If taken at a place less than 100 miles from the place of issue of the order, the debtor shall be brought forthwith before the court that issued the order. (2) If taken at a place 100 miles or more from the place of issue of the order, the debtor shall be brought without unnecessary delay before the nearest United States magistrate, bankruptcy judge, or district judge. If, after hearing, the magistrate, bankruptcy judge, or district judge finds that an order has issued under this rule and that the person in custody is the debtor, or if the person in custody waives a hearing, the magistrate, bankruptcy judge, or district judge shall issue an order of removal and the person in custody shall be released on conditions assuring prompt appearance before the court which issued the order to compel the attendance. (c) Conditions of Release In determining what conditions will reasonably assure attendance or obedience under subdivision (a) of this rule or appearance under subdivision (b) of this rule, the court shall be governed by the provisions and policies of title 18, U.S.C., Sec. 3146(a) and (b). -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Bankruptcy Rule 206. The rule requires the debtor to be examined as soon as possible if allegations of the movant for compulsory examination under this rule are found to be true after a hearing. Subdivision (b) includes in paragraphs (1) and (2) provisions adapted from subdivisions (a) and (b) of Rule 40 of the Federal Rules of Criminal Procedure, which governs the handling of a person arrested in one district on a warrant issued in another. Subdivision (c) incorporates by reference the features of subdivisions (a) and (b) of 18 U.S.C. Sec. 3146, which prescribe standards, procedures and factors to be considered in determining conditions of release of accused persons in noncapital cases prior to trial. The word 'debtor' as used in this rule includes the persons named in Rule 9001(5). The affidavit required to be submitted in support of the motion may be subscribed by the unsworn declaration provided for in 28 U.S.C. Sec. 1746. -CHANGE- CHANGE OF NAME Reference to United States magistrate or to magistrate deemed to refer to United States magistrate judge pursuant to section 321 of Pub. L. 101-650, set out as a note under section 631 of Title 28, Judiciary and Judicial Procedure. ------DocID 14942 Document 287 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2006 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2006. Solicitation and Voting of Proxies in Chapter 7 Liquidation Cases -STATUTE- (a) Applicability This rule applies only in a liquidation case pending under chapter 7 of the Code. (b) Definitions (1) Proxy. A proxy is a written power of attorney authorizing any entity to vote the claim or otherwise act as the owner's attorney in fact in connection with the administration of the estate. (2) Solicitation of Proxy. The solicitation of a proxy is any communication, other than one from an attorney to a regular client who owns a claim or from an attorney to the owner of a claim who has requested the attorney to represent the owner, by which a creditor is asked, directly or indirectly, to give a proxy after or in contemplation of the filing of a petition by or against the debtor. (c) Authorized Solicitation (1) A proxy may be solicited only by (A) a creditor owning an allowable unsecured claim against the estate on the date of the filing of the petition; (B) a committee elected pursuant to Sec. 705 of the Code; (C) a committee of creditors selected by a majority in number and amount of claims of creditors (i) whose claims are not contingent or unliquidated, (ii) who are not disqualified from voting under Sec. 702(a) of the Code and (iii) who were present or represented at a meeting of which all creditors having claims of over $500 or the 100 creditors having the largest claims had at least five days notice in writing and of which meeting written minutes were kept and are available reporting the names of the creditors present or represented and voting and the amounts of their claims; or (D) a bona fide trade or credit association, but such association may solicit only creditors who were its members or subscribers in good standing and had allowable unsecured claims on the date of the filing of the petition. (2) A proxy may be solicited only in writing. (d) Solicitation Not Authorized This rule does not permit solicitation (1) in any interest other than that of general creditors; (2) by or on behalf of any custodian; (3) by the interim trustee or by or on behalf of any entity not qualified to vote under Sec. 702(a) of the Code; (4) by or on behalf of an attorney at law; or (5) by or on behalf of a transferee of a claim for collection only. (e) Data Required From Holders of Multiple Proxies At any time before the voting commences at any meeting of creditors pursuant to Rule 2003, or at any other time as the court may direct, a holder of two or more proxies shall file with the clerk a verified list of the proxies to be voted and a verified statement of the pertinent facts and circumstances in connection with the execution and delivery of each proxy, including: (1) a copy of the solicitation; (2) identification of the solicitor, the forwarder, if the forwarder is neither the solicitor nor the owner of the claim, and the proxyholder, including their connections with the debtor and with each other. If the solicitor, forwarder, or proxyholder is an association, there shall also be included a statement that the creditors whose claims have been solicited and the creditors whose claims are to be voted were members or subscribers in good standing and had allowable unsecured claims on the date of the filing of the petition. If the solicitor, forwarder, or proxyholder is a committee of creditors, the statement shall also set forth the date and place the committee was organized, that the committee was organized in accordance with clause (B) or (C) of paragraph (c)(1) of this rule, the members of the committee, the amounts of their claims, when the claims were acquired, the amounts paid therefor, and the extent to which the claims of the committee members are secured or entitled to priority; (3) a statement that no consideration has been paid or promised by the proxyholder for the proxy; (4) a statement as to whether there is any agreement and, if so, the particulars thereof, between the proxyholder and any other entity for the payment of any consideration in connection with voting the proxy, or for the sharing of compensation with any entity, other than a member or regular associate of the proxyholder's law firm, which may be allowed the trustee or any entity for services rendered in the case, or for the employment of any entity as attorney, accountant, appraiser, auctioneer, or other employee for the estate; (5) if the proxy was solicited by an entity other than the proxyholder, or forwarded to the holder by an entity who is neither a solicitor of the proxy nor the owner of the claim, a statement signed and verified by the solicitor or forwarder that no consideration has been paid or promised for the proxy, and whether there is any agreement, and, if so, the particulars thereof, between the solicitor or forwarder and any other entity for the payment of any consideration in connection with voting the proxy, or for sharing compensation with any entity other than a member or regular associate of the solicitor's or forwarder's law firm which may be allowed the trustee or any entity for services rendered in the case, or for the employment of any entity as attorney, accountant, appraiser, auctioneer, or other employee for the estate; (6) if the solicitor, forwarder, or proxyholder is a committee, a statement signed and verified by each member as to the amount and source of any consideration paid or to be paid to such member in connection with the case other than by way of dividend on the member's claim. (f) Enforcement of Restrictions on Solicitation On motion of any party in interest or on its own initiative, the court may determine whether there has been a failure to comply with the provisions of this rule or any other impropriety in connection with the solicitation or voting of a proxy. After notice and a hearing the court may reject any proxy for cause, vacate any order entered in consequence of the voting of any proxy which should have been rejected, or take any other appropriate action. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is a comprehensive regulation of solicitation and voting of proxies in liquidation cases. It is derived from former Bankruptcy Rule 208. The rule applies only in chapter 7 cases because no voting occurs, other than on a plan, in a chapter 11 case. Former Bankruptcy Rule 208 did not apply to solicitations of acceptances of plans. Creditor control was a basic feature of the Act and is continued, in part, by the Code. Creditor democracy is perverted and the congressional objective frustrated, however, if control of administration falls into the hands of persons whose principal interest is not in what the estate can be made to yield to the unsecured creditors but in what it can yield to those involved in its administration or in other ulterior objectives. Subdivision (b). The definition of proxy in the first paragraph of subdivision (b) is derived from former Bankruptcy Rule 208. Subdivision (c). The purpose of the rule is to protect creditors against loss of control of administration of their debtors' estates to holders of proxies having interests that differ from those of the creditors. The rule does not prohibit solicitation but restricts it to those who were creditors at the commencement of the case or their freely and fairly selected representatives. The special role occupied by credit and trade associations is recognized in the last clause of subdivision (c)(1). On the assumption that members or subscribers may have affiliated with an association in part for the purpose of obtaining its services as a representative in liquidation proceedings, an established association is authorized to solicit its own members, or its regular customers or clients, who were creditors on the date of the filing of the petition. Although the association may not solicit nonmembers or nonsubscribers for proxies, it may sponsor a meeting of creditors at which a committee entitled to solicit proxies may be selected in accordance with clause (C) of subdivision (c)(1). Under certain circumstances, the relationship of a creditor, creditors' committee, or association to the estate or the case may be such as to warrant rejection of any proxy solicited by such a person or group. Thus a person who is forbidden by the Code to vote his own claim should be equally disabled to solicit proxies from creditors. Solicitation by or on behalf of the debtor has been uniformly condemned, e.g., In re White, 15 F.2d 371 (9th Cir. 1926), as has solicitation on behalf of a preferred creditor, Matter of Law, 13 Am.B.R. 650 (S.D. Ill. 1905). The prohibition on solicitation by a receiver or his attorney made explicit by General Order 39 has been collaterally supported by rulings rejecting proxies solicited by a receiver in equity, In re Western States Bldg.-Loan Ass'n, 54 F.2d 415 (S.D. Cal. 1931), and by an assignee for the benefit of creditors, Lines v. Falstaff Brewing Co., 233 F.2d 927 (9th Cir. 1956). Subdivision (d) prohibits solicitation by any person or group having a relationship described in the preceding paragraph. It also makes no exception for attorneys or transferees of claims for collection. The rule does not undertake to regulate communications between an attorney and his regular client or between an attorney and a creditor who has asked the attorney to represent him in a proceeding under the Code, but any other communication by an attorney or any other person or group requesting a proxy from the owner of a claim constitutes a regulated solicitation. Solicitation by an attorney of a proxy from a creditor who was not a client prior to the solicitation is objectionable not only as unethical conduct as recognized by such cases as In the Matter of Darland Company, 184 F. Supp. 760 (S.D. Iowa 1960) but also and more importantly because the practice carries a substantial risk that administration will fall into the hands of those whose interest is in obtaining fees from the estate rather than securing dividends for creditors. The same risk attaches to solicitation by the holder of a claim for collection only. Subdivision (e). The regulation of solicitation and voting of proxies is achieved by the rule principally through the imposition of requirements of disclosure on the holders of two or more proxies. The disclosures must be made to the clerk before the meeting at which the proxies are to be voted to afford the clerk or a party in interest an opportunity to examine the circumstances accompanying the acquisition of the proxies in advance of any exercise of the proxies. In the light of the examination the clerk or a party in interest should bring to the attention of the judge any question that arises and the judge may permit the proxies that comply with the rule to be voted and reject those that do not unless the holders can effect or establish compliance in such manner as the court shall prescribe. The holders of single proxies are excused from the disclosure requirements because of the insubstantiality of the risk that such proxies have been solicited, or will be voted, in an interest other than that of general creditors. Every holder of two or more proxies must include in the submission a verified statement that no consideration has been paid or promised for the proxy, either by the proxyholder or the solicitor or any forwarder of the proxy. Any payment or promise of consideration for a proxy would be conclusive evidence of a purpose to acquire control of the administration of an estate for an ulterior purpose. The holder of multiple proxies must also include in the submission a verified statement as to whether there is any agreement by the holder, the solicitor, or any forwarder of the proxy for the employment of any person in the administration of an estate or for the sharing of any compensation allowed in connection with the administration of the estate. The provisions requiring these statements implement the policy of the Code expressed in Sec. 504 as well as the policy of this rule to deter the acquisition of proxies for the purpose of obtaining a share in the outlays for administration. Finally the facts as to any consideration moving or promised to any member of a committee which functions as a solicitor, forwarder, or proxyholder must be disclosed by the proxyholder. Such information would be of significance to the court in evaluating the purpose of the committee in obtaining, transmitting, or voting proxies. Subdivision (f) has counterparts in the local rules referred to in the Advisory Committee's Note to former Bankruptcy Rule 208. Courts have been accorded a wide range of discretion in the handling of disputes involving proxies. Thus the referee was allowed to reject proxies and to proceed forthwith to hold a scheduled election at the same meeting. E.g., In re Portage Wholesale Co., 183 F.2d 959 (7th Cir. 1950); In re McGill, 106 Fed. 57 (6th Cir. 1901); In re Deena Woolen Mills, Inc., 114 F. Supp. 260, 273 (D. Me. 1953); In re Finlay, 3 Am.B.R. 738 (S.D.N.Y. 1900). The bankrupty judge may postpone an election to permit a determination of issues presented by a dispute as to proxies and to afford those creditors whose proxies are rejected an opportunity to give new proxies or to attend an adjourned meeting to vote their own claims. Cf. In the Matter of Lenrick Sales, Inc., 369 F.2d 439, 442-43 (3d Cir.), cert. denied, 389 U.S. 822 (1967); In the Matter of Construction Supply Corp. 221 F. Supp. 124, 128 (E.D. Va. 1963). This rule is not intended to restrict the scope of the court's discretion in the handling of disputes as to proxies. ------DocID 14943 Document 288 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2007 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2007. Appointment of Creditors' Committee Organized Before Commencement of the Case -STATUTE- (a) Appointment In a chapter 9 municipality or chapter 11 reorganization case, on application of a party in interest and after notice as the court may direct, the court may appoint as the committee of unsecured creditors required by Sec. 1102(a) of the Code, members of a committee selected before the commencement of the case in accordance with subdivision (b) of this rule. (b) Selection of Members of Committee The court may find that a committee selected by unsecured creditors before the commencement of a chapter 9 or chapter 11 case satisfies the requirements of Sec. 1102(b)(1) of the Code if: (1) it was selected by a majority in number and amount of claims of unsecured creditors who may vote under Sec. 702(a) of the Code and were present in person or represented at a meeting of which all creditors having unsecured claims of over $1,000 or the 100 unsecured creditors having the largest claims had at least five days notice in writing, and of which meeting written minutes reporting the names of the creditors present or represented and voting and the amounts of their claims were kept and are available for inspection; (2) all proxies voted at the meeting for the elected committee were solicited pursuant to Rule 2006 and the lists and statements required by subdivision (e) thereof have been filed with the court; and (3) the organization of the committee was in all other respects fair and proper. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Section 1102(b)(1) of the Code permits the court to appoint as the unsecured creditors' committee, the committee that was selected by creditors before the order for relief. This provision recognizes the propriety of continuing a 'prepetition' committee in an official capacity. Such a committee, however, must be found to have been fairly chosen and representative of the different kinds of claims to be represented. Subdivision (a) does not necessarily require a hearing but does require a party in interest to bring to the court's attention the fact that a prepetition committee had been organized and should be appointed. An application would suffice for this purpose. Party in interest would include the committee, any member of the committee, or any of its agents acting for the committee. Whether or not notice of the application should be given to any other party is left to the discretion of the court. Subdivision (b) implements Sec. 1102(b)(1). The Code provision allows the court to appoint, as the official Sec. 1102(a) committee, a 'prepetition' committee if its members were fairly chosen and the committee is representative of the different kinds of claims. This subdivision of the rule indicates some of the factors the court may consider in determining whether the requirements of Sec. 1102(b)(1) have been satisfied. In effect, the subdivision provides various factors which are similar to those set forth in Rule 2006 with respect to the solicitation and voting of proxies in a chapter 7 liquidation case. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The rule is amended to conform to the 1984 amendments to Sec. 1102(b)(1) of the Code. ------DocID 14944 Document 289 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2008 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2008. Notice to Trustee of Selection -STATUTE- The clerk shall immediately notify the person selected as trustee how to qualify and, if applicable, the amount of the trustee's bond. A trustee that has filed a blanket bond pursuant to Rule 2010 and has been selected as trustee in a chapter 7 or chapter 13 case that does not notify the court in writing of rejection of the office within five days after receipt of notice of selection shall be deemed to have accepted the office. Any other person selected as trustee shall notify the court in writing of acceptance of the office within five days after receipt of notice of selection or shall be deemed to have rejected the office. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is adapted from former Bankruptcy Rule 209(c). The remainder of that rule is inapplicable because its provisions are covered by Sec. 701-703, 321 of the Code. If the person selected as trustee accepts the office, he must qualify within five days after his selection, as required by Sec. 322(a) of the Code. In districts having a standing trustee for chapter 13 cases, a blanket acceptance of the appointment would be sufficient for compliance by the standing trustee with this rule. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The rule is amended to eliminate the need for a standing chapter 13 trustee or member of the panel of chapter 7 trustees to accept or reject an appointment. ------DocID 14945 Document 290 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2009 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2009. Trustees for Estates When Joint Administration Ordered -STATUTE- (a) Election of Single Trustee for Estates Being Jointly Administered If the court orders a joint administration of two or more estates pursuant to Rule 1015(b), creditors may elect a single trustee for the estates being jointly administered. (b) Right of Creditors To Elect Separate Trustee Notwithstanding entry of an order for joint administration pursuant to Rule 1015(b) the creditors of any debtor may elect a separate trustee for the estate of the debtor as provided in Sec. 702 of the Code. (c) Appointment of Trustees for Estates Being Jointly Administered (1) Chapter 7 Liquidation Cases. The court may appoint one or more interim trustees for estates being jointly administered in chapter 7 cases. (2) Chapter 11 Reorganization Cases. If a trustee is ordered, the court may appoint one or more trustees for estates being jointly administered in chapter 11 cases. (3) Chapter 13 Individual's Debt Adjustment Cases. The court may appoint one or more trustees for estates being jointly administered in chapter 13 cases. (d) Potential Conflicts of Interest On a showing that creditors or equity security holders of the different estates will be prejudiced by conflicts of interest of a common trustee, the court shall order separate trustees for estates being jointly administered. (e) Trustees for Partnership and Partners' Individual Estates Notwithstanding the foregoing provisions of this rule, the trustee of a partnership estate may also be the trustee of the individual estate of any general partner if the estates are being jointly administered unless the court, for cause shown, either (1) permits the creditors of a general partner to elect a separate trustee or (2) appoints a separate trustee for the individual estate. (f) Separate Accounts The trustee or trustees of estates being jointly administered shall keep separate accounts of the property and distribution of each estate. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is applicable in chapter 7 cases and, in part, in chapter 11 and 13 cases. The provisions in subdivisions (a) and (b) concerning creditor election of a trustee apply only in a chapter 7 case because it is only pursuant to Sec. 702 of the Code that creditors may elect a trustee. Subdivision (c) of the rule applies in chapter 11 and 13 as well as chapter 7 cases; pursuant to Sec. 1104 of the Code, the court may order the appointment of a trustee on application of a party in interest and, pursuant to Sec. 1163 of the Code, the court must appoint a trustee in a railroad reorganization case. Subdivision (c) should not be taken as an indication that more than one trustee may be appointed for a single debtor. Section 1104(c) permits only one trustee for each estate. In a chapter 13 case, if there is no standing trustee, the court is to appoint a person to serve as trustee pursuant to Sec. 1302 of the Code. There is no provision for a trustee in a chapter 9 case, except for a very limited purpose; see Sec. 926 of the Code. This rule recognizes that economical and expeditious administration of two or more estates may be facilitated not only by the selection of a single trustee for a partnership and its partners, but by such selection whenever estates are being jointly administered pursuant to Rule 1015. See In the Matter of International Oil Co., 427 F.2d 186, 187 (2d Cir. 1970). The rule is derived from former Sec. 5c of the Act and former Bankruptcy Rule 210. The premise of Sec. 5c of the Act was that notwithstanding the potentiality of conflict between the interests of the creditors of the partners and those of the creditors of the partnership, the conflict is not sufficiently serious or frequent in most cases to warrant the selection of separate trustees for the firm and the several partners. Even before the proviso was added to Sec. 5c of the Act in 1938 to permit the creditors of a general partner to elect their separate trustee for his estate, it was held that the court had discretion to permit such an election or to make a separate appointment when a conflict of interest was recognized. In re Wood, 248 Fed. 246, 249-50 (6th Cir.), cert. denied, 247 U.S. 512 (1918); 4 Collier, Bankruptcy 723.04 (15th ed. 1980). The rule retains in subdivision (e) the features of the practice respecting the selection of a trustee that was developed under Sec. 5 of the Act. Subdivisions (a) and (c) permit the court to authorize election of a single trustee or to make a single appointment when joint administration of estates of other kinds of debtors is ordered, but subdivision (d) requires the court to make a preliminary evaluation of the risks of conflict of interest. If after the election or appointment of a common trustee a conflict of interest materializes, the court must take appropriate action to deal with it. Subdivision (f) is derived from Sec. 5e of the Act and former Bankruptcy Rule 210(f) and requires that the common trustee keep a separate account for each estate in all cases that are jointly administered. ------DocID 14946 Document 291 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2010 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2010. Qualification by Trustee; Proceeding on Bond -STATUTE- (a) Blanket Bond The court may authorize a blanket bond in favor of the United States conditioned on the faithful performance of official duties by the trustee or trustees to cover (1) a person who qualifies as trustee in a number of cases, and (2) a number of trustees each of whom qualifies in a different case. (b) Evidence of Qualification A certified copy of the order approving the trustee's bond shall constitute conclusive evidence of qualification. (c) Proceeding on Bond A proceeding on the trustee's bond may be brought by any party in interest in the name of the United States for the use of the entity injured by the breach of the condition. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivisions (a) and (b). Subdivision (a) gives authority for approval by the court of a single bond to cover (1) a person who qualifies as trustee in a number of cases, and (2) a number of trustees each of whom qualifies in a different case. The cases need not be related in any way. Substantial economies can be effected if a single bond covering a number of different cases can be issued and approved at one time. When a blanket bond is filed, the trustee qualifies under subdivision (b) of the rule by filing an acceptance of the office. Subdivision (c) prescribes the evidentiary effect of a certified copy of an order approving the trustee's bond given by a trustee under this rule or, when a blanket bond has been authorized, of a certified copy of acceptance. This rule supplements the Federal Rules of Evidence, which apply in bankruptcy cases. See Rule 1101 of the Federal Rules of Evidence. The order of approval should conform to Official Form No. 25. See, however, Sec. 549(c) of the Code which provides only for the filing of the petition in the real estate records to serve as constructive notice of the pendency of the case. See also Rule 2011 which prescribes the evidentiary effect of a certificate that the debtor is a debtor in possession. Subdivision (d) is derived from former Bankruptcy Rule 212(f). Reference should be made to Sec. 322(a) and (d) of the Code which requires the bond to be filed with the bankruptcy court and places a two year limitation for the commencement of a proceeding on the bond. A bond filed under this rule should conform to Official Form No. 25. A proceeding on the bond of a trustee is governed by the rules in Part VII. See the Note accompanying Rule 7001. See also Rule 9025. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (b) is deleted because of the amendment to Rule 2008. ------DocID 14947 Document 292 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2011 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2011. Evidence of Debtor in Possession -STATUTE- Whenever evidence is required that a debtor is a debtor in possession, the clerk may so certify and the certificate shall constitute conclusive evidence of that fact. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule prescribes the evidentiary effect of a certificate issued by the clerk that the debtor is a debtor in possession. See Official Form No. 26. Only chapter 11 of the Code provides for a debtor in possession. See Sec. 1107(a) of the Code. If, however, a trustee is appointed in the chapter 11 case, there will not be a debtor in possession. See Sec. 1101(1), 1105 of the Code. ------DocID 14948 Document 293 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2012 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2012. Substitution of Trustee or Successor Trustee; Accounting -STATUTE- (a) Trustee A trustee appointed in a Chapter 11 case is substituted automatically for the debtor in possession as a party in any pending action, proceeding, or matter. (b) Successor Trustee When a trustee dies, resigns, is removed, or otherwise ceases to hold office during the pendency of a case under the Code (1) the successor is automatically substituted as a party in any pending action, proceeding, or matter; and (2) within the time fixed by the court, the successor trustee shall prepare and file with the court an accounting of the prior administration of the estate. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Paragraph (1) of this rule implements Sec. 325 of the Code. It provides that a pending action or proceeding continues without abatement and that the trustee's successor is automatically substituted as a party whether it be another trustee or the debtor returned to possession, as such party. Paragraph (2) places it within the responsibility of a successor trustee to file an accounting of the prior administration of the estate. If an accounting is impossible to obtain from the prior trustee because of death or lack of cooperation, prior reports submitted in the earlier administration may be updated. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a) is new. The subdivision provides for the substitution of a trustee appointed in a chapter 11 case for the debtor in possession in any pending litigation. The original provisions of the rule are now in subdivision (b). ------DocID 14949 Document 294 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2013 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2013. Limitation on Appointment or Employment of Trustees, Examiners, Appraisers and Auctioneers -STATUTE- (a) Limitation on Appointments Appointments of trustees and examiners and employment of appraisers and auctioneers shall be made so that the annual aggregate compensation of any person shall not be disproportionate or excessive, giving proper regard to geographic constraints. (b) Record To Be Kept The clerk shall maintain a public record listing fees awarded by the court (1) to trustees and attorneys, accountants, appraisers, auctioneers and other professionals employed by trustees, and (2) to examiners appointed by the court. The record shall include the name and docket number of the case, the name of the individual or firm receiving the fee and the amount of the fee awarded. The record shall be maintained chronologically and shall be kept current and open to examination by the public without charge. (c) Summary of Record At the close of each annual period, the clerk shall prepare a summary of the public record by individual or firm name, to reflect total fees awarded during the preceding year. The summary shall be open to examination by the public without charge. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is adapted from former Rule 213. The first sentence of that rule is omitted because of the provisions in 28 U.S.C. Sec. 586 and 604(f) creating panels of private trustees. The rule is not applicable to standing trustees serving in chapter 13 cases. See Sec. 1302 of the Code. A basic purpose of the rule is to prevent what Congress has defined as 'cronyism.' Appointment or employment, whether in a chapter 7 or 11 case, should not center among a small select group of individuals unless the circumstances are such that it would be warranted. The public record of appointments to be kept by the clerk will provide a means for monitoring the appointment process. Subdivison (b) provides a convenient source for public review of fees paid from debtors' estates in the bankruptcy courts. Thus, public recognition of appointments, fairly distributed and based on professional qualifications and expertise, will be promoted and notions of improper favor dispelled. This rule is in keeping with the findings of the Congressional subcommittees as set forth in the House Report of the Committee on the Judiciary, No. 95-595, 95th Cong., 1st Sess. 89-99 (1977). These findings included the observations that there were frequent appointments of the same person, contacts developed between the bankruptcy bar and the courts, and an unusually close relationship between the bar and the judges developed over the years. A major purpose of the new statute is to dilute these practices and instill greater public confidence in the system. Rule 2013 implements that laudatory purpose. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT In subdivisions (b) and (c) the word awarded is substituted for the word paid. While clerks do not know if fees are paid, they can determine what fees are awarded by the court. ------DocID 14950 Document 295 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2014 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2014. Employment of Professional Persons -STATUTE- (a) Application for and Order of Employment An order approving the employment of attorneys, accountants, appraisers, auctioneers, agents, or other professionals pursuant to Sec. 327 or Sec. 1103 of the Code shall be made only on application of the trustee or committee, stating the specific facts showing the necessity for the employment, the name of the person to be employed, the reasons for the selection, the professional services to be rendered, any proposed arrangement for compensation, and, to the best of the applicant's knowledge, all of the person's connections with the debtor, creditors, or any other party in interest, their respective attorneys and accountants. The application shall be accompanied by a verified statement of the person to be employed setting forth the person's connections with the debtor, creditors, or any other party in interest, their respective attorneys and accountants. (b) Services Rendered by Member or Associate of Firm of Attorneys or Accountants If, under the Code and this rule, a law partnership or corporation is employed as an attorney, or an accounting partnership or corporation is employed as an accountant, or if a named attorney or accountant is employed, any partner, member, or regular associate of the partnership, corporation, or individual may act as attorney or accountant so employed, without further order of the court. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a) is adapted from the second sentence of former Bankruptcy Rule 215(a). The remainder of that rule is covered by Sec. 327 of the Code. Subdivision (b) is derived from former Bankruptcy Rule 215(f). The compensation provisions are set forth in Sec. 504 of the Code. ------DocID 14951 Document 296 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2015 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2015. Duty of Trustee or Debtor in Possession to Keep Records, Make Reports, and Give Notice of Case -STATUTE- (a) Trustee or Debtor in Possession A trustee or debtor in possession shall (1) in a chapter 7 liquidation case and, if the court directs, in a chapter 11 reorganization case file a complete inventory of the property of the debtor within 30 days after qualifying as a trustee or debtor in possession, unless such an inventory has already been filed; (2) keep a record of receipts and the disposition of money and property received; (3) file the reports and summaries required by Sec. 704(8) of the Code within the times fixed by the court and which shall include a statement, if payments are made to employees, of the amounts of deductions for all taxes required to be withheld or paid for and in behalf of employees and the place where these amounts are deposited; (4) as soon as possible after the commencement of the case, give notice of the case to every entity known to be holding money or property subject to withdrawal or order of the debtor, including every bank, savings or building and loan association, public utility company, and landlord with whom the debtor has a deposit, and to every insurance company which has issued a policy having a cash surrender value payable to the debtor, except that notice need not be given to any entity who has knowledge or has previously been notified of the case; (5) in every county in which real property of the debtor is located file a notice of or a copy of the petition, without schedules, in the office where a transfer of real property may be recorded to perfect such transfer; (6) within 30 days after the date of the order confirming a plan or within such other time as the court may fix, file a report with the court concerning the action taken by the trustee or debtor in possession and the progress made in the consummation of the plan and file further reports as the court may direct until the plan has been consummated; (7) after consummation of a plan, file an application for a final decree showing that the plan has been consummated, and the names and addresses, if known, of the holders of claims or interests which have not been surrendered or released in accordance with the provisions of the plan and the nature and amounts of claims or interests, and other facts as may be necessary to enable the court to pass on the provisions to be included in the final decree. (b) Chapter 13 Trustee and Debtor (1) Business Cases. In a chapter 13 individual's debt adjustment case, when the debtor is engaged in business, the debtor shall perform the duties prescribed by clauses (1)-(4) of subdivision (a) of this rule. (2) Nonbusiness Cases. In a chapter 13 individual's debt adjustment case, when the debtor is not engaged in business, the trustee shall perform the duties prescribed by clause (2) of subdivision (a) of this rule. (c) Transmission of Reports In a chapter 11 case the court may direct that copies or summaries of annual reports and copies or summaries of other reports shall be mailed to the creditors, equity security holders, and indenture trustees. The court may also direct the publication of summaries of any such reports. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule combines the provisions found in former Rules 218, 10-208, 11-30 and 13-208 of the Rules of Bankruptcy Procedure. It specifies various duties which are in addition to those required by Sec. 704, 1106, 1302 and 1304 of the Code. In subdivision (a) the times permitted to be fixed by the court in clause (3) for the filing of reports and summaries may be fixed by local rule or order. Subdivision (b). This subdivision prescribes duties on either the debtor or trustee in chapter 13 cases, depending on whether or not the debtor is engaged in business (Sec. 1304 of the Code). The duty of giving notice prescribed by subdivision (a)(4) is not included in a nonbusiness case because of its impracticability. Subdivision (c) is derived from former Chapter X Rule 10-208(c) which, in turn, was derived from Sec. 190 of the Act. The equity security holders to whom the reports should be sent are those of record at the time of transmittal of such reports. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a) is amended to add as a duty of the trustee or debtor in possession the filing of a notice of or a copy of the petition. The filing of such notice or a copy of the petition is essential to the protection of the estate from unauthorized post-petition conveyances of real property. Section 549(c) of the Code protects the title of a good faith purchaser for fair equivalent value unless the notice or copy of the petition is filed. ------DocID 14952 Document 297 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2016 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2016. Compensation for Services Rendered and Reimbursement of Expenses -STATUTE- (a) Application for Compensation or Reimbursement An entity seeking interim or final compensation for services, or reimbursement of necessary expenses, from the estate shall file with the court an application setting forth a detailed statement of (1) the services rendered, time expended and expenses incurred, and (2) the amounts requested. An application for compensation shall include a statement as to what payments have theretofore been made or promised to the applicant for services rendered or to be rendered in any capacity whatsoever in connection with the case, the source of the compensation so paid or promised, whether any compensation previously received has been shared and whether an agreement or understanding exists between the applicant and any other entity for the sharing of compensation received or to be received for services rendered in or in connection with the case, and the particulars of any sharing of compensation or agreement or understanding therefor, except that details of any agreement by the applicant for the sharing of compensation as a member or regular associate of a firm of lawyers or accountants shall not be required. The requirements of this subdivision shall apply to an application for compensation for services rendered by an attorney or accountant even though the application is filed by a creditor or other entity. (b) Disclosure of Compensation Paid or Promised to Attorney for Debtor Every attorney for a debtor, whether or not the attorney applies for compensation, shall file with the court within 15 days after the order for relief, or at another time as the court may direct, the statement required by Sec. 329 of the Code including whether the attorney has shared or agreed to share the compensation with any other entity. The statement shall include the particulars of any such sharing or agreement to share by the attorney, but the details of any agreement for the sharing of the compensation with a member or regular associate of the attorney's law firm shall not be required. A supplemental statement shall be filed within 15 days after any payment or agreement not previously disclosed. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Rule 219. Many of the former rule's requirements are, however, set forth in the Code. Section 329 requires disclosure by an attorney of transactions with the debtor, Sec. 330 sets forth the bases for allowing compensation, and Sec. 504 prohibits sharing of compensation. This rule implements those various provisions. Subdivision (a) includes within its provisions a committee, member thereof, agent, attorney or accountant for the committee when compensation or reimbursement of expenses is sought from the estate. Regular associate of a law firm is defined in Rule 9001(9) to include any attorney regularly employed by, associated with, or counsel to that law firm. Firm is defined in Rule 9001(6) to include a partnership or professional corporation. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a) is amended to change 'person' to 'entity'. There are occasions in which a governmental unit may be entitled to file an application under this rule. The requirement that the application contain a 'detailed statement of services rendered, time expended and expenses incurred' gives to the court authority to ensure that the application is both comprehensive and detailed. No amendments are made to delineate further the requirements of the application because the amount of detail to be furnished is a function of the nature of the services rendered and the complexity of the case. Subdivision (b) is amended to require that the attorney for the debtor file the Sec. 329 statement before the meeting of creditors. This will assist the parties in conducting the examination of the debtor. In addition, the amended rule requires the attorney to supplement the Sec. 329 statement if an undisclosed payment is made to the attorney or a new or amended agreement is entered into by the debtor and the attorney. ------DocID 14953 Document 298 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2017 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2017. Examination of Debtor's Transactions with Debtor's Attorney -STATUTE- (a) Payment or Transfer to Attorney Before Commencement of Case On motion by any party in interest or on the court's own initiative, the court after notice and a hearing may determine whether any payment of money or any transfer of property by the debtor, made directly or indirectly and in contemplation of the filing of a petition under the Code by or against the debtor, to an attorney for services rendered or to be rendered is excessive. (b) Payment or Transfer to Attorney After Commencement of Case On motion by the debtor or on the court's own initiative, the court after notice and a hearing may determine whether any payment of money or any transfer of property or any agreement therefor, by the debtor to an attorney after the commencement of a case under the Code is excessive, whether the payment or transfer is made or is to be made directly or indirectly, if the payment, transfer, or agreement therefor is for services in any way related to the case. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from Sec. 60d of the Act and former Bankruptcy Rule 220 and implements Sec. 329 of the Code. Information required to be disclosed by the attorney for a debtor by Sec. 329 of the Code and by the debtor in his Statement of Financial Affairs (Item )15 of Form No. 7, Item )20 of Form No. 8) will assist the court in determining whether to proceed under this rule. Section 60d was enacted in recognition of 'the temptation of a failing debtor to deal too liberally with his property in employing counsel to protect him in view of financial reverses and probable failure.' In re Wood & Henderson, 210 U.S. 246, 253 (1908). This rule, like Sec. 60d of the Act and Sec. 329 of the Code, is premised on the need for and appropriateness of judicial scrutiny of arrangements between a debtor and his attorney to protect the creditors of the estate and the debtor against overreaching by an officer of the court who is in a peculiarly advantageous position to impose on both the creditors and his client. 2 Collier, Bankruptcy 329.02 (15th ed. 1980); MacLachlan, Bankruptcy 318 (1956). Rule 9014 applies to any contested matter arising under this rule. This rule is not to be construed to permit post-petition payments or transfers which may be avoided under other provisions of the Code. ------DocID 14954 Document 299 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2018 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2018. Intervention; Right to Be Heard -STATUTE- (a) Permissive Intervention In a case under the Code, after hearing on such notice as the court directs and for cause shown, the court may permit any interested entity to intervene generally or with respect to any specified matter. (b) Intervention by Attorney General of a State In a chapter 7, 11, or 13 case, the Attorney General of a State may appear and be heard on behalf of consumer creditors if the court determines the appearance is in the public interest, but the Attorney General may not appeal from any judgment, order, or decree in the case. (c) Chapter 9 Municipality Case The Secretary of the Treasury of the United States may, or if requested by the court shall, intervene in a chapter 9 case. Representatives of the state in which the debtor is located may intervene in a chapter 9 case with respect to matters specified by the court. (d) Labor Unions In a chapter 9 or 11 case, a labor union or employees' association, representative of employees of the debtor, shall have the right to be heard on the economic soundness of a plan affecting the interests of the employees. A labor union or employees' association which exercises its right to be heard under this subdivision shall not be entitled to appeal any judgment, order, or decree relating to the plan, unless otherwise permitted by law. (e) Service on Entities Covered by This Rule The court may enter orders governing the service of notice and papers on entities permitted to intervene or be heard pursuant to this rule. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Rules 8-210, 9-15 and 10-210 and it implements Sec. 1109 and 1164 of the Code. Pursuant to Sec. 1109 of the Code, parties in interest have a right to be heard and the Securities and Exchange Commission may raise and be heard on any issue but it may not take an appeal. That section is applicable in chapter 9 cases (Sec. 901 of the Code) and in chapter 11 cases, including cases under subchapter IV thereof for the reorganization of a railroad. In a railroad reorganization case under subchapter IV of chapter 11, Sec. 1164 also gives the right to be heard to the Interstate Commerce Commission, the Department of Transportation and any state or local regulatory commission with jurisdiction over the debtor, but these entities may not appeal. This rule does not apply in adversary proceedings. For intervention in adversary proceedings, see Rule 7024. The rules do not provide any right of compensation to or reimbursement of expenses for intervenors or others covered by this rule. Section 503(b)(3)(D) and (4) is not applicable to the entities covered by this rule. Subdivision (a) is derived from former Chapter VIII Rule 8-210 and former Chapter X Rule 10-210. It permits intervention of an entity (see Sec. 101(14), (21) of the Code) not otherwise entitled to do so under the Code or this rule. Such a party seeking to intervene must show cause therefor. Subdivision (b) specifically grants the appropriate state's Attorney General the right to appear and be heard on behalf of consumer creditors when it is in the public interest. See House Rep. No. 95-595, 95th Cong., 1st Sess. (1977) 189. While 'consumer creditor' is not defined in the Code or elsewhere, it would include the type of individual entitled to priority under Sec. 507(a)(5) of the Code, that is, an individual who has deposited money for the purchase, lease or rental of property or the purchase of services for the personal, family, or household use of the individual. It would also include individuals who purchased or leased property for such purposes in connection with which there may exist claims for breach of warranty. This subdivision does not grant the Attorney General the status of party in interest. In other contexts, the Attorney General will, of course, be a party in interest as for example, in representing a state in connection with a tax claim. Subdivision (c) recognizes the possible interests of the Secretary of the Treasury or of the state of the debtor's locale when a municipality is the debtor. It is derived from former Chapter IX Rule 9-15 and Sec. 85(d) of the Act. Subdivision (d) is derived from former Chapter X Rule 10-210 which, in turn, was derived from Sec. 206 of the Act. Section 206 has no counterpart in the Code. Subdivision (e) is derived from former Chapter VIII Rule 8-210(d). It gives the court flexibility in directing the type of future notices to be given intervenors. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (d) is amended to make it clear that the prohibition against appeals by labor unions is limited only to their participation in connection with the hearings on the plan as provided in subdivision (d). If a labor union would otherwise have the right to file an appeal or to be a party to an appeal, this rule does not preclude the labor union from exercising that right. ------DocID 14955 Document 300 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 2019 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART II -HEAD- Rule 2019. Representation of Creditors and Equity Security Holders in Chapter 9 Municipality and Chapter 11 Reorganization Cases -STATUTE- (a) Data Required In a chapter 9 municipality or chapter 11 reorganization case, except with respect to a committee appointed pursuant to Sec. 1102 of the Code, every entity or committee representing more than one creditor or equity security holder and, unless otherwise directed by the court, every indenture trustee, shall file a verified statement with the clerk setting forth (1) the name and address of the creditor or equity security holder; (2) the nature and amount of the claim or interest and the time of acquisition thereof unless it is alleged to have been acquired more than one year prior to the filing of the petition; (3) a recital of the pertinent facts and circumstances in connection with the employment of the entity or indenture trustee, and, in the case of a committee, the name or names of the entity or entities at whose instance, directly or indirectly, the employment was arranged or the committee was organized or agreed to act; and (4) with reference to the time of the employment of the entity, the organization or formation of the committee, or the appearance in the case of any indenture trustee, the amounts of claims or interests owned by the entity, the members of the committee or the indenture trustee, the times when acquired, the amounts paid therefor, and any sales or other disposition thereof. The statement shall include a copy of the instrument, if any, whereby the entity, committee, or indenture trustee is empowered to act on behalf of creditors or equity security holders. A supplemental statement shall be filed promptly, setting forth any material changes in the facts contained in the statement filed pursuant to this subdivision. (b) Failure To Comply; Effect On motion of any party in interest or on its own initiative, the court may (1) determine whether there has been a failure to comply with the provisions of subdivision (a) of this rule or with any other applicable law regulating the activities and personnel of any entity, committee, or indenture trustee or any other impropriety in connection with any solicitation and, if it so determines, the court may refuse to permit that entity, committee, or indenture trustee to be heard further or to intervene in the case; (2) examine any representation provision of a deposit agreement, proxy, trust mortgage, trust indenture, or deed of trust, or committee or other authorization, and any claim or interest acquired by any entity or committee in contemplation or in the course of a case under the Code and grant appropriate relief; and (3) hold invalid any authority, acceptance, rejection, or objection given, procured, or received by an entity or committee who has not complied with this rule or with Sec. 1125(b) of the Code. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is a comprehensive regulation of representation in chapter 9 municipality and in chapter 11 reorganization cases. It is derived from Sec. 209-213 of the Act and former Chapter X Rule 10-211. Subdivision (b) is derived from Sec. 212, 213 of the Act. As used in clause (2), 'other authorization' would include a power or warrant of attorney which are specifically mentioned in Sec. 212 of the Act. This rule deals with representation provisions in mortgages, trust deeds, etc. to protect the beneficiaries from unfair practices and the like. It does not deal with the validation or invalidation of security interests generally. If immediate compliance is not possible, the court may permit a representative to be heard on a specific matter, but there is no implicit waiver of compliance on a permanent basis. ------DocID 14956 Document 301 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES PART III -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- PART III - CLAIMS AND DISTRIBUTION TO CREDITORS AND EQUITY INTEREST HOLDERS; PLANS ------DocID 14957 Document 302 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3001 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3001. Proof of Claim -STATUTE- (a) Form and Content A proof of claim is a written statement setting forth a creditor's claim. A proof of claim for wages, salary, or commissions shall conform substantially to Official Form No. 20 or No. 21; any other proof of claim shall conform substantially to Official Form No. 19. (b) Who May Execute A proof of claim shall be executed by the creditor or the creditor's authorized agent except as provided in Rules 3004 and 3005. (c) Claim Based on a Writing When a claim, or an interest in property of the debtor securing the claim, is based on a writing, the original or a duplicate shall be filed with the proof of claim. If the writing has been lost or destroyed, a statement of the circumstances of the loss or destruction shall be filed with the claim. (d) Evidence of Perfection of Security Interest If a security interest in property of the debtor is claimed, the proof of claim shall be accompanied by evidence that the security interest has been perfected. (e) Transferred Claim (1) Unconditional Transfer Before Proof Filed. If a claim other than one based on a bond or debenture has been unconditionally transferred before proof of the claim has been filed, the proof of claim may be filed only by the transferee. If the claim has been transferred after the filing of the petition, the proof of claim shall be supported by (A) a statement of the transferor acknowledging the transfer and stating the consideration therefor or (B) a statement of the transferee setting forth the consideration for the transfer and why the transferee is unable to obtain the statement from the transferor. (2) Unconditional Transfer After Proof Filed. If a claim other than one based on a bond or debenture has been unconditionally transferred after the proof of claim has been filed, evidence of the terms of the transfer shall be filed by the transferee. The clerk shall immediately notify the original claimant by mail of the filing of the evidence of transfer and that objection thereto, if any, must be filed with the clerk within 20 days of the mailing of the notice or within any additional time allowed by the court. If the court finds, after a hearing on notice, that the claim has been unconditionally transferred, it shall enter an order substituting the transferee for the original claimant, otherwise the court shall enter such order as may be appropriate. (3) Transfer of Claim for Security Before Proof Filed. If a claim other than one based on a bond or debenture has been transferred for security before proof of the claim has been filed, the transferor or transferee or both may file a proof of claim for the full amount. The proof shall be supported by a statement setting forth the terms of the transfer. If the claim was transferred after the filing of the petition, the proof shall also be supported by (A) a statement of the transferor acknowledging the transfer and stating the consideration therefor, or (B) a statement of the transferee setting forth the consideration for the transfer and why the transferee is unable to obtain the statement from the transferor. If either the transferor or the transferee files a proof of claim, the clerk shall immediately notify the other by mail of the right to join in the filed claim. If both transferor and transferee file proofs of the same claim, the proofs shall be consolidated. After a hearing on notice, the court shall enter such orders respecting allowance and voting of the claim, payment of dividends thereon, and participation in the administration of the estate as may be appropriate. (4) Transfer of Claim for Security After Proof Filed. If a claim other than one based on a bond or debenture has been transferred for security after the proof of claim has been filed, evidence of the terms of the transfer shall be filed by the transferee. The clerk shall immediately notify the original claimant by mail of the filing of the evidence of transfer and that objection thereto, if any, must be filed with the clerk within 20 days of the mailing of the notice or within any additional time allowed by the court. After a hearing on notice, the court shall enter such orders respecting allowance and voting of the claim, payment of dividends thereon, and participation in the administration of the estate as may be appropriate. (5) Service of Objection; Notice of Hearing. A copy of an objection to the evidence of transfer filed pursuant to paragraph (2) or (4) of this subdivision together with a notice of a hearing shall be mailed or otherwise delivered to the transferee at least 30 days prior to the hearing. (f) Evidentiary Effect A proof of claim executed and filed in accordance with these rules shall constitute prima facie evidence of the validity and amount of the claim. (g) (FOOTNOTE 1) To the extent not inconsistent with the United States Warehouse Act or applicable State law, a warehouse receipt, scale ticket, or similar document of the type routinely issued as evidence of title by a grain storage facility, as defined in section 557 of title 11, shall constitute prima facie evidence of the validity and amount of a claim of ownership of a quantity of grain. (FOOTNOTE 1) So in original. Subsec. (g) enacted without a catchline. -SOURCE- (As amended July 10, 1984, Pub. L. 98-353, title III, Sec. 354, 98 Stat. 361.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is adapted from former Bankruptcy Rules 301 and 302. The Federal Rules of Evidence, made applicable to cases under the Code by Rule 1101, do not prescribe the evidentiary effect to be accorded particular documents. Subdivision (f) of this rule supplements the Federal Rules of Evidence as they apply to cases under the Code. Subdivision (c). This subdivision is similar to former Bankruptcy Rule 302(c) and continues the requirement for the filing of any written security agreement and provides that the filing of a duplicate of a writing underlying a claim authenticates the claim with the same effect as the filing of the original writing. Cf. Rules 1001(4) and 1003 of F.R. of Evid. Subdivision (d) together with the requirement in the first sentence of subdivision (c) for the filing of any written security agreement, is designed to facilitate the determination whether the claim is secured and properly perfected so as to be valid against the trustee. Subdivision (d). 'Satisfactory evidence' of perfection, which is to accompany the proof of claim, would include a duplicate of an instrument filed or recorded, a duplicate of a certificate of title when a security interest is perfected by notation on such a certificate, a statement that pledged property has been in possession of the secured party since a specified date, or a statement of the reasons why no action was necessary for perfection. The secured creditor may not be required to file a proof of claim under this rule if he is not seeking allowance of a claim for a deficiency. But see Sec. 506(d) of the Code. Subdivision (e). The rule recognizes the differences between an unconditional transfer of a claim and a transfer for the purpose of security and prescribes a procedure for dealing with the rights of the transferor and transferee when the transfer is for security. The rule clarifies the procedure to be followed when a transfer precedes or follows the filing of the petition. The interests of sound administration are served by requiring the post-petition transferee to file with the proof of claim a statement of the transferor acknowledging the transfer and the consideration for the transfer. Such a disclosure will assist the court in dealing with evils that may arise out of post-bankruptcy traffic in claims against an estate. Monroe v. Scofield, 135 F.2d 725 (10th Cir. 1943); In re Philadelphia & Western Ry., 64 F. Supp. 738 (E.D. Pa. 1946); cf. In re Latham Lithographic Corp., 107 F.2d 749 (2d Cir. 1939). Both paragraphs (1) and (3) of this subdivision, which deal with a transfer before the filing of a proof of claim, recognize that the transferee may be unable to obtain the required statement from the transferor, but in that event a sound reason for such inability must accompany the proof of claim filed by the transferee. Paragraphs (3) and (4) clarify the status of a claim transferred for the purpose of security. An assignee for security has been recognized as a rightful claimant in bankruptcy. Feder v. John Engelhorn & Sons, 202 F.2d 411 (2d Cir. 1953). An assignor's right to file a claim notwithstanding the assignment was sustained in In re R & L Engineering Co., 182 F. Supp. 317 (S.D. Cal. 1960). Facilitation of the filing of proofs by both claimants as holders of interests in a single claim is consonant with equitable treatment of the parties and sound administration. See In re Latham Lithographic Corp., 107 F.2d 749 (2d Cir. 1939). Paragraphs (2) and (4) of subdivision (e) deal with the transfer of a claim after proof has been filed. Evidence of the terms of the transfer required to be disclosed to the court will facilitate the court's determination of the appropriate order to be entered because of the transfer. Paragraph (5) describes the procedure to be followed when an objection is made by the transferor to the transferee's filed evidence of transfer. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 Subdivision (g) was added by Sec. 354 of the 1984 amendments. -REFTEXT- REFERENCES IN TEXT The United States Warehouse Act, referred to in subd. (g), is Part C of act Aug. 11, 1916, ch. 313, 39 Stat. 486, as amended, which is classified generally to chapter 10 (Sec. 241 et seq.) of Title 7, Agriculture. For complete classification of this Act to the Code, see section 241 of Title 7 and Tables. 1984 AMENDMENT Subd. (g). Pub. L. 98-353 added subd. (g). -MISC2- EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 14958 Document 303 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3002 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3002. Filing Proof of Claim or Interest -STATUTE- (a) Necessity for Filing An unsecured creditor or an equity security holder must file a proof of claim or interest in accordance with this rule for the claim or interest to be allowed, except as provided in Rules 1019(4), 3003, 3004, and 3005. (b) Place of Filing A proof of claim or interest shall be filed in accordance with Rule 5005. (c) Time for filing In a chapter 7 liquidation or chapter 13 individual's debt adjustment case, a proof of claim shall be filed within 90 days after the first date set for the meeting of creditors called pursuant to Sec. 341(a) of the Code, except as follows: (1) On motion of the United States, a state, or subdivision thereof before the expiration of such period and for cause shown, the court may extend the time for filing of a claim by the United States, a state, or subdivision thereof. (2) In the interest of justice and if it will not unduly delay the administration of the case, the court may extend the time for filing a proof of claim by an infant or incompetent person or the representative of either. (3) An unsecured claim which arises in favor of an entity or becomes allowable as a result of a judgment may be filed within 30 days after the judgment becomes final if the judgment is for the recovery of money or property from that entity or denies or avoids the entity's interest in property. If the judgment imposes a liability which is not satisfied, or a duty which is not performed within such period or such further time as the court may permit, the claim shall not be allowed. (4) A claim arising from the rejection of an executory contract of the debtor may be filed within such time as the court may direct. (5) If notice of insufficient assets to pay a dividend was given to creditors pursuant to Rule 2002(e), and subsequently the trustee notifies the court that payment of a dividend appears possible, the clerk shall notify the creditors of that fact and that they may file proofs of claim within 90 days after the mailing of the notice. (6) In a chapter 7 liquidation case, if a surplus remains after all claims allowed have been paid in full, the court may grant an extension of time for the filing of claims against the surplus not filed within the time hereinabove prescribed. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a) of this rule is substantially a restatement of the general requirement that claims be proved and filed. The exceptions refer to Rule 3003 providing for the filing of claims in chapter 9 and 11 cases, and to Rules 3004 and 3005 authorizing claims to be filed by the debtor or trustee and the filing of a claim by a contingent creditor of the debtor. A secured claim need not be filed or allowed under Sec. 502 or Sec. 506(d) unless a party in interest has requested a determination and allowance or disallowance under Sec. 502. Subdivision (c) is adapted from former Bankruptcy Rule 302(e) but changes the time limits on the filing of claims in chapter 7 and 13 cases from six months to 90 days after the first date set for the meeting of creditors. The special rule for early filing by a secured creditor in a chapter 13 case, in former Rule 13-302(e)(1) is not continued. Although the claim of a secured creditor may have arisen before the petition, a judgment avoiding the security interest may not have been entered until after the time for filing claims has expired. Under Rule 3002(c)(3) the creditor who did not file a secured claim may nevertheless file an unsecured claim within the time prescribed. A judgment does not become final for the purpose of starting the 30 day period provided for by paragraph (3) until the time for appeal has expired or, if an appeal is taken, until the appeal has been disposed of. In re Tapp, 61 F. Supp. 594 (W.D. Ky. 1945). Paragraph (1) is derived from former Bankruptcy Rule 302(e). The governmental unit may move for an extension of the 90 day period. Pursuant to Sec. 501(c) of the Code, if the government does not file its claim within the proper time period, the debtor or trustee may file on its behalf. An extension is not needed by the debtor or trustee because the right to file does not arise until the government's time has expired. Paragraph (4) is derived from former chapter rules. (See, e.g., Rule 11-33(a)(2)(B). In light of the reduced time it is necessary that a party with a claim arising from the rejection of an executory contract have sufficient time to file that claim. This clause allows the court to fix an appropriate time. Paragraph (5) of subdivision (c) is correlated with the provision in Rule 2002(e) authorizing notification to creditors of estates from which no dividends are anticipated. The clause permits creditors who have refrained from filing claims after receiving notification to be given an opportunity to file when subsequent developments indicate the possibility of a dividend. The notice required by this clause must be given in the manner provided in Rule 2002. The information relating to the discovery of assets will usually be obtained by the clerk from the trustee's interim reports or special notification by the trustee. Provision is made in Rule 2002(a) and (h) for notifying all creditors of the fixing of a time for filing claims against a surplus under paragraph (6). This paragraph does not deal with the distribution of the surplus. Reference must also be made to Sec. 726(a)(2)(C) and (3) which permits distribution on late filed claims. Paragraph (6) is only operative in a chapter 7 case. In chapter 13 cases, the plan itself provides the distribution to creditors which is not necessarily dependent on the size of the estate. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a) is amended by adding a reference to Rule 1019(4). Rule 1019(4) provides that claims actually filed by a creditor in a chapter 11 or 13 case shall be treated as filed in a superseding chapter 7 case. Claims deemed filed in a chapter 11 case pursuant to Sec. 1111(a) of the Code are not considered as filed in a superseding chapter 7 case. The creditor must file a claim in the superseding chapter 7 case. ------DocID 14959 Document 304 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3003 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3003. Filing Proof of Claim or Equity Security Interest in Chapter 9 Municipality or Chapter 11 Reorganization Cases -STATUTE- (a) Applicability of Rule This rule applies in chapter 9 and 11 cases. (b) Schedule of Liability and List of Equity Security Holders (1) Schedule of Liabilities. The schedule of liabilities filed pursuant to Sec. 521(l) of the Code shall constitute prima facie evidence of the validity and amount of the claims of creditors, unless they are scheduled as disputed, contingent, or unliquidated. It shall not be necessary for a creditor or equity security holder to file a proof of claim or interest except as provided in subdivision (c)(2) of this rule. (2) List of Equity Security Holders. The list of equity security holders filed pursuant to Rule 1007(a)(3) shall constitute prima facie evidence of the validity and amount of the equity security interests and it shall not be necessary for the holders of such interests to file a proof of interest. (c) Filing Proof of Claim (1) Who May File. Any creditor or indenture trustee may file a proof of claim within the time prescribed by subdivision (c)(3) of this rule. (2) Who Must File. Any creditor or equity security holder whose claim or interest is not scheduled or scheduled as disputed, contingent, or unliquidated shall file a proof of claim or interest within the time prescribed by subdivision (c)(3) of this rule; any creditor who fails to do so shall not be treated as a creditor with respect to such claim for the purposes of voting and distribution. (3) Time for Filing. The court shall fix and for cause shown may extend the time within which proofs of claim or interest may be filed. (4) Effect of Filing Claim. A proof of claim or interest executed and filed in accordance with this subdivision shall supersede any scheduling of that claim or interest pursuant to Sec. 521(l) of the Code. (5) Filing by Indenture Trustee. An indenture trustee may file a claim on behalf of all known or unknown holders of securities issued pursuant to the trust instrument under which it is trustee. (d) Proof of Right to Record Status For the purposes of Rules 3017, 3018 and 3021 and for receiving notices, an entity who is not the record holder of a security may file a statement setting forth facts which entitle that entity to be treated as the record holder. An objection to the statement may be filed by any party in interest. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a). This rule applies only in chapter 9 and chapter 11 cases. It is adapted from former Chapter X Rule 10-401 and provides an exception to the requirement for filing proofs of claim and interest as expressed in Sec. 925 and 1111(a) of the Code. Subdivision (b). This general statement implements Sec. 925 and 1111(a) of the Code. Subdivision (c). This subdivision permits, in paragraph (1), the filing of a proof of claim but does not make it mandatory. Paragraph (2) requires, as does the Code, filing when a claim is scheduled as disputed, contingent, or unliquidated as to amount. It is the creditor's responsibility to determine if the claim is accurately listed. Notice of the provision of this rule is provided for in Official Form No. 16, the order for the meeting of creditors. In an appropriate case the court may order creditors whose claims are scheduled as disputed, contingent, or unliquidated be notified of that fact but the procedure is left to the discretion of the court. Subdivision (d) is derived from former Chapter X Rule 10-401(f). Except with respect to the need and time for filing claims, the other aspects concerning claims covered by Rules 3001 and 3002 are applicable in chapter 9 and 11 cases. Holders of equity security interests need not file proofs of interest. Voting and distribution participation is dependent on ownership as disclosed by the appropriate records of a transfer agent or the corporate or other business records at the time prescribed in Rules 3017 and 3021. ------DocID 14960 Document 305 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3004 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3004. Filing of Claims by Debtor or Trustee -STATUTE- If a creditor fails to file a proof of claim on or before the first date set for the meeting of creditors called pursuant to Sec. 341(a) of the Code, the debtor or trustee may do so in the name of the creditor, within 30 days after expiration of the time for filing claims prescribed by Rule 3002(c) or 3003(c), whichever is applicable. The clerk shall forthwith mail notice of the filing to the creditor, the debtor and the trustee. A proof of claim filed by a creditor pursuant to Rule 3002 or Rule 3003(c), shall supersede the proof filed by the debtor or trustee. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is adapted from former Bankruptcy Rule 303 but conforms with the changes made by Sec. 501(c) of the Code. Rule 303 permitted only the filing of tax and wage claims by the debtor. Section 501(c) of the Code, however, permits the filing by the debtor or trustee on behalf of any creditor. It is the policy of the Code that debtors' estates should be administered for the benefit of creditors without regard to the dischargeability of their claims. After their estates have been closed, however, discharged debtors may find themselves saddled with liabilities, particularly for taxes, which remain unpaid because of the failure of creditors holding nondis- chargeable claims to file proofs of claim and receive distributions thereon. The result is that the debtor is deprived of an important benefit of the Code without any fault or omission on the debtor's part and without any objective of the Code being served thereby. Section 501(c) of the Code authorizes a debtor or trustee to file a proof of claim for any holder of a claim. Although all claims may not be nondischargeable, it may be difficult to determine, in particular, whether tax claims survive discharge. See Plumb, Federal Tax Liens and Priorities in Bankruptcy, 43 Ref. J. 37, 43-44 (1969); 1 Collier, Bankruptcy 17.14 (14th ed. 1967); 3 id. 523.06 (15th ed. 1979). To eliminate the necessity of the resolution of this troublesome issue, the option accorded the debtor by the Code does not depend on the nondischargeability of the claim. No serious administrative problems and no unfairness to creditors seemed to develop from adoption of Rule 303, the forerunner to Sec. 501(c). The authority to file is conditioned on the creditor's failure to file the proof of claim on or before the first date set for the meeting of creditors, which is the date a claim must ordinarily be filed in order to be voted in a chapter 7 case. Notice to the creditor is provided to enable him to file a proof of claim pursuant to Rule 3002, which proof, when filed, would supersede the proof filed by the debtor or trustee. Notice to the trustee would serve to alert the trustee to the special character of the proof and the possible need for supplementary evidence of the validity and amount of the claim. If the trustee does not qualify until after a proof of claim is filed by the debtor pursuant to this rule, he should be notified as soon as practicable thereafter. To the extent the claim is allowed and dividends paid thereon, it will be reduced or perhaps paid in full. If the claim is also filed pursuant to Rule 3005, only one distribution thereon may be made. As expressly required by Rule 3005 and by the purpose of this rule such distribution must diminish the claim. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Under the rule as amended, the debtor or trustee in a chapter 7 or 13 case has 120 days from the first date set for the meeting of creditors to file a claim for the creditor. During the first 90 days of that period the creditor in a chapter 7 or 13 case may file a claim as provided by Rule 3002(c). If the creditor fails to file a claim, the debtor or trustee shall have an additional 30 days thereafter to file the claim. A proof of claim filed by a creditor supersedes a claim filed by the debtor or trustee only if it is timely filed within the 90 days allowed under Rule 3002(c). ------DocID 14961 Document 306 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3005 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3005. Filing of Claim, Acceptance, or Rejection By Guarantor, Surety, Indorser, or Other Codebtor -STATUTE- (a) Filing of Claim If a creditor has not filed a proof of claim pursuant to Rule 3002 or 3003(c), an entity that is or may be liable with the debtor to that creditor, or who has secured that creditor, may, within 30 days after the expiration of the time for filing claims prescribed by Rule 3002(c) or 3003(c) whichever is applicable, execute and file a proof of claim in the name of the creditor, if known, or if unknown, in the entity's own name. No distribution shall be made on the claim except on satisfactory proof that the original debt will be diminished by the amount of distribution. A proof of claim filed by a creditor pursuant to Rule 3002 or 3003(c) shall supersede the proof of claim filed pursuant to the first sentence of this subdivision. (b) Filing of Acceptance or Rejection; Substitution of Creditor An entity which has filed a claim pursuant to the first sentence of subdivision (a) of this rule may file an acceptance or rejection of a plan in the name of the creditor, if known, or if unknown, in the entity's own name but if the creditor files a proof of claim within the time permitted by Rule 3003(c) or files a notice with the court prior to confirmation of a plan of the creditor's intention to act in the creditor's own behalf, the creditor shall be substituted for the obligor with respect to that claim. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is adapted from former Rules 304 and 10-402. Together with Sec. 501(b) of the Code, the rule makes clear that anyone who may be liable on a debt of the debtor, including a surety, guarantor, indorser, or other codebtor, is authorized to file in the name of the creditor of the debtor. Subdivision (a). Rule 3002(c) provides the time period for filing proofs of claim in chapter 7 and 13 cases; Rule 3003(c) provides the time, when necessary, for filing claims in a chapter 9 or 11 case. Subdivision (b). This subdivision applies in chapter 9 and 11 cases as distinguished from chapter 7 cases. It permits voting for or against a plan by an obligor who files a claim in place of the creditor. ------DocID 14962 Document 307 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3006 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3006. Withdrawal of Claim or Acceptance or Rejection of Plan -STATUTE- A creditor may withdraw a claim as of right by filing a notice of withdrawal, except as provided in this rule. If after a creditor has filed a proof of claim an objection is filed thereto or a complaint is filed against that creditor in an adversary proceeding, or the creditor has accepted or rejected the plan or otherwise has participated significantly in the case, the creditor may not withdraw the claim except on order of the court after a hearing on notice to the trustee or debtor in possession, and any creditors' committee selected pursuant to Sec. 705(a) or 1102 of the Code. The order of the court shall contain such terms and conditions as the court deems proper. Unless the court orders otherwise, an authorized withdrawal of a claim shall constitute withdrawal of any related acceptance or rejection of a plan. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Rules 305 and 10-404. Since 1938 it has generally been held that Rule 41 F.R.Civ.P. governs the withdrawal of a proof of claim. In re Empire Coal Sales Corp., 45 F. Supp. 974, 976 (S.D.N.Y.), aff'd sub nom. Kleid v. Ruthbell Coal Co., 131 F.2d 372, 373 (2d Cir. 1942); Kelso v. MacLaren, 122 F.2d 867, 870 (8th Cir. 1941); In re Hills, 35 F. Supp. 532, 533 (W.D. Wash. 1940). Accordingly, the cited cases held that after an objection has been filed a proof of claim may be withdrawn only subject to approval by the court. This constitutes a restriction of the right of withdrawal as recognized by some though by no means all of the cases antedating the promulgation of the Federal Rules of Civil Procedure. See 3 Collier Bankruptcy, 57.12 (14th ed. 1961); Note, 20 Bost. U. L. Rev. 121 (1940). The filing of a claim does not commence an adversary proceeding but the filing of an objection to the claim initiates a contest that must be disposed of by the court. This rule recognizes the applicability of the considerations underlying Rule 41(a) F.R.Civ.P. to the withdrawal of a claim after it has been put in issue by an objection. Rule 41(a)(2) F.R.Civ.P. requires leave of court to obtain dismissal over the objection of a defendant who has pleaded a counterclaim prior to the service of the plaintiff's motion to dismiss. Although the applicability of this provision to the withdrawal of a claim was assumed in Conway v. Union Bank of Switzerland, 204 F.2d 603, 608 (2d Cir. 1953), Kleid v. Ruthbell Coal Co., supra, Kelso v. MacLaren, supra, and In re Hills, supra, this rule vests discretion in the court to grant, deny, or condition the request of a creditor to withdraw, without regard to whether the trustee has filed a merely defensive objection or a complaint seeking an affirmative recovery of money or property from the creditor. A number of pre-1938 cases sustained denial of a creditor's request to withdraw proof of claim on the ground of estoppel or election of remedies. 2 Remington, Bankruptcy 186 (Henderson ed. 1956); cf. 3 Collier, supra 57.12, at 201 (1964). Voting a claim for a trustee was an important factor in the denial of a request to withdraw in Standard Varnish Works v. Haydock, 143 Fed. 318, 319-20 (6th Cir. 1906), and In re Cann, 47 F.2d 661, 662 (W.D. Pa. 1931). And it has frequently been recognized that a creditor should not be allowed to withdraw a claim after accepting a dividend. In re Friedmann, 1 Am. B. R. 510, 512 (Ref., S.D.N.Y. 1899); 3 Collier 205 (1964); cf. In re O'Gara Coal Co., 12 F.2d 426, 429 (7th Cir.), cert. denied, 271 U.S. 683 (1926). It was held in Industrial Credit Co. v. Hazen, 222 F.2d 225 (8th Cir. 1955), however, that although a claimant had participated in the first meeting of creditors and in the examination of witnesses, the creditor was entitled under Rule 41(a)(1) F.R.Civ.P. to withdraw the claim as of right by filing a notice of withdrawal before the trustee filed an objection under Sec. 57g of the Act. While this rule incorporates the post-1938 case law referred to in the first paragraph of this note, it rejects the inference drawn in the Hazen case that Rule 41(a) F.R.Civ.P. supersedes the pre-1938 case law that vests discretion in the court to deny or restrict withdrawal of a claim by a creditor on the ground of estoppel or election of remedies. While purely formal or technical participation in a case by a creditor who has filed a claim should not deprive the creditor of the right to withdraw the claim, a creditor who has accepted a dividend or who has voted in the election of a trustee or otherwise participated actively in proceedings in a case should be permitted to withdraw only with the approval of the court on terms it deems appropriate after notice to the trustee. 3 Collier 205-06 (1964). ------DocID 14963 Document 308 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3007 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3007. Objections to Claims -STATUTE- An objection to the allowance of a claim shall be in writing and filed with the court. A copy of the objection with notice of the hearing thereon shall be mailed or otherwise delivered to the claimant, the debtor or debtor in possession and the trustee at least 30 days prior to the hearing. If an objection to a claim is joined with a demand for relief of the kind specified in Rule 7001, it becomes an adversary proceeding. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from Sec. 47a(8) of the Act and former Bankruptcy Rule 306. It prescribes the manner in which an objection to a claim shall be made and notice of the hearing thereon given to the claimant. The requirement of a writing does not apply to an objection to the allowance of a claim for the purpose of voting for a trustee or creditors' committee in a chapter 7 case. See Rule 2003. The contested matter initiated by an objection to a claim is governed by rule 9014, unless a counterclaim by the trustee is joined with the objection to the claim. The filing of a counterclaim ordinarily commences an adversary proceeding subject to the rules in Part VII. While the debtor's other creditors may make objections to the allowance of a claim, the demands of orderly and expeditious administration have led to a recognition that the right to object is generally exercised by the trustee. Pursuant to Sec. 502(a) of the Code, however, any party in interest may object to a claim. But under Sec. 704 the trustee, if any purpose would be served thereby, has the duty to examine proofs of claim and object to improper claims. By virtue of the automatic allowance of a claim not objected to, a dividend may be paid on a claim which may thereafter be disallowed on objection made pursuant to this rule. The amount of the dividend paid before the disallowance in such event would be recoverable by the trustee in an adversary proceeding. ------DocID 14964 Document 309 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3008 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3008. Reconsideration of Claims -STATUTE- A party in interest may move for reconsideration of an order allowing or disallowing a claim against the estate. The court after a hearing on notice shall enter an appropriate order. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Section 502(j) of the Code deals only with the reconsideration of allowed claims as did former Sec. 57k of the Act and General Order 21(b). It had sometimes been held that a referee had no jurisdiction to reconsider a disallowed claim, or the amount or priority of an allowed claim, at the instance of the claimant. See, e.g., In re Gouse, 7 F. Supp. 106 (M.D. Pa. 1934); In re Tomlinson & Dye, Inc., 3 F. Supp. 800 (N.D. Okla. 1933). This view disregarded Sec. 2a(2) of the Act and the 'ancient and elementary power' of a referee as a court to reconsider orders. In re Pottasch Brow. Co., Inc., 79 F.2d 613, 616 (2d Cir. 1935); Castaner v. Mora, 234 F.2d 710 (1st Cir. 1956). This rule recognizes, as did former Bankruptcy Rule 307, the power of the court to reconsider an order of disallowance on appropriate motion. Reconsideration of a claim that has been previously allowed or disallowed after objection is discretionary with the court. The right to seek reconsideration of an allowed claim, like the right to object to its allowance, is generally exercised by the trustee if one has qualified and is performing the duties of that office with reasonable diligence and fidelity. A request for reconsideration of a disallowance would, on the other hand, ordinarily come from the claimant. A proof of claim executed and filed in accordance with the rules in this Part III is prima facie evidence of the validity and the amount of the claim notwithstanding a motion for reconsideration of an order of allowance. Failure to respond does not constitute an admission, though it may be deemed a consent to a reconsideration. In re Goble Boat Co., 190 Fed. 92 (N.D.N.Y. 1911). The court may decline to reconsider an order of allowance or disallowance without notice to any adverse party and without affording any hearing to the movant. If a motion to reconsider is granted, notice and hearing must be afforded to parties in interest before the previous action in the claim taken in respect to the claim may be vacated or modified. After reconsideration, the court may allow or disallow the claim, increase or decrease the amount of a prior allowance, accord the claim a priority different from that originally assigned it, or enter any other appropriate order. The rule expands Sec. 502(j) which provides for reconsideration of an allowance only before the case is closed. Authorities have disagreed as to whether reconsideration may be had after a case has been reopened. Compare 3 Collier Bankruptcy 57.23(4) (14th ed. 1964), see generally 3 id. 502.10 (15th ed. 1979), with 2 Remington, Bankruptcy 498 (Henderson ed. 1956). If a case is reopened as provided in Sec. 350(b) of the Code, reconsideration of the allowance or disallowance of a claim may be sought and granted in accordance with this rule. ------DocID 14965 Document 310 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3009 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3009. Declaration and Payment of Dividends in Chapter 7 Liquidation Cases -STATUTE- In chapter 7 cases, dividends to creditors shall be paid as promptly as practicable in the amounts and at the times as ordered by the court. Dividend checks shall be made payable and mailed to each creditor whose claim has been allowed, unless a power of attorney authorizing another entity to receive dividends has been executed and filed in accordance with Rule 9010. In that event, dividend checks shall be made payable to the creditor and to the other entity and shall be mailed to the other entity. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Rules 308 and 11-35(a). The preparation of records showing dividends declared and to whom payable is subject to prescription by the Director of the Administrative Office pursuant to Rule 5003(e). The rule governs distributions to creditors having priority as well as to general unsecured creditors. Notwithstanding the detailed statutory provisions regulating the declaration of dividends, a necessarily wide discretion over this matter has been recognized to reside in the court. See 3A Collier, Bankruptcy 65.03 (14th ed. 1975): 1 Proceedings of Seminar for Newly Appointed Referees in Bankruptcy 173 (1964). Although the rule leaves to the discretion of the court the amount and the times of dividend payments, it recognizes the creditors' right to as prompt payment as practicable. The second and third sentences of the rule make explicit the method of payment of dividends and afford protection of the interests of the creditor and the holder of a power of attorney authorized to receive payment. The rule does not permit variance at local option. This represents a marked change from former Bankruptcy Rule 308. ------DocID 14966 Document 311 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3010 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3010. Small Dividends and Payments in Chapter 7 Liquidation and Chapter 13 Individual's Debt Adjustment Cases -STATUTE- (a) Chapter 7 Cases In a chapter 7 case no dividend in an amount less than $5 shall be distributed by the trustee to any creditor unless authorized by local rule or order of the court. Any dividend not distributed to a creditor shall be treated in the same manner as unclaimed funds as provided in Sec. 347 of the Code. (b) Chapter 13 Cases In a chapter 13 case no payment in an amount less than $15 shall be distributed by the trustee to any creditor unless authorized by local rule or order of the court. Funds not distributed because of this subdivision shall accumulate and shall be paid whenever the accumulation aggregates $15. Any funds remaining shall be distributed with the final payment. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule permits a court to eliminate the disproportionate expense and inconvenience incurred by the issuance of a dividend check of less than $5 (or $15 in a chapter 13 case). Creditors are more irritated than pleased to receive such small dividends, but the money is held subject to their specific request as are unclaimed dividends under Sec. 347(a) of the Code. When the trustee deposits undistributed dividends pursuant to a direction in accordance with this rule the trustee should file with the clerk a list of the names and addresses, so far as known, of the persons entitled to the money so deposited and the respective amounts payable to them pursuant to Rule 3011. In a chapter 13 case, the small dividend will accumulate and will be payable at the latest, with the final dividend. Local rule or order may change the practice permitted in this rule and, in that connection, the order may be incorporated in the order confirming a chapter 13 plan. ------DocID 14967 Document 312 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3011 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3011. Unclaimed Funds in Chapter 7 Liquidation and Chapter 13 Individual's Debt Adjustment Cases -STATUTE- The trustee shall file with the clerk a list of all known names and addresses of the entities and the amounts which they are entitled to be paid from remaining property of the estate that is paid into court pursuant to Sec. 347(a) of the Code. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Bankruptcy Rule 310. The operative provisions of that rule, however, are contained in Sec. 347(a) of the Code, requiring the trustee to stop payment of checks remaining unpaid 90 days after distribution. The rule adds the requirement of filing a list of the names and addresses of the persons entitled to these dividends. This rule applies in a chapter 7 or 13 case but not in a chapter 9 or 11 case. The latter cases are governed by Sec. 347(b) of the Code which provides for unclaimed distributions to be returned to the debtor or other entity acquiring the assets of the debtor. ------DocID 14968 Document 313 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3012 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3012. Valuation of Security -STATUTE- The court may determine the value of a claim secured by a lien on property in which the estate has an interest on motion of any party in interest and after a hearing on notice to the holder of the secured claim and any other entity as the court may direct. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Pursuant to Sec. 506(a) of the Code, secured claims are to be valued and allowed as secured to the extent of the value of the collateral and unsecured, to the extent it is enforceable, for the excess over such value. The valuation of secured claims may become important in different contexts e.g., to determine the issue of adequate protection under Sec. 361, impairment under Sec. 1124, or treatment of the claim in a plan pursuant to Sec. 1129(b) of the Code. This rule permits the issue to be raised on motion by a party in interest. The secured creditor is entitled to notice of the hearing on the motion and the court may direct that others in the case also receive such notice. An adversary proceeding is commenced when the validity, priority, or extent of a lien is at issue as prescribed by Rule 7001. That proceeding is relevant to the basis of the lien itself while valuation under Rule 3012 would be for the purposes indicated above. ------DocID 14969 Document 314 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3013 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3013. Classification of Claims and Interests -STATUTE- For the purposes of the plan and its acceptance, the court may, on motion after hearing on notice as the court may direct, determine classes of creditors and equity security holders pursuant to Sec. 1122 and 1322(b)(1) of the Code. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Sections 1122 and 1322(b)(1) set the standards for classifying claims and interests but provide that such classification is accomplished in the plan. This rule does not change the standards; rather it recognizes that it may be desirable or necessary to establish proper classification before a plan can be formulated. It provides for a court hearing on such notice as the court may direct. ------DocID 14970 Document 315 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3014 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3014. Election Pursuant to Sec. 1111(b) by Secured Creditor in Chapter 9 Municipality and Chapter 11 Reorganization Cases -STATUTE- An election of application of Sec. 1111(b)(2) of the Code by a class of secured creditors in a chapter 9 or 11 case may be made at any time prior to the conclusion of the hearing on the disclosure statement or within such later time as the court may fix. The election shall be in writing and signed unless made at the hearing on the disclosure statement. The election, if made by the majorities required by Sec. 1111(b)(1)(A)(i), shall be binding on all members of the class with respect to the plan. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Pursuant to Sec. 1111(b)(1) of the Code, a nonrecourse secured loan is converted, automatically, into a recourse loan thereby entitling the creditor to an unsecured deficiency claim if the value of the collateral is less than the debt. The class, however, may retain the loan as a nonrecourse loan by electing application of Sec. 1111(b)(2) by the majorities stated in Sec. 1111(b)(1)(A)(i). That section does not specify any time periods for making the election. Rule 3014 provides that if no agreement is negotiated, the election of Sec. 1111(b)(2) of the Code may be made at any time prior to conclusion of the hearing on the disclosure statement. Once the hearing has been concluded, it would be too late for a secured creditor class to demand different treatment unless the court has fixed a later time. This would be the case if, for example, a public class of secured creditors should have an approved disclosure statement prior to electing under Sec. 1111(b). Generally it is important that the proponent of a plan ascertain the position of the secured creditor class before a plan is proposed. The secured creditor class must know the prospects of its treatment under the plan before it can intelligently determine its rights under Sec. 1111(b). The rule recognizes that there may be negotiations between the proponent of the plan and the secured creditor leading to a representation of desired treatment under Sec. 1111(b). If that treatment is approved by the requisite majorities of the class and culminates in a written, signed statement filed with the court, that statement becomes binding and the class may not thereafter demand different treatment under Sec. 1111(b) with respect to that plan. The proponent of the plan is thus enabled to seek approval of the disclosure statement and transmit the plan for voting in anticipation of confirmation. Only if that plan is not confirmed may the class of secured creditors thereafter change its prior election. While this rule and the Code refer to a class of secured creditors it should be noted that ordinarily each secured creditor is in a separate and distinct class. In that event, the secured creditor has the sole power to determine application of Sec. 1111(b) with respect to that claim. ------DocID 14971 Document 316 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3015 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3015. Filing of Plan in Chapter 13 Individual's Debt Adjustment Cases -STATUTE- The debtor may file a chapter 13 plan with the petition. If a plan is not filed with the petition, it shall be filed within 15 days thereafter and such time shall not be further extended except for cause shown and on notice as the court may direct. Every proposed plan and any modification thereof shall be dated. The clerk shall include the plan or a summary of the plan with each notice of the hearing on confirmation pursuant to Rule 2002(b). If required by the court, the debtor shall furnish a sufficient number of copies to enable the clerk to include a copy of the plan with the notice of the hearing. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Section 1321 provides only that the 'debtor shall file a plan.' No time periods are specified, nor is any other detail provided. The rule requires a chapter 13 plan to be filed either with the petition or within 15 days thereafter. The court may, for cause, extend the time. The rule permits a summary of the plan to be transmitted with the notice of the hearing on confirmation. The court may, however, require the plan itself to be transmitted and the debtor to supply enough copies for this purpose. In the former rules under Chapter XIII the plan would accompany the notice of the first meeting of creditors. It is more important for the plan or a summary of its terms to be sent with the notice of the confirmation hearing. At that hearing objections to the plan will be heard by the court. ------DocID 14972 Document 317 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3016 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3016. Filing of Plan and Disclosure Statement in Chapter 9 Municipality and Chapter 11 Reorganization Cases -STATUTE- (a) Time for Filing Plan A party in interest, other than the debtor, who is authorized to file a plan under Sec. 1121(c) of the Code, may file a plan at any time before the conclusion of the hearing on the disclosure statement or thereafter with leave of court. (b) Identification of Plan Every proposed plan and any modification thereof shall be dated and, in a chapter 11 case, identified with the name of the entity or entities submitting or filing it. (c) Disclosure Statement In a chapter 9 or 11 case, a disclosure statement pursuant to Sec. 1125 or evidence showing compliance with Sec. 1126(b) of the Code shall be filed with the plan or within a time fixed by the court. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule implements the Code provisions concerning the filing of plans in chapters 9 and 11. Chapter 9 Cases. Section 941 provides that the debtor may file a plan with the petition or thereafter but within a time fixed by the court. A rule, therefore, is unnecessary to specify the time for filing chapter 9 plans. Chapter 11 Nonrailroad Cases. Section 1121 contains detailed provisions with respect to who may file a chapter 11 plan and, in part, the time period. Section 1121(a) permits a debtor to file a plan with the petition or at any time during the case. Section 1121(b) and (c) grants exclusive periods of 120 days and 180 days for the debtor to file and obtain acceptance of a plan. Failure to take advantage of these periods or the appointment of a trustee would permit other parties in interest to file a plan. These statutory provisions are not repeated in the rules. Chapter 11 Railroad Cases. Pursuant to subchapter IV of chapter 11, Sec. 1121 of the Code is applicable in railroad cases; see Sec. 1161, 103(g). A trustee, however, is to be appointed in every case; thus, pursuant to Sec. 1121(c), any party in interest may file a plan. See discussion of subdivision (a) of this rule, infra. Subdivision (a). Section 1121(c), while permitting parties in interest a limited right to file plans, does not provide any time limitation. This subdivision sets as the deadline, the conclusion of the hearing on the disclosure statement. The court may, however, grant additional time. It is derived from former Chapter X Rule 10-301(c)(2) which used, as the cut-off time, the conclusion of the hearing on approval of a plan. As indicated, supra, Sec. 1121(a) permits a debtor to file a plan at any time during the chapter 11 case. Under Sec. 1121(c), parties other than a debtor may file a plan only after a trustee is appointed or the debtor's exclusive time expires. Subdivision (b) requires plans to be properly identified. Subdivision (c). This provision is new. In chapter 9 and 11 cases (including railroad reorganization cases) postpetition solicitation of votes on a plan requires transmittal of a disclosure statement, the contents of which have been approved by the court. See Sec. 1125 of the Code. A prepetition solicitation must either have been in conformity with applicable nonbankruptcy law or, if none, the disclosure must have been of adequate information as set forth in Sec. 1125 of the Code. See Sec. 1126(b). Subdivision (c) of this rule provides the time for filing the disclosure statement or evidence of compliance with Sec. 1126(b) which ordinarily will be with the plan but the court may allow a later time or the court may, pursuant to the last sentence, fix a time certain. Rule 3017 deals with the hearing on the disclosure statement. The disclosure statement, pursuant to Sec. 1125 is to contain adequate information. 'Adequate information' is defined in Sec. 1125(a) as information that would permit a reasonable creditor or equity security holder to make an informed judgment on the plan. ------DocID 14973 Document 318 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3017 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3017. Court Consideration of Disclosure Statement in Chapter 9 Municipality and Chapter 11 Reorganization Cases -STATUTE- (a) Hearing on Disclosure Statement and Objections Thereto Following the filing of a disclosure statement as provided in Rule 3016(c), the court shall hold a hearing on not less than 25 days notice to the debtor, creditors, equity security holders and other parties in interest as provided in Rule 2002 to consider such statement and any objections or modifications thereto. The plan and the disclosure statement shall be mailed with the notice of the hearing only to the debtor, any trustee or committee appointed under the Code, the Securities and Exchange Commission and any party in interest who requests in writing a copy of the statement or plan. Objections to the disclosure statement shall be filed with the court and served on the debtor, the trustee, any committee appointed under the Code and such other entity as may be designated by the court, at any time prior to approval of the disclosure statement or by such earlier date as the court may fix. (b) Determination on Disclosure Statement Following the hearing the court shall determine whether the disclosure statement should be approved. (c) Dates Fixed for Voting on Plan and Confirmation On or before approval of the disclosure statement, the court shall fix a time within which the holders of claims and interests may accept or reject the plan and may fix a date for the hearing on confirmation. (d) Transmission and Notice to Creditors and Equity Security Holders On approval of a disclosure statement, the debtor in possession, trustee, proponent of the plan, or clerk as ordered by the court shall mail to all creditors and equity security holders (1) the plan, or a court approved summary of the plan; (2) the disclosure statement approved by the court; (3) notice of the time within which acceptances and rejections of such plan may be filed; (4) notice of any date fixed for the hearing on confirmation; and (5) such other information as the court may direct including any opinion of the court approving the disclosure statement or a court approved summary of the opinion. In addition, a form of ballot conforming to Official Form No. 30 shall be mailed to creditors and equity security holders entitled to vote on the plan. In the event the opinion of the court is not transmitted or only a summary of the plan is transmitted, the opinion of the court or the plan shall be provided on request of a party in interest at the expense of the proponent of the plan. For the purposes of this subdivision, creditors and equity security holders shall include holders of stock, bonds, debentures, notes, and other securities of record at the date the order approving the disclosure statement was entered. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is adapted from former Rule 10-303 which dealt with the approval of a Chapter X plan by the court. There is no requirement for plan approval in a chapter 9 or 11 case under the Code but there is the requirement that a disclosure statement containing adequate financial information be approved by the court after notice and a hearing before votes on a plan are solicited. Section 1125(b) of the Code is made applicable in chapter 9 cases by Sec. 901(a). It is also applicable in railroad reorganization cases under subchapter IV of chapter 11; see Sec. 1161 of the Code. Subdivision (a) of this rule provides for the hearing on the disclosure statement. Thus, a hearing would be required in all cases; whether it may be ex parte would depend on the circumstances of the case, but a mere absence of objections would not eliminate the need for a hearing; see Sec. 102(1) of the Code. No provision similar to former Rule 10-303(f) is included. That subdivision together with former Rule 10-304 prohibited solicitation of votes until after entry of an order approving the plan. Section 1125(b) of the Code explicitly provides that votes on a plan may not be solicited until a disclosure statement approved by the court is transmitted. Pursuant to the change in rulemaking power, a comparable provision in this rule is unnecessary. 28 U.S.C. Sec. 2075. Copies of the disclosure statement and plan need not be mailed with the notice of the hearing or otherwise transmitted prior to the hearing except with respect to the parties explicitly set forth in the subdivision. It should be noted that, by construction, the singular includes the plural. Therefore, the phrase 'plan or plans' or 'disclosure statement or statements' has not been used although the possibility of multiple plans and statements is recognized. Subdivision (d) permits the court to require a party other than the clerk of the bankruptcy court to bear the responsibility for transmitting the notices and documents specified in the rule when votes on the plan are solicited. Ordinarily the person responsible for such mailing will be the proponent of the plan. In rare cases the clerk may be directed to mail these documents, particularly when the trustee would have the responsibility but there is insufficient money in the estate to enable the trustee to perform this task. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (d). Section 1125(c) of the Code requires that the entire approved disclosure statement be provided in connection with voting on a plan. The court is authorized by Sec. 1125(c) to approve different disclosure statements for different classes. Although the rule does not permit the mailing of a summary of the disclosure statement in place of the approved disclosure statement, the court may approve a summary of the disclosure statement to be mailed with the complete disclosure statement to those voting on the plan. ------DocID 14974 Document 319 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3018 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3018. Acceptance or Rejection of Plans -STATUTE- (a) Persons Entitled To Accept or Reject Plan; Time for Acceptance or Rejection A plan may be accepted or rejected by the following entities within the time fixed by the court pursuant to rule 3017: (1) any creditor whose claim is deemed allowed pursuant to Sec. 502 of the code or has been allowed by the court; (2) subject to subdivision (b) of this rule, any creditor who is a security holder of record at the date the order approving the disclosure statement is entered whose claim has not been disallowed; and, (3) an equity security holder of record at the date the order approving the disclosure statement is entered whose interest has not been disallowed. For cause shown and within the time fixed for acceptance or rejection of a plan, the court after notice and hearing may permit a creditor or equity security holder to change or withdraw an acceptance or rejection. Notwithstanding objection to a claim or interest, the court after notice and hearing may temporarily allow the claim or interest in an amount which the court deems proper for the purpose of accepting or rejecting a plan. (b) Acceptances or Rejections Obtained Before Petition Acceptances or rejections of a plan may be obtained before the commencement of a case under the Code and may be filed with the court on behalf of (1) the holder of a claim or interest which is deemed allowed pursuant to Sec. 502 of the Code or allowed by the court; (2) a creditor who is a security holder of record at the date specified in the solicitation for the purposes of such solicitation and whose claim has not been disallowed; and (3) an equity security holder of record at the date specified in the solicitation for the purposes of such solicitation and whose interest has not been disallowed. A holder of a claim or interest who has accepted or rejected a plan before the commencement of the case under the Code shall not be deemed to have accepted or rejected the plan if the court finds after notice and hearing that the plan was not transmitted to substantially all impaired creditors and impaired equity security holders, that an unreasonably short time was prescribed for such creditors and equity security holders to accept or reject the plan, or that the solicitation was not in compliance with Sec. 1126(b) of the Code. (c) Form of Acceptance or Rejection An acceptance or rejection shall be in writing, identify the plan or plans accepted or rejected, be signed by the creditor or equity security holder or an authorized agent, and conform to Official Form No. 30. If more than one plan is transmitted purusant to Rule 3017, an acceptance or rejection may be filed by each creditor or equity security holder for any number of plans transmitted and if acceptances are filed for more than one plan, the creditor or equity security holder may indicate a preference or preferences among the plans so accepted. (d) Acceptance or Rejection by Partially Secured Creditor A creditor whose claim has been allowed in part as a secured claim and in part as an unsecured claim shall be entitled to accept or reject a plan in both capacities. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule applies in chapter 9, 11 and 13 cases under the Code. The references in the rule to equity security holders will not, however, be relevant in chapter 9 or 13 cases. The rule will be of little utility in a chapter 13 case because only secured creditors may be requested to vote on a plan; unsecured creditors are not entitled to vote; see Sec. 1325(a)(4), (5) of the Code. Subdivision (a) is derived from former Rule 10-305(a). It substitutes, in a reorganization case, entry of the order approving the disclosure statement for the order approving a plan in conformity with the differences between Chapter X and chapter 11. In keeping with the underlying theory it continues to recognize that the lapse of time between the filing of the petition and entry of such order will normally be significant and, during that interim, bonds and equity interests can change ownership. Subdivision (b) recognizes the former Chapter XI practice permitting a plan and acceptances to be filed with the petition, as does Sec. 1126(b) of the Code. However, because a plan under chapter 11 may affect shareholder interests, there should be reference to a record date of ownership. In this instance the appropriate record date is that used in the prepetition solicitation materials because it is those acceptances or rejections which are being submitted to the court. While Sec. 1126(c), (d), and (e) prohibits use of an acceptance or rejection not procured in good faith, the added provision in subdivision (b) of the rule is somewhat more detailed. It would prohibit use of prepetition acceptances or rejections when some but not all impaired creditors or equity security holders are solicited or when they are not given a reasonable opportunity to submit their acceptances or rejections. This provision together with Sec. 1126(e) gives the court the power to nullify abusive solicitation procedures. Subdivision (c). It is possible that multiple plans may be before the court for confirmation. Pursuant to Sec. 1129(c) of the Code, the court may confirm only one plan but is required to consider the preferences expressed by those accepting the plans in determining which one to confirm. Subdivisions (d) and (e) of former Rule 10-305 are not continued since comparable provisions are contained in the statute; see Sec. 1126(c), (d), (e). It should be noted that while the singular 'plan' is used throughout, by construction the plural is included; see Sec. 102(7). ------DocID 14975 Document 320 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3019 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3019. Modification of Accepted Plan Before Confirmation -STATUTE- After a plan has been accepted and before its confirmation, the proponent may file a modification of the plan. If the court finds after hearing on notice to the trustee, any committee appointed under the Code and any other entity designated by the court that the proposed modification does not adversely change the treatment of the claim of any creditor or the interest of any equity security holder who has not accepted in writing the modification, it shall be deemed accepted by all creditors and equity security holders who have previously accepted the plan. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule implements Sec. 942, 1127 and 1323 of the Code. For example, Sec. 1127 provides for modification before and after confirmation but does not deal with the minor modifications that do not adversely change any rights. The rule makes clear that a modification may be made, after acceptance of the plan without submission to creditors and equity security holders if their interests are not affected. To come within this rule, the modification should be one that does not change the rights of a creditor or equity security holder as fixed in the plan before modification. ------DocID 14976 Document 321 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3020 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3020. Deposit; Confirmation of Plan -STATUTE- (a) Deposit In a chapter 11 case, prior to entry of the order confirming the plan, the court may order the deposit with the trustee or debtor in possession of the consideration required by the plan to be distributed on confirmation. Any money deposited shall be kept in a special account established for the exclusive purpose of making the distribution. (b) Objections to and Hearing on Confirmation (1) Objections. Objections to confirmation of the plan shall be filed with the court and served on the debtor, the trustee, any committee appointed under the Code and on any other entity designated by the court, within a time fixed by the court. An objection to confirmation is governed by Rule 9014. (2) Hearing. The court shall rule on confirmation of the plan after notice and hearing as provided in Rule 2002. If no objection is timely filed, the court may determine that the plan has been proposed in good faith and not by any means forbidden by law without receiving evidence on such issues. (c) Order of Confirmation The order of confirmation shall conform to Official Form No. 31 and notice of entry thereof shall be mailed promptly as provided in Rule 2002(f) to the debtor, creditors, equity security holders and other parties in interest. (d) Retained Power Notwithstanding the entry of the order of confirmation, the court may enter all orders necessary to administer the estate. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is adapted from former Rules 10-307, 11-38, and 13-213. It applies to cases filed under chapters 9, 11 and 13. Certain subdivisions of the earlier rules have not been included, such as, a subdivision revesting title in the debtor because Sec. 541 of the Code does not transfer title out of the debtor as did Sec. 70a of the Bankruptcy Act; see also Sec. 1141(b), 1327(b). Subdivision (b) of former Rule 13-213 is not included because its provisions are contained in the statute; see Sec. 1322, 1325(b), 105. Subdivision (a) gives discretion to the court to require in chapter 11 cases the deposit of any consideration to be distributed on confirmation. If money is to be distributed, it is to be deposited in a special account to assure that it will not be used for any other purpose. The Code is silent in chapter 11 with respect to the need to make a deposit or the person with whom any deposit is to be made. Consequently, there is no statutory authority for any person to act in a capacity similar to the disbursing agent under former Chapter XI practice. This rule provides that only the debtor in possession or trustee should be appointed as the recipient of the deposit. Any consideration other than money, e.g., notes or stock may be given directly to the debtor in possession or trustee and need not be left in any kind of special account. In chapter 9 cases, Sec. 944(b) provides for deposit with a disbursing agent appointed by the court of any consideration to be distributed under the plan. Subdivision (d) clarifies the authority of the court to conclude matters pending before it prior to confirmation and to continue to administer the estate as necessary, e.g., resolving objections to claims. ------DocID 14977 Document 322 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3021 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3021. Distribution Under Plan -STATUTE- After confirmation of a plan, distribution shall be made to creditors whose claims have been allowed, to holders of stock, bonds, debentures, notes, and other securities of record at the time of commencement of distribution whose claims or equity security interests have not been disallowed and to indenture trustees who have filed claims pursuant to Rule 3003(c)(5) and which have been allowed. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Chapter X Rule 10-405(a). Subdivision (b) of that rule is covered by Sec. 1143 of the Code. ------DocID 14978 Document 323 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 3022 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART III -HEAD- Rule 3022. Final Decree -STATUTE- After an estate is fully administered, including distribution of any deposit required by the plan, the court shall enter a final decree (1) discharging any trustee if not previously discharged and cancelling the trustee's bond; (2) making provision by way of injunction or otherwise as may be equitable; and (3) closing the case. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Section 350 of the Code requires the court to close the case after the estate is fully administered and the trustee has been discharged. Section 1143 places a five year limitation on the surrender of securities when required for participation under a plan but this provision should not delay entry of the final decree. ------DocID 14979 Document 324 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES PART IV -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IV -HEAD- PART IV - THE DEBTOR: DUTIES AND BENEFITS ------DocID 14980 Document 325 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 4001 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IV -HEAD- Rule 4001. Relief from Automatic Stay; Use of Cash Collateral; Obtaining Credit; Agreements -STATUTE- (a) Relief From Stay (1) Motion. A motion for relief from an automatic stay provided by the Code shall be made in accordance with Rule 9014. (2) Final Hearing on Stay. The stay of any act against property of the estate under Sec. 362(a) of the Code expires 30 days after a final hearing is commenced pursuant to Sec. 362(e) unless before that time expires the court denies the motion for relief from the stay or, after notice and a hearing, orders the stay continued pending conclusion of the final hearing. (3) Ex Parte Relief From Stay. Relief from a stay under Sec. 362(a) may be granted without prior notice to the adverse party only if (A) it clearly appears from specific facts shown by affidavit or by a verified motion that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party or the attorney for the adverse party can be heard in opposition, and (B) the movant's attorney certifies to the court in writing the efforts, if any, which have been made to give notice and the reasons why notice should not be required. The party obtaining relief under this subdivision and Sec. 362(f) shall immediately give oral notice thereof to the trustee or debtor in possession and to the debtor and forthwith mail or otherwise transmit to such adverse party or parties a copy of the order granting relief. On two days notice to the party who obtained relief from the stay without notice or on shorter notice to that party as the court may prescribe, the adverse party may appear and move reinstatement of the stay. In that event, the court shall proceed expeditiously to hear and determine the motion. (b) Use of Cash Collateral (1) Motion; Service. A motion for authorization to use cash collateral shall be made in accordance with Rule 9014 and shall be served on any entity which has an interest in the cash collateral, on any committee appointed under the Code or its authorized agent, or, if no committee has been appointed, on the creditors included on the list filed pursuant to Rule 1007(d) and on such other entities as the court may direct. (2) Hearing. The court may commence a final hearing on a motion for authorization to use cash collateral no earlier than 15 days after service of the motion. If the motion so requests, the court may conduct a preliminary hearing before such 15 day period expires, but the court may authorize the use of only that amount of cash collateral as is necessary to avoid immediate and irreparable harm to the estate pending a final hearing. (3) Notice. Notice of hearing pursuant to this subdivision shall be given to the parties on whom service of the motion is required by paragraph (1) of this subdivision and to such other entities as the court may direct. (c) Obtaining Credit (1) Motion; Service. A motion for authority to obtain credit shall be made in accordance with Rule 9014 and shall be served on any committee appointed under the Code or its authorized agent, or, if no committee has been appointed, on the creditors listed on the list filed pursuant to Rule 1007(d), and on such other entities as the court may direct. The motion shall be accompanied by a copy of the agreement. (2) Hearing. The court may commence a final hearing on a motion for authority to obtain credit no earlier than 15 days after service of the motion. If the motion so requests, the court may conduct a hearing before such 15 day period expires, but the court may authorize the obtaining of credit only to the extent necessary to avoid immediate and irreparable harm to the estate pending a final hearing. (3) Notice. Notice of hearing pursuant to this subdivision shall be given to the parties on whom service of the motion is required by paragraph (1) of this subdivision and to such other entities as the court may direct. (d) Agreement Relating to Relief From the Automatic Stay, Providing Adequate Protection, Use of Cash Collateral, and Obtaining Credit (1) Motion; Service. A motion for approval of an agreement to provide adequate protection, for the modification or termination of the stay provided for in Sec. 362, for the use of cash collateral, or for approval of an agreement between the debtor and an entity that has a lien or interest in property of the estate pursuant to which the entity consents to the creation of a lien senior or equal to the entity's lien or interest in such property shall be served on any committee appointed under the Code or its authorized agent, or, if no committee has been appointed, on the creditors listed on the list filed pursuant to Rule 1007(d) and on such other entities as the court may direct. The motion shall be accompanied by a copy of the agreement. (2) Objection. Notice of the motion and the time within which objections may be filed and served on the debtor in possession or trustee shall be mailed to the parties on whom service is required by paragraph (1) of this subdivision and to such other entities as the court may direct. Unless the court fixes a different time, objections may be filed within 15 days of the mailing of notice. (3) Disposition; Hearing. If no objection is filed, the court may enter an order approving or disapproving the agreement without conducting a hearing. If an objection is filed or if the court determines a hearing is appropriate, the court shall hold a hearing on no less than five days' notice to the objector, the movant, the parties on whom service is required by paragraph (1) of this subdivision and such other entities as the court may direct. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule implements Sec. 362 of the Code which set forth provisions regarding the automatic stay that arises on the filing of a petition. That section and this rule are applicable in chapters 7, 9, 11 and 13 cases. It also implements Sec. 363(c)(2) concerning use of cash collateral. Subdivision (a) transforms with respect to the automatic stay what was an adversary proceeding under the former rules to motion practice. The Code provides automatic stays in several sections, e.g., Sec. 362(a), 1301(a), and in Sec. 362(d) provides some grounds for relief from the stay. This rule specifies that the pleading seeking relief is by means of a motion. Thus the time period in Rule 7012 to answer a complaint would not be applicable and shorter periods may be fixed. Section 362(e) requires the preliminary hearing to be concluded within 30 days of it inception, rendering ordinary complaint and answer practice inappropriate. This subdivision also makes clear that a motion under Rule 9014 is the proper procedure for a debtor to seek court permission to use cash collateral. See Sec. 363(c)(2). Pursuant to Rule 5005, the motion should be filed in the court in which the case in pending. The court or local rule may specify the persons to be served with the motion for relief from the stay; see Rule 9013. Subdivision (b) of the rule fills a procedural void left by Sec. 362. Pursuant to Sec. 362(e), the automatic stay is terminated 30 days after a motion for relief is made unless the court continues the stay as a result of a final hearing or, pending final hearing, after a preliminary hearing. If a preliminary hearing is held, Sec. 362(e) requires the final hearing to be commenced within 30 days after the preliminary hearing. Although the expressed legislative intent is to require expeditious resolution of a secured party's motion for relief, Sec. 362 is silent as to the time within which the final hearing must be concluded. Subdivision (b) imposes a 30 day deadline on the court to resolve the dispute. At the final hearing, the stay is to be terminated, modified, annulled, or conditioned for cause, which includes, inter alia, lack of adequate protection; Sec. 362(d). The burden of proving adequate protection is on the party opposing relief from the stay; Sec. 362(g)(2). Adequate protection is exemplified in Sec. 361. Subdivision (c) implements Sec. 362(f) which permits ex parte relief from the stay when there will be irreparable damage. This subdivision sets forth the procedure to be followed when relief is sought under Sec. 362(f). It is derived from former Bankruptcy Rule 601(d). NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The scope of this rule is expanded and the former subdivisions (a), (b) and (c) are now combined in subdivision (a). The new subdivision (a)(2) is amended to conform to the 1984 amendments to Sec. 362(e) of the Code. Subdivision (b) deals explicitly with the procedures which follow after a motion to use cash collateral is made and served. Filing shall be pursuant to Rule 5005. Service of the motion may be made by any method authorized by Rule 7004 and, if service is by mail, service is complete on mailing. Rule 9006(e). Under subdivision (b)(2), the court may commence a final hearing on the motion within 15 days of service. Rule 9006(f) does not extend this 15 day period when service of the motion is by mail because the party served is not required to act within the 15 day period. In addition to service of the motion, notice of the hearing must be given. Rule 9007 authorizes the court to direct the form and manner of giving notice that is appropriate to the circumstances. Section 363(c)(3) authorizes the court to conduct a preliminary hearing and to authorize the use of cash collateral 'if there is a reasonable likelihood that the trustee will prevail at a final hearing.' Subdivision (b)(2) of the rule permits a preliminary hearing to be held earlier than 15 days after service. Any order authorizing the use of cash collateral shall be limited to the amount necessary to protect the estate until a final hearing is held. The objective of subdivision (b) is to accommodate both the immediate need of the debtor and the interest of the secured creditor in the cash collateral. The time for holding the final hearing may be enlarged beyond the 15 days prescribed when required by the circumstances. The motion for authority to use cash collateral shall include (1) the amount of cash collateral sought to be used; (2) the name and address of each entity having an interest in the cash collateral; (3) the name and address of the entity in control or having possession of the cash collateral; (4) the facts demonstrating the need to use the cash collateral; and (5) the nature of the protection to be provided those having an interest in the cash collateral. If a preliminary hearing is requested, the motion shall also include the amount of cash collateral sought to be used pending final hearing and the protection to be provided. Notice of the preliminary and final hearings may be combined. This rule does not limit the authority of the court under Sec. 363(c)(2)(B) and Sec. 102(1). Subdivision (c) is new. The service, hearing, and notice requirements are similar to those imposed by subdivision (b). The motion to obtain credit shall include the amount and type of the credit to be extended, the name and address of the lender, the terms of the agreement, the need to obtain the credit, and the efforts made to obtain credit from other sources. If the motion is to obtain credit pursuant to Sec. 364(c) or (d), the motion shall describe the collateral, if any, and the protection for any existing interest in the collateral which may be affected by the proposed agreement. Subdivision (d) is new. In the event the 15 day period for filing objections to the approval of an agreement of the parties described in this subdivision is too long, the parties either may move for a reduction of the period under Rule 9006(c)(1) or proceed under subdivision (b) or (c), if applicable. Rule 9006(c)(1) requires that cause be shown for the reduction of the period in which to object. In applying this criterion the court may consider the option of proceeding under subdivision (b) or (c) and grant a preliminary hearing and relief pending final hearing. ------DocID 14981 Document 326 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 4002 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IV -HEAD- Rule 4002. Duties of Debtor -STATUTE- In addition to performing other duties prescribed by the Code and rules, the debtor shall (1) attend and submit to an examination at the times ordered by the court; (2) attend the hearing on a complaint objecting to discharge and testify, if called as a witness; (3) inform the trustee immediately in writing as to the location of real property in which the debtor has an interest and the name and address of every person holding money or property subject to the debtor's withdrawal or order if a schedule of property has not yet been filed pursuant to Rule 1007; (4) cooperate with the trustee in the preparation of an inventory, the examination of proofs of claim, and the administration of the estate, and (5) file a statement of any change of the debtor's address. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule should be read together with Sec. 343 and 521 of the Code and Rule 1007, all of which impose duties on the debtor. Clause (3) of this rule implements the provisions of Rule 2015(a). NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT New clause (5) of the rule imposes on the debtor the duty to advise the clerk of any change of the debtor's address. ------DocID 14982 Document 327 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 4003 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IV -HEAD- Rule 4003. Exemptions -STATUTE- (a) Claim of Exemptions A debtor shall list the property claimed as exempt under Sec. 522 of the Code on the schedule of assets required to be filed by Rule 1007. If the debtor fails to claim exemptions or file the schedule within the time specified in Rule 1007, a dependent of the debtor may file the list within 30 days thereafter. (b) Objections to Claim of Exemptions The trustee or any creditor may file objections to the list of property claimed as exempt within 30 days after the conclusion of the meeting of creditors held pursuant to Rule 2003(a) or the filing of any amendment to the list unless, within such period, further time is granted by the court. Copies of the objections shall be delivered or mailed to the trustee and to the person filing the list and the attorney for such person. (c) Burden of Proof In any hearing under this rule, the objecting party has the burden of proving that the exemptions are not properly claimed. After hearing on notice, the court shall determine the issues presented by the objections. (d) Avoidance by Debtor of Transfers of Exempt Property A proceeding by the debtor to avoid a lien or other transfer of property exempt under Sec. 522(f) of the Code shall be by motion in accordance with Rule 9014. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from Sec. 522(1) of the Code and, in part, former Bankruptcy Rule 403. The Code changes the thrust of that rule by making it the burden of the debtor to list his exemptions and the burden of parties in interest to raise objections in the absence of which 'the property claimed as exempt on such list is exempt;' Sec. 522(1). Subdivision (a). While Sec. 522(1) refers to a list of property claimed as exempt, the rule incorporates such a list as part of Official Form No. 6, the schedule of the debtor's assets, rather than requiring a separate list and filing. Rule 1007, to which subdivision (a) refers, requires that schedule to be filed within 15 days after the order for relief, unless the court extends the time. Section 522(1) also provides that a dependent of the debtor may file the list if the debtor fails to do so. Subdivision (a) of the rule allows such filing from the expiration of the debtor's time until 30 days thereafter. Dependent is defined in Sec. 522(a)(1). Subdivision (d) provides that a proceeding by the debtor, permitted by Sec. 522(f) of the Code, is a contested matter rather than the more formal adversary proceeding. Proceedings within the scope of this subdivision are distinguished from proceedings brought by the trustee to avoid transfers. The latter are classified as adversary proceedings by Rule 7001. ------DocID 14983 Document 328 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 4004 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IV -HEAD- Rule 4004. Grant or Denial of Discharge -STATUTE- (a) Time for Filing Complaint Objecting to Discharge; Notice of Time Fixed In a chapter 7 liquidation case a complaint objecting to the debtor's discharge under Sec. 727(a) of the Code shall be filed not later than 60 days following the first date set for the meeting of creditors held pursuant to Sec. 341(a). In a chapter 11 reorganization case, such complaint shall be filed not later than the first date set for the hearing on confirmation. Not less than 25 days notice of the time so fixed shall be given to all creditors as provided in Rule 2002(f) and to the trustee and the trustee's attorney. (b) Extension of Time On motion of any party in interest, after hearing on notice, the court may extend for cause the time for filing a complaint objecting to discharge. The motion shall be made before such time has expired. (c) Grant of Discharge In a chapter 7 case, on expiration of the time fixed for filing a complaint objecting to discharge, the court shall forthwith grant the discharge unless (1) the debtor is not an individual, (2) a complaint objecting to the discharge has been filed, or (3) the debtor has filed a waiver under Sec. 727(a)(10). Notwithstanding the foregoing, on motion of the debtor, the court may defer the entry of an order granting a discharge for 30 days and, on motion within such period, the court may defer entry of the order to a date certain. (d) Applicability of Rules in Part VII A proceeding commenced by a complaint objecting to discharge is governed by Part VII of these rules. (e) Order of Discharge An order of discharge shall conform to Offical Form No. 27. (f) Registration in Other Districts An order of discharge that has become final may be registered in any other district by filing a certified copy of the order in the office of the clerk of that district. When so registered the order of discharge shall have the same effect as an order of the court of the district where registered. (g) Notice of Discharge The clerk shall promptly mail a copy of the final order of discharge to those specified in subdivision (a) of this rule. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is adapted from former Bankruptcy Rule 404. Subdivisions (a) and (b) of this rule prescribe the procedure for determining whether a discharge will be granted pursuant to Sec. 727 of the Code. The time fixed by subdivision (a) may be enlarged as provided in subdivision (b). The notice referred to in subdivision (a) is required to be given by mail and addressed to creditors as provided in Rule 2002. An extension granted on a motion pursuant to subdivision (b) of the rule would ordinarily benefit only the movant, but its scope and effect would depend on the terms of the extension. Subdivision (c). If a complaint objecting to discharge is filed, the court's grant or denial of the discharge will be entered at the conclusion of the proceeding as a judgment in accordance with Rule 9021. The inclusion of the clause in subdivision (c) qualifying the duty of the court to grant a discharge when a waiver has been filed is in accord with the construction of the Code. 4 Collier, Bankruptcy 727.12 (15th ed. 1979). The last sentence of subdivision (c) takes cognizance of Sec. 524(c) of the Code which authorizes a debtor to enter into enforceable reaffirmation agreements only prior to entry of the order of discharge. Immediate entry of that order after expiration of the time fixed for filing complaints objecting to discharge may render it more difficult for a debtor to settle pending litigation to determine the dischargeability of a debt and execute a reaffirmation agreement as part of a settlement. Subdivision (d). An objection to discharge is required to be made by a complaint, which initiates an adversary proceeding as provided in Rule 7003. Pursuant to Rule 5005, the complaint should be filed in the court in which the case is pending. Subdivision (e). Official Form No. 27 to which subdivision (e) refers, includes notice of the effects of a discharge specified in Sec. 524(a) of the Code. Subdivision (f). Registration may facilitate the enforcement of the order of discharge in a district other than that in which it was entered. See 2 Moore's Federal Practice 1.04(2) (2d ed. 1967). Because of the nationwide service of process authorized by Rule 7004, however, registration of the order of discharge is not necessary under these rules to enable a discharged debtor to obtain relief against a creditor proceeding anywhere in the United States in disregard of the injunctive provisions of the order of discharge. Subdivision (g). Notice of discharge should be mailed promptly after the order becomes final so that creditors may be informed of entry of the order and of its injunctive provisions. Rule 2002 specifies the manner of the notice and persons to whom the notice is to be given. ------DocID 14984 Document 329 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 4005 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IV -HEAD- Rule 4005. Burden of Proof in Objecting to Discharge -STATUTE- At the trial on a complaint objecting to a discharge, the plaintiff has the burden of proving the objection. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule does not address the burden of going forward with the evidence. Subject to the allocation by the rule of the initial burden of producing evidence and the ultimate burden of persuasion, the rule leaves to the courts the formulation of rules governing the shift of the burden of going forward with the evidence in the light of considerations such as the difficulty of proving the nonexistence of a fact and of establishing a fact as to which the evidence is likely to be more accessible to the debtor than to the objector. See, e.g., In re Haggerty, 165 F.2d 977, 979-80 (2d Cir. 1948); Federal Provision Co. v. Ershowsky, 94 F.2d 574, 575 (2d Cir. 1938); In re Riceputo, 41 F. Supp. 926, 927-28 (E.D.N.Y. 1941). ------DocID 14985 Document 330 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 4006 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IV -HEAD- Rule 4006. Notice of No Discharge -STATUTE- If an order is entered denying or revoking a discharge or if a waiver of discharge is filed, the clerk, after the order becomes final or the waiver is filed, shall promptly give notice thereof to all creditors in the manner provided in Rule 2002. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES The suspension by Sec. 108(c) of the Code of the statute of limitations affecting any debt of a debtor terminates within 30 days after the debtor is denied a discharge or otherwise loses his right to a discharge. If, however, a debtor's failure to receive a discharge does not come to the attention of his creditors until after the statutes of limitations have run, the debtor obtains substantially the same benefits from his bankruptcy as a debtor who is discharged. This rule requires the clerk to notify creditors if a debtor fails to obtain a discharge because a waiver of discharge was filed under Sec. 727(a)(10) or as a result of an order denying or revoking the discharge under Sec. 727(a) or (d). ------DocID 14986 Document 331 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 4007 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IV -HEAD- Rule 4007. Determination of Dischargeability of a Debt -STATUTE- (a) Persons Entitled To File Complaint A debtor or any creditor may file a complaint with the court to obtain a determination of the dischargeability of any debt. (b) Time for Commencing Proceeding Other Than Under Sec. 523(c) of the Code A complaint other than under Sec. 523(c) may be filed at any time. A case may be reopened without payment of an additional filing fee for the purpose of filing a complaint to obtain a determination under this rule. (c) Time for Filing Complaint Under Sec. 523(c) in Chapter 7 Liquidation and Chapter 11 Reorganization Cases; Notice of Time Fixed A complaint to determine the dischargeability of any debt pursuant to Sec. 523(c) of the Code shall be filed not later than 60 days following the first date set for the meeting of creditors held pursuant to Sec. 341(a). The court shall give all creditors not less than 30 days notice of the time so fixed in the manner provided in Rule 2002. On motion of any party in interest, after hearing on notice, the court may for cause extend the time fixed under this subdivision. The motion shall be made before the time has expired. (d) Time for Filing Complaint Under Sec. 523(c) in Chapter 13 Individual's Debt Adjustment Cases; Notice of Time Fixed On motion by a debtor for a discharge under Sec. 1328(b), the court shall enter an order fixing a time for the filing of a complaint to determine the dischargeability of any debt pursuant to Sec. 523(c) and shall give not less than 30 days notice of the time fixed to all creditors in the manner provided in Rule 2002. On motion of any party in interest after hearing on notice the court may for cause extend the time fixed under this subdivision. The motion shall be made before the time has expired. (e) Applicability of Rules in Part VII A proceeding commenced by a complaint filed under this rule is governed by Part VII of these rules. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule prescribes the procedure to be followed when a party requests the court to determine dischargeability of a debt pursuant to Sec. 523 of the Code. Although a complaint that comes within Sec. 523(c) must ordinarily be filed before determining whether the debtor will be discharged, the court need not determine the issues presented by the complaint filed under this rule until the question of discharge has been determined under Rule 4004. A complaint filed under this rule initiates an adversary proceeding as provided in Rule 7003. Subdivision (b) does not contain a time limit for filing a complaint to determine the dischargeability of a type of debt listed as nondischargeable under Sec. 523(a)(1), (3), (5), (7), (8), or (9). Jurisdiction over this issue on these debts is held concurrently by the bankruptcy court and any appropriate nonbankruptcy forum. Subdivision (c) differs from subdivision (b) by imposing a deadline for filing complaints to determine the issue of dischargeability of debts set out in Sec. 523(a)(2), (4) or (6) of the Code. The bankruptcy court has exclusive jurisdiction to determine dischargeability of these debts. If a complaint is not timely filed, the debt is discharged. See Sec. 523(c). Subdivision (e). The complaint required by this subdivision should be filed in the court in which the case is pending pursuant to Rule 5005. ------DocID 14987 Document 332 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 4008 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IV -HEAD- Rule 4008. Discharge and Reaffirmation Hearing -STATUTE- Not more than 30 days following the entry of an order granting or denying a discharge, or confirming a plan in a chapter 11 reorganization case concerning an individual debtor and on not less than 10 days notice to the debtor and the trustee, the court shall hold a hearing as provided in Sec. 524(d) of the Code. A motion by the debtor for approval of a reaffirmation agreement shall be filed before or at the hearing. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Section 524(d) of the Code requires the court to hold a hearing to inform an individual debtor concerning the granting or denial of discharge and the law applicable to reaffirmation agreements. The notice of the Sec. 524(d) hearing may be combined with the notice of the meeting of creditors or entered as a separate order. The expression 'not more than' contained in the first sentence of the rule is for the explicit purpose of requiring the hearing to occur within that time period and cannot be extended. ------DocID 14988 Document 333 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES PART V -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART V -HEAD- PART V - COURTS AND CLERKS ------DocID 14989 Document 334 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 5001 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART V -HEAD- Rule 5001. Courts and Clerks' Offices -STATUTE- (a) Courts Always Open The courts shall be deemed always open for the purpose of filing any pleading or other proper paper, issuing and returning process, and filing, making, or entering motions, orders and rules. (b) Trials and Hearings; Orders in Chambers All trials and hearings shall be conducted in open court and so far as convenient in a regular court room. All other acts or proceedings may be done or conducted by a judge in chambers and at any place either within or without the district; but no hearing, other than one ex parte, shall be conducted outside the district without the consent of all parties affected thereby. (c) Clerk's Office The clerk's office with the clerk or a deputy in attendance shall be open during business hours on all days except Saturdays, Sundays and the legal holidays listed in Rule 6(a) F.R.Civ.P. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is adapted from subdivisions (a), (b) and (c) of Rule 77 F.R.Civ.P. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Rule 9001, as amended, defines court to mean the bankruptcy judge or district judge before whom a case or proceeding is pending. Clerk means the bankruptcy clerk, if one has been appointed for the district; if a bankruptcy clerk has not been appointed, clerk means clerk of the district court. -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in subd. (c), are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 14990 Document 335 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 5002 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART V -HEAD- Rule 5002. Restrictions on Appointments -STATUTE- (a) Appointment of Relatives Prohibited No individual may be appointed as a trustee or examiner or be employed as an attorney, accountant, appraiser, auctioneer, or other professional person pursuant to Sec. 327 or Sec. 1103 of the Code if the individual is a relative of the bankruptcy judge making the appointment or approving the employment. Whenever under this subdivision an individual is ineligible for appointment or employment, the individual's firm, partnership, corporation, or any other form of business association or relationship, and all members, associates and professional employees thereof are also ineligible for appointment or employment. (b) Judicial Determination that Appointment or Employment Is Improper A bankruptcy judge may not appoint a person as a trustee or examiner or approve the employment of a person as an attorney, accountant, appraiser, auctioneer, or other professional person pursuant to Sec. 327 or Sec. 1103 of the code if that person is or has been so connected with such judge as to render the appointment or employment improper. -SOURCE- (As amended Apr. 29, 1985, eff. Aug. 1, 1985.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is adapted from former Bankruptcy Rule 505(a). The scope of the prohibition on appointment or employment is expanded to include an examiner appointed under Sec. 1104 of the Code and attorneys and other professional persons whose employment must be approved by the court under Sec. 327 or Sec. 1103. The rule supplements two statutory provisions. Under 18 U.S.C. Sec. 1910, it is a criminal offense for a judge to appoint a relative as a trustee and, under 28 U.S.C. Sec. 458, a person may not be 'appointed to or employed in any office or duty in any court' if he is a relative of any judge of that court. The rule prohibits the appointment or employment of a relative of a bankruptcy judge in a case pending before that bankruptcy judge or before other bankruptcy judges sitting within the district. A relative is defined in Sec. 101(34) of the Code to be an 'individual related by affinity or consanguinity within the third degree as determined by the common law, or individual in a step or adoptive relationship within such third degree.' Persons within the third degree under the common law system are as follows: first degree - parents, brothers and sisters, and children; second degree - grandparents, uncles and aunts, first cousins, nephews and nieces, and grandchildren; third degree - great grandparents, great uncles and aunts, first cousins once removed, second cousins, grand nephews and nieces, great grandchildren. Rule 9001 incorporates the definitions of Sec. 101 of the Code. In order for the policy of this rule to be meaningfully implemented, it is necessary to extend the prohibition against appointment or employment to the firm or other business association of the ineligible person and to those affiliated with the firm or business association. 'Firm' is defined in Rule 9001 to include a professional partnership or corporation of attorneys or accountants. All other types of business and professional associations and relationships are covered by this rule. NOTES OF ADVISORY COMMITTEE ON RULES - 1985 AMENDMENT The amended rule is divided into two subdivisions. Subdivision (a) applies to relatives of bankruptcy judges and subdivision (b) applies to persons who are or have been connected with bankruptcy judges. Subdivision (a) permits no judicial discretion; subdivision (b) allows judicial discretion. In both subdivisions of the amended rule 'bankruptcy judge' has been substituted for 'judge'. The amended rule makes clear that it only applies to relatives of, or persons connected with, the bankruptcy judge. See In re Hilltop Sand and Gravel, Inc., 35 B.R. 412 (N.D. Ohio 1983). Subdivision (a). The original rule prohibited all bankruptcy judges in a district from appointing or approving the employment of (i) a relative of any bankruptcy judge serving in the district, (ii) the firm or business association of any ineligible relative and (iii) any member or professional employee of the firm or business association of an ineligible relative. In addition, the definition of relative, the third degree relationship under the common law, is quite broad. The restriction on the employment opportunities of relatives of bankruptcy judges was magnified by the fact that many law and accounting firms have practices and offices spanning the nation. Relatives are not eligible for appointment or employment when the bankruptcy judge to whom they are related makes the appointment or approves the employment. Canon 3(b)(4) of the Code of Judicial Conduct, which provides that the judge 'shall exercise his power of appointment only on the basis of merit, avoiding nepotism and favoritism,' should guide a bankruptcy judge when a relative of a judge of the same bankruptcy court is considered for appointment or employment. Subdivision (b), derived from clause (2) of the original rule, makes a person ineligible for appointment or employment if the person is so connected with a bankruptcy judge making the appointment or approving the employment as to render the appointment or approval of employment improper. The caption and text of the subdivision emphasize that application of the connection test is committed to the sound discretion of the bankruptcy judge who is to make the appointment or approve the employment. All relevant circumstances are to be taken into account by the court. The most important of those circumstances include: the nature and duration of the connection with the bankruptcy judge; whether the connection still exists, and, if not, when it was terminated; and the type of appointment or employment. These and other considerations must be carefully evaluated by the bankruptcy judge. The policy underlying subdivision (b) is essentially the same as the policy embodied in the Code of Judicial Conduct. Canon 2 of the Code of Judicial Conduct instructs a judge to avoid impropriety and the appearance of impropriety, and Canon 3(b)(4) provides that the judge 'should exercise his power of appointment only on the basis of merit, avoiding nepotism and favoritism.' Subdivision (b) alerts the potential appointee or employee and party seeking approval of employment to consider the possible relevance or impact of subdivision (b) and indicates to them that appropriate disclosure must be made to the bankruptcy court before accepting appointment or employment. The information required may be made a part of the application for approval of employment. See Rule 2014(a). Subdivision (b) departs from the former rule in an important respect: a firm or business association is not prohibited from appointment or employment merely because an individual member or employee of the firm or business association is ineligible under subdivision (b). The emphasis given to the bankruptcy court's judicial discretion in applying subdivision (b) and the absence of a per se extension of ineligibility to the firm or business association or any ineligible individual complement the amendments to subdivision (a). The change is intended to moderate the prior limitation on the employment opportunities of attorneys, accountants and other professional persons who are or who have been connected in some way with the bankruptcy judge. For example, in all but the most unusual situations service as a law clerk to a bankruptcy judge is not the type of connection which alone precludes appointment or employment. Even if a bankruptcy judge determines that it is improper to appoint or approve the employment of a former law clerk in the period immediately after completion of the former law clerk's service with the judge, the firm which employes the former law clerk will, absent other circumstances, be eligible for employment. In each instance all the facts must be considered by the bankruptcy judge. Subdivision (b) applies to persons connected with a bankruptcy judge. 'Person' is defined in Sec. 101 of the Bankruptcy Code to include an 'individual, partnership and corporation'. A partnership or corporation may be appointed or employed to serve in a bankruptcy case. If a bankruptcy judge is connected in some way with a partnership or corporation, it is necessary for the court to determine whether the appointment or employment of that partnership or corporation is proper. The amended rule does not regulate professional relationships which do not require approval of a bankruptcy judge. Disqualification of the bankruptcy judge pursuant to 28 U.S.C. Sec. 455 may, however, be appropriate. Under Rule 5004(a), a bankruptcy judge may find that disqualification from only some aspect of the case, rather than the entire case, is necessary. A situation may also arise in which the disqualifying circumstance only comes to light after services have been performed. Rule 5004(b) provides that if compensation from the estate is sought for these services, the bankruptcy judge is disqualified from awarding compensation. ------DocID 14991 Document 336 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 5003 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART V -HEAD- Rule 5003. Records Kept by the Clerk -STATUTE- (a) Bankruptcy Dockets The clerk shall keep a docket in each case under the Code and shall enter thereon each judgment, order, and activity in that case as prescribed by the Director of the Administrative Office of the United States Courts. The entry of a judgment or order in a docket shall show the date the entry is made. (b) Claims Register The clerk shall keep in a claims register a list of claims filed in a case when it appears that there will be a distribution to unsecured creditors. (c) Judgments The clerk shall keep, in the form and manner as the Director of the Administrative Office of the United States Courts may prescribe, a correct copy of every final judgment or order affecting title to or lien on real propety or for the recovery of money or property, and any other order which the court may direct to be kept. On request of the prevailing party, a correct copy of every judgment or order affecting title to or lien upon real or personal property or for the recovery of money or property shall be kept and indexed with the civil judgments of the district court. (d) Index of Cases; Certificate of Search The clerk shall keep indices of all cases and adversary proceedings as prescribed by the Director of the Administrative Office of the United States Courts. On request, the clerk shall make a search of any index and papers in the clerk's custody and certify whether a case or proceeding has been filed in or transferred to the court or if a discharge has been entered in its records. (e) Other Books and Records of the Clerk The clerk shall also keep such other books and records as may be required by the Director of the Administrative Office of the United States Courts. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule consolidates former Bankruptcy Rules 504 and 507. The record-keeping duties of the referee under former Bankruptcy Rule 504 are transferred to the clerk. Subdivisions (a), (c), (d) and (e) are similar to subdivisions (a)-(d) of Rule 79 F.R.Civ.P. Subdivision (b) requires that filed claims be listed on a claims register only when there may be a distribution to unsecured creditors. Compilation of the list for no asset or nominal asset cases would serve no purpose. Rule 2013 requires the clerk to maintain a public record of fees paid from the estate and an annual summary thereof. Former Bankruptcy Rules 507(d) and 508, which made materials in the clerk's office and files available to the public, are not necessary because Sec. 107 of the Code guarantees public access to files and dockets of cases under the Code. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a) has been made more specific. Subdivision (c) is amended to require that on the request of the prevailing party the clerk of the district court shall keep and index bankruptcy judgments and orders affecting title to or lien upon real or personal property or for the recovery of money or property with the civil judgments of the district court. This requirement is derived from former Rule 9021(b). The Director of the Administrative Office will provide guidance to the bankruptcy and district court clerks regarding appropriate paperwork and retention procedures. ------DocID 14992 Document 337 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 5004 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART V -HEAD- Rule 5004. Disqualification -STATUTE- (a) Disqualification of Judge A bankruptcy judge shall be governed by 28 U.S.C. Sec. 455, and disqualified from presiding over the proceeding or contested matter in which the disqualifying circumstance arises or, if appropriate, shall be disqualified from presiding over the case. (b) Disqualification of Judge from Allowing Compensation A bankruptcy judge shall be disqualified from allowing compensation to a person who is a relative of the bankruptcy judge or with whom the judge is so connected as to render it improper for the judge to authorize such compensation. -SOURCE- (As amended Apr. 29, 1985, eff. Aug. 1, 1985; Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a). Disqualification of a bankruptcy judge is governed by 28 U.S.C. Sec. 455. That section provides that the judge 'shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned' or under certain other circumstances. In a case under the Code it is possible that the disqualifying circumstance will be isolated to an adversary proceeding or contested matter. The rule makes it clear that when the disqualifying circumstance is limited in that way the judge need only disqualify himself from presiding over that adversary proceeding or contested matter. It is possible, however, that even if the disqualifying circumstance arises in connection with an adversary proceeding, the effect will be so pervasive that disqualification from presiding over the case is appropriate. This distinction is consistent with the definition of 'proceeding' in 28 U.S.C. Sec. 455(d)(1). Subdivision (b) precludes a bankruptcy judge from allowing compensation from the estate to a relative or other person closely associated with the judge. The subdivision applies where the judge has not appointed or approved the employment of the person requesting compensation. Perhaps the most frequent application of the subdivision will be in the allowance of administrative expenses under Sec. 503(b)(3)-(5) of the Code. For example, if an attorney or accountant is retained by an indenture trustee who thereafter makes a substantial contribution in a chapter 11 case, the attorney or accountant may seek compensation under Sec. 503(b)(4). If the attorney or accountant is a relative of or associated with the bankruptcy judge, the judge may not allow compensation to the attorney or accountant. Section 101(34) defines relative and Rule 9001 incorporates the definitions of the Code. See the Advisory Committee's Note to Rule 5002. NOTES OF ADVISORY COMMITTEE ON RULES - 1985 AMENDMENT Subdivision (a) was affected by the Bankruptcy Amendments and Federal Judgeship Act of 1984, P.L. 98-353, 98 Stat. 333. The 1978 Bankruptcy Reform Act, P.L. 95-598, included bankruptcy judges in the definition of United States judges in 28 U.S.C. Sec. 451 and they were therefore subject to the provisions of 28 U.S.C. Sec. 455. This was to become effective on April 1, 1984, P.L. 95-598, Sec. 404(b). Section 113 of P.L. 98-353, however, appears to have rendered the amendment to 28 U.S.C. Sec. 451 ineffective. Subdivision (a) of the rule retains the substance and intent of the earlier draft by making bankruptcy judges subject to 28 U.S.C. Sec. 455. The word 'associated' in subdivision (b) has been changed to 'connected' in order to conform with Rule 5002(b). NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The rule is amended to be gender neutral. The bankruptcy judge before whom the matter is pending determines whether disqualification is required. ------DocID 14993 Document 338 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 5005 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART V -HEAD- Rule 5005. Filing of Papers -STATUTE- (a) Filing The proofs of claim or interest, complaints, motions, applications, objections and other papers required to be filed by these rules, except as provided in 28 U.S.C. Sec. 1409, shall be filed with the clerk in the district where the case under the Code is pending. The judge of that court may permit the papers to be filed with the judge, in which event the filing date shall be noted thereon, and they shall be forthwith transmitted to the clerk. (b) Error in Filing A paper intended to be filed but erroneously delivered to the trustee, the attorney for the trustee, a bankruptcy judge, a district judge, or the clerk of the district court shall, after the date of its receipt has been noted thereon, be transmitted forthwith to the clerk of the bankruptcy court. In the interest of justice, the court may order that the paper shall be deemed filed as of the date of its original delivery. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a) is an adaptation of Rule 5(e) F.R.Civ.P. Sections 301-304 of the Code and Rules 1002 and 1003 require that cases under the Code be commenced by filing a petition 'with the bankruptcy court.' Other sections of the Code and other rules refer to or contemplate filing but there is no specific reference to filing with the bankruptcy court. For example, Sec. 501 of the Code requires filing of proofs of claim and Rule 3016(c) requires the filing of a disclosure statement. This subdivision applies to all situations in which filing is required. Except when filing in another district is authorized by 28 U.S.C. Sec. 1473, all papers, including complaints commencing adversary proceedings, must be filed in the court where the case under the Code is pending. Subdivision (b) is the same as former Bankruptcy Rule 509(c). NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a) is amended to conform with the 1984 amendments. ------DocID 14994 Document 339 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 5006 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART V -HEAD- Rule 5006. Certification of Copies of Papers -STATUTE- The clerk shall issue a certified copy of the record of any proceeding in a case under the Code or of any paper filed with the court on payment of any prescribed fee. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Fees for certification and copying are fixed by the Judicial Conference under 28 U.S.C. Sec. 1930(b). Rule 1101 F. R. Evid. makes the Federal Rules of Evidence applicable to cases under the Code. Rule 1005 F. R. Evid. allows the contents of an official record or of a paper filed with the court to be proved by a duly certified copy. A copy certified and issued in accordance with Rule 5006 is accorded authenticity by Rule 902(4) F. R. Evid. ------DocID 14995 Document 340 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 5007 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART V -HEAD- Rule 5007. Record of Proceedings and Transcripts -STATUTE- (a) Filing of Record or Transcript The reporter or operator of a recording device shall certify the original notes of testimony, tape recording, or other original record of the proceeding and promptly file them with the clerk. The person preparing any transcript shall promptly file a certified copy with the clerk. (b) Transcript Fees The fees for copies of transcripts shall be charged at rates prescribed by the Judicial Conference of the United States. No fee may be charged for the certified copy filed with the clerk. (c) Admissibility of Record in Evidence A certified sound recording or a transcript of a proceeding shall be admissible as prima facie evidence to establish the record. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule supplements 28 U.S.C. Sec. 773. A record of proceedings before the bankruptcy judge is to be made whenever practicable. By whatever means the record is made, subdivision (a) requires that the preparer of the record certify and file the original notes, tape recording, or other form of sound recording of the proceedings. Similarly, if a transcript is requested, the preparer is to file a certified copy with the clerk. Subdivision (b) is derived from 28 U.S.C. Sec. 753(f). Subdivision (c) is derived from former Bankruptcy Rule 511(c). This subdivision extends to a sound recording the same evidentiary status as a transcript under 28 U.S.C. Sec. 773(b). ------DocID 14996 Document 341 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 5008 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART V -HEAD- Rule 5008. Funds of the Estate -STATUTE- (a) Court Approval Required A deposit or investment for which a bond or deposit of securities is required under Sec. 345(b) of the Code shall not be made until the court, on motion with such notice as the court directs, approves the bond or the deposit of securities. (b) Report of Deposit or Investment Promptly after making the initial deposit or investment of the estate's funds and thereafter as the court may direct, the trustee shall file a report which identifies the depository or describes the investment and states the amount of any deposit or investment and whether any portion is insured or guaranteed by the United States or a department, agency, or instrumentality of the United States, or backed by the full faith and credit of the United States. (c) Deposit of Securities; Agreement Securities accepted for deposit in lieu of a surety on a depository bond shall be deposited in the custody of the Federal Reserve Bank or branch thereof designated by the court or in the custody of such other person as the court may direct. The securities shall be deposited conditioned on proper accounting for all money deposited or invested and for any return on any such money, prompt repayment of such money and return thereon, and faithful performance of the duties as a depository or entity with whom an investment is made. The entity depositing securities shall execute an agreement for the deposit of securities in favor of the United States which incorporates the foregoing conditions. Securities subject to such an agreement shall be subject to the order of the court. (d) Action on Bond or Agreement for Deposit of Securities Proceedings on a bond given pursuant to Sec. 345(b) of the Code or on an agreement for deposit of securities required by subdivision (c) of this rule shall be in the name of the United States for the use of the estate or any entity injured by a breach of the condition. (e) Prohibition of Deposits When Adequacy of Security Doubtful No trustee or other person shall deposit or invest funds received or held as a fiduciary under the Code if there is reasonable cause to believe that the bond or the security therefor or the deposited securities are or may be inadequate in view of existing and expected deposits or investments. (f) Reports Required Depositories and entities with whom deposits or investments are made shall file reports as prescribed by regulations of the Director of the Administrative Office of the United States Courts. (g) Deficiency in Amount of Bond or Deposited Securities Whenever the bond and any deposited securities do not or will not constitute adequate security because of exisiting and expected deposits or investments, the court shall require the depository or entity with whom an investment is made to increase the amount of the bond or the deposited securities within a fixed time. If within the time fixed the depository or entity with whom an investment is made fails to increase the amount of the bond or the deposited securities to an amount adequate for existing and expected deposits or investments, the court shall order immediate payment of all money on deposit or invested with it, with all interest payable thereon. (h) Relief From Liability on Bond A surety on a bond may move to be relieved from liability with respect to any subsequent default. If after hearing on notice to the depository or entity with whom the investment is made, to other sureties, to trustees and to other representatives of estates having money of the estate protected by the bond, the court determines that the motion may be granted without injury to any party in interest, the surety shall be relieved after a new bond or other appropriate security is submitted and approved. (i) Combining of Funds for Deposit The court may authorize the deposit or investment of funds from more than one estate in a single account or investment instrument. The trustee shall maintain records identifying separately the money of each estate. The court shall require that a statement of account be filed at least quarterly. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a). Section 345 of the Code permits the trustee to deposit or invest money of the estate without prior approval of the court. The trustee may select any kind of financial institution as a depository and any form of investment instrument. Except when the deposit or investment is backed by the United States, the depository must either post a bond or deposit securities. Section 345(b)(1)(B) requires court approval of the bond. Subdivision (a) requires that the court's approval of the bond be obtained before funds of the estate are deposited or invested. The same requirement of prior court approval is also made applicable to the deposit of securities. Subdivision (b) requires that the initial deposit or investment of the estate's funds be reported to the court. A local rule or order may require the filing of additional reports concerning the management of the estate's funds. If the deposit or investment is not backed by the United States, the report should identify the order of the court approving the bond or the deposit of securities. The court may direct that the report of initial deposits or investments or other reports be provided to creditors or other parties in interest. Subdivision (c) is an adaptation of former Bankruptcy Rule 512(b). This subdivision makes the conditions of the bond specified in Sec. 345(b)(1) of the Code applicable to a deposit of securities under Sec. 345(b)(2) and also requires the execution of an agreement for deposit of securities which incorporates these conditions. The first sentence of the subdivision goes beyond the comparable provision in former Bankruptcy Rule 512(b) by specifically authorizing the court to permit the securities to be held by an entity other than the Federal Reserve Bank. Subdivisions (d)-(h) are derived from former Bankruptcy Rule 512. Subdivision (i) authorizes the court to permit a trustee to combine money of more than one estate for the purposes of deposit or investment. Combined deposits or investments may be particularly beneficial when a standing chapter 13 trustee has a large number of plans to administer. The subdivision requires that at least quarterly statements of account be filed, but leaves to the court the form of the account and whether more frequent reports should be filed. ------DocID 14997 Document 342 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 5009 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART V -HEAD- Rule 5009. Closing Cases -STATUTE- When an estate has been fully administered and the court has discharged the trustee, the case shall be closed. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is the same as Sec. 350(a) of the Code. An estate may be closed even though the period allowed by Rule 3002(c) for filing claims has not expired. The closing of a case may be expedited when a notice of no dividends is given under Rule 2002(e). Dismissal of a case for want of prosecution or failure to pay filing fees is governed by Rule 1017. ------DocID 14998 Document 343 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 5010 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART V -HEAD- Rule 5010. Reopening Cases -STATUTE- A case may be reopened on motion of the debtor or other party in interest pursuant to Sec. 350(b) of the Code. In a chapter 7 or 13 case a trustee shall be appointed unless the court determines that a trustee is not necessary to protect the interests of creditors and the debtor or to insure efficient administration of the case. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Section 350(b) of the Code provides: 'A case may be reopened in the court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause.' Rule 9024, which incorporates Rule 60 F.R.Civ.P., exempts motions to reopen cases under the Code from the one year limitation of Rule 60(b). Although a case has been closed the court may sometimes act without reopening the case. Under Rule 9024, clerical errors in judgments, orders, or other parts of the record or errors therein caused by oversight or omission may be corrected. A judgment determined to be non-dischargeable pursuant to Rule 4007 may be enforced after a case is closed by a writ of execution obtained pursuant to Rule 7069. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT In order to avoid unnecessary cost and delay, the rule is amended to permit reopening of a case without the appointment of a trustee when the services of a trustee are not needed. ------DocID 14999 Document 344 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 5011 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART V -HEAD- Rule 5011. Withdrawal and Abstention from Hearing a Proceeding -STATUTE- (a) Withdrawal A motion for withdrawal of a case or proceeding shall be heard by a district judge. (b) Abstention From Hearing a Proceeding Unless a district judge orders otherwise, a motion for abstention pursuant to 28 U.S.C. Sec. 1334(c) shall be heard by the bankruptcy judge, who shall file a report and recommendation for disposition of the motion. The clerk shall serve forthwith a copy of the report and recommendation on the parties to the proceeding. Within 10 days of being served with a copy of the report and recommendation a party may serve and file with the clerk objections prepared in the manner provided in Rule 9033(b). Review of the report and recommendation by the district court shall be governed by Rule 9033. (c) Effect of Filing of Motion for Withdrawal or Abstention The filing of a motion for withdrawal of a case or proceeding or for abstention pursuant to 28 U.S.C. Sec. 1334(c) shall not stay the administration of the case or any proceeding therein before the bankruptcy judge except that the bankruptcy judge may stay, on such terms and conditions as are proper, proceedings pending disposition of the motion. A motion for a stay ordinarily shall be presented first to the bankruptcy judge. A motion for a stay or relief from a stay filed in the district court shall state why it has not been presented to or obtained from the bankruptcy judge. Relief granted by the district judge shall be on such terms and conditions as the judge deems proper. -SOURCE- (Added Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Motions for withdrawal pursuant to 28 U.S.C. Sec. 157(d) or abstention pursuant to 28 U.S.C. Sec. 1334(c), like all other motions, are to be filed with the clerk as required by Rule 5005(a). If a bankruptcy clerk has been appointed for the district, all motions are filed with the bankruptcy clerk. The method for forwarding withdrawal motions to the district court will be established by administrative procedures. Subdivision (a). Section 157(d) permits the district court to order withdrawal on its own motion or the motion of a party. Subdivision (a) of this rule makes it clear that the bankruptcy judge will not conduct hearings on a withdrawal motion. The withdrawal decision is committed exclusively to the district court. Subdivision (b). A decision to abstain under 28 U.S.C. Sec. 1334(c) is not appealable. The district court is vested originally with jurisdiction and the decision to relinquish that jurisdiction must ultimately be a matter for the district court. The bankruptcy judge ordinarily will be in the best position to evaluate the grounds asserted for abstention. This subdivision (b) provides that the initial hearing on the motion is before the bankruptcy judge. The procedure for review of the report and recommendation are governed by Rule 9033. This rule does not apply to motions under Sec. 305 of the Code for abstention from hearing a case. Judicial decisions will determine the scope of the bankruptcy judge's authority under Sec. 305. Subdivision (c). Unless the court so orders, proceedings are not stayed when motions are filed for withdrawal or for abstention from hearing a proceeding. Because of the district court's authority over cases and proceedings, the subdivision authorizes the district court to order a stay or modify a stay ordered by the bankruptcy judge. ------DocID 15000 Document 345 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES PART VI -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VI -HEAD- PART VI - COLLECTION AND LIQUIDATION OF THE ESTATE ------DocID 15001 Document 346 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 6001 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VI -HEAD- Rule 6001. Burden of Proof As to Validity of Post Petition Transfer -STATUTE- Any entity asserting the validity of a transfer under Sec. 549 of the Code shall have the burden of proof. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Bankruptcy Rule 603. The Act contained, in Sec. 70d, a provision placing the burden of proof on the same person as did Rule 603. The Code does not contain any directive with respect to the burden of proof. This omission, in all probability, resulted from the intention to leave matters affecting evidence to these rules. See H. Rep. No. 95-595, 95th Cong. 1st Sess. (1977) 293. ------DocID 15002 Document 347 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 6002 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VI -HEAD- Rule 6002. Accounting by Prior Custodian of Property of the Estate -STATUTE- (a) Accounting Required Any custodian required by the Code to deliver property in the custodian's possession or control to the trustee shall promptly file a report and account with the court with respect to the property of the estate and the administration thereof. (b) Examination of Administration On the filing of the report and account required by subdivision (a) of this rule and after an examination has been made into the superseded administration, after hearing on notice the court shall determine the propriety of the administration, including the reasonableness of all disbursements. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES 'Custodian' is defined in Sec. 101(10) of the Code. The definition includes a trustee or receiver appointed in proceedings not under the Code, as well as an assignee for the benefit of creditors. This rule prescribes the procedure to be followed by a custodian who under Sec. 543 of the Code is required to deliver property to the trustee and to account for its disposition. The examination under subdivision (b) may be initiated (1) on the motion of the custodian required to account under subdivision (a) for an approval of his account and discharge thereon, (2) on the motion of, or the filing of an objection to the custodian's account by, the trustee or any other party in interest, or (3) on the court's own initiative. Rule 9014 applies to any contested matter arising under this rule. Section 543(d) is similar to an abstention provision. It grants the bankruptcy court discretion to permit the custodian to remain in possession and control of the property. In that event, the custodian is excused from complying with Sec. 543(a)-(c) and thus would not be required to turn over the property to the trustee. When there is no duty to turn over to the trustee, Rule 6002 would not be applicable. ------DocID 15003 Document 348 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 6003 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VI -HEAD- Rule 6003. Disbursement of Money of the Estate -STATUTE- Disbursement of estate funds shall be by check unless another method is approved by the court. On motion of a party in interest, the court may require countersignatures except that signature by the judge shall not be permitted. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule authorizes the trustee to disburse money of the estate not only by check but by any other method approved by the court. In this latter regard, it continues the flexibility introduced by former Bankruptcy Rule 605(c) to recognize that mechanisms for payments through bank accounts are subject to technological and other changes. Local rule or a court order in a particular case may prescribe record-keeping requirements. The second sentence implements the policy of removing judges from nonjudicial functions. ------DocID 15004 Document 349 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 6004 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VI -HEAD- Rule 6004. Use, Sale or Lease of Property -STATUTE- (a) Notice of Proposed Use, Sale, or Lease of Property Notice of a proposed use, sale, or lease of property, other than cash collateral, not in the ordinary course of business shall be given pursuant to Rule 2002(a)(2), (c)(1), and (i) and, if applicable, in accordance with Sec. 363(b)(2) of the Code. (b) Objection to Proposal Except as provided in subdivisions (c) and (d) of this rule, an objection to a proposed use, sale, or lease of property shall be filed and served not less than five days before the date set for the proposed action or within the time fixed by the court. An objection to the proposed use, sale, or lease of property is governed by Rule 9014. (c) Sale Free and Clear of Liens and Other Interests A motion for authority to sell property free and clear of liens or other interests shall be made in accordance with Rule 9014 and shall be served on the parties who have liens or other interests in the property to be sold. The notice required by subdivision (a) of this rule shall include the date of the hearing on the motion and the time within which objections may be filed and served on the debtor in possession or trustee. (d) Sale of Property Under $2,500 Notwithstanding subdivision (a) of this rule, when all of the nonexempt property of the estate has an aggregate gross value less than $2,500, it shall be sufficient to give a general notice of intent to sell such property other that in the ordinary course of business to all creditors, indenture trustees, committees appointed or elected pursuant to the Code and other persons as the court may direct. An objection to any such sale may be filed and served by a party in interest within 15 days of the mailing of the notice, or within the time fixed by the court. An objection is governed by Rule 9014. (e) Hearing If a timely objection is made pursuant to subdivision (b) or (d) of the rule, the date of the hearing thereon may be set in the notice given pursuant to subdivision (a) of this rule. (f) Conduct of Sale Not in the Ordinary Course of Business (1) Public or Private Sale. All sales not in the ordinary course of business may be by private sale or by public auction. Unless it is impracticable, an itemized statement of the property sold, the name of each purchaser, and the price received for each item or lot or for the property as a whole if sold in bulk shall be filed with the clerk on completion of a sale. If the property is sold by an auctioneer, the auctioneer shall file the statement and furnish a copy to the trustee, debtor in possession, or chapter 13 debtor. If the property is not sold by an auctioneer, the trustee, debtor in possession, or chapter 13 debtor shall file the statement. (2) Execution of Instruments. After a sale in accordance with this rule the debtor, the trustee, or debtor in possession, as the case may be, shall execute any instrument necessary or ordered by the court to effectuate the transfer to the purchaser. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivisions (a) and (b). Pursuant to Sec. 363(b) of the Code, a trustee or debtor in possession may use, sell, or lease property other than in the ordinary course of business only after notice and hearing. Rule 2002(a), (c) and (i) specifies the time when notice of sale is to be given, the contents of the notice and the persons to whom notice is to be given of sales of property. Subdivision (a) makes those provisions applicable as well to notices for proposed use and lease of property. The Code does not provide the time within which parties may file objections to a proposed sale. Subdivision (b) of the rule requires the objection to be in writing and filed not less than five days before the proposed action is to take place. The objection should also be served within that time on the person who is proposing to take the action which would be either the trustee or debtor in possession. This time period is subject to change by the court. In some instances there is a need to conduct a sale in a short period of time and the court is given discretion to tailor the requirements to the circumstances. Subdivision (c). In some situations a notice of sale for different pieces of property to all persons specified in Rule 2002(a) may be uneconomic and inefficient. This is particularly true in some chapter 7 liquidation cases when there is property of relatively little value which must be sold by the trustee. Subdivision (c) allows a general notice of intent to sell when the aggregate value of the estate's property is less than $2,500. The gross value is the value of the property without regard to the amount of any debt secured by a lien on the property. It is not necessary to give a detailed notice specifying the time and place of a particular sale. Thus, the requirements of Rule 2002(c) need not be met. If this method of providing notice of sales is used, the subdivision specifies that parties in interest may serve and file objections to the proposed sale of any property within the class and the time for service and filing is fixed at not later than 15 days after mailing the notice. The court may fix a different time. Subdivision (c) would have little utility in chapter 11 cases. Pursuant to Rule 2002(i), the court can limit notices of sale to the creditors' committee appointed under Sec. 1102 of the Code and the same burdens present in a small chapter 7 case would not exist. Subdivision (d). If a timely objection is filed, a hearing is required with respect to the use, sale, or lease of property. Subdivision (d) renders the filing of an objection tantamount to requesting a hearing so as to require a hearing pursuant to Sec. 363(b) and 102(l)(B)(i). Subdivision (e) is derived in part from former Bankruptcy Rule 606(b) but does not carry forward the requirement of that rule that court approval be obtained for sales of property. Pursuant to Sec. 363(b) court approval is not required unless timely objection is made to the proposed sale. The itemized statement or information required by the subdivision is not necessary when it would be impracticable to prepare it or set forth the information. For example, a liquidation sale of retail goods although not in the ordinary course of business may be on a daily ongoing basis and only summaries may be available. The duty imposed by paragraph (2) does not affect the power of the bankruptcy court to order third persons to execute instruments transferring property purchased at a sale under this subdivision. See, e.g., In re Rosenberg, 138 F.2d 409 (7th Cir. 1943). NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a) is amended to conform to the 1984 amendments to Sec. 363(b)(2) of the Code. Subdivision (b) is amended to provide that an objection to a proposed use, sale, or lease of property creates a contested matter governed by Rule 9014. A similar amendment is made to subdivision (d), which was formerly subdivision (c). Subdivision (c) is new. Section 363(f) provides that sales free and clear of liens or other interests are only permitted if one of the five statutory requirements is satisfied. Rule 9013 requires that a motion state with particularity the grounds relied upon by the movant. A motion for approval of a sale free and clear of liens or other interests is subject to Rule 9014, service must be made on the parties holding liens or other interests in the property, and notice of the hearing on the motion and the time for filing objections must be included in the notice given under subdivision (a). ------DocID 15005 Document 350 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 6005 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VI -HEAD- Rule 6005. Appraisers and Auctioneers -STATUTE- The order of the court approving the employment of an appraiser or auctioneer shall fix the amount or rate of his compensation. No officer or employee of the Judicial Branch of the United States or the United States Department of Justice shall be eligible to act as appraiser or auctioneer. No residence or licensing requirement shall disqualify an appraiser or auctioneer from employment. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Bankruptcy Rule 606(c) and implements Sec. 327 of the Code. Pursuant to Sec. 327, the trustee or debtor in possession may employ one or more appraisers or auctioneers, subject to court approval. This rule requires the court order approving such employment to fix the amount or rate of compensation. The second sentence of the former rule is retained to continue to safeguard against imputations of favoritism which detract from public confidence in bankruptcy administration. The final sentence is to guard against imposition of parochial requirements not warranted by any consideration having to do with sound bankruptcy administration. Reference should also be made to Rule 2013(a) regarding the limitation on employment of appraisers and auctioneers, and Rule 2014(a) regarding the application for appointment of an appraiser or auctioneer. ------DocID 15006 Document 351 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 6006 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VI -HEAD- Rule 6006. Assumption, Rejection and Assignment of Executory Contracts -STATUTE- (a) Proceeding To Assume, Reject, or Assign A proceeding to assume, reject, or assign an executory contract, unexpired lease, or time share interest, other than as part of a plan, is governed by Rule 9014. (b) Proceeding To Require Trustee To Act A proceeding by a party to an executory contract, unexpired lease, or time share interest in a chapter 9 municipality case, chapter 11 reorganization case, or chapter 13 individual's debt adjustment case, to require the trustee, debtor in possession, or debtor to determine whether to assume or reject the contract, lease, or time share interest is governed by Rule 9014. (c) Hearing When a motion is made pursuant to subdivision (a) or (b) of this rule, the court shall set a hearing on notice to the other party to the contract and to other parties in interest as the court may direct. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Section 365(a) of the Code requires court approval for the assumption or rejection of an executory contract by the trustee or debtor in possession. The trustee or debtor in possession may also assign an executory contract, Sec. 365(f)(1), but must first assume the contract, Sec. 365(f)(2). Rule 6006 provides a procedure for obtaining court approval. It does not apply to the automatic rejection of contracts which are not assumed in chapter 7 liquidation cases within 60 days after the order for relief, or to the assumption or rejection of contracts in a plan pursuant to Sec. 1123(b)(2) or Sec. 1322(b)(7). Subdivision (a) by referring to Rule 9014 requires a motion to be brought for the assumption, rejection, or assignment of an executory contract. Normally, the motion will be brought by the trustee, debtor in possession or debtor in a chapter 9 or chapter 13 case. The authorization to assume a contract and to assign it may be sought in a single motion and determined by a single order. Subdivision (b) makes applicable the same motion procedure when the other party to the contract seeks to require the chapter officer to take some action. Section 365(d)(2) recognizes that this procedure is available to these contractual parties. This provision of the Code and subdivision of the rule apply only in chapter 9, 11 and 13 cases. A motion is not necessary in chapter 7 cases because in those cases a contract is deemed rejected if the trustee does not timely assume it. Subdivision (c) provides for the court to set a hearing on a motion made under subdivision (a) or (b). The other party to the contract should be given appropriate notice of the hearing and the court may order that other parties in interest, such as a creditors' committee, also be given notice. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivisions (a) and (b) are amended to conform to the 1984 amendment to Sec. 365 of the Code, which governs assumption or rejection of time share interests. Section 1113, governing collective bargaining agreements, was added to the Code in 1984. It sets out requirements that must be met before a collective bargaining agreement may be rejected. The application to reject a collective bargaining agreement referred to in Sec. 1113 shall be made by motion. The motion to reject creates a contested matter under Rule 9014, and service is made pursuant to Rule 7004 on the representative of the employees. The time periods set forth in Sec. 1113(d) govern the scheduling of the hearing and disposition of a motion to reject the agreement. ------DocID 15007 Document 352 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 6007 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VI -HEAD- Rule 6007. Abandonment or Disposition of Property -STATUTE- (a) Notice of Proposed Abandonment or Disposition; Objections Unless otherwise directed by the court, the trustee or debtor in possession shall give notice of a proposed abandonment or disposition of property to all creditors, indenture trustees and committees appointed or elected pursuant to the Code. An objection may be filed and served by a party in interest within 15 days of the mailing of the notice, or within the time fixed by the court. (b) Motion by Party in Interest A party in interest may file and serve a motion requiring the trustee or debtor in possession to abandon property of the estate. (c) Hearing If a timely objection is made as prescribed by subdivision (a) of this rule, or if a motion is made as prescribed by subdivision (b), the court shall set a hearing on notice to the entities as the court may direct. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Sections 554 and 725 of the Code permit and require abandonment and disposition of property of the estate. Pursuant to Sec. 554, the trustee may abandon property but only after notice and hearing. This section is applicable in chapter 7, 11 and 13 cases. Section 725 requires the trustee to dispose of property in which someone other than the estate has an interest, prior to final distribution. It applies only in chapter 7 cases. Notice and hearing are also required conditions. Section 102(1) provides that 'notice and hearing' is construed to mean appropriate notice and an opportunity for a hearing. Neither Sec. 554 nor Sec. 725 specify to whom the notices are to be sent. This rule does not apply to Sec. 554(c). Pursuant to that subsection, property is deemed abandoned if it is not administered. A hearing is not required by the statute. Subdivision (a) requires the notices to be sent to all creditors, indenture trustees, and committees elected under Sec. 705 or appointed under Sec. 1102 of the Code. This may appear burdensome, expensive and inefficient but the subdivision is in keeping with the Code's requirement for notice and the Code's intent to remove the bankruptcy judge from undisputed matters. The burden, expense and inefficiency can be alleviated in large measure by incorporating the notice into or together with the notice of the meeting of creditors so that separate notices would not be required. Subdivision (b) implements Sec. 554(b) which specifies that a party in interest may request an order that the trustee abandon property. The rule specifies that the request be by motion and, pursuant to the Code, lists the parties who should receive notice. Subdivision (c) requires a hearing when an objection under subdivision (a) is filed or a motion under subdivision (b) is made. Filing of an objection is sufficient to require a hearing; a separate or joined request for a hearing is unnecessary since the objection itself is tantamount to such a request. ------DocID 15008 Document 353 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 6008 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VI -HEAD- Rule 6008. Redemption of Property from Lien or Sale -STATUTE- On motion by the debtor, trustee, or debtor in possession and after hearing on notice as the court may direct, the court may authorize the redemption of property from a lien or from a sale to enforce a lien in accordance with applicable law. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Bankruptcy Rule 609. No provision in the Code addresses the trustee's right of redemption. Ordinarily the secured creditor should be given notice of the trustee's motion so that any objection may be raised to the proposed redemption. The rule applies also to a debtor exercising a right of redemption pursuant to Sec. 722. A proceeding under that section is governed by Rule 9014. ------DocID 15009 Document 354 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 6009 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VI -HEAD- Rule 6009. Prosecution and Defense of Proceedings by Trustee or Debtor in Possession -STATUTE- With or without court approval, the trustee or debtor in possession may prosecute or may enter an appearance and defend any pending action or proceeding by or against the debtor, or commence and prosecute any action or proceeding in behalf of the estate before any tribunal. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Bankruptcy Rule 610. ------DocID 15010 Document 355 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 6010 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VI -HEAD- Rule 6010. Proceeding to Avoid Indemnifying Lien or Transfer to Surety -STATUTE- If a lien voidable under Sec. 547 of the Code has been dissolved by the furnishing of a bond or other obligation and the surety thereon has been indemnified by the transfer of, or the creation of a lien upon, nonexempt property of the debtor, the surety shall be joined as a defendant in any proceeding to avoid the indemnifying transfer or lien. Such proceeding is governed by the rules in Part VII. If an order is entered for the recovery of indemnifying property in kind or for the avoidance of an indemnifying lien, on motion by any party in interest after notice and hearing the court shall ascertain the value of such property or lien. If the value is less than the amount for which the property or lien is indemnity, the surety may elect to retain the property or lien on payment of the value so ascertained to the trustee or debtor in possession, within the time fixed by the court. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from former Bankruptcy Rule 612. ------DocID 15011 Document 356 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES PART VII -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- PART VII - ADVERSARY PROCEEDINGS ------DocID 15012 Document 357 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7001 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7001. Scope of Rules of Part VII -STATUTE- An adversary proceeding is governed by the rules of this Part VII. It is a proceeding (1) to recover money or property, except a proceeding to compel the debtor to deliver property to the trustee, or a proceeding under Sec. 554(b) or Sec. 725 of the Code, Rule 2017, or Rule 6002, (2) to determine the validity, priority, or extent of a lien or other interest in property, other than a proceeding under Rule 4003(d), (3) to obtain approval pursuant to Sec. 363(h) for the sale of both the interest of the estate and of a coowner in property, (4) to object to or revoke a discharge, (5) to revoke an order of confirmation of a chapter 11 or chapter 13 plan, (6) to determine the dischargeability of a debt, (7) to obtain an injunction or other equitable relief, (8) to subordinate any allowed claim or interest, except when subordination is provided in a chapter 9, 11, or 13 plan, (9) to obtain a declaratory judgment relating to any of the foregoing, or (10) to determine a claim or cause of action removed pursuant to 28 U.S.C. Sec. 1452. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES The rules in Part VII govern the procedural aspects of litigation involving the matters referred to in this Rule 7001. Under Rule 9014 some of the Part VII rules also apply to contested matters. These Part VII rules are based on the premise that to the extent possible practice before the bankruptcy courts and the district courts should be the same. These rules either incorporate or are adaptations of most of the Federal Rules of Civil Procedure. Although the Part VII rules of the former Bankruptcy Rules also relied heavily on the F.R.Civ.P., the former Part VII rules departed from the civil practice in two significant ways: a trial or pretrial conference had to be scheduled as soon as the adversary proceeding was filed and pleadings had to be filed within periods shorter than those established by the F.R.Civ.P. These departures from the civil practice have been eliminated. The content and numbering of these Part VII rules correlates to the content and numbering of the F.R.Civ.P. Most, but not all, of the F.R.Civ.P. have a comparable Part VII rule. When there is no Part VII rule with a number corresponding to a particular F.R.Civ.P., Parts V and IX of these rules must be consulted to determine if one of the rules in those parts deals with the subject. The list below indicates the F.R.Civ.P., or subdivision thereof, covered by a rule in either Part V or Part IX. --------------------------------------------------------------------- F.R.Civ.P. Rule in Part V or IX --------------------------------------------------------------------- 6 9006 7(b) 9013 10(a) 9004(b) 11 9011 38,39 9015(a)-(e) 47-51 9015(f) 43,44,44.1 9017 45 9016 58 9021 59 9023 60 9024 61 9005 63 9028 77(a),(b),(c) 5001 77(d) 9022(d) 79(a)-(d) 5003 81(c) 9027 83 9029 92 9030 ------------------------------- Proceedings to which the rules in Part VII apply directly include those brought to avoid transfers by the debtor under Sec. 544, 545, 547, 548 and 549 of the Code; subject to important exceptions, proceedings to recover money or property; proceedings on bonds under Rules 5008(d) and 9025; proceedings under Rule 4004 to determine whether a discharge in a chapter 7 or 11 case should be denied because of an objection grounded on Sec. 727 and proceedings in a chapter 7 or 13 case to revoke a discharge as provided in Sec. 727(d) or 1328(e); and proceedings initiated pursuant to Sec. 523(c) of the Code to determine the dischargeability of a particular debt. Those proceedings were classified as adversary proceedings under former Bankruptcy Rule 701. Also included as adversary proceedings are proceedings to revoke an order of confirmation of a plan in a chapter 11 or 13 case as provided in Sec. 1144 and 1330, to subordinate under Sec. 510(c), other than as part of a plan, an allowed claim or interest, and to sell under Sec. 363(h) both the interest of the estate and a co-owner in property. Declaratory judgments with respect to the subject matter of the various adversary proceedings are also adversary proceedings. Any claim or cause of action removed to a bankruptcy court pursuant to 28 U.S.C. Sec. 1478 is also an adversary proceeding. Unlike former Bankruptcy Rule 701, requests for relief from an automatic stay do not commence an adversary proceeding. Section 362(e) of the Code and Rule 4001 establish an expedited schedule for judicial disposition of requests for relief from the automatic stay. The formalities of the adversary proceeding process and the time for serving pleadings are not well suited to the expedited schedule. The motion practice prescribed in Rule 4001 is best suited to such requests because the court has the flexibility to fix hearing dates and other deadlines appropriate to the particular situation. Clause (1) contains important exceptions. A person with an interest in property in the possession of the trustee or debtor in possession may seek to recover or reclaim that property under Sec. 554(b) or Sec. 725 of the Code. Since many attempts to recover or reclaim property under these two sections do not generate disputes, application of the formalities of the Part VII Rules is not appropriate. Also excluded from adversary proceedings is litigation arising from an examination under Rule 2017 of a debtor's payments of money or transfers of property to an attorney representing the debtor in a case under the Code or an examination of a superseded administration under Rule 6002. Exemptions and objections thereto are governed by Rule 4003. Filing of proofs of claim and the allowances thereof are governed by Rules 3001-3005, and objections to claims are governed by Rule 3007. When an objection to a claim is joined with a demand for relief of the kind specified in this Rule 7001, the matter becomes an adversary proceeding. See Rule 3007. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Another exception is added to clause (1). A trustee may proceed by motion to recover property from the debtor. ------DocID 15013 Document 358 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7002 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7002. References to Federal Rules of Civil Procedure -STATUTE- Whenever a Federal Rule of Civil Procedure applicable to adversary proceedings makes reference to another Federal Rule of Civil Procedure, the reference shall be read as a reference to the Federal Rule of Civil Procedure as modified in this Part VII. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rules 5, 12, 13, 14, 25, 27, 30, 41 and 52 F.R.Civ.P. are made applicable to adversary proceedings by Part VII. Each of those rules contains a cross reference to another Federal Rule; however, the Part VII rule which incorporates the cross-referenced Federal Rule modifies the Federal Rule in some way. Under this Rule 7002 the cross reference is to the Federal Rule as modified by Part VII. For example, Rule 5 F.R.Civ.P., which is made applicable to adversary proceedings by Rule 7005, contains a reference to Rule 4 F.R.Civ.P. Under this Rule 7002, the cross reference is to Rule 4 F.R.Civ.P. as modified by Rule 7004. Rules 7, 10, 12, 13, 14, 19, 22, 23.2, 24-37, 41, 45, 49, 50, 52, 55, 59, 60, 62 F.R.Civ.P. are made applicable to adversary proceedings by Part VII or generally to cases under the Code by Part IX. Each of those Federal Rules contains a cross reference to another Federal Rule which is not modified by the Part VII or Part IX rule which makes the cross-referenced Federal Rule applicable. Since the cross-referenced rule is not modified by a Part VII rule this Rule 7002 does not apply. -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in text, are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 15014 Document 359 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7003 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7003. Commencement of Adversary Proceeding -STATUTE- Rule 3 F.R.Civ.P. applies in adversary proceedings. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rule 5005(a) requires that a complaint commencing an adversary proceeding be filed with the court in which the case under the Code is pending unless 28 U.S.C. Sec. 1473 authorizes the filing of the complaint in another district. ------DocID 15015 Document 360 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7004 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7004. Process; Service of Summons, Complaint -STATUTE- (a) Summons; Service; Proof of Service Rule 4(a), (b), (c)(2)(C)(i), (d), (e) and (g)-(j) F.R.Civ.P. applies in adversary proceedings. Personal service pursuant to Rule 4(d) F.R.Civ.P. may be made by any person not less than 18 years of age who is not a party and the summons may be delivered by the clerk to any such person. (b) Service by First Class Mail In addition to the methods of service authorized by Rule 4(c)(2)(C)(i) and (d) F.R.Civ.P., service may be made within the United States by first class mail postage prepaid as follows: (1) Upon an individual other than an infant or incompetent, by mailing a copy of the summons and complaint to the individual's dwelling house or usual place of abode or to the place where the individual regularly conducts a business or profession. (2) Upon an infant or an incompetent person, by mailing a copy of the summons and complaint to the person upon whom process is prescribed to be served by the law of the state in which service is made when an action is brought against such defendant in the courts of general jurisdiction of that state. The summons and complaint in such case shall be addressed to the person required to be served at that person's dwelling house or usual place of abode or at the place where the person regularly conducts a business or profession. (3) Upon a domestic or foreign corporation or upon a partnership or other unincorporated association, by mailing a copy of the summons and complaint to the attention of an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process and, if the agent is one authorized by statute to receive service and the statute so requires, by also mailing a copy to the defendant. (4) Upon the United States, by mailing a copy of the summons and complaint to the United States attorney for the district in which the action is brought and also the Attorney General of the United States at Washington, District of Columbia, and in any action attacking the validity of an order of an officer or an agency of the United States not made a party, by also mailing a copy of the summons and complaint to such officer or agency. (5) Upon any officer or agency of the United States, by mailing a copy of the summons and complaint to the United States as prescribed in paragraph (4) of this subdivision and also to the officer or agency. If the agency is a corporation, the mailing shall be as prescribed in paragraph (3) of this subdivision of this rule. (6) Upon a state or municipal corporation or other governmental organization thereof subject to suit, by mailing a copy of the summons and complaint to the person or office upon whom process is prescribed to be served by the law of the state in which service is made when an action is brought against such a defendant in the courts of general jurisdiction of that state, or in the absence of the designation of any such person or office by state law, then to the chief executive officer thereof. (7) Upon a defendant of any class referred to in paragraph (1) or (3) of this subdivision of this rule, it is also sufficient if a copy of the summons and complaint is mailed to the entity upon whom service is prescribed to be served by any statute of the United States or by the law of the state in which service is made when an action is brought against such defendant in the court of general jurisdiction of that state. (8) Upon any defendant, it is also sufficient if a copy of the summons and complaint is mailed to an agent of such defendant authorized by appointment or by law to receive service of process, at the agent's dwelling house or usual place of abode or at the place where the agent regularly carries on a business or profession and, if the authorization so requires, by mailing also a copy of the summons and complaint to the defendant as provided in this subdivision. (9) Upon the debtor, after a petition has been filed by or served upon the debtor and until the case is dismissed or closed, by mailing copies of the summons and complaint to the debtor at the address shown in the petition or statement of affairs or to such other address as the debtor may designate in writing filed with the court and, if the debtor is represented by an attorney, to the attorney at the attorney's post-office address. (c) Service by Publication If a party to an adversary proceeding to determine or protect rights in property in the custody of the court cannot be served as provided in Rule 4(d) or (i) F.R.Civ.P. or subdivision (b) of this rule, the court may order the summons and complaint to be served by mailing copies thereof by first class mail postage prepaid, to the party's last known address and by at least one publication in such manner and form as the court may direct. (d) Nationwide Service of Process The summons and complaint and all other process except a subpoena may be served anywhere in the United States. (e) Service on Debtor and Others in Foreign Country The summons and complaint and all other process except a subpoena may be served as provided in Rule 4(d)(1) and (d)(3) F.R.Civ.P. in a foreign country (A) on the debtor, any person required to perform the duties of a debtor, any general partner of a partnership debtor, or any attorney who is a party to a transaction subject to examination under Rule 2017; or (B) on any party to an adversary proceeding to determine or protect rights in property in the custody of the court; or (C) on any person whenever such service is authorized by a federal or state law referred to in Rule 4(c)(2)(C)(i) or (e) F.R.Civ.P. (f) Summons: Time Limit for Service If service is made pursuant to Rule 4(d)(1)-(6) F.R.Civ.P. it shall be made by delivery of the summons and complaint within 10 days following issuance of the summons. If service is made by any authorized form of mail, the summons and complaint shall be deposited in the mail within 10 days following issuance of the summons. If a summons is not timely delivered or mailed, another summons shall be issued and served. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a) of the rule, by incorporation of Rule 4(a), (b), (d), (e) and (g)-(i) F.R.Civ.P., governs the mechanics of issuance of a summons and its form, the manner of service on parties and their representatives, and service in foreign countries. Subdivision (b), which is the same as former Rule 704(c), authorizes service of process by first class mail postage prepaid. This rule retains the modes of service contained in former Bankruptcy Rule 704. The former practice, in effect since 1976, has proven satisfactory. Subdivision (c) is derived from former Bankruptcy Rule 704(d)(2). Subdivision (d). Nationwide service of process is authorized by subdivision (d). Subdivision (e) authorizes service by delivery on individuals and corporations in foreign countries if the party to be served is the debtor or any person required to perform the duties of the debtor and certain other persons, the adversary proceeding involves property in the custody of the bankruptcy court, or if federal or state law authorizes such service in a foreign country. Subdivision (f). The requirement of former Bankruptcy Rule 704 that the summons be served within 10 days is carried over into these rules by subdivision (f). NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a) is amended to make Rule 4(j) F.R.Civ.P. applicable to service of the summons. If service is not completed within 120 days of the filing of the complaint, the complaint may be dismissed. Technical amendments are made to subdivisions (a), (b), (e), and (f) to conform to recent amendments to Rule 4 F.R.Civ.P. ------DocID 15016 Document 361 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7005 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7005. Service and Filing of Pleadings and Other Papers -STATUTE- Rule 5 F.R.Civ.P. applies in adversary proceedings. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rule 5 F.R.Civ.P. refers to Rule 4 F.R.Civ.P. Pursuant to Rule 7002 this reference is to Rule 4 F.R.Civ.P. as incorporated and modified by Rule 7004. ------DocID 15017 Document 362 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7007 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7007. Pleadings Allowed -STATUTE- Rule 7 F.R.Civ.P. applies in adversary proceedings. ------DocID 15018 Document 363 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7008 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7008. General Rules of Pleading -STATUTE- (a) Applicability of Rule 8 F.R.Civ.P. Rule 8 F.R.Civ.P. applies in adversary proceedings. The allegation of jurisdiction required by Rule 8(a) shall also contain a reference to the name, number, and chapter of the case under the Code to which the adversary proceeding relates and to the district and division where the case under the Code is pending. In an adversary proceeding before a bankruptcy judge, the complaint, counterclaim, cross-claim, or third-party complaint shall contain a statement that the proceeding is core or non-core and, if non-core, that the pleader does or does not consent to entry of final orders or judgment by the bankruptcy judge. (b) Attorney's Fees A request for an award of attorney's fees shall be pleaded as a claim in a complaint, cross-claim, third-party complaint, answer, or reply as may be appropriate. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Proceedings before a bankruptcy judge are either core or non-core. 28 U.S.C. Sec. 157. A bankruptcy judge may enter a final order or judgment in a core proceeding. In a non-core proceeding, absent consent of the parties, the bankruptcy judge may not enter a final order or judgment but may only submit proposed findings of fact and conclusions of law to the district judge who will enter the final order or judgment. 28 U.S.C. Sec. 157(c)(1). The amendment to subdivision (a) of this rule requires an allegation as to whether a proceeding is core or non-core. A party who alleges that the proceeding is non-core shall state whether the party does or does not consent to the entry of a final order or judgment by the bankruptcy judge. Failure to include the statement of consent does not constitute consent. Only express consent in the pleadings or otherwise is effective to authorize entry of a final order or judgment by the bankruptcy judge in a non-core proceeding. Amendments to Rule 7012 require that the defendant admit or deny the allegation as to whether the proceeding is core or non-core. ------DocID 15019 Document 364 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7009 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7009. Pleading Special Matters -STATUTE- Rule 9 F.R.Civ.P. applies in adversary proceedings. ------DocID 15020 Document 365 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7010 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7010. Form of Pleadings -STATUTE- Rule 10 F.R.Civ.P. applies in adversary proceedings, except that the caption of each pleading in such a proceeding shall conform substantially to Offical Form No. 34. ------DocID 15021 Document 366 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7012 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7012. Defenses and Objections - When and How Presented - By Pleading or Motion - Motion for Judgment on the Pleadings -STATUTE- (a) When Presented If a complaint is duly served, the defendant shall serve an answer within 30 days after the issuance of the summons, except when a different time is prescribed by the court. The court shall prescribe the time for service of the answer when service of a complaint is made by publication or upon a party in a foreign country. A party served with a pleading stating a cross-claim shall serve an answer thereto within 20 days after service. The plaintiff shall serve a reply to a counterclaim in the answer within 20 days after service of the answer or, if a reply is ordered by the court, within 20 days after service of the order, unless the order otherwise directs. The United States or an officer or agency thereof shall serve an answer to a complaint within 35 days after the issuance of the summons, and shall serve an answer to a cross-claim, or a reply to a counterclaim, within 35 days after service upon the United States attorney of the pleading in which the claim is asserted. The service of a motion permitted under this rule alters these periods of time as follows, unless a different time is fixed by order of the court: (1) if the court denies the motion or postpones its disposition until the trial on the merits, the responsive pleading shall be served within 10 days after notice of the court's action; (2) if the court grants a motion for a more definite statement, the responsive pleading shall be served within 10 days after the service of a more definite statement. (b) Applicability of Rule 12(b)-(h) F.R.Civ.P. Rule 12(b)-(h) F.R.Civ.P. applies in adversary proceedings. A responsive pleading shall admit or deny an allegation that the proceeding is core or non-core. If the response is that the proceeding in non-core, it shall include a statement that the party does or does not consent to entry of final orders or judgment by the bankruptcy judge. In non-core proceedings final orders and judgments shall not be entered on the bankruptcy judge's order except with the express consent of the parties. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a) continues the practice of former Bankruptcy Rule 712(a) by requiring that the answer to a complaint be filed within 30 days after the issuance of the summons. Under Rule 7004(f), the summons must be served within 10 days of issuance. The other pleading periods in adversary proceedings are the same as those in civil actions before the district courts, except that the United States is allowed 35 rather than 60 days to respond. Rule 12(b)(7) and (h)(2) F.R.Civ.P. refers to Rule 19 F.R.Civ.P. Pursuant to Rule 7002 these references are to Rule 19 F.R.Civ.P. as incorporated and modified by Rule 7019. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The amendment to subdivision (b) requires a response to the allegation that the proceeding is core or non-core. A final order of judgment may not be entered in a non-core proceeding heard by a bankruptcy judge unless all parties expressly consent. 28 U.S.C. Sec. 157(c). ------DocID 15022 Document 367 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7013 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7013. Counterclaim and Cross-Claim -STATUTE- Rule 13 F.R.Civ.P. applies in adversary proceedings, except that a party sued by a trustee or debtor in possession need not state as a counterclaim any claim that the party has against the debtor, the debtor's property, or the estate, unless the claim arose after the entry of an order for relief. A trustee or debtor in possession who fails to plead a counterclaim through oversight, inadvertence, or excusable neglect, or when justice so requires, may by leave of court amend the pleading, or commence a new adversary proceeding or separate action. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rule 13(h) F.R.Civ.P. refers to Rule 19 F.R.Civ.P. Pursuant to Rule 7002 this reference is to Rule 19 F.R.Civ.P. as incorporated and mofified by Rule 7019. ------DocID 15023 Document 368 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7014 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7014. Third-Party Practice -STATUTE- Rule 14 F.R.Civ.P. applies in adversary proceedings. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule does not purport to deal with questions of jurisdiction. The scope of the jurisdictional grant under 28 U.S.C. Sec. 1471 and whether the doctrines of pendent or ancillary jurisdiction are applicable to adversary proceedings will be determined by the courts. Rule 14 F.R.Civ.P. refers to Rules 12 and 13 F.R.Civ.P. Pursuant to Rule 7002 those references are to Rules 12 and 13 as incorporated and modified by Rules 7012 and 7013. ------DocID 15024 Document 369 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7015 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7015. Amended and Supplemental Pleadings -STATUTE- Rule 15 F.R.Civ.P. applies in adversary proceedings. ------DocID 15025 Document 370 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7016 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7016. Pre-Trial Procedure; Formulating Issues -STATUTE- Rule 16 F.R.Civ.P. applies in adversary proceedings. ------DocID 15026 Document 371 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7017 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7017. Parties Plaintiff and Defendant; Capacity -STATUTE- Rule 17 F.R.Civ.P. applies in adversary proceedings, except as provided in Rules 2110(d) and 5008(d). -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rules 2010(d) and 5008(d), which implement Sec. 322 and 345 of the Code, authorize a party in interest to prosecute a claim on the bond of a trustee or depository in the name of the United States. ------DocID 15027 Document 372 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7018 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7018. Joinder of Claims and Remedies -STATUTE- Rule 18 F.R.Civ.P. applies in adversary proceedings. ------DocID 15028 Document 373 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7019 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7019. Joinder of Persons Needed for Just Determination -STATUTE- Rule 19 F.R.Civ.P. applies in adversary proceedings, except that (1) if an entity joined as a party raises the defense that the court lacks jurisdiction over the subject matter and the defense is sustained, the court shall dismiss such entity from the adversary proceedings and (2) if an entity joined as a party properly and timely raises the defense of improper venue, the court shall determine, as provided in 28 U.S.C. Sec. 1412, whether that part of the proceeding involving the joined party shall be transferred to another district, or whether the entire adversary proceeding shall be transferred to another district. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule addresses a situation different from that encountered by the district court when its jurisdiction is based on diversity of citizenship under 28 U.S.C. Sec. 1332. Joining of a party whose citizenship is the same as that of an adversary destroys the district court's jurisdiction over the entire civil action but under 28 U.S.C. Sec. 1471 the attempted joinder of such a person would not affect the bankruptcy court's jurisdiction over the original adversary proceeding. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The rule is amended to delete the reference to retention of the adversary proceeding if venue is improper. See 28 U.S.C. Sec. 1412. ------DocID 15029 Document 374 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7020 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7020. Permissive Joinder of Parties -STATUTE- Rule 20 F.R.Civ.P. applies in adversary proceedings. ------DocID 15030 Document 375 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7021 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7021. Misjoinder and Non-Joinder of Parties -STATUTE- Rule 21 F.R.Civ.P. applies in adversary proceedings. ------DocID 15031 Document 376 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7022 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7022. Interpleader -STATUTE- Rule 22(1) F.R.Civ.P. applies in adversary proceedings. ------DocID 15032 Document 377 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7023 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7023. Class Proceedings -STATUTE- Rule 23 F.R.Civ.P. applies in adversary proceedings. ------DocID 15033 Document 378 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7023.1 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7023.1. Derivative Proceedings by Shareholders -STATUTE- Rule 23.1 F.R.Civ.P. applies in adversary proceedings. ------DocID 15034 Document 379 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES 7023.2 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- 7023.2. Adversary Proceedings Relating to Unincorporated Associations -STATUTE- Rule 23.2 F.R.Civ.P. applies in adversary proceedings. ------DocID 15035 Document 380 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7024 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7024. Intervention -STATUTE- Rule 24 F.R.Civ.P. applies in adversary proceedings. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES A person may seek to intervene in the case under the Code or in an adversary proceeding relating to the case under the Code. Intervention in a case under the Code is governed by Rule 2018 and intervention in an adversary proceeding is governed by this rule. Intervention in a case and intervention in an adversary proceeding must be sought separately. ------DocID 15036 Document 381 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7025 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7025. Substitution of Parties -STATUTE- Subject to the provisions of Rule 2012, Rule 25 F.R.Civ.P. applies in adversary proceedings. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rule 25 F.R.Civ.P. refers to Rule 4 F.R.Civ.P. Pursuant to Rule 7002 that reference is to Rule 4 as incorporated and modified by Rule 7004. ------DocID 15037 Document 382 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7026 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7026. General Provisions Governing Discovery -STATUTE- Rule 26 F.R.Civ.P. applies in adversary proceedings. ------DocID 15038 Document 383 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7027 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7027. Depositions Before Adversary Proceedings or Pending Appeal -STATUTE- Rule 27 F.R.Civ.P. applies to adversary proceedings. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rule 27(a)(2) F.R.Civ.P. refers to Rule 4 F.R.Civ.P. Pursuant to Rule 7002 the reference is to Rule 4 F.R.Civ.P. as incorporated and modified by Rule 7004. ------DocID 15039 Document 384 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7028 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7028. Persons Before Whom Depositions May Be Taken -STATUTE- Rule 28 F.R.Civ.P. applies in adversary proceedings. ------DocID 15040 Document 385 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7029 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7029. Stipulations Regarding Discovery Procedure -STATUTE- Rule 29 F.R.Civ.P. applies in adversary proceedings. ------DocID 15041 Document 386 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7030 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7030. Depositions Upon Oral Examination -STATUTE- Rule 30 F.R.Civ.P. applies in adversary proceedings. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rule 30 F.R.Civ.P. refers to Rule 4 F.R.Civ.P. Pursuant to Rule 7002 that reference is a reference to Rule 4 F.R.Civ.P. as incorporated and modified by Rule 7004. ------DocID 15042 Document 387 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7031 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7031. Deposition Upon Written Questions -STATUTE- Rule 31 F.R.Civ.P. applies in adversary proceedings. ------DocID 15043 Document 388 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7032 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7032. Use of Depositions in Adversary Proceedings -STATUTE- Rule 32 F.R.Civ.P. applies in adversary proceedings. ------DocID 15044 Document 389 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7033 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7033. Interrogatories to Parties -STATUTE- Rule 33 F.R.Civ.P. applies in adversary proceedings. ------DocID 15045 Document 390 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7034 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7034. Production of Documents and Things and Entry Upon Land for Inspection and Other Purposes -STATUTE- Rule 34 F.R.Civ.P. applies in adversary proceedings. ------DocID 15046 Document 391 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7035 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7035. Physical and Mental Examination of Persons -STATUTE- Rule 35 F.R.Civ.P. applies in adversary proceedings. ------DocID 15047 Document 392 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7036 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7036. Requests for Admission -STATUTE- Rule 36 F.R.Civ.P. applies in adversary proceedings. ------DocID 15048 Document 393 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7037 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7037. Failure to Make Discovery: Sanctions -STATUTE- Rule 37 F.R.Civ.P. applies in adversary proceedings. ------DocID 15049 Document 394 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7040 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7040. Assignment of Cases for Trial -STATUTE- Rule 40 F.R.Civ.P. applies in adversary proceedings. ------DocID 15050 Document 395 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7041 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7041. Dismissal of Adversary Proceedings -STATUTE- Rule 41 F.R.Civ.P. applies in adversary proceedings, except that a complaint objecting to the debtor's discharge shall not be dismissed at the plaintiff's instance without notice to the trustee and only on order of the court containing terms and conditions which the court deems proper. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Dismissal of a complaint objecting to a discharge raises special concerns because the plaintiff may have been induced to dismiss by an advantage given or promised by the debtor or someone acting in his interest. Some courts by local rule or order have required the debtor and his attorney or the plaintiff to file an affidavit that nothing has been promised to the plaintiff in consideration of the withdrawal of the objection. By specifically authorizing the court to impose conditions in the order of dismissal this rule permits the continuation of this salutary practice. Rule 41 F.R.Civ.P. refers to Rule 19 F.R.Civ.P. Pursuant to Rule 7002 that reference is to Rule 19 F.R.Civ.P. as incorporated and modified by Rule 7019. ------DocID 15051 Document 396 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7042 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7042. Consolidation of Adversary Proceedings; Separate Trials -STATUTE- Rule 42 F.R.Civ.P. applies in adversary proceedings. ------DocID 15052 Document 397 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7052 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7052. Findings by the Court -STATUTE- Rule 52 F.R.Civ.P. applies in adversary proceedings. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rule 52(a) F.R.Civ.P. refers to Rule 12 F.R.Civ.P. Pursuant to Rule 7002 this reference is to Rule 12 F.R.Civ.P. as incorporated and modified by Rule 7012. ------DocID 15053 Document 398 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7054 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7054. Judgments; Costs -STATUTE- (a) Judgments Rule 54(a)-(c) F.R.Civ.P. applies in adversary proceedings. (b) Costs The court may allow costs to the prevailing party except when a statute of the United States or these rules otherwise provides. Costs against the United States, its officers and agencies shall be imposed only to the extent permitted by law. Costs may be taxed by the clerk on one day's notice; on motion served within five days thereafter, the action of the clerk may be reviewed by the court. ------DocID 15054 Document 399 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7055 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7055. Default -STATUTE- Rule 55 F.R.Civ.P. applies in adversary proceedings. ------DocID 15055 Document 400 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7056 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7056. Summary Judgment -STATUTE- Rule 56 F.R.Civ.P. applies in adversary proceedings. ------DocID 15056 Document 401 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7062 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7062. Stay of Proceedings to Enforce a Judgment -STATUTE- Rule 62 F.R.Civ.P. applies in adversary proceedings except that an order granting relief from an automatic stay provided by Sec. 362, Sec. 922, or Sec. 1301 of the Code, an order authorizing or prohibiting the use of cash collateral or property of the estate under Sec. 363, and an order authorizing the trustee to obtain credit pursuant to Sec. 364 shall be additional exceptions to Rule 62(a). -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES The additional exceptions set forth in this rule make applicable to those matters the consequences contained in Rule 62(c) and (d) with respect to orders in actions for injunctions. ------DocID 15057 Document 402 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7064 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7064. Seizure of Person or Property -STATUTE- Rule 62 F.R.Civ.P. applies in adversary proceedings. ------DocID 15058 Document 403 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7065 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7065. Injunctions -STATUTE- Rule 65 F.R.Civ.P. applies in adversary proceedings, except that a temporary restraining order or preliminary injunction may be issued on application of a debtor, trustee, or debtor in possession without compliance with Rule 65(c). ------DocID 15059 Document 404 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7067 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7067. Deposit in Court -STATUTE- Rule 67 F.R.Civ.P. applies in adversary proceedings. ------DocID 15060 Document 405 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7068 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7068. Offer of Judgment -STATUTE- Rule 68 F.R.Civ.P. applies in adversary proceedings. ------DocID 15061 Document 406 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7069 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7069. Execution -STATUTE- Rule 69 F.R.Civ.P. applies in adversary proceedings. ------DocID 15062 Document 407 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7070 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7070. Judgment for Specific Acts; Vesting Title -STATUTE- Rule 70 F.R.Civ.P. applies in adversary proceedings and the court may enter a judgment divesting the title of any party and vesting title in others whenever the real or personal property involved is within the jurisdiction of the court. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The reference to court is used in the amendment because the district court may preside over an adversary proceeding. ------DocID 15063 Document 408 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7071 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7071. Process in Behalf of and Against Persons Not Parties -STATUTE- Rule 71 F.R.Civ.P. applies in adversary proceedings. ------DocID 15064 Document 409 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 7087 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VII -HEAD- Rule 7087. Transfer of Adversary Proceeding -STATUTE- On motion and after a hearing, the court may transfer an adversary proceeding or any part thereof to another district pursuant to 28 U.S.C. Sec. 1412, except as provided in Rule 7019(2). -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The reference to the venue section of title 28 is amended to conform to the 1984 amendments to title 28. ------DocID 15065 Document 410 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES PART VIII -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- PART VIII - APPEALS TO DISTRICT COURT OR BANKRUPTCY APPELLATE PANEL ------DocID 15066 Document 411 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8001 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8001. Manner of Taking Appeal; Voluntary Dismissal -STATUTE- (a) Appeal as of Right; How Taken An appeal from a final judgment, order, or decree of a bankruptcy judge to a district court or bankruptcy appellate panel shall be taken by filing a notice of appeal with the clerk within the time allowed by Rule 8002. Failure of an appellant to take any step other than the timely filing of a notice of appeal does not affect the validity of the appeal, but is ground only for such action as the district court or bankruptcy appellate panel deems appropriate, which may include dismissal of the appeal. The notice of appeal shall conform substantially to Official Form No. 35, shall contain the names of all parties to the judgment, order, or decree appealed from and the names, addresses and telephone numbers of their respective attorneys, and be accompanied by the prescribed fee. Each appellant shall file a sufficient number of copies of the notice of appeal to enable the clerk to comply promptly with Rule 8004. (b) Appeal by Leave; How Taken An appeal from an interlocutory judgment, order or decree of a bankruptcy judge as permitted by 28 U.S.C. Sec. 158(a) shall be taken by filing a notice of appeal, as prescribed in subdivision (a) of this rule, accompanied by a motion for leave to appeal prepared in accordance with Rule 8003 and with proof of service in accordance with Rule 8008. (c) Voluntary Dismissal (1) Before Docketing. If an appeal has not been docketed, the appeal may be dismissed by the bankruptcy judge on the filing of a stipulation for dismissal signed by all the parties, or on motion and notice by the appellant. (2) After Docketing. If an appeal has been docketed and the parties to the appeal sign and file with the clerk of the district court or the clerk of the bankruptcy appellate panel an agreement that the appeal be dismissed and pay any court costs or fees that may be due, the clerk of the district court or the clerk of the bankruptcy appellate panel shall enter an order dismissing the appeal. An appeal may also be dismissed on motion of the appellant on terms and conditions fixed by the district court or bankruptcy appellate panel. ((d) Effect of Taking a Direct Appeal to the Court of Appeals) (Abrogated Mar. 30, 1987, eff. Aug. 1, 1987) (e) Consent To Appeal to Bankruptcy Appellate Panel Unless otherwise provided by a rule promulgated pursuant to Rule 8018, consent to have an appeal heard by a bankruptcy appellate panel may be given in a separate statement of consent executed by a party or contained in the notice of appeal or cross appeal. The statement of consent shall be filed before the transmittal of the record pursuant to Rule 8007(b) or within 30 days of the filing of the notice of appeal, whichever is later. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES These rules in Part VIII apply only to appeals to the district courts or bankruptcy appellate panels. Subsequent appeals to the courts of appeals, or direct appeals by agreement of the parties under 28 U.S.C. Sec. 1293(b), are governed by the Federal Rules of Appellate Procedure. Subdivisions (a) and (b) require that a notice of appeal be filed whenever a litigant seeks to secure appellate review by the district court or bankruptcy appellate panel. An appeal from an interlocutory order which will be heard only if leave is granted under 28 U.S.C. Sec. 1334(b) or 1482(b) is taken by filing a notice of appeal accompanied by a motion for leave to appeal which complies with the requirements set forth in Rule 8003. Rule 8003 also governs other aspects of interlocutory appeals. Subdivision (c) is an adaptation of Rule 42 F.R.App.P. Subdivision (d) deals with the situation in which an appellant perfects an appeal to the district court or a bankruptcy appellate panel and also a direct appeal pursuant to 28 U.S.C. Sec. 1293(b) to the court of appeals. This subdivision provides that once the appeal to the court of appeals is taken, a notice of appeal to the district court or bankruptcy appellate panel shall be dismissed and, if the first appeal is to the district court or bankruptcy appellate panel, the first appeal shall be dismissed. Paragraph (3) gives an appellant or cross appellant an opportunity to file an appeal to the district court or bankruptcy appellate panel if the court of appeals dismisses the direct appeal because the judgment, order, or decree appealed from is not final. Since the court of appeals has determined the judgment, order, or decree is not final, the new appeal is an appeal for which leave is necessary. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivisions (a) and (b) are amended to conform to the 1984 amendments. Subdivision (d) is abrogated because there is no direct appeal to the court of appeals under 28 U.S.C. Sec. 158, as enacted by the 1984 amendments. Subdivision (e) is new. Section 158(b)(1) of title 28 authorizes the circuit councils to establish bankruptcy appellate panels. Appeals may not be heard by these panels unless the district court authorizes the referral and all parties to the appeal consent. This rule requires that the parties consent to such an appeal; however, the method of consenting to an appeal may be the subject of a rule promulgated by a circuit council under Rule 8018. ------DocID 15067 Document 412 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8002 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8002. Time for Filing Notice of Appeal -STATUTE- (a) Ten-Day Period The notice of appeal shall be filed with the clerk within 10 days of the date of the entry of the judgment, order, or decree appealed from. If a timely notice of appeal is filed by a party, any other party may file a notice of appeal within 10 days of the date on which the first notice of appeal was filed, or within the time otherwise prescribed by this rule, whichever period last expires. If a notice of appeal is mistakenly filed with the district court or the bankruptcy appellate panel, the clerk of the district court or the clerk of the bankruptcy appellate panel shall note thereon the date on which it was received and transmit it to the clerk and it shall be deemed filed with the clerk on the date so noted. (b) Effect of Motion on Time for Appeal If a timely motion is filed by any party: (1) for judgment notwithstanding the verdict under Rule 9015; (2) under Rule 7052(b) to amend or make additional findings of fact, whether or not an alteration of the judgment would be required if the motion is granted; (3) under Rule 9023 to alter or amend the judgment; or (4) under Rule 9023 for a new trial, the time for appeal for all parties shall run from the entry of the order denying a new trial or granting or denying any other such motion. A notice of appeal filed before the disposition of any of the above motions shall have no effect; a new notice of appeal must be filed. No additional fees shall be required for such filing. (c) Extension of Time for Appeal The bankruptcy judge may extend the time for filing the notice of appeal by any party for a period not to exceed 20 days from the expiration of the time otherwise prescribed by this rule. A request to extend the time for filing a notice of appeal must be made before the time for filing a notice of appeal has expired, except that a request made no more than 20 days after the expiration of the time for filing a notice of appeal may be granted upon a showing of excusable neglect if the judgment or order appealed from does not authorize the sale of any property or the obtaining of credit or the incurring of debt under Sec. 364 of the Code, or is not a judgment or order approving a disclosure statement, confirming a plan, dismissing a case, or converting the case to a case under another chapter of the Code. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is an adaptation of Rule 4(a) F.R.App.P. The time to appeal from a judgment, order, or decree of a bankruptcy judge is 10 days, rather than the 30 days provided for in the civil practice. The shortened time is specified in order to obtain prompt appellate review, often important to the administration of a case under the Code. If a timely notice of appeal is filed, other parties have an additional 10 days within which to file a notice of appeal. A notice of appeal filed within the additional 10 day period by an appellee is a cross appeal, but there is a separate appeal if a non-appellee files a notice of appeal within that 10 day period. The district courts and bankruptcy appellate panels have inherent authority to consolidate appeals. Subdivision (b) is essentially the same as Rule 4(a)(4) of the F.R.App.P. Subdivision (c) is similar to former Bankruptcy Rule 802(c). To expedite the disposition of appeals the maximum extension of time is 20 days instead of the 30 days provided by Rule 4(a)(5) of the F.R.App.P. Subject to the exceptions set forth in subdivision (c), the court may extend the time for taking an appeal when a motion for extension is filed after the expiration of the original 10 day period but no later than 20 days after the expiration of the original 10 day period. Orders of the bankruptcy court relating to the sale of property, extension of credit, confirmation of a plan, dismissal or conversion of the case, and approval of the disclosure statement are of such significance to the administration of the case, the parties in interest, and third parties that this subdivision requires that either an appeal or a motion for extension be filed within the original 10 day period. If a timely notice of appeal is not filed, no appeal may be taken later. Former Bankruptcy Rule 803, which provided that a referee's judgment became final when the appeal period expired, has been omitted as unnecessary. ------DocID 15068 Document 413 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8003 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8003. Leave to Appeal -STATUTE- (a) Content of Motion; Answer A motion for leave to appeal under 28 U.S.C. Sec. 158(a) shall contain: (1) a statement of the facts necessary to an understanding of the questions to be presented by the appeal; (2) a statement of those questions and of the relief sought; (3) a statement of the reasons why an appeal should be granted; and (4) a copy of the judgment, order, or decree complained of and of any opinion or memorandum relating thereto. Within 10 days after service of the motion an adverse party may file with the clerk an answer in opposition. (b) Transmittal; Determination of Motion The clerk shall transmit the notice of appeal, the motion for leave to appeal and any answer thereto to the clerk of the district court or the clerk of the bankruptcy appellate panel as soon as all parties have filed answers or the time for filing an answer has expired. The motion and answer shall be submitted without oral argument unless otherwise ordered. (c) Appeal Improperly Taken Regarded as a Motion for Leave To Appeal If a required motion for leave to appeal is not filed, but a notice of appeal is timely filed, the district court or bankruptcy appellate panel may grant leave to appeal or direct that a motion for leave to appeal be filed. The district court or the bankruptcy appellate panel may also deny leave to appeal but in so doing shall consider the notice of appeal as a motion for leave to appeal. Unless an order directing that a motion for leave to appeal be filed provides otherwise, the motion shall be filed within 10 days of entry of the order. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivisions (a) and (b) of this rule are derived from Rules 5 and 6 F.R.App.P. The motion for leave to appeal is addressed to the district court or the bankruptcy appellate panel, although filed with the clerk of the bankruptcy court. Subdivision (c) provides that if a party mistakenly believes the order appealed from is final and files only a notice of appeal, the appeal is not automatically dismissed. The district court or bankruptcy appellate panel has the options to direct that a motion be filed, to decide exclusively on the papers already filed to grant leave to appeal, or to deny leave to appeal. Cf. 28 U.S.C. Sec. 2103. ------DocID 15069 Document 414 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8004 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8004. Service of the Notice of Appeal -STATUTE- The clerk shall serve notice of the filing of a notice of appeal by mailing a copy thereof to counsel of record of each party other than the appellant or, if a party is not represented by counsel, to the party's last known address. Failure to serve notice shall not affect the validity of the appeal. The clerk shall note on each copy served the date of the filing of the notice of appeal and shall note in the docket the names of the parties to whom copies are mailed and the date of the mailing. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is an adaptation of Rule 3(d) F.R.App.P. ------DocID 15070 Document 415 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8005 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8005. Stay Pending Appeal -STATUTE- A motion for a stay of the judgment, order, or decree of a bankruptcy judge, for approval of a supersedeas bond, or for other relief pending appeal must ordinarily be presented to the bankruptcy judge in the first instance. Notwithstanding Rule 7062 but subject to the power of the district court and the bankruptcy appellate panel reserved hereinafter, the bankruptcy judge may suspend or order the continuation of other proceedings in the case under the Code or make any other appropriate order during the pendency of an appeal on such terms as will protect the rights of all parties in interest. A motion for such relief, or for modification or termination of relief granted by a bankruptcy judge, may be made to the district court or the bankruptcy appellate panel, but the motion shall show why the relief, modification, or termination was not obtained from the bankruptcy judge. The district court or the bankruptcy appellate panel may condition the relief it grants under this rule on the filing of a bond or other appropriate security with the bankruptcy court. When an appeal is taken by a trustee, a bond or other appropriate security may be required, but when an appeal is taken by the United States or an officer or agency thereof or by direction of any department of the Government of the United States a bond or other security shall not be required. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES The first, third, and fourth sentences of this rule are adaptations of Rule 8(a) and (b) F.R.App.P. The second sentence of the rule is derived from Sec. 39(c) of the Bankruptcy Act and confers on the bankruptcy judge discretion respecting the stay or continuation of other proceedings in the case while an appeal is pending. The last sentence of the rule, which specifically subjects a trustee to the same kind of security requirements as other litigants, is derived from former Bankruptcy Rule 805. The exemption of the United States from the bond or security requirements is the same as the exemption contained in Rule 62(e) F.R.Civ.P. Sections 363(m) and 364(e) of the Code provide that unless an order approving a sale of property, or authorizing the obtaining of credit or the incurring of debt is stayed pending appeal, the sale of property to a good faith purchaser or a good faith extension of credit, with or without any priority or lien, shall not be affected by the reversal or modification of such order on appeal, whether or not the purchaser or creditor knows of the pendency of the appeal. ------DocID 15071 Document 416 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8006 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8006. Record and Issues on Appeal -STATUTE- Within 10 days after filing the notice of appeal as provided by Rule 8001(a) or entry of an order granting leave to appeal the appellant shall file with the clerk and serve on the appellee a designation of the items to be included in the record on appeal and a statement of the issues to be presented. Within seven days after the service of the statement of the appellant the appellee may file and serve on the appellant a designation of additional items to be included in the record on appeal and, if the appellee has filed a cross appeal, the appellee as cross appellant shall file and serve a statement of the issues to be presented on the cross appeal and a designation of additional items to be included in the record. A cross appellee may, within seven days of service of the statement of the cross appellant, file and serve on the cross appellant a designation of additional items to be included in the record. The record on appeal shall include the items so designated by the parties, the notice of appeal, the judgment, order, or decree appealed from, and any opinion, findings of fact, and conclusions of law of the court. If the record designated by any party includes a transcript of any proceeding or a part thereof, the party shall immediately after filing the designation deliver to the reporter and file with the clerk a written request for the transcript and make satisfactory arrangements for payment of its cost. All parties shall take any other action necessary to enable the clerk to assemble and transmit the record. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is an adaptation of Rule 10(b) F.R.App.P. The last sentence of the rule is derived from Rule 11(a) F.R.App.P. ------DocID 15072 Document 417 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8007 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8007. Completion and Transmission of the Record; Docketing of the Appeal -STATUTE- (a) Duty of Reporter To Prepare and File Transcript On receipt of a request for a transcript, the reporter shall acknowledge on the request the date it was received and the date on which the reporter expects to have the transcript completed and shall transmit the request, so endorsed, to the clerk or the clerk of the bankruptcy appellate panel. On completion of the transcript the reporter shall file it with the clerk and, if appropriate, notify the clerk of the bankruptcy appellate panel. If the transcript cannot be completed within 30 days of receipt of the request the reporter shall seek an extension of time from the clerk or the clerk of the bankruptcy appellate panel and the action of the clerk shall be entered in the docket and the parties notified. If the reporter does not file the transcript within the time allowed, the clerk or the clerk of the bankruptcy appellate panel shall notify the bankruptcy judge. (b) Duty of Clerk To Transmit Record; Copies of Record; Docketing of Appeal When the record is complete for purposes of appeal, the clerk shall transmit it forthwith to the clerk of the district court or the clerk of the bankruptcy appellate panel. If the record is to be retained by the clerk as provided in subdivision (c) of this rule, the clerk shall transmit the notice of appeal and the judgment, order, or decree appealed from, and any opinion, findings of fact and conclusions of law of the court. On receipt of the transmission the clerk of the district court or the clerk of the bankruptcy appellate panel shall enter the appeal in the docket and give notice promptly to all parties to the judgment, order, or decree appealed from of the date on which the appeal was docketed. If the bankruptcy appellate panel directs that additional copies of the record be furnished, the clerk of the bankruptcy appellate panel shall notify the appellant and, if the appellant fails to provide the copies, the clerk shall prepare the copies at the expense of the appellant. (c) Retention of Record by the Clerk Any part of the record on appeal may be retained by the clerk if the parties to the appeal so stipulate, a rule of the bankruptcy appellate panel so provides, or the bankruptcy clerk so orders. The record on appeal for all purposes shall nevertheless be the record as designated under Rule 8006. When the bankruptcy judge has ordered retention, the parties shall provide to the clerk copies of any papers retained and the clerk shall transmit those copies to the clerk of the district court or the bankruptcy appellate panel. If papers have been retained pursuant to a stipulation of the parties, on request of a party to the stipulation the clerk shall transmit the papers so requested to the clerk of the district court or the clerk of the bankruptcy appellate panel. On order of the district court or the bankruptcy appellate panel the clerk shall transmit any retained papers to the clerk of the district court or the clerk of the bankruptcy appellate panel. (d) Record for Preliminary Hearing If prior to the time the record is transmitted a party moves in the district court or before the bankruptcy appellate panel for dismissal, for a stay pending appeal, for additional security on the bond on appeal or on a supersedeas bond, or for any intermediate order, the clerk at the request of any party to the appeal shall transmit to the clerk of the district court or the clerk of the bankruptcy appellate panel the parts of the original record as any party to the appeal shall designate. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a) is an adaptation of Rule 11(b) F.R.App.P. Subdivision (b) is similar to former Bankruptcy Rule 807. The duty of the clerk of the bankruptcy court to transmit the record as soon as the record is complete is derived from the second paragraph of Rule 11(b) F.R.App.P. The last sentence of the subdivision applies to appeals to bankruptcy appellate panels. Additional copies of the record may be needed when the appendix to the brief required under Rule 8009(b) is not adequate in the judgment of the bankruptcy appellate panel for disposition of the appeal. If additional copies are required, the appellant will arrange for the production of the copies; if the appellant fails to do so, the clerk of the bankruptcy appellate panel shall prepare the copies at the expense of the appellant. Subdivision (c) is derived from subdivisions (c), (e) and (f) of Rule 11 F.R.App.P. and subdivision (d) is essentially the same as Rule 11(b) F.R.App.P. ------DocID 15073 Document 418 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8008 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8008. Filing and Service -STATUTE- (a) Filing Papers required or permitted to be filed with the clerk of the district court or the clerk of the bankruptcy appellate panel may be filed by mail addressed to the clerk, but filing shall not be timely unless the papers are received by the clerk within the time fixed for filing, except that briefs shall be deemed filed on the day of mailing. An original and one copy of all papers shall be filed when an appeal is to the district court; an original and three copies shall be filed when an appeal is to a bankruptcy appellate panel. The district court or bankruptcy appellate panel may require that additional copies be furnished. (b) Service of All Papers Required Copies of all papers filed by any party and not required by these rules to be served by the clerk of the district court or the clerk of the bankruptcy appellate panel shall, at or before the time of filing, be served by the party or a person acting for the party on all other parties to the appeal. Service on a party represented by counsel shall be made on counsel. (c) Manner of Service Service may be personal or by mail. Personal service includes delivery of the copy to a clerk or other responsible person at the office of counsel. Service by mail is complete on mailing. (d) Proof of Service Papers presented for filing shall contain an acknowledgment of service by the person served or proof of service in the form of a statement of the date and manner of service and of the names of the persons served, certified by the person who made service. The clerk of the district court or the clerk of the bankruptcy appellate panel may permit papers to be filed without acknowledgment or proof of service but shall require the acknowledgment or proof of service to be filed promptly thereafter. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is an adaptation of Rule 25 F.R.App.P. Motions, briefs, appendices when required, statements, and any other filed paper must be accompanied by the specified number of copies. Rules 8001 and 8004 govern the number of copies of the notice of appeal which must be filed. ------DocID 15074 Document 419 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8009 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8009. Briefs and Appendix; Filing and Service -STATUTE- (a) Briefs Unless the district court or the bankruptcy appellate panel by local rule or by order excuses the filing of briefs or specifies different time limits: (1) The appellant shall serve and file a brief within 15 days after entry of the appeal on the docket pursuant to Rule 8007. (2) The appellee shall serve and file a brief within 15 days after service of the brief of appellant. If the appellee has filed a cross appeal, the brief of the appellee shall contain the issues and argument pertinent to the cross appeal, denominated as such, and the response to the brief of the appellant. (3) The appellant may serve and file a reply brief within 10 days after service of the brief of the appellee, and if the appellee has cross-appealed, the appellee may file and serve a reply brief to the response of the appellant to the issues presented in the cross appeal within 10 days after service of the reply brief of the appellant. No further briefs may be filed except with leave of the district court or the bankruptcy appellate panel. (b) Appendix to Brief If the appeal is to a bankruptcy appellate panel, the appellant shall serve and file with the appellant's brief excerpts of the record as an appendix, which shall include the following: (1) The complaint and answer or other equivalent pleadings; (2) Any pretrial order; (3) The judgment, order, or decree from which the appeal is taken; (4) Any other orders relevant to the appeal; (5) The opinion, findings of fact, or conclusions of law filed or delivered orally by the court and citations of the opinion if published; (6) Any motion and response on which the court rendered decision; (7) The notice of appeal; (8) The relevant entries in the bankruptcy docket; and (9) The transcript or portion thereof, if so required by a rule of the bankruptcy appellate panel. An appellee may also serve and file an appendix which contains material required to be included by the appellant but omitted by appellant. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a) of this rule is adapted from Rules 28(a) and 31(a) F.R.App.P. The introductory clause of the rule recognizes the desirability of allowing local and individual variation in the filing of briefs. The numbered paragraphs prescribe shorter periods than the corresponding periods allowed by Rule 31(a) F.R.App.P. Subdivision (b), which is similar to an interim rule for bankruptcy appellate panels promulgated by the Ninth Circuit, applies only when an appeal is to an appellate panel. The appellant must prepare an appendix to the brief which contains the documents relevant to the appeal. With the appendix available to each member of the appellate panel, it is unlikely that multiple copies of the record will be necessary. The last sentence of the subdivision enables the appellee to correct an omission of the appellant. Rule 30 F.R.App.P., which governs the preparation of the appendix in appeals taken to the courts of appeals, specifies fewer documents which must be included in the appendix but permits the parties to include any other material. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The amendment to Rule 8007(c) permits a rule of the bankruptcy appellate panel to provide that the record is to be retained rather than transmitted. The new paragraph (9) of subdivision (b) of this rule complements Rule 8007(c) by authorizing a rule of the panel to require inclusion of the transcript or a portion thereof in the appendix. ------DocID 15075 Document 420 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8010 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8010. Form of Briefs; Length -STATUTE- (a) Form of Briefs Unless the district court or the bankruptcy appellate panel by local rule otherwise provides, the form of brief shall be as follows: (1) Brief of the Appellant. The brief of the appellant shall contain under appropriate headings and in the order here indicated: (A) A table of contents, with page references, and a table of cases alphabetically arranged, statutes and other authorities cited, with references to the pages of the brief where they are cited. (B) A statement of the basis of appellate jurisdiction. (C) A statement of the issues presented and the applicable standard of appellate review. (D) A statement of the case. The statement shall first indicate briefly the nature of the case, the course of the proceedings, and the disposition in the court below. There shall follow a statement of the facts relevant to the issues presented for review, with appropriate references to the record. (E) An argument. The argument may be preceded by a summary. The argument shall contain the contentions of the appellant with respect to the issues presented, and the reasons therefor, with citations to the authorities, statutes and parts of the record relied on. (F) A short conclusion stating the precise relief sought. (2) Brief of the Appellee. The brief of the appellee shall conform to the requirements of paragraph (1)(A)-(E) of this subdivision, except that a statement of the basis of appellate jurisdiction, of the issues, or of the case need not be made unless the appellee is dissatisfied with the statement of the appellant. (b) Reproduction of Statutes, Rules, Regulations, or Similar Material If determination of the issues presented requires reference to the Code or other statutes, rules, regulations, or similar material, relevant parts thereof shall be reproduced in the brief or in an addendum or they may be supplied to the court in pamphlet form. (c) Length of Briefs Unless the district court or the bankruptcy appellate panel by local rule or order otherwise provides, principal briefs shall not exceed 50 pages, and reply briefs shall not exceed 25 pages, exclusive of pages containing the table of contents, tables of citations and any addendum containing statutes, rules, regulations, or similar material. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from subdivisions (a), (b), (c), and (f) of Rule 28 F.R.App.P. When an appeal is to a bankruptcy appellate panel and an appendix is filed pursuant to Rule 8009(b) and reference is made in a brief to parts of the record included in the appendix, the reference should be to the appropriate pages of the appendix at which those parts appear. ------DocID 15076 Document 421 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8011 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8011. Motions -STATUTE- (a) Content of Motions; Response; Reply A request for an order or other relief shall be made by filing with the clerk of the district court or the clerk of the bankruptcy appellate panel a motion for such order or relief with proof of service on all other parties to the appeal. The motion shall contain or be accompanied by any matter required by a specific provision of these rules governing such a motion, shall state with particularity the grounds on which it is based, and shall set forth the order or relief sought. If a motion is supported by briefs, affidavits or other papers, they shall be served and filed with the motion. Any party may file a response in opposition to a motion other than one for a procedural order within seven days after service of the motion, but the district court or the bankruptcy appellate panel may shorten or extend the time for responding to any motion. (b) Determination of Motions for Procedural Orders Notwithstanding subdivision (a) of this rule, motions for procedural orders, including any motion under Rule 9006, may be acted on at any time, without awaiting a response thereto and without hearing. Any party adversely affected by such action may move for reconsideration, vacation, or modification of the action. (c) Determination of all Motions All motions will be decided without oral argument unless the court orders otherwise. A motion for a stay, or for other emergency relief may be denied if not presented promptly. (d) Emergency Motions Whenever a movant requests expedited action on a motion on the ground that, to avoid irreparable harm, relief is needed in less time than would normally be required for the district court or bankruptcy appellate panel to receive and consider a response, the word 'Emergency' shall precede the title of the motion. The motion shall be accompanied by an affidavit setting forth the nature of the emergency. The motion shall state whether all grounds advanced in support thereof were submitted to the bankruptcy judge and, if any grounds relied on were not submitted, why the motion should not be remanded to the bankruptcy judge for reconsideration. The motion shall include the office addresses and telephone numbers of moving and opposing counsel and shall be served pursuant to Rule 8008. Prior to filing the motion, the movant shall make every practicable effort to notify opposing counsel in time for counsel to respond to the motion. The affidavit accompanying the motion shall also state when and how opposing counsel was notified or if opposing counsel was not notified why it was not practicable to do so. (e) Power of a Single Judge To Entertain Motions A single judge of a bankruptcy appellate panel may grant or deny any request for relief which under these rules may properly be sought by motion, except that a single judge may not dismiss or otherwise decide an appeal or a motion for leave to appeal. The action of a single judge may be reviewed by the panel. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivisions (a), (b) and (e) of this rule conform substantially to subdivisions (a), (b) and (c) of Rule 27 F.R.App.P. Subdivisions (c) and (d) are taken from Rule 13(c) and (d) of the Rules of the First Circuit governing appeals to bankruptcy appellate panels. ------DocID 15077 Document 422 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8012 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8012. Oral Argument -STATUTE- Oral argument shall be allowed in all cases unless the district judge or the judges of the bankruptcy appellate panel unanimously determine after examination of the briefs and record, or appendix to the brief, that oral argument is not needed. Any party shall have an opportunity to file a statement setting forth the reason why oral argument should be allowed. Oral argument will not be allowed if (1) the appeal is frivolous; (2) the dispositive issue or set of issues has been recently authoritatively decided; or (3) the facts and legal arguments are adequately presented in the briefs and record and the decisional process would not be significantly aided by oral argument. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from Rule 34(a) F.R.App.P. The other details of oral argument which are covered by the remaining subdivisions of Rule 34 F.R.App.P are not in these rules and are left to local rule or order of the court. ------DocID 15078 Document 423 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8013 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8013. Disposition of Appeal; Weight Accorded Bankruptcy Judge's Findings of Fact -STATUTE- On an appeal the district court or bankruptcy appellate panel may affirm, modify, or reverse a bankruptcy judge's judgment, order, or decree or remand with instructions for further proceedings. Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule accords to the findings of a bankruptcy judge the same weight given the findings of a district judge under Rule 52 F.R.Civ.P. See also Rules 7052(a) and 9014. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The amendment to this rule conforms the appellate review standard to Rule 52 F.R.Civ.P., as amended in August 1985. ------DocID 15079 Document 424 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8014 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8014. Costs -STATUTE- Except as otherwise provided by law, agreed to by the parties, or ordered by the district court or the bankruptcy appellate panel, costs shall be taxed against the losing party on an appeal. If a judgment is affirmed or reversed in part, or is vacated, costs shall be allowed only as ordered by the court. Costs incurred in the production of copies of briefs, the appendices, and the record and in the preparation and transmission of the record, the cost of the reporter's transcript, if necessary for the determination of the appeal, the premiums paid for cost of supersedeas bonds or other bonds to preserve rights pending appeal and the fee for filing the notice of appeal shall be taxed by the clerk as costs of the appeal in favor of the party entitled to costs under this rule. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is an adaptation of Rule 39(a), (c) and (e) of the F.R.App.P. Under this rule all costs are taxed by the clerk of the bankruptcy court. ------DocID 15080 Document 425 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8015 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8015. Motion for Rehearing -STATUTE- Unless the district court or the bankruptcy appellate panel by local rule or by court order otherwise provides, a motion for rehearing may be filed within 10 days after entry of the judgment of the district court or the bankruptcy appellate panel. If a timely motion for rehearing is filed, the time for appeal to the court of appeals for all parties shall run from the entry of the order denying rehearing or the entry of a subsequent judgment. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This is an adaptation of the first sentence of Rule 40(a) F.R.App.P. The filing of a motion for rehearing does not toll the time for taking an appeal to the court of appeals from the district court or the bankruptcy appellate panel. Appeals from a district court or a bankruptcy appellate panel are to the appropriate court of appeals. Under Rule 4(a)(4) F.R.App.P. the filing of post-trial motions in the district court has the effect of vitiating any prior notice of appeal and, on the district court's disposition of those post-trial motions, a new appeal period starts. Rule 4 F.R.App.P. does not, however, contain any provision which stays or otherwise alters the time for taking an appeal to the court of appeals when a motion for rehearing is filed under Rule 8015 with the district court or bankruptcy appellate panel. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The amendment, which is derived from Rule 8002(b), Rule 4(a)(4) F.R.App.P., and Rule 11.1 Sup.Ct.R., clarifies the effect of the filing of a timely motion for rehearing. If a timely motion is filed, the appeal period to the court of appeals begins to run on the entry of an order denying the motion or the entry of a subsequent judgment. ------DocID 15081 Document 426 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8016 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8016. Duties of Clerk of District Court and Bankruptcy Appellate Panel -STATUTE- (a) Entry of Judgment The clerk of the district court or the clerk of the bankruptcy appellate panel shall prepare, sign and enter the judgment following receipt of the opinion of the court or the appellate panel or, if there is no opinion, following the instruction of the court or the appellate panel. The notation of a judgment in the docket constitutes entry of judgment. (b) Notice or Orders or Judgments; Return of Record Immediately on the entry of a judgment or order the clerk of the district court or the clerk of the bankruptcy appellate panel shall transmit a notice of the entry to each party to the appeal and to the clerk, together with a copy of any opinion respecting the judgment or order, and shall make a note of the transmission in the docket. Original papers transmitted as the record on appeal shall be returned to the clerk on disposition of the appeal. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a) of this rule is adapted from Rule 36 F.R.App.P. Subdivision (b) is similar to subdivisions (c) and (d) of Rule 45 F.R.App.P. ------DocID 15082 Document 427 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8017 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8017. Stay of Judgment of District Court or Bankruptcy Appellate Panel -STATUTE- (a) Automatic Stay of Judgment on Appeal Judgments of the district court or the bankruptcy appellate panel are stayed until the expiration of 10 days after entry, unless otherwise ordered by the district court or the bankruptcy appellate panel. (b) Stay Pending Appeal to the Court of Appeals On motion and notice to the parties to the appeal, the district court or the bankruptcy appellate panel may stay its judgment pending an appeal to the court of appeals. The stay shall not extend beyond 30 days after the entry of the judgment of the district court or the bankruptcy appellate panel unless the period is extended for cause shown. If before the expiration of a stay entered pursuant to this subdivision there is an appeal to the court of appeals by the party who obtained the stay, the stay shall continue until final disposition by the court of appeals. A bond or other security may be required as a condition to the grant or continuation of a stay of the judgment. A bond or other security may be required if a trustee obtains a stay but a bond or security shall not be required if a stay is obtained by the United States or an officer or agency thereof or at the direction of any department of the Government of the United States. (c) Power of Court of Appeals not Limited This rule does not limit the power of a court of appeals or any judge thereof to stay proceedings during the pendency of an appeal or to suspend, modify, restore, or grant an injunction during the pendency of an appeal or to make any order appropriate to preserve the status quo or the effectiveness of the judgment subsequently to be entered. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from Rule 62 F.R.Civ.P. and Rule 41 F.R.App.P. Subdivision (a) accords to the parties to an appeal 10 days within which to decide whether to pursue an appeal to the court of appeals. In ordinary civil litigation there is a similar opportunity. Rule 62(a) F.R.Civ.P. automatically stays enforcement of a district court's judgment in a civil action and Rule 41(a) F.R.App.P. provides that the mandate of the court of appeals shall not issue for 21 days, unless the court otherwise directs. The district court or bankruptcy appellate panel may reduce the 10 day period of this subdivision. Subdivision (b) vests in the district courts and the bankruptcy appellate panels the same authority the courts of appeals have under Rule 41(b) F.R.App.P. to stay their judgments pending appeal. Perfection of an appeal to the court of appeals while a stay entered by the district court or bankruptcy appellate panel is in effect results in the automatic continuation of that stay during the course of the appeal in the court of appeals. Subdivision (c) is the same as Rule 62(g) F.R.Civ.P. ------DocID 15083 Document 428 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8018 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8018. Rules by Circuit Councils and District Courts -STATUTE- Circuit councils which have authorized bankruptcy appellate panels pursuant to 28 U.S.C. Sec. 158(b) and the district courts may by action of a majority of the judges of the council or district court make and amend rules governing practice and procedure for appeals from orders or judgments of the bankruptcy judges to the respective bankruptcy appellate panel or district court, not inconsistent with the rules of this Part VIII. Rule 83 F.R.Civ.P. governs the procedure for making and amending rules to govern appeals. In all cases not provided for by rule, the district court or the bankruptcy appellate panel may regulate its practice in any manner not inconsistent with these rules. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is similar to Rule 47 F.R.App.P. and Rule 83 F.R.Civ.P. Local rules governing procedure before the bankruptcy courts may be promulgated under Rule 9028. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Rule 83 F.R.Civ.P. was amended in August 1985 to require greater participation by the public in the rule making process. The amendment to Rule 8018 incorporates Rule 83 F.R.Civ.P. Under 28 U.S.C. Sec. 158(b)(2), appeals may be taken to a bankruptcy appellate panel only if the district court so authorizes. If a district court does not authorize appeals to the bankruptcy appellate panel, appeals will be to the district court. This rule is amended to authorize district courts to promulgate rules for appeals. ------DocID 15084 Document 429 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 8019 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART VIII -HEAD- Rule 8019. Suspension of Rules in Part VIII -STATUTE- In the interest of expediting decision or for other cause, the district court or the bankruptcy appellate panel may suspend the requirements or provisions of the rules in Part VIII, except Rules 8001, 8002 and 8013, and may order proceedings in accordance with its direction. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from Rule 2 F.R.App.P. ------DocID 15085 Document 430 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES PART IX -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- PART IX - GENERAL PROVISIONS ------DocID 15086 Document 431 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9001 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9001. General Definitions -STATUTE- The definitions of words and phrases in Sec. 101, Sec. 902 and Sec. 1101 and the rules of construction in Sec. 102 of the Code govern their use in these rules. In addition, the following words and phrases used in these rules have the meanings indicated: (1) 'Bankruptcy clerk' means a clerk appointed pursuant to 28 U.S.C. Sec. 156(b). (2) 'Bankruptcy Code' or 'Code' means title 11 of the United States Code. (3) 'Clerk' means bankruptcy clerk, if one has been appointed, otherwise clerk of the district court. (4) 'Court' or 'judge' means the judicial officer before whom a case or proceeding is pending. (5) 'Debtor.' When any act is required by these rules to be performed by a debtor or when it is necessary to compel attendance of a debtor for examination and the debtor is not a natural person: (A) if the debtor is a corporation, 'debtor' includes, if designated by the court, any or all of its officers, members of its board of directors or trustees or of a similar controlling body, a controlling stockholder or member, or any other person in control; (B) if the debtor is a partnership, 'debtor' includes any or all of its general partners or, if designated by the court, any other person in control. (6) 'Firm' includes a partnership or professional corporation of attorneys or accountants. (7) 'Judgment' means any appealable order. (8) 'Mail' means first class, postage prepaid. (9) 'Regular associate' means any attorney regularly employed by, associated with, or counsel to an individual or firm. (10) 'Trustee' includes a debtor in possession in a chapter 11 case. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The terms 'bankruptcy clerk' and 'clerk' have been defined to reflect that unless otherwise stated, for the purpose of these rules, the terms are meant to identify the court officer for the bankruptcy records. If a bankruptcy clerk is appointed, all filings are made with the bankruptcy clerk. If one has not been appointed, all filings are with the clerk of the district court. Rule 5005. The rule is also amended to include a definition of 'court or judge'. Since a case or proceeding may be before a bankruptcy judge or a judge of the district court, 'court or judge' is defined to mean the judicial officer before whom the case or proceeding is pending. -REFTEXT- REFERENCES IN TEXT The Bankruptcy Act of 1898 as amended, referred to in pars. (1) and (2), is act July 1, 1898, ch. 541, 30 Stat. 544, as amended, which was classified generally to former Title 11, Bankruptcy. Sections 1(10) and 2a of this Act were classified to sections 1(10) and 11(a), respectively, of former Title 11. The Act was repealed effective Oct. 1, 1979, by Pub. L. 95-598, Sec. 401(a), 402(a), Nov. 6, 1978, 92 Stat. 2682, section 101 of which enacted revised Title 11. ------DocID 15087 Document 432 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9002 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9002. Meanings of Words in the Federal Rules of Civil Procedure When Applicable to Cases Under The Code -STATUTE- The following words and phrases used in the Federal Rules of Civil Procedure made applicable to cases under the Code by these rules have the meanings indicated unless they are inconsistent with the context: (1) 'Action' or 'civil action' means an adversary proceeding or, when appropriate, a contested petition, or proceedings to vacate an order for relief or to determine any other contested matter. (2) 'Appeal' means an appeal as provided by 28 U.S.C. Sec. 158. (3) 'Clerk' or 'clerk of the district court' means the court officer responsible for the bankruptcy records in the district. (4) 'District Court,' 'trial court,' 'court,' or 'judge' means bankruptcy judge if the case or proceeding is pending before a bankruptcy judge. (5) 'Judgment' includes any order appealable to an appellate court. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in text, are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 15088 Document 433 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9003 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9003. Prohibition of Ex Parte Contacts -STATUTE- Except as otherwise permitted by applicable law, any party in interest and any attorney, accountant, or employee of a party in interest shall refrain from ex parte meetings and communications with the court concerning matters affecting a particular case or proceeding. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule regulates the actions of parties in interest and their attorneys or others employed by parties in interest. This regulation of the conduct of parties in interest and their representative is designed to insure that the bankruptcy system operates fairly and that no appearance of unfairness is created. See H. Rep. No. 95-595, 95th Cong., 1st Sess. 95 et seq. (1977). This rule is not a substitute for or limitation of any applicable canon of professional responsibility or judicial conduct. See, e.g., Canon 7, EC7-35, Disciplinary Rule 7-110(B) of the Code of Professional Responsibility: 'Generally, in adversary proceedings a lawyer should not communicate with a judge relative to a matter pending before, or which is to be brought before, a tribunal over which he presides in circumstances which might have the effect or give the appearance of granting undue advantage to one party;' and Canon 3A(4) of the Code of Judicial Conduct: 'A judge should . . . neither initiate nor consider ex parte or other communications concerning a pending or impending proceeding.' NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT This rule is amended to apply to both the bankruptcy judges and the district judges of the district. ------DocID 15089 Document 434 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9004 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9004. General Requirements of Form -STATUTE- (a) Legibility; Abbreviations All petitions, pleadings, schedules and other papers shall be clearly legible. Abbreviations in common use in the English language may be used. (b) Caption Each paper filed shall contain a caption setting forth the name of the court, the title of the case, the bankruptcy docket number, and a brief designation of the character of the paper. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (b). Additional requirements applicable to the caption for a petition are found in Rule 1005, to the caption for notices to creditors in Rule 2002(m), and to the caption for a pleading or other paper filed in an adversary proceeding in Rule 7010. Failure to comply with this or any other rule imposing a merely formal requirement does not ordinarily result in the loss of rights. See Rule 9005. ------DocID 15090 Document 435 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9005 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9005. Harmless Error -STATUTE- Rule 61 F.R.Civ.P. applies in cases under the Code. When appropriate, the court may order the correction of any error or defect or the cure of any omission which does not affect substantial rights. -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in text, are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 15091 Document 436 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9006 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9006. Time -STATUTE- (a) Computation In computing any period of time prescribed or allowed by these rules, by the local rules, by order of court, or by any applicable statute, the day of the act, event, or default from which the designated period of time begins to run shall not be included. The last day of the period so computed shall be included, unless it is a Saturday, a Sunday, or a legal holiday, or, when the act to be done is the filing of a paper in court, a day on which weather or other conditions have made the clerk's office inaccessible, in which event the period runs until the end of the next day which is not one of the aforementioned days. When the period of time prescribed or allowed is less than 8 days, intermediate Saturdays, Sundays, and legal holidays shall be excluded in the computation. As used in this rule and in Rule 5001(c), 'legal holiday' includes New Year's Day, Birthday of Martin Luther King, Jr., Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, Christmas Day, and any other day appointed as a holiday by the President or the Congress of the United States, or by the State in which the court is held. (b) Enlargement (1) In General. Except as provided in paragraphs (2) and (3) of this subdivision, when an act is required or allowed to be done at or within a specified period by these rules or by a notice given thereunder or by order of court, the court for cause shown may at any time in its discretion (1) with or without motion or notice order the period enlarged if the request therefor is made before the expiration of the period originally prescribed or as extended by a previous order or (2) on motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect. (2) Enlargement Not Permitted. The court may not enlarge the time for taking action under Rule (FOOTNOTE 1) 1007(d), 1017(b)(3), 1019(2), 2003(a) and (d), 7052, 9015(f), 9023, and 9024. (FOOTNOTE 1) So in original. Probably should be 'Rules'. (3) Enlargement Limited. The court may enlarge the time for taking action under Rules 1006(b)(2), 3002(c), 4003(b), 4004(a), 4007(c), 8002, and 9033, only to the extent and under the conditions stated in those rules. (c) Reduction (1) In General. Except as provided in paragraph (2) of this subdivision, when an act is required or allowed to be done at or within a specified time by these rules or by a notice given thereunder or by order of court, the court for cause shown may in its discretion with or without motion or notice order the period reduced. (2) Reduction Not Permitted. The court may not reduce the time for taking action under Rules 2002(a)(4) and (a)(8), 2003(a), 3002(c), 3014, 3015, 4001(b)(2), (c)(2), 4003(a), 4004(a) 4007(c), 8002, and 9033(b). (d) For Motions - Affidavits A written motion, other than one which may be heard ex parte, and notice of any hearing shall be served not later than five days before the time specified for such hearing, unless a different period is fixed by these rules or by order of the court. Such an order may for cause shown be made on ex parte application. When a motion is supported by affidavit, the affidavit shall be served with the motion; and, except as otherwise provided in Rule 9023, opposing affidavits may be served not later than one day before the hearing, unless the court permits them to be served at some other time. (e) Time of Service Service of process and service of any paper other than process or of notice by mail is complete on mailing. (f) Additional Time After Service by Mail When there is a right or requirement to do some act or undertake some proceedings within a prescribed period after service of a notice or other paper and the notice or paper other than process is served by mail, three days shall be added to the prescribed period. (g) Grain Storage Facility Cases This rule shall not limit the court's authority under Sec. 557 of the Code to enter orders governing procedures in cases in which the debtor is an owner or operator of a grain storage facility. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987; Apr. 25, 1989, eff. Aug. 1, 1989.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a). This rule is an adaptation of Rule 6 F.R.Civ.P. It governs the time for acts to be done and proceedings to be had in cases under the Code and any litigation arising therein. Subdivision (b) is patterned after Rule 6(b) F.R.Civ.P. and Rule 26(b) F.R.App.P. Paragraph (1) of this subdivision confers on the court discretion generally to authorize extensions of time for doing acts required or allowed by these rules or orders of court. The exceptions to this general authority to extend the time are contained in paragraphs (2) and (3). In the interest of prompt administration of bankruptcy cases certain time periods may not be extended. Paragraph (2) lists the rules which establish time periods which may not be extended: Rule 1007(d), time for filing a list of 20 largest creditors; Rule 1017(b)(3), 30 day period for sending notice of dismissal for failure to pay the filing fee; Rule 1019(2), 20 day period for notice of conversion to a chapter 7 case; Rule 2003(a), meeting of creditors not more than 40 days after order for relief; Rule 2003(d), 10 days for filing a motion for resolution of an election dispute; Rule 3014, time for the Sec. 1111(b)(2) election; Rule 4001(b), expiration of stay 30 days following the commencement of final hearing; Rule 7052(b), 10 day period to move to amend findings of fact; Rule 9015(f), 20 day period to move for judgment notwithstanding the verdict; Rule 9023, 10 day period to move for a new trial; and Rule 9024, time to move for relief from judgment. Many rules which establish a time for doing an act also contain a specific authorization and standard for granting an extension of time and, in some cases, limit the length of an extension. In some instances it would be inconsistent with the objective of the rule and sound administration of the case to permit extension under Rule 9006(b)(1), but with respect to the other rules it is appropriate that the power to extend time be supplemented by Rule 9006(b)(1). Unless a rule which contains a specific authorization to extend time is listed in paragraph (3) of this subdivision, an extension of the time may be granted under paragraph (1) of this subdivision. If a rule is included in paragraph (3) an extension may not be granted under paragraph (1). The following rules are listed in paragraph (3): Rule 1006(b)(2), time for paying the filing fee in installments; Rule 3002(c), 90 day period for filing a claim in a chapter 7 or 13 case; Rule 4003(b), 30 days for filing objections to a claim of exemptions; Rule 4004(a), 60 day period to object to a discharge; Rule 4007(b), 60 day period to file a dischargeability complaint; and Rule 8002, 10 days for filing a notice of appeal. Subdivision (c). Paragraph (1) of this subdivision authorizes the reduction of the time periods established by these rules or an order of the court. Excluded from this general authority are the time periods established by the rules referred to in paragraph (2) of the subdivision: Rule 2002 (a) and (b), 20 day and 25 day notices of certain hearings and actions in the case; Rule 2003(a), meeting of creditors to be not less than 20 days after the order for relief; Rule 3002(c), 90 days for filing a claim in a chapter 7 or 13 case; Rule 3014, time for Sec. 1111(b)(2) election; Rule 3015, 10 day period after filing of petition to file a chapter 13 plan; Rule 4003(a), 15 days for a dependent to claim exemptions; Rule 4004(a), 60 day period to object to a discharge; Rule 4007(c), 60 day period to file a dischargeability complaint; and Rule 8002, 10 days for filing a notice of appeal. Reduction of the time periods fixed in the rules referred to in this subdivision would be inconsistent with the purposes of those rules and would cause harmful uncertainty. Subdivision (d) is derived from Rule 6(d) F.R.Civ.P. The reference is to Rule 9023 instead of to Rule 59(c) F.R.Civ.P. because Rule 9023 incorporates Rule 59 F.R.Civ.P. but excepts therefrom motions to reconsider orders allowing and disallowing claims. Subdivision (f) is new and is the same as Rule 6(e) F.R.Civ.P. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a) is amended to conform to the 1984 amendments to Rule 6 F.R.Civ.P. Subdivision (b). The reference to Rule 4001(b) in paragraph (3) is deleted because of the amendments made to Rule 4001. Rule 9033, which is new, contains specific provisions governing the extension of time to file objections to proposed findings of fact and conclusions of law. Rule 9033 is added to the rules referred to in paragraph (3). Subdivision (c). Rule 4001(b)(2) and (c)(2) provide that a final hearing on a motion to use cash collateral or a motion for authority to obtain credit may be held no earlier than 15 days after the filing of the motion. These two rules are added to paragraph (2) to make it clear that the 15 day period may not be reduced. Rule 9033 is also added to paragraph (2). Subdivision (g) is new. Under Sec. 557 of the Code, as enacted by the 1984 amendments, the court is directed to expedite grain storage facility cases. This subdivision makes it clear this rule does not limit the court's authority under Sec. 557. The original Advisory Committee Note to this rule included the 25 day notice period of Rule 2002(b) as a time period which may not be reduced under Rule 9006(c)(2). This was an error. NOTES OF ADVISORY COMMITTEE ON RULES - 1989 AMENDMENT Prior to 1987, subdivision (a) provided that intermediate weekends and legal holidays would not be counted in the computation of a time period if the prescribed or allowed time was less than 7 days. This rule was amended in 1987 to conform to Fed. R. Civ. P. 6(a) which provides for the exclusion of intermediate weekends and legal holidays if the time prescribed or allowed is less than 11 days. An undesirable result of the 1987 amendment was that 10-day time periods prescribed in the interest of prompt administration of bankruptcy cases were extended to at least 14 calendar days. As a result of the present amendment, 10-day time periods prescribed or allowed will no longer be extended to at least 14 calendar days because of intermediate weekends and legal holidays. ------DocID 15092 Document 437 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9007 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9007. General Authority to Regulate Notices -STATUTE- When notice is to be given under these rules, the court shall designate, if not otherwise specified herein, the time within which, the entities to whom, and the form and manner in which the notice shall be given. When feasible, the court may order any notices under these rules to be combined. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) ------DocID 15093 Document 438 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9008 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9008. Service or Notice by Publication -STATUTE- Whenever these rules require or authorize service or notice by publication, the court shall, to the extent not otherwise specified in these rules, determine the form and manner thereof, including the newspaper or other medium to be used and the number of publications. ------DocID 15094 Document 439 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9009 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9009. Forms -STATUTE- The Official Forms prescribed by the Judicial Conference of the United States shall be observed and used with alterations as may be appropriate. Forms may be combined and their contents rearranged to permit economies in their use. The Director of the Administrative Office of the United States Courts may issue additional forms for use under the Code. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES The rule continues the obligatory character of the Official Forms in the interest of facilitating the processing of the paperwork of bankruptcy administration, but provides that Official Forms will be prescribed by the Judicial Conference of the United States. The Supreme Court and the Congress will thus be relieved of the burden of considering the large number of complex forms used in bankruptcy practice. The use of the Official Forms has generally been held subject to a 'rule of substantial compliance' and some of these rules, for example Rule 1002, specifically state that the filed document need only 'conform substantially' to the Official Form. See also Rule 9005. The second sentence recognizes the propriety of combining and rearranging Official Forms to take advantage of technological developments and resulting economies. The Director of the Administrative Office is authorized to issue additional forms for the guidance of the bar. ------DocID 15095 Document 440 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9010 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9010. Representation and Appearances; Powers of Attorney -STATUTE- (a) Authority To Act Personally or by Attorney A debtor, creditor, equity security holder, indenture trustee, committee or other party may (1) appear in a case under the Code and act either in the entity's own behalf or by an attorney authorized to practice in the court, and (2) perform any act not constituting the practice of law, by an authorized agent, attorney in fact, or proxy. (b) Notice of Appearance An attorney appearing for a party in a case under the Code shall file a notice of appearance with the attorney's name, office address and telephone number, unless the attorney's appearance is otherwise noted in the record. (c) Power of Attorney The authority of any agent, attorney in fact, or proxy to represent a creditor for any purpose other than the execution and filing of a proof of claim or the acceptance or rejection of a plan shall be evidenced by a power of attorney conforming substantially to Official Form No. 17 or Official Form No. 18. The execution of any such power of attorney shall be acknowledged before one of the officers enumerated in 28 U.S.C. Sec. 459, Sec. 953, Rule 9012, or a person authorized to administer oaths under the laws of the state where the oath is administered. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is substantially the same as former Bankruptcy Rule 910 and does not purport to change prior holdings prohibiting a corporation from appearing pro se. See In re Las Colinas Development Corp., 585 F.2d 7 (1st Cir. 1978). NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (c) is amended to include a reference to Rule 9012 which is amended to authorize a bankruptcy judge or clerk to administer oaths. ------DocID 15096 Document 441 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9011 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9011. Signing and Verification of Papers -STATUTE- (a) Signature Every petition, pleading, motion and other paper served or filed in a case under the Code on behalf of a party represented by an attorney, except a list, schedule, statement of financial affairs, statement of executory contracts, statement of intention, Chapter 13 Statement, or amendments thereto, shall be signed by at least one attorney of record in the attorney's individual name, whose office address and telephone number shall be stated. A party who is not represented by an attorney shall sign all papers and state the party's address and telephone number. The signature of an attorney or a party constitutes a certificate that the attorney or party has read the document; that to the best of the attorney's or party's knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harrass, to cause delay, or to increase the cost of litigation. If a document is not signed, it shall be stricken unless it is signed promptly after the omission is called to the attention of the person whose signature is required. If a document is signed in violation of this rule, the court on motion or on its own initiative, shall impose on the person who signed it, the represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the document, including a reasonable attorney's fee. (b) Verification Except as otherwise specifically provided by these rules, papers filed in a case under the Code need not be verified. Whenever verification is required by these rules, an unsworn declaration as provided in 28 U.S.C. Sec. 1746 satisfies the requirement of verification. (c) Copies of Signed or Verified Papers When these rules require copies of a signed or verified paper, it shall suffice if the original is signed or verified and the copies are conformed to the original. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a). Excepted from the papers which an attorney for a debtor must sign are lists, schedules, statements of financial affairs, statements of executory contracts, Chapter 13 Statements and amendments thereto. Rule 1008 requires that these documents be verified by the debtor. Although the petition must also be verified, counsel for the debtor must sign the petition. See Official Form No. 1. An unrepresented party must sign all papers. The last sentence of this subdivision authorizes a broad range of sanctions. The word 'document' is used in this subdivision to refer to all papers which the attorney or party is required to sign. Subdivision (b) extends to all papers filed in cases under the Code the policy of minimizing reliance on the formalities of verification which is reflected in the third sentence of Rule 11 F.R.Civ.P. The second sentence of subdivision (b) permits the substitution of an unsworn declaration for the verification. See 28 U.S.C. Sec. 1746. Rules requiring verification or an affidavit are as follows: Rule 1008, petitions, schedules, statements of financial affairs, Chapter 13 Statements and amendments; Rule 2006(e), list of multiple proxies and statement of facts and circumstances regarding their acquisition; Rule 4001(c), motion for ex parte relief from stay; Rule 7065, incorporating Rule 65(b) F.R.Civ.P. governing issuance of temporary restraining order; Rule 8011(d), affidavit in support of emergency motion on appeal. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The statement of intention of the debtor under Sec. 521(2) of the Code is added to the documents which counsel is not required to sign. ------DocID 15097 Document 442 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9012 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9012. Oaths and Affirmations -STATUTE- (a) Persons Authorized To Administer Oaths The following persons may administer oaths and affirmations and take acknowledgments: a bankruptcy judge, clerk, deputy clerk, officer authorized to administer oaths in proceedings before the courts of the United States or under the laws of the state where the oath is to be taken, or a diplomatic or consular officer of the United States in any foreign country. (b) Affirmation in Lieu of Oath When in a case under the Code an oath is required to be taken a solemn affirmation may be accepted in lieu thereof. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from Rule 43(d) F.R.Civ.P. The provisions of former Bankruptcy Rule 912(a) relating to who may administer oaths have been deleted as unnecessary. Bankruptcy judges and the clerks and deputy clerks of bankruptcy courts are authorized by statute to administer oaths and affirmations and to take acknowledgments. 28 U.S.C. Sec. 459, 953. A person designated to preside at the meeting of creditors has authority under Rule 2003(b)(1) to administer the oath. Administration of the oath at a deposition is governed by Rule 7028. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a) has been added to the rule to authorize bankruptcy judges and clerks to administer oaths. ------DocID 15098 Document 443 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9013 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9013. Motions: Form and Service -STATUTE- A request for an order, except when an application is authorized by these rules, shall be by written motion, unless made during a hearing. The motion shall state with particularity the grounds therefor, and shall set forth the relief or order sought. Every written motion other than one which may be considered ex parte shall be served by the moving party on the trustee or debtor in possession and on those entities specified by these rules or, if service is not required or the entities to be served are not specified by these rules, the moving party shall serve the entities the court directs. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is derived from Rule 5(a) and Rule 7(b)(1) F.R.Civ.P. Except when an application is specifically authorized by these rules, for example an application under Rule 2014 for approval of the employment of a professional, all requests for court action must be made by motion. ------DocID 15099 Document 444 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9014 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9014. Contested Matters -STATUTE- In a contested matter in a case under the Code not otherwise governed by these rules, relief shall be requested by motion, and reasonable notice and opportunity for hearing shall be afforded the party against whom relief is sought. No response is required under this rule unless the court orders an answer to a motion. The motion shall be served in the manner provided for service of a summons and complaint by Rule 7004, and, unless the court otherwise directs, the following rules shall apply: 7021, 7025, 7026, 7028-7037, 7041, 7042, 7052, 7054-7056, 7062, 7064, 7069, and 7071. The court may at any stage in a particular matter direct that one or more of the other rules in Part VII shall apply. An entity that desires to perpetuate testimony may proceed in the same manner as provided in Rule 7027 for the taking of a deposition before an adversary proceeding. The clerk shall give notice to the parties of the entry of any order directing that additional rules of Part VII are applicable or that certain of the rules of Part VII are not applicable. The notice shall be given within such time as is necessary to afford the parties a reasonable opportunity to comply with the procedures made applicable by the order. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rules 1017(d), 3020(b)(1), 4001(a), 4003(d), and 6006(a), which govern respectively dismissal or conversion of a case, objections to confirmation of a plan, relief from the automatic stay and the use of cash collateral, avoidance of a lien under Sec. 552(f) of the Code, and the assumption or rejection of executory contracts or unexpired leases, specifically provide that litigation under those rules shall be as provided in Rule 9014. This rule also governs litigation in other contested matters. Whenever there is an actual dispute, other than an adversary proceeding, before the bankruptcy court, the litigation to resolve that dispute is a contested matter. For example, the filing of an objection to a proof of claim, to a claim of exemption, or to a disclosure statement creates a dispute which is a contested matter. Even when an objection is not formally required, there may be a dispute. If a party in interest opposes the amount of compensation sought by a professional, there is a dispute which is a contested matter. When the rules of Part VII are applicable to a contested matter, reference in the Part VII rules to adversary proceedings is to be read as a reference to a contested matter. See Rule 9002(1). ------DocID 15100 Document 445 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES (Rule 9015 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- (Rule 9015. Jury Trial) (Abrogated Mar. 30, 1987, eff. Aug. 1, 1987) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Former section 1480 of title 28 preserved a right to trial by jury in any case or proceeding under title 11 in which jury trial was provided by statute. Rule 9015 provided the procedure for jury trials in bankruptcy courts. Section 1480 was repealed. Section 1411 added by the 1984 amendments affords a jury trial only for personal injury or wrongful death claims, which 28 U.S.C. Sec. 157(b)(5) requires be tried in the district court. Nevertheless, Rule 9015 has been cited as conferring a right to jury trial in other matters before bankruptcy judges. In light of the clear mandate of 28 U.S.C. Sec. 2075 that the 'rules shall not abridge, enlarge, or modify any substantive right', Rule 9015 is abrogated. In the event the courts of appeals or the Supreme Court define a right to jury trial in any bankruptcy matters, a local rule in substantially the form of Rule 9015 can be adopted pending amendment of these rules. ------DocID 15101 Document 446 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9016 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9016. Subpoena -STATUTE- Rule 45 F.R.Civ.P. applies in cases under the Code. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Although Rule 7004(d) authorizes nationwide service of process, Rule 45 F.R.Civ.P. limits the subpoena power to the judicial district and places outside the district which are within 100 miles of the place of trial or hearing. -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in text, are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 15102 Document 447 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9017 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9017. Evidence -STATUTE- The Federal Rules of Evidence and Rules 43, 44 and 44.1 F.R.Civ.P. apply in cases under the Code. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Sections 251 and 252 of Public Law 95-598, amended Rule 1101 of the Federal Rules of Evidence to provide that the Federal Rules of Evidence apply in bankruptcy courts and to any case or proceeding under the Code. Rules 43, 44 and 44.1 of the F.R.Civ.P., which supplement the Federal Rules of Evidence, are by this rule made applicable to cases under the Code. Examples of bankruptcy rules containing matters of an evidentiary nature are: Rule 2011, evidence of debtor retained in possession; Rule 3001(f), proof of claim constitutes prima facie evidence of the amount and validity of a claim; and Rule 5007(c), sound recording of court proceedings constitutes the record of the proceedings. -REFTEXT- REFERENCES IN TEXT The Federal Rules of Evidence and the Federal Rules of Civil Procedure, referred to in text, are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 15103 Document 448 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9018 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9018. Secret, Confidential, Scandalous, or Defamatory Matter -STATUTE- On motion or on its own initiative, with or without notice, the court may make any order which justice requires (1) to protect the estate or any entity in respect of a trade secret or other confidential research, development, or commercial information, (2) to protect any entity against scandalous or defamatory matter contained in any paper filed in a case under the Code, or (3) to protect governmental matters that are made confidential by statute or regulation. If an order is entered under this rule without notice, any entity affected thereby may move to vacate or modify the order, and after a hearing on notice the court shall determine the motion. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule provides the procedure for invoking the court's power under Sec. 107 of the Code. ------DocID 15104 Document 449 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9019 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9019. Compromise and Arbitration -STATUTE- (a) Compromise On motion by the trustee and after a hearing on notice to creditors, the debtor and indenture trustees as provided in Rule 2002(a) and to such other entities as the court may designate, the court may approve a compromise or settlement. (b) Authority To Compromise or Settle Controversies Within Classes After a hearing on such notice as the court may direct, the court may fix a class or classes of controversies and authorizes the trustee to compromise or settle controversies within such class or classes without further hearing or notice. (c) Arbitration On stipulation of the parties to any controversy affecting the estate the court may authorize the matter to be submitted to final and binding arbitration. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivisions (a) and (c) of this rule are essentially the same as the provisions of former Bankruptcy Rule 919 and subdivision (b) is the same as former Rule 8-514(b), which was applicable to railroad reorganizations. Subdivision (b) permits the court to deal efficiently with a case in which there may be a large number of settlements. ------DocID 15105 Document 450 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9020 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9020. Contempt Proceedings -STATUTE- (a) Contempt Committed in Presence of Bankruptcy Judge Contempt committed in the presence of a bankruptcy judge may be determined summarily by a bankruptcy judge. The order of contempt shall recite the facts and shall be signed by the bankruptcy judge and entered of record. (b) Other Contempt Contempt committed in a case or proceeding pending before a bankruptcy judge, except when determined as provided in subdivision (a) of this rule, may be determined by the bankruptcy judge only after a hearing on notice. The notice shall be in writing, shall state the essential facts constituting the contempt charged and describe the contempt as criminal or civil and shall state the time and place of hearing, allowing a reasonable time for the preparation of the defense. The notice may be given on the court's own initiative or on application of the United States attorney or by an attorney appointed by the court for that purpose. If the contempt charged involves disrespect to or criticism of a bankruptcy judge, that judge is disqualified from presiding at the hearing except with the consent of the person charged. (c) Service and Effective Date of Order; Review The clerk shall serve forthwith a copy of the order of contempt on the entity named therein. The order shall be effective 10 days after service of the order and shall have the same force and effect as an order of contempt entered by the district court unless, within the 10 day period, the entity named therein serves and files with the clerk objections prepared in the manner provided in Rule 9033(b). If timely objections are filed, the order shall be reviewed as provided in Rule 9033. (d) Right to Jury Trial Nothing in this rule shall be construed to impair the right to jury trial whenever it otherwise exists. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Section 1481 of Title 28 provides that a bankruptcy court 'may not . . . punish a criminal contempt not committed in the presence of the judge of the court or warranting a punishment of imprisonment.' Rule 9020 does not enlarge the power of bankruptcy courts. Subdivision (a) is adapted from former Bankruptcy Rule 920 and Rule 42 F.R.Crim.P. Paragraph (1) of the subdivision permits summary imposition of punishment for contempt if the conduct is in the presence of the court and is of such nature that the conduct 'obstruct(s) the administration of justice.' See 18 U.S.C. Sec. 401(a). Cases interpreting Rule 42(a) F.R.Crim.P. have held that when criminal contempt is in question summary disposition should be the exception: summary disposition should be reserved for situations where it is necessary to protect the judicial institution. 3 Wright, Federal Practice & Procedure - Criminal Sec. 707 (1969). Those cases are equally pertinent to the application of this rule and, therefore, contemptuous conduct in the presence of the judge may often be punished only after the notice and hearing requirements of subdivision (b) are satisfied. If the bankruptcy court concludes it is without power to punish or to impose the proper punishment for conduct which constitutes contempt, subdivision (a)(3) authorizes the bankruptcy court to certify the matter to the district court. Subdivision (b) makes clear that when a person has a constitutional or statutory right to a jury trial in a criminal contempt matter this rule in no way affects that right. See Frank v. United States, 395 U.S. 147 (1969). The Federal Rules of Civil Procedure do not specifically provide the procedure for the imposition of civil contempt sanctions. The decisional law governing the procedure for imposition of civil sanctions by the district courts will be equally applicable to the bankruptcy courts. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The United States Bankruptcy Courts, as constituted under the Bankruptcy Reform Act of 1978, were courts of law, equity, and admiralty with an inherent contempt power, but former 28 U.S.C. Sec. 1481 restricted the criminal contempt power of bankruptcy judges. Under the 1984 amendments, bankruptcy judges are judicial officers of the district court, 28 U.S.C. Sec. 151, 152(a)(1). There are no decisions by the courts of appeals concerning the authority of bankruptcy judges to punish for either civil or criminal contempt under the 1984 amendments. This rule, as amended, recognizes that bankruptcy judges may not have the power to punish for contempt. Sound judicial administration requires that the initial determination of whether contempt has been committed should be made by the bankruptcy judge. If timely objections are not filed to the bankruptcy judge's order, the order has the same force and effect as an order of the district court. If objections are filed within 10 days of service of the order, the district court conducts a de novo review pursuant to Rule 9033 and any order of contempt is entered by the district court on completion of the court's review of the bankruptcy judge's order. ------DocID 15106 Document 451 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9021 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9021. Entry of Judgment -STATUTE- Except as otherwise provided herein, Rule 58 F.R.Civ.P. applies in cases under the Code. Every judgment entered in an adversary proceeding or contested matter shall be set forth on a separate document. A judgment is effective when entered as provided in Rule 5003. The reference in Rule 58 F.R.Civ.P. to Rule 79(a) F.R.Civ.P. shall be read as a reference to Rule 5003 of these rules. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a). This rule is derived from Rule 58 F.R.Civ.P. The requirement that a judgment entered in an adversary proceeding or contested matter be set forth on a separate document is to eliminate uncertainty as to whether an opinion or memorandum of the court is a judgment. There is no sound reason to require that every order in a case under the Code be evidenced by a separate document. Subdivision (b) establishes a procedure for entering a judgment of a bankruptcy court for the recovery of money or property in an index of judgments kept by the clerk of the district court. It clarifies the availability of the same remedies for the enforcement of a bankruptcy court judgment as those provided for the enforcement of a district court judgment. See 28 U.S.C. Sec. 1961-63. When indexed in accordance with subdivision (b) of this rule a judgment of the bankruptcy court may be found by anyone searching for liens of record in the judgment records of the district court. Certification of a copy of the judgment to the clerk of the district court provides a basis for registration of the judgment pursuant to 28 U.S.C. Sec. 1963 in any other district. When so registered, the judgment may be enforced by issuance of execution and orders for supplementary proceedings that may be served anywhere within the state where the registering court sits. See 7 Moore, Federal Practice 2409-11 (2d ed. 1971). The procedures available in the district court are not exclusive, however, and the holder of a judgment entered by the bankruptcy court may use the remedies under Rules 7069 and 7070 even if the judgment is indexed by the clerk of the district court. Subdivision (c) makes it clear that when a district court hears a matter reserved to it by 28 U.S.C. Sec. 1471, 1481, its judgments are entered in the district court's civil docket and in the docket of the bankruptcy court. When the district court acts as an appellate court, Rule 8016(a) governs the entry of judgments on appeal. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Former subdivision (a) was derived from Rule 58 F.R.Civ.P. As amended, Rule 9021 adopts Rule 58. The reference in Rule 58 to Rule 79(a) F.R.Civ.P. is to be read as a reference to Rule 5003. -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in text, are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 15107 Document 452 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9022 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9022. Notice of Judgment or Order -STATUTE- (a) Judgment or Order of Bankruptcy Judge Immediately on the entry of a judgment or order the clerk shall serve a notice of the entry by mail in the manner provided by Rule 7005 on the contesting parties and on other entities as the court directs. Service of the notice shall be noted in the docket. Lack of notice of the entry does not affect the time to appeal or relieve or authorize the court to relieve a party for failure to appeal within the time allowed, except as permitted in Rule 8002. (b) Judgment or Order of District Judge Notice of a judgment or order entered by a district judge is governed by Rule 77(d) F.R.Civ.P. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a) of this rule is an adaptation of Rule 77(d) F.R.Civ.P. Subdivision (b) complements Rule 9021(b). When a district court acts as an appellate court, Rule 8016(b) requires the clerk to give notice of the judgment on appeal. -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in subd. (b), are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 15108 Document 453 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9023 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9023. New Trials; Amendment of Judgments -STATUTE- Rule 59 F.R.Civ.P. applies in cases under the Code, except as provided in Rule 3008. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rule 59 F.R.Civ.P. regulates motions for a new trial and amendment of judgment. Those motions must be served within 10 days of the entry of judgment. No similar time limit is contained in Rule 3008 which governs reconsideration of claims. -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in text, are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 15109 Document 454 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9024 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9024. Relief from Judgment or Order -STATUTE- Rule 60 F.R.Civ.P. applies in cases under the Code except that (1) a motion to reopen a case under the Code or for the reconsideration of an order allowing or disallowing a claim against the estate entered without a contest is not subject to the one year limitation prescribed in Rule 60(b), (2) a complaint to revoke a discharge in a chapter 7 liquidation case may be filed only within the time allowed by Sec. 727(e) of the Code, and (3) a complaint to revoke an order confirming a plan may be filed only within the time allowed by Sec. 1144 or Sec. 1330. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Motions to reopen cases are governed by Rule 5010. Reconsideration of orders allowing and disallowing claims is governed by Rule 3008. For the purpose of this rule all orders of the bankruptcy court are subject to Rule 60 F.R.Civ.P. Pursuant to Sec. 727(e) of the Code a complaint to revoke a discharge must be filed within one year of the entry of the discharge or, when certain grounds of revocation are asserted, the later of one year after the entry of the discharge or the date the case is closed. Under Sec. 1144 and Sec. 1330 of the Code a party must file a complaint to revoke an order confirming a chapter 11 or 13 plan within 180 days of its entry. Clauses (2) and (3) of this rule make it clear that the time periods established by Sec. 727(e), 1144 and 1330 of the Code may not be circumvented by the invocation of F.R.Civ.P. 60(b). -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in text, are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 15110 Document 455 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9025 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9025. Security: Proceedings Against Sureties -STATUTE- Whenever the Code or these rules require or permit the giving of security by a party, and security is given in the form of a bond or stipulation or other undertaking with one or more sureties, each surety submits to the jurisdiction of the court, and liability may be determined in an adversary proceeding governed by the rules in Part VII. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is an adaptation of Rule 65.1 F.R.Civ.P. and applies to any surety on a bond given pursuant to Sec. 303(e) of the Code, Rules 2001, 2010, 5008, 7062, 7065, 8005, or any other rule authorizing the giving of such security. ------DocID 15111 Document 456 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9026 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9026. Exceptions Unnecessary -STATUTE- Rule 46 F.R.Civ.P. applies in cases under the Code. -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in text, are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 15112 Document 457 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9027 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9027. Removal -STATUTE- (a) Application (1) Where Filed; Form and Content. An application for removal shall be filed with the clerk for the district and division within which is located the state or federal court where the civil action is pending. The application shall be verified and contain a short and plain statement of the facts which entitle the applicant to remove and be accompanied by a copy of all process and pleadings. (2) Time for Filing; Civil Action Initiated Before Commencement of the Case Under the Code. If the claim or cause of action in a civil action is pending when a case under the Code is commenced, an application for removal may be filed only within the longest of (A) 90 days after the order for relief in the case under the Code, (B) 30 days after entry of an order terminating a stay, if the claim or cause of action in a civil action has been stayed under Sec. 362 of the Code, or (C) 30 days after a trustee qualifies in a chapter 11 reorganization case but not later than 180 days after the order for relief. (3) Time for Filing; Civil Action Initiated After Commencement of the Case Under the Code. If a case under the Code is pending when a claim or cause of action is asserted in another court, an application for removal may be filed with the clerk only within the shorter of (A) 30 days after receipt, through service or otherwise, of a copy of the initial pleading setting forth the claim or cause of action sought to be removed or (B) 30 days after receipt of the summons if the initial pleading has been filed with the court but not served with the summons. (b) Bond An application for removal, except when the applicant is the trustee, debtor, debtor in possession, or the United States shall be accompanied by a bond with good and sufficient surety conditioned that the party will pay all costs and disbursements incurred by reason of the removal should it be determined that the claim or cause of action was not removable or was improperly removed. (c) Notice Promptly after filing the application and the bond, if required, the applicant shall serve a copy of the application on all parties to the removed claim or cause of action. (d) Filing in Non-Bankruptcy Court Promptly after filing the application and bond, if any, the applicant shall file a copy of the application with the clerk of the court from which the claim or cause of action is removed. Removal of the claim or cause of action is effected on such filing of a copy of the application. The parties shall proceed no further in that court unless and until the claim or cause of action is remanded. (e) Remand A motion for remand of the removed claim or cause of action shall be filed with the clerk and served on the parties to the removed claim or cause of action. Unless the district court orders otherwise, a motion for remand shall be heard by the bankruptcy judge, who shall file a report and recommendation for disposition of the motion. The clerk shall serve forthwith a copy of the report and recommendation on the parties. Within 10 days of being served with a copy of the report and recommendation, a party may serve and file with the clerk objections prepared in the manner provided in Rule 9033(b). Review by the district court of the report and recommendation shall be governed by Rule 9033. (f) Procedure After Removal (1) After removal of a claim or cause of action to a district court the district court or, if the case under the Code has been referred to a bankruptcy judge of the district, the bankruptcy judge, may issue all necessary orders and process to bring before it all proper parties whether served by process issued by the court from which the claim or cause of action was removed or otherwise. (2) The district court or, if the case under the Code has been referred to a bankruptcy judge of the district, the bankruptcy judge may require the applicant to file with the clerk copies of all records and proceedings relating to the claim or cause of action in the court from which the claim or cause of action was removed. (g) Process After Removal If one or more of the defendants has not been served with process, the service has not been perfected prior to removal, or the process served proves to be defective, such process or service may be completed or new process issued pursuant to Part VII of these rules. This subdivision shall not deprive any defendant on whom process is served after removal of the defendant's right to move to remand the case. (h) Applicability of Part VII The rules of Part VII apply to a claim or cause of action removed to a district court from a federal or state court and govern procedure after removal. Repleading is not necessary unless the court so orders. In a removed action in which the defendant has not answered, the defendant shall answer or present the other defenses or objections available under the rules of Part VII within 20 days following the receipt through service or otherwise of a copy of the initial pleading setting forth the claim for relief on which the action or proceeding is based, or within 20 days following the service of summons on such initial pleading, or within five days following the filing of the application for removal, whichever period is longest. ((i) Time for Filing a Demand for Jury Trial) (Abrogated Mar. 30, 1987, eff. Aug. 1, 1987) (j) Record Supplied When a party is entitled to copies of the records and proceedings in any civil action or proceeding in a federal or a state court, to be used in the removed civil action or proceeding, and the clerk of the federal or state court, on demand accompanied by payment or tender of the lawful fees, fails to deliver certified copies, the court may, on affidavit reciting the facts, direct such record to be supplied by affidavit or otherwise. Thereupon the proceedings, trial and judgment may be had in the court, and all process awarded, as if certified copies had been filed. (k) Attachment or Sequestration; Securities When a claim or cause of action is removed to a district court, any attachment or sequestration of property in the court from which the claim or cause of action was removed shall hold the property to answer the final judgment or decree in the same manner as the property would have been held to answer final jugment or decree had it been rendered by the court from which the claim or cause of action was removed. All bonds, undertakings, or security given by either party to the claim or cause of action prior to its removal shall remain valid and effectual notwithstanding such removal. All injunctions issued, orders entered and other proceedings had prior to removal shall remain in full force and effect until disolved or modified by the court. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Under 28 U.S.C. Sec. 1478(a) 'any claim or cause of action in a civil action, other than a proceeding before the United States Tax Court or a civil action by a Government unit to enforce (a) . . . regulatory or police power' may be removed 'if the bankruptcy courts have jurisdiction over such claim or cause of action.' This rule specifies how removal is accomplished, the procedure thereafter, and the procedure to request remand of the removed claim or cause of action. If the claim or cause of action which is removed to the bankruptcy court is subject to the automatic stay of Sec. 362 of the Code, the litigation may not proceed in the bankruptcy court until relief from the stay is granted. The subdivisions of this rule conform substantially to 28 U.S.C. Sec. 1446-1450 and Rule 81(a) F.R.Civ.P. pertaining to removal to the district courts. Subdivision (a)(1) is derived from 28 U.S.C. Sec. 1446(a). Subdivisions (a)(2) and (a)(3) are derived from paragraphs one and two of 28 U.S.C. Sec. 1446(b). Timely exercise of the right to remove is as important in bankruptcy cases as in removals from a state court to a district court. Subdivision (a)(2) governs the situation in which there is litigation pending and a party to the litigation becomes a debtor under the Code. Frequently, removal would be of little utility in such cases because the pending litigation will be stayed by Sec. 362(a) on commencement of the case under the Code. As long as the stay remains in effect there is no reason to impose a time limit for removal to the bankruptcy court and, therefore, clause (B) of subdivision (a)(2) provides that a removal application may be filed within 30 days of entry of an order terminating the stay. Parties to stayed litigation will not be required to act immediately on commencement of a case under the Code to protect their right to remove. If the pending litigation is not stayed by Sec. 362(a) of the Code, the removal application must ordinarily be filed within 90 days of the order for relief. Clause (C) contains an alternative period for a chapter 11 case. If a trustee is appointed, the removal application may be filed within 30 days of the trustee's qualification, provided that the removal application is filed not more than 180 days after the order for relief. The removal application must be filed within the longest of the three possible periods. For example, in a chapter 11 case if the 90 day period expires but a trustee is appointed shortly thereafter, the removal application may be filed within 30 days of the trustee's qualification but not later than 180 days after the order for relief. Nevertheless, if the claim or cause of action in the civil action is stayed under Sec. 362, the application may be filed after the 180 day period expires, provided the application is filed within 30 days of an order terminating the stay. Subdivision (a)(3) applies to the situation in which the case under the Code is pending when the removable claim or cause of action is asserted in a civil action initiated in other than the bankruptcy court. The time for filing the application for removal begins to run on receipt of the first pleading containing the removable claim or cause of action. Only litigation not stayed by the Code or by court order may properly be initiated after the case under the Code is commenced. See e.g., Sec. 362(a). Subdivision (b). With one exception, this subdivision is the same as 28 U.S.C. Sec. 1446(d). The exemption from the bond requirement is enlarged to include a trustee or debtor in possession. Complete exemption from the bond requirement for removal is appropriate because of the limited resources which may be available at the beginning of a case and the small probability that an action will be improperly removed. Recovery on the bond is permitted only when the removal was improper. If the removal is proper but the bankruptcy court orders the action remanded on equitable grounds, 28 U.S.C. Sec. 1478(b), there is no recovery on the bond. Subdivisions (c) and (d) are patterned on 28 U.S.C. Sec. 1446(e). Subdivision (e). There is no provision in the Federal Rules of Civil Procedure for seeking remand. The first sentence of this subdivision requires that a request for remand be by motion and that the moving party serve all other parties; however, no hearing is required. In recognition of the intrusion of the removal practice on the state and federal courts from which claims or causes of action are removed, the subdivision directs the bankruptcy court to decide remand motions as soon as practicable. The last sentence of this subdivision is derived from 28 U.S.C. Sec. 1446(c) Subdivisions (f) and (g), with appropriate changes to conform them to the bankruptcy context, are the same as 28 U.S.C. Sec. 1447(a) and (b) and 28 U.S.C. Sec. 1448, respectively. Subdivisions (h) and (i) are taken from Rule 81(c) F.R.Civ.P. Subdivisions (j) and (k) are derived from 28 U.S.C. Sec. 1449 and Sec. 1450, respectively. Remand orders of bankruptcy judges are not appealable. 28 U.S.C. Sec. 1478(b). This rule does not deal with the question whether a single plaintiff or defendant may remove a claim or cause of action if there are two or more plaintiffs or defendants. See 28 U.S.C. Sec. 1478. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Section 1452 of title 28, with certain exceptions, provides for removal of claims or causes of action in civil actions pending in state or federal courts when the claim or cause of action is within the jurisdiction conferred by 28 U.S.C. Sec. 1334. An order granting or denying a motion for remand is not appealable. 28 U.S.C. Sec. 1452(b). Under subdivision (e), as amended, the district court must enter the order on the remand motion; however, the bankruptcy judge conducts the initial hearing on the motion and files a report and recommendation. The parties may file objections. Review of the report and recommendation is pursuant to Rule 9033. Subdivision (f) has been amended to provide that if there has been a referral pursuant to 28 U.S.C. Sec. 157(a) the bankruptcy judge will preside over the removed civil action. Subdivision (i) has been abrogated consistent with the abrogation of Rule 9015. ------DocID 15113 Document 458 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9028 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9028. Disability of a Judge -STATUTE- Rule 63 F.R.Civ.P. applies in cases under the Code. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is an adaptation of Rule 63 F.R.Civ.P. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Rule 9028 has been changed to adopt the procedures contained in Rule 63 of the Federal Rules of Civil Procedure for substituting a judge in the event of disability. -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in text, are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 15114 Document 459 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9029 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9029. Local Bankruptcy Rules -STATUTE- Each district court by action of a majority of the judges thereof may make and amend rules governing practice and procedure in all cases and proceedings within the district court's bankruptcy jurisdiction which are not inconsistent with these rules. Rule 83 F.R.Civ.P. governs the procedure for making local rules. A district court may authorize the bankruptcy judges of the district, subject to any limitation or condition it may prescribe and the requirements of 83 F.R.Civ.P., to make rules of practice and procedure not inconsistent with these rules. In all cases not provided for by rule, the court may regulate its practice in any manner not inconsistent with these rules or those of the district in which the court acts. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule is an adaptation of Rule 83 F.R.Civ.P. and Rule 57(a) F.R.Crim.P. Under this rule bankruptcy courts may make local rules which govern practice before those courts. Circuit councils and district courts are authorized by Rule 8018 to make local rules governing appellate practice. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Rule 9029 is amended to authorize the district court to promulgate local rules governing bankruptcy practice. This rule, as amended, permits the district court to authorize the bankruptcy judges to promulgate or recommend local rules for adoption by the district court. Effective August 1, 1985, Rule 83 F.R.Civ.P., governing adoption of local rules, was amended to achieve greater participation by the bar, scholars, and the public in the rule making process; to authorize the judicial council to abrogate local rules; and to make certain that single-judge standing orders are not inconsistent with these rules or local rules. Rule 9029 has been amended to incorporate Rule 83. The term 'court' in the last sentence of the rule includes the judges of the district court and the bankruptcy judges of the district. Rule 9001(4). -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in text, are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 15115 Document 460 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9030 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9030. Jurisdiction and Venue Unaffected -STATUTE- These rules shall not be construed to extend or limit the jurisdiction of the courts or the venue of any matters therein. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES The rule is an adaptation of Rule 82 F.R.Civ.P. ------DocID 15116 Document 461 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9031 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9031. Masters Not Authorized -STATUTE- Rule 53 F.R.Civ.P. does not apply in cases under the Code. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule precludes the appointment of masters in cases and proceedings under the Code. -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in text, are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. ------DocID 15117 Document 462 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9032 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9032. Effect of Amendment of Federal Rules of Civil Procedure -STATUTE- The Federal Rules of Civil Procedure which are incorporated by reference and made applicable by these rules shall be the Federal Rules of Civil Procedure in effect on the effective date of these rules and as thereafter amended, unless otherwise provided by such amendment. -REFTEXT- REFERENCES IN TEXT The Federal Rules of Civil Procedure, referred to in text, are set out in the Appendix to Title 28, Judiciary and Judicial Procedure. The effective date of these rules, referred to in text, is Aug. 1, 1983. See Effective Date note set out prec. Rule 1001 of this Appendix. ------DocID 15118 Document 463 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule 9033 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART IX -HEAD- Rule 9033. Review of Proposed Findings of Fact and Conclusions of Law in Non-Core Proceedings -STATUTE- (a) Service In non-core proceedings heard pursuant to 28 U.S.C. Sec. 157(c)(1), the bankruptcy judge shall file proposed findings of fact and conclusions of law. The clerk shall serve forthwith copies on all parties by mail and note the date of mailing on the docket. (b) Objections: Time for Filing Within 10 days after being served with a copy of the proposed findings of fact and conclusions of law a party may serve and file with the clerk written objections which identify the specific proposed findings or conclusions objected to and state the grounds for such objection. A party may respond to another party's objections within 10 days after being served with a copy thereof. A party objecting to the bankruptcy judge's proposed findings or conclusions shall arrange promptly for the transcription of the record, or such portions of it as all parties may agree upon or the bankruptcy judge deems sufficient, unless the district judge otherwise directs. (c) Extension of Time The bankruptcy judge may for cause extend the time for filing objections by any party for a period not to exceed 20 days from the expiration of the time otherwise prescribed by this rule. A request to extend the time for filing objections must be made before the time for filing objections has expired, except that a request made no more than 20 days after the expiration of the time for filing objections may be granted upon a showing of excusable neglect. (d) Standard of Review The district judge shall make a de novo review upon the record or, after additional evidence, of any portion of the bankruptcy judge's findings of fact or conclusions of law to which specific written objection has been made in accordance with this rule. The district judge may accept, reject, or modify the proposed findings of fact or conclusions of law, receive further evidence, or recommit the matter to the bankruptcy judge with instructions. -SOURCE- (Added Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Section 157(c)(1) of title 28 requires a bankruptcy judge to submit proposed findings of fact and conclusions of law to the district court when the bankruptcy judge has heard a non-core proceeding. This rule, which is modeled on Rule 72 F.R.Civ.P., provides the procedure for objecting to, and for review by, the district court of specific findings and conclusions. Subdivision (a) requires the clerk to serve a copy of the proposed findings and conclusions on the parties. The bankruptcy clerk, or the district court clerk if there is no bankruptcy clerk in the district, shall serve a copy of the proposed findings and conclusions on all parties. Subdivision (b) is derived from Rule 72(b) F.R.Civ.P. which governs objections to a recommended disposition by a magistrate. Subdivision (c) is similar to Rule 8002(c) of the Bankruptcy Rules and provides for granting of extensions of time to file objections to proposed findings and conclusions. Subdivision (d) adopts the de novo review provisions of Rule 72(b) F.R.Civ.P. ------DocID 15119 Document 464 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES PART X -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART X -HEAD- PART X - UNITED STATES TRUSTEES ------DocID 15120 Document 465 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule X-1001 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART X -HEAD- Rule X-1001. Applicability of Rules -STATUTE- (a) Part X Rules The rules in Part X apply to cases under the Code filed in or transferred to any district in which a United States trustee is authorized. (b) Inapplicability of Rules The following rules do not apply in cases under the Code filed in or transferred to any district specified in subdivision (a) of this rule: 2001(a), (c), 2002(a)(1), 2003(a),(b)(1), (2),(d), 2007, 2008, 2009(c), (d), (e), 2010(a), 5008, and the second sentence of 6003. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Section 1501 of the Code lists the following judicial or 'pilot' districts in which United States trustees are to be appointed by the Attorney General pursuant to 28 U.S.C. Sec. 581: Northern District of Alabama, Central District of California, Districts of Colorado, District of Columbia, Delaware, Northern District of Illinois, Districts of Kansas, Maine, Massachusetts, Minnesota, New Hampshire, New Jersey, Southern District of New York, Districts of North Dakota, Rhode Island, South Dakota, Northern District of Texas, and Eastern District of Virginia. These Part X rules are for use in those districts in connection with the duties and responsibilities of the United States trustees. They are set out separately to facilitate their repeal in the event the United States trustee system is not continued by Congress beyond March 31, 1984. See Pub. L. 95-598, Sec. 408(c). Subdivision (b) indicates the rules that are not applicable in the pilot districts. Following is a list of the rules in Part X and the rules which they affect, in addition to those listed in Rule X-1001: --------------------------------------------------------------------- Rules in Part X Rules in Parts I through IX affected by rules in Part X --------------------------------------------------------------------- X-1002 1007(d) X-1002(a) 1007(a) X-1002(b) 1007(a)(4) 1002(b) 1003(b) 1007(f) X-1003(a) 2001(a) X-1003(b) 2001(c) X-1004 2008 2009(e) 2013(a) X-1005 2009(e) X-1005(a) 2009(c) X-1006 2007 (as to chapter 11) X-1006(a) 2003(a) X-1006(b)(1) 2003(b)(1) X-1006(b)(2) 2003(b)(2) X-1006(c) 2003(d) X-1007(a) 2015(a)(1) X-1007(b) 4002 X-1008 2002(a),(b) X-1008(a) 2002(a)(2),(5),(7),(f) ------------------------------- Cross references to rules affected by rules in Part X (in addition to those listed in Rule X-1001): --------------------------------------------------------------------- Rule affected Rules in Part X --------------------------------------------------------------------- 1002(b) X-1002(b) 1003(b) X-1002(b) 1007(a)(4) X-1002(b) 1007(a) X-1002(a) 1007(d) X-1002 2002(a) X-1008 2002(a)(2) X-1008(a) 2002(a)(5) X-1008(a) 2002(a)(7) X-1008(a) 2002(b) X-1008(a) 2002(f) X-1008(a) 2015(a)(1) X-1007(a) ------------------------------- ------DocID 15121 Document 466 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule X-1002 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART X -HEAD- Rule X-1002. Petitions, Lists, Schedules and Statements -STATUTE- (a) Petitions and Accompanying Materials (1) Number of Copies. In addition to the number of copies required to be filed by local rule, there shall be filed one copy of the petition, the list of creditors, the schedules of assets and liabilities, the schedule of current income and expenditures, the statement of financial affairs, the statement of executory contracts, the statement of intention and the Chapter 13 Statement and any amendments thereto. (2) Transmission to United States Trustee. The clerk shall forthwith transmit to the United States trustee the additional copies filed pursuant to this subdivision. Written notice of a hearing for an extension of time to file schedules, statements and lists pursuant to Rule 1007(a)(4) and (c) shall be given the United States trustee. (b) Filing Lists by Debtor in Chapter 11 Reorganization Cases In chapter 11 cases, the debtor shall file an additional copy of the lists of creditors and of the 20 largest unsecured creditors required by Rule 1007(a) and (d). The lists shall contain additional information as the United States trustee may require and one copy of each shall be transmitted forthwith by the clerk to the United States trustee. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rule X-1002 requires that a copy of the petition commencing a case under the Code, whether it is a case under chapter 7, 9, 11, or 13, be sent to the United States trustee. This supplements Rules 1002(b) and 1003(b). Sections 301-303 of the Code provide that petitions are to be filed with the bankruptcy court. Nevertheless, the United States trustee should be apprised of the commencement of every case and this is most easily accomplished by providing that office with a copy of the petition. The clerk also must transmit a copy of the lists of creditors and any schedules and statements that are filed. Rule 1007(d) requires a list of the 20 largest creditors and a list of all creditors to be filed. These lists should be transmitted to the United States trustee. The clerk should transmit the papers specified in this rule forthwith on their filing because the United States trustee requires the information to perform certain duties, e.g., appointment of an interim trustee, Sec. 15701 of the Code, and appointment of a committee of unsecured creditors, Sec. 151102. Lists of the largest creditors have frequently been deficient, and have hampered the United States trustee in appointing a creditors' committee. Subdivision (b) of this rule provides the United States trustee with authority to require sufficient information to assemble a creditors' committee that complies with Sec. 1102(b) of the Code. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivisions (a) and (b) are amended to conform to the amendments to Rules 1002 and 1007. ------DocID 15122 Document 467 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule X-1003 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART X -HEAD- Rule X-1003. Appointment of Interim Trustee Before Order for Relief in a Chapter 7 Liquidation Case -STATUTE- (a) Appointment At any time following the commencement of an involuntary liquidation case and before an order for relief, the court on written motion of a party in interest may order the appointment of an interim trustee under Sec. 15303 of the Code. The motion shall set forth the necessity for the appointment and may be granted only after hearing on notice to the debtor, the United States trustee, and other parties in interest as the court may designate. (b) Form of Order The order directing the appointment of an interim trustee shall state why the appointment is necessary and shall specify the trustee's duties. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule parallels Rule 2001(a) with minor adjustments to reflect that in a United States trustee district, it is the United States trustee, rather than the court, who appoints interim trustees. ------DocID 15123 Document 468 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule X-1004 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART X -HEAD- Rule X-1004. Notification to Trustee of Selection; Blanket Bond -STATUTE- (a) Notification The United States trustee shall immediately notify the person selected as the trustee how to qualify and, if applicable, the amount of the bond. A trustee that has filed a blanket bond pursuant to subdivision (b) of this rule and has been selected as trustee in a chapter 7 or chapter 13 case that does not notify the court in writing of rejection of the office within five days after receipt of notice of selection shall be deemed to have accepted the office. Any other person selected as trustee shall give written notification to the court and the United States trustee of acceptance of the office within five days after receipt of notice of selection. (b) Blanket Bond The United States trustee may authorize a blanket bond in favor of the United States conditioned on the faithful performance of official duties by the trustee or trustees to cover (1) a person who qualifies as trustee in a number of cases, and (2) a number of trustees each of whom qualifies in a different case. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule parallels Rules 2008 and 2010, except for adjustments to reflect that in a United States trustee district, it is the United States trustee, rather than the court, who appoints interim trustees and sets the bond. If a person selected as trustee accepts the office, he should also qualify within five days after the selection as required by Sec. 322(a). A standing trustee appointed for chapter 13 cases may notify the court and the United States trustee of the acceptance of office in advance of the commencement of individual cases. No bond is required if the United States trustee personally serves as trustee in a case; see Sec. 15322(a). NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a) is amended to eliminate the need for a standing chapter 13 trustee or member of the panel of chapter 7 trustees to accept or reject an appointment. ------DocID 15124 Document 469 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule X-1005 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART X -HEAD- Rule X-1005. Trustees for Estates When Joint Administration Ordered -STATUTE- (a) Appointment of Trustees for Estates Being Jointly Administered (1) Chapter 7 Liquidation Cases. The United States trustee may appoint one or more interim trustees for estates being jointly administered in chapter 7 cases. (2) Chapter 11 Reorganization Cases. If a trustee is ordered, the United States trustee may appoint one or more trustees for estates being jointly administered in chapter 11 cases. (3) Chapter 13 Individual's Debt Adjustment Cases. The United States trustee may appoint one or more trustees for estates being jointly administered in chapter 13 cases. (b) Potential Conflicts of Interest On a showing that creditors of the different estates will be prejudiced by conflicts of interest of a common trustee the court shall order the appointment of separate trustees for estates being jointly administered. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule parallels Rule 2009(c) and (d), and differs only in that it makes clear that the United States trustee, rather than the court, has the responsibility for appointing trustees. See Sec. 15701, 151104, 151302 of the Code and 28 U.S.C. Sec. 586(b). If separate trustees are ordered pursuant to subdivision (b), separate and successor trustees should be chosen as prescribed by Sec. 703 of the Code. If the occasion for another election arises, the United States trustee should call a meeting of creditors for this purpose. Rule 2009(e) is not applicable in pilot districts as a direct restriction on the United States trustee because the exercise of discretion by the executive branch is not subject to advance restriction by rule of court or otherwise. United States v. Cox, 342 F.2d 167 (5th Cir. 1965), cert. denied, 365 U.S. 863 (1965); United States v. Frumento, 409 F. Supp. 136, 141 (E.D. Pa.), aff'd, 563 F.2d 1083 (3d Cir. 1977), cert. denied, 434 U.S. 1072 (1977); accord, Smith v. United States, 375 F.2d 243 (5th Cir. 1967); House Report No. 95-595, 95th Cong., 1st Sess. 110 (1977). Any appointment of a trustee by a United States trustee in a case under chapter 11 may be disapproved by the court for cause; see Sec. 151104(c). ------DocID 15125 Document 470 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule X-1006 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART X -HEAD- Rule X-1006. Meetings of Creditors or Equity Security Holders -STATUTE- (a) Date and Place The United States trustee shall call a meeting of creditors to be held not less than 20 nor more than 40 days after the order for relief. If there is an appeal from or a motion to vacate the order for relief, or if there is a motion to dismiss the case, the United States trustee may set a later time for the meeting. The meeting may be held at a regular place for holding court or at any other place designated by the United States trustee within the district convenient for the parties in interest. If the United States trustee designates a place for the meeting which is not regularly staffed by the United States trustee or an assistant who may preside at the meeting, the meeting may be held not more than 60 days after the order for relief. (b) Order of Meeting (1) Meeting of Creditors. The United States trustee or a designee shall preside at the meeting of creditors. The business of the meeting shall include the examination of the debtor under oath and, in a chapter 7 liquidation case, may include the election of a trustee or of a creditors' committee. The presiding officer shall have authority to administer oaths. (2) Meeting of Equity Security Holders. If the court orders a meeting of equity security holders pursuant to Sec. 341(b) of the Code, the United States trustee shall fix a date for the meeting and the trustee or a designee shall preside. (c) Report to the Court The United States trustee shall transmit to the court the name and address of any person elected trustee or entity elected a member of a creditors' committee. If an election is disputed, the presiding officer shall promptly inform the court in writing of the dispute. Pending disposition of the dispute by the court, the interim trustee shall continue in office. If no motion for the resolution of the election dispute is made to the court within ten days after the date of the creditors' meeting, the interim trustee shall serve as trustee in the case. (d) Special Meetings The United States trustee may call a special meeting of creditors on application or on the United States trustee's own initiative. (e) Final Meeting If the United States trustee calls a final meeting of creditors in a case in which the net proceeds realized exceed $250, the clerk shall mail a summary of the trustee's final account to the creditors with the notice of the meeting, together with a statement of the amount of the claims allowed. The trustee or a designee shall attend the final meeting and shall, if requested, report on the administration of the estate. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule imposes on the United States trustee the duty to fix the date for the meeting of creditors required by Sec. 341(a) of the Code and the meeting of equity security holders if one is ordered by the court. Although the United States trustee fixes the date of the meeting, a duty that is parallel to that imposed on the court by Rule 2003(a), the clerk of the bankrupcty court transmits the notice of the meeting unless the court orders otherwise, as prescribed by Rule 2002(a)(1). As indicated in Rule X-1006, there is flexibility with regard to the location of the meeting. Pursuant to Sec. 702 and 705 of the Code, creditors may elect a trustee and a committee in a chapter 7 case. Subdivision (b) of this rule provides that the United States trustee or his designee will preside over any election that is held under those sections. While Rule X-1006 is applicable to cases under chapter 11 and chapter 13, trustees and committees are not elected in these cases. Subdivision (c) recognizes that the court should be informed immediately about the election or nonelection of a trustee in a chapter 7 case. This subdivision also notes that there may be a disputed election, but in no event may the United States trustee or his designee resolve the dispute. For purposes of expediency, the results of the election could be obtained for each alternative presented by the dispute and reported to the court. Thus, when an interested party (not the United States trustee) moves for resolution of the dispute, the court will determine the issue and another meeting to conduct the election may not be necessary. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT Subdivision (a) is amended to conform to the amendment to Rule 2003(a). See the Committee Note to Rule 2003. ------DocID 15126 Document 471 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule X-1007 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART X -HEAD- Rule X-1007. Duty of Trustee or Debtor in Possession to Make Reports, Furnish Information, and Cooperate with United States Trustee -STATUTE- (a) Duty To File Inventory A trustee or debtor in possession shall file the inventory required by Rule 2015(a)(1) with the United States trustee and with the court if the court so directs. (b) Duty To Furnish Information to, and Cooperate With, United States Trustee The trustee or debtor in possession shall cooperate with the United States trustee by furnishing such information as the United States trustee may reasonably require in supervising the administration of the estate. The trustee or debtor in possession in a chapter 11 reorganization case, and the debtor in a chapter 13 individual's debt adjustment case when the debtor is engaged in business, shall furnish the United States trustee and file with the clerk regular reports of operations as the United States trustee may reasonably require. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a) supplements Rule 2015(a) and the legislative direction that the administration of cases is under the supervision of the United States trustee. 28 U.S.C. Sec. 586(a)(3). Thus, in the absence of a contest, the court should not become involved in receiving or reviewing interim reports of the assets of a debtor, except under the limited circumstances set forth in Sec. 704(7) of the Code. The United States trustee is charged with the supervision of the administration of all cases under chapters 7, 11 and 13. 28 U.S.C. Sec. 586(a), and chapter 15 of the Code. Subdivision (b), which is based in part on Rule 4002, makes clear the duties of the parties to assist the United States trustee in performing that function. The timely filing of reports of operations is crucial to the efficient administration of chapter 11 and business chapter 13 cases. Under the former Bankruptcy Act, these reports were regularly filed with the bankruptcy judges, but since the United States trustees unlike courts cannot enter orders, this rule enables the United States trustee to superintend the activities of trustees and debtors in possession. ------DocID 15127 Document 472 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule X-1008 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART X -HEAD- Rule X-1008. Notices to United States Trustee -STATUTE- (a) Notices To Be Furnished to United States Trustees Unless the United States trustee otherwise requests, the United States trustee shall receive notice of and pleadings relating to: (1) the matters described in Rule 2002(a)(2), (5), (7), 2002(b), and (f); (2) applications for approval of the employment of professional persons under Rule 2014; (3) applications for compensation of professional persons under Rule 2016; (4) the hearing to consider a disclosure statement pursuant to Rule 3017; (5) the hearing on the appointment of a trustee or examiner; and (6) any other matter notice of which is requested by the United States trustee or ordered by the court. (b) Time for Notice to United States Trustee Subject to Rule 2002, the United States trustee shall receive notice within sufficient time to permit the United States trustee to participate in the matter. (c) United States Trustee Need Not Furnish Notice The United States trustee shall not be required to give any notice provided for in Rule 2002(a) or (b). -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule supplements Rule 2002 and provides for notice to the United States trustee of those matters within his responsibility. The rule omits those notices described in Rule 2002(a)(1) because a meeting of creditors may be convened only by the United States trustee. Rule X-1008 also omits the notice described in Rule 2002(a)(3) (compromise of controversies), 2002(a)(4) (claims against a surplus), and 2002(a)(6) (acceptance or rejection of proposed modifications of a plan in a case under chapter 11), because these do not relate to matters that generally involve the United States trustee. When the facts are such that the United States trustee should be able to monitor those aspects of a case, the rule provides that the United States trustee may request notices. Similarly, this rule permits a United States trustee in a particular judicial district to request notices in certain categories, or request not to receive notices in other categories when the practice in that district makes that desirable. ------DocID 15128 Document 473 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule X-1009 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART X -HEAD- Rule X-1009. Right to be Heard; Filing Papers -STATUTE- (a) Right To Be Heard The United States trustee may raise and appear and be heard on any issue relating to the United States trustee's responsibilities in a case under the Code. (b) Filing of Papers In the interest of effective administration, the court or the United States trustee may require a party in interest to file with the United States trustee a copy of any paper filed with the court. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Subdivision (a) gives the United States trustee standing to be heard. He should have the opportunity, for example, to object to or support actions proposed to be taken by a chapter 7 trustee. Similarly, he should have the opportunity to move to convert or dismiss a chapter 11 case if the operation of the business or management of the property precludes effective administration of the case under that chapter. This rule does not attempt to expand the authority of the United States trustee to move to convert or dismiss a case under Sec. 1112(b), and leaves the interpretation of that provision to the courts. Subdivision (a) gives effect to the Congressional intent that the United States trustee shall have an active role in cases under the Code. Subdivision (b) enables the United States trustee to be informed of all developments in a case. It supplements the provisions of Rule X-1008 which requires certain notices and pleadings to be sent to the United States trustee. ------DocID 15129 Document 474 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Rule X-1010 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS PART X -HEAD- Rule X-1010. Prohibition of Ex Parte Contacts -STATUTE- The United States trustee and assistants to and agents of the United States trustee shall refrain from ex parte meetings and communications with the bankruptcy court concerning matters affecting a particular case or proceeding. This rule does not preclude communication with the court to discuss general problems of administration and improvement of bankruptcy administration, including the operation of the United States trustee system. -SOURCE- (As amended Mar. 30, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This rule and Rule 9003 do not supersede or limit any applicable canon of professional responsibility or judicial conduct. See Advisory Committee Note to Rule 9003. Communication between the judicial and administrative systems is expressly not prohibited. It may be desirable that the court and the United States trustee cooperatively seek ways to improve the administration of cases under the Code. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT This rule is amended to conform to the amendment to Rule 9003. ------DocID 15130 Document 475 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES OFFICIAL FORMS -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- OFFICIAL FORMS -MISC1- (Note: These official forms should be observed and used with such alterations as may be appropriate to suit the circumstances. See Rule 9009.) ------DocID 15131 Document 476 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 1 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 1. - Voluntary Petition -STATUTE- UNITED STATES BANKRUPTCY COURT FOR THE XXXXXX DISTRICT OF XXXXXXXXXX XXXXXXXXXXXXXXXX In re XXXXXXXXXXXXXXX, Debtor (set forth here all names including trade names used by Debtor within last Case No. XXXX 6 years). Social Security No. XXXX and Debtor's Employer's Tax Identification No. XXXX XXXXXXXXXXXXXXXX VOLUNTARY PETITION 1. Petitioner's mailing address, including county, is XXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX. 2. Petitioner has resided (or has been domiciled or Petitioner's principal place of business has been or The principal assets of the petitioner have been) within this district for the preceding 180 days (or for a longer portion of the preceding 180 days than in any other district). 3. Petitioner is qualified to file this petition and is entitled to the benefits of title 11, United States Code as a voluntary debtor. 4. (If appropriate) A copy of petitioner's proposed plan, dated XXXX, is attached (or Petitioner intends to file a plan pursuant to chapter 11 or chapter 13) of title 11, United States Code. 5. (If petitioner is a corporation) Exhibit 'A' is attached to and made part of this petition. (6) (If petitioner is an individual whose debts are primarily consumer debts) Petitioner is aware that (he or she) may proceed under chapter 7, 11, 12, or 13 of title 11, United States Code, understands the relief available under each such chapter, and chooses to proceed under chapter 7 of such title. (7) (If petitioner is an individual whose debts are primarily consumer debts and such petitioner is represented by an attorney) A declaration or an affidavit in the form of Exhibit 'B' is attached to and made a part of this petition. WHEREFORE, petitioner prays for relief in accordance with chapter 7 (or chapter 11 or chapter 13) of title 11, United States Code. Signed: XXXXXXXXXXXXXX, Attorney for Petitioner. Address: XXXXXXXXXXXXXX, XXXXXXXXXXXXXX. (Petitioner signs if not represented by attorney.) XXXXXXXXXXXXXX, Petitioner. I, XXXXXX, the petitioner named in the foregoing petition, declare under penalty of perjury that the foregoing is true and correct. Executed on XXXXXX Signature: XXXXXXXX Petitioner. EXHIBIT 'A' (If petitioner is a corporation, this Exhibit 'A' shall be completed and attached to the petition pursuant to paragraph 5 thereof.) (CAPTION AS IN FORM NO. 1) FOR COURT USE ONLY XXXXXXXXXXXXXXX Date Petition Filed XXXXXXXXXXXXXXX Case Number XXXXXXXXXXXXXXX Bankruptcy Judge 1. Petitioner's employer identification num- ber is XXXXXX. 2. If any of petitioner's securities are registered under section 12 of the Securities and Exchange Act of 1934, SEC file number is XXXXXX. 3. The following financial data is the latest available information and refers to petitioner's condition on XXXXXX. --------------------------------------------------------------------- --------------------------------------------------------------------- a. Total assets: $XXXXXXXXXXX b. Total $XXXXXXXXXXX liabilities: Approximate number of holders Secured debt, $XXXX XXXXXXX excluding that listed below Debt securities held $XXXX XXXXXXX by more than 100 holders Secured $XXXX XXXXXXX Unsecured $XXXX XXXXXXX Other liabilities, $XXXX XXXXXXX excluding contingent or unliquidated claims Number of shares of $XXXX XXXXXXX common stock ------------------------------- Comments, if any: XXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX 4. Brief description of petitioner's business: XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX 5. (If presently available, supply the following information) The name of any person who directly or indirectly owns, controls, or holds, with power to vote, 20% or more of the voting securities of petitioner is XXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX 6. (If presently available, supply the following information) The names of all corporations 20% or more of the outstanding voting securities of which are directly or indirectly owned, controlled, or held, with power to vote, by petitioner are XXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX EXHIBIT 'B' (If petitioner is an individual whose debts are primarily consumer debts, this Exhibit 'B' shall be completed and attached to the petition pursuant to paragraph (7) thereof.) (CAPTION AS IN FORM NO. 1) FOR COURT USE ONLY XXXXXXXXXXXXXXX Date Petition Filed XXXXXXXXXXXXXXX Case Number XXXXXXXXXXXXXXX Bankruptcy Judge I, XXXXXXXXXXXX, the attorney for the petitioner named in the foregoing petition, declare that I have informed the petitioner that (he or she) may proceed under chapter 7, 11, 12, or 13 of title 11, United States Code, and have explained the relief available under each such chapter. Executed on XXXXXXXX Signature XXXXXXXXXX Attorney for Petitioner -SOURCE- (As amended July 10, 1984, Pub. L. 98-353, title III, Sec. 322, 98 Stat. 357; Sept. 19, 1986, eff. Sept. 19, 1986; Pub. L. 99-554, title II, Sec. 283(aa), Oct. 27, 1986, 100 Stat. 3118.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form may be used to commence a voluntary case under chapter 7, 11, or 13 of the Bankruptcy Code. A chapter 9 petition requires other allegations (see Sec. 109(c) of the Code) but this form may be adapted for such use. The title of the case, in the caption of the form, should include all names used by the debtor, such as trade names, names used in doing business, married names and maiden names. This will enable creditors to properly identify the debtor when they receive notices and orders. A joint petition, available for an individual and spouse, may be filed under chapter 7, 11, or 13. See Sec. 302 of the Code. This form may be adapted for such use. The unsworn declaration at the end of the petition conforms with 28 U.S.C. Sec. 1746 (1976) which permits the declaration to be made in the manner indicated with the same force and effect as a sworn statement. The form may be adapted for use outside of the United States by adding the words 'under the laws of the United States' after the word 'perjury'. Exhibit 'A' to be attached to the petition of a corporate debtor is for the purpose of supplying the Securities and Exchange Commission with the information it requires at the beginning stages of a chapter 11 case. NOTES OF ADVISORY COMMITTEE ON RULES - 1986 AMENDMENT Paragraphs 6 and 7 and Exhibit B were added by Sec. 322 of the 1984 amendments. The references to chapters 11 and 12 of title 11 of the United States Code found in paragraph 6 and Exhibit B were added by Sec. 283(aa) of the 1986 amendments. 1986 AMENDMENT Par. (6). Pub. L. 99-554 inserted reference to chapters 11 and 12. Exhibit B. Pub. L. 99-554 inserted reference to chapters 11 and 12. 1984 AMENDMENT Pars. (6), (7). Pub. L. 98-353 added pars. (6) and (7). Exhibit B. Pub. L. 98-353 added Exhibit 'B'. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, see section 302(a) of Pub. L. 99-554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353, set out as a note under section 101 of this title. ------DocID 15132 Document 477 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 2 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 2. - Application and Order To Pay Filing Fee in Installments -STATUTE- UNITED STATES BANKRUPTCY COURT FOR THE XXXXXX DISTRICT OF XXXXXXXXXX XXXXXXXXXXXXXXXX In re XXXXXXXXXXXXXXX, Case No. XXXX Debtor. XXXXXXXXXXXXXXXX APPLICATION TO PAY FILING FEE IN INSTALLMENTS In accordance with Bankruptcy Rule 1006, application is made for permission to pay the filing fee on the following terms: $XXXXX with the filing of the petition, and the balance of $XXXXX in XXX installments, as follows: $XXXXX on or before XXXXXXXXXX $XXXXX on or before XXXXXXXXXX $XXXXX on or before XXXXXXXXXX $XXXXX on or before XXXXXXXXXX I certify that I have not paid any money or transferred any property to an attorney or any other person for services in connection with this case or in connection with any other pending bankruptcy case and that I will not make any payment or transfer any property for services in connection with the case until the filing fee is paid in full. Dated: XXXXXX Signed: XXXXXXXX, Applicant. Address: XXXXXXX, XXXXXXXX ORDER IT IS ORDERED that the debtor pay the filing fee in installments on the terms set forth in the foregoing application. IT IS FURTHER ORDERED that until the filing fee is paid in full the debtor shall not pay, and no person shall accept, any money for services in connection with this case, and the debtor shall not relinquish, and no person shall accept, any property as payment for services in connection with this case. Dated: XXXXXX BY THE COURT XXXXXXXXXX Bankruptcy Judge -SOURCE- (As amended Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES The application for permission to pay filing fees in installments may be filed in accordance with 28 U.S.C. Sec. 1930(a), and Rule 1006. Only an individual debtor in a voluntary case, or individual debtors filing a joint petition may pay the fee in installments. If a joint petition is filed, this form may be adapted for use by both petitioners. NOTES OF ADVISORY COMMITTEE ON RULES - 1986 AMENDMENT Official Forms 2 and 3 have been combined. ------DocID 15133 Document 478 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 3 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 3. - Order for Payment of Filing Fee in Installments -STATUTE- (ABROGATED SEPT. 19, 1986) ------DocID 15134 Document 479 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 4 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 4. - Unsworn Declaration Under Penalty of Perjury on Behalf of a Corporation or Partnership -STATUTE- I, XXXXXX, (the president or other officer or an authorized agent of the corporation) (or a member or an authorized agent of the partnership) named as petitioner in the foregoing petition, declare under penalty of perjury that the foregoing is true and correct, and that the filing of this petition on behalf of the (corporation) (or partnership) has been authorized. Executed on XXXXXX Signature: XXXXXXXXXX -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rule 1008 requires all petitions to be verified. This form is to be used on behalf of a corporation or partnership. It may be adapted for use in connection with other papers required by these rules to be verified. See the Note to Rule 9011. 28 U.S.C. Sec. 1746 permits an unsworn declaration to be used in lieu of a verification. See Advisory Committee Note to Form No. 1. ------DocID 15135 Document 480 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 5 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 5. - Certificate of Commencement of Case -STATUTE- (CAPTION AS IN FORM NO. 1) CERTIFICATE OF COMMENCEMENT OF CASE I hereby certify that on XXXXXX, XXX the above named debtor filed a petition (or if applicable a petition was filed against the above named debtor) requesting relief under chapter XXX of title 11, United States Code (the Bankruptcy Code). Dated: XXXXXX XXXXXXXXXXXXXXXXXX Clerk of the Bankruptcy Court. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is adapted from certificates that have been in use in several districts. The certificate may be used to alert persons dealing with the debtor or property of the debtor of the pendency of a case under the Code before the notice of the meeting of creditors is sent. ------DocID 15136 Document 481 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 6 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 6. - Schedules of Assets and Liabilities -STATUTE- (CAPTION AS IN FORM NO. 1) SCHEDULE A. - STATEMENT OF ALL LIABILITIES OF DEBTOR. Schedules A-1, A-2 and A-3 must include all the claims against the debtor or the debtor's property as of the date of the filing of the petition by or against the debtor. -------------------------------------- SCHEDULE A-1. - CREDITORS HAVING PRIORITY. (1) Nature of claim (2): Name of creditor and complete mailing address including zip code (3): Specify when claim was incurred and the consideration therefor; when claim is subject to setoff, evidenced by a judgment, negotiable instrument, or other writing, or incurred as partner or joint contractor, so indicate; specify name of any partner or joint contractor on any debt (4): Indicate if claim is contingent, unliquidated, or disputed (5): Amount of claim -------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- a. Wages, salary, and $XXXX commissions, including vacation, severance and sick leave pay owing to employees not exceeding $2,000 to each, earned within 90 days before filing of petition or cessation of business (if earlier specify date). b. Contributions to $XXXX employee benefit plans for services rendered within 180 days before filing of petition or cessation of business (if earlier specify date). c. Claims of farmers, $XXXX not exceeding $2,000 for each individual, pursuant to 11 U.S.C. Sec. 507(a)(5)(A). d. Claims of United $XXXX States fishermen, not exceeding $2,000 for each individual, pursuant to 11 U.S.C. Sec. 507(a)(5)(B). e. Deposits by $XXXX individuals, not exceeding $900 for each for purchase, lease, or rental of property or services for personal, family, or household use that were not delivered or provided. f. Taxes owing (itemize $XXXX by type of tax and taxing authority) (1) To the United $XXXX States (2) To any state $XXXX (3) To any other $XXXX taxing authority ---------------------- Total $XXXX ------------------------------- -------------------------------------- SCHEDULE A-2. - CREDITORS HOLDING SECURITY (1) Name of creditor and complete mailing address including zip code (2): Description of security and date when obtained by creditor (3): Specify when claim was incurred and the consideration therefor; when claim is subject to setoff, evidenced by a judgment, negotiable instrument, or other writing, or incurred as partner or joint contractor, so indicate; specify name of any partner or joint contractor on any debt (4): Indicate if claim is contingent, unliquidated, or disputed (5): Market value (6): Amount of claim without deduction of value of security --------- THE FOLLOWING DATA ARE NOT AVAILABLE -------------------------------------- Schedule A-3. - Creditors having unsecured claims without priority. --------------------------------------------------------------------- : : : --------------------------------------------------------------------- (1) :(2) :(3) :(4) Name of :Specify when :Indicate if :Amount of claim creditor : claim was : claim is : (including : incurred and : contingent, : last known : the : unliquidated, : holder of any : consideration : or disputed : negotiable : therefor; when: : instrument) : claim is : : and complete : contingent, : : mailing : unliquidated, : : address : disputed, : : including zip : subject to : : code : setoff, : : : evidenced by a: : : judgment, : : : negotiable : : : instrument, or: : : other writing,: : : or incurred as: : : partner or : : : joint : : : contractor, so: : : indicate; : : : specify name : : : of any partner: : : or joint : : : contractor on : : : any debt : : ---------------- : : Total : $XXXX ------------------------------- SCHEDULE B - STATEMENT OF ALL PROPERTY OF DEBTOR Schedules B-1, B-2, B-3, and B-4 must include all property of the debtor as of the date of the filing of the petition by or against the debtor. Schedule B-1. - Real Property --------------------------------------------------------------------- --------------------------------------------------------------------- Description and Nature of interest Market value of location of all (specify all deeds debtor's interest real property in and written without deduction which debtor has an instruments for secured claims interest (including relating thereto) listed in Schedule equitable and A-2 or exemptions future interests, claimed in Schedule interests in B-4 estates by the entirety, community property, life estates, leaseholds, and rights and powers exercisable for the debtor's own benefit) ---------------------- Total $XXX ------------------------------- Schedule B-2. - Personal Property --------------------------------------------------------------------- --------------------------------------------------------------------- Type of Property Description and Market value of Location debtor's interest without deduction for secured claims listed on Schedule A-2 or exemptions claimed in Schedule B-4 Total $XXX ------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- a. Cash on hand $XXXX b. Deposits of money XXXX with banking institutions, savings and loan associations, brokerage houses, credit unions, public utility companies, landlords and others c. Households goods, XXXX supplies and furnishings d. Books, pictures, and XXXX other art objects; stamp, coin and other collections e. Wearing apparel, XXXX jewelry, firearms, sports equipment and other personal possessions f. Automobiles, trucks, XXXX trailers and other vehicles g. Boats, motors and XXXX their accessories h. Livestock, poultry XXXX and other animals i. Farming equipment, XXXX supplies and implements j. Office equipment, XXXX furnishings and supplies k. Machinery, fixtures, XXXX equipment and supplies (other than those listed in Items j and l) used in business l. Inventory XXXX m. Tangible personal XXXX property of any other description n. Patents, copyrights, XXXX licenses, franchises and other general intangibles (specify all documents and writings relating thereto) o. Government and XXXX corporate bonds and other negotiable and nonnegotiable instruments p. Other liquidated XXXX debts owing debtor q. Contingent and XXXX unliquidated claims of every nature, including counterclaims of the debtor (give estimated value of each) r. Interests in XXXX insurance policies (name insurance company of each policy and itemize surrender or refund value of each) s. Annuities (itemize XXXX and name each issuer) t. Stock and interests XXXX in incorporated and unincorporated companies (itemize separately) u. Interests in XXXX partnerships v. Equitable and future XXXX interests, life estates, and rights or powers exercisable for the benefit of the debtor (other than those listed in schedule B-1) (specify all written instruments relating thereto) ---------------------- Total $XXXX ------------------------------- Schedule B-3. - Property not otherwise scheduled --------------------------------------------------------------------- --------------------------------------------------------------------- Type of Property Description and Market value of Location debtor's interest without deduction for secured claims listed in Schedule A-2 or exemption claimed in Schedule B-4 ------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- a. Property transferred $XXX under assignment for benefit of creditors, within 120 days prior to filing of petition (specify date of assignment, name and address of assignee, amount realized therefrom by the assignee, and disposition of proceeds so far as known to debtor) b. Property of any kind XXX not otherwise scheduled ---------------------- Total $XXX ------------------------------- Debtor selects the following property as exempt pursuant to 11 U.S.C. Sec. 522(d) (or the laws of the State of XXXXXX.) Schedule B-4. - Property claimed as exempt --------------------------------------------------------------------- : : : --------------------------------------------------------------------- Type of :Location, :Specify statute:Value claimed Property : description, : creating the : exempt : and, so far as: exemption : : relevant to : : : the claim of : : : exemption, : : : present use of: : : property : : --------------------------------------------------------------------- : : : $XXX : : : XXX : : Total : $XXX ------------------------------- Summary of debts and property. (From the statements of the debtor in Schedules A and B) --------------------------------------------------------------------- Schedule Total --------------------------------------------------------------------- Debts A-1/a,b Wages, etc. having $XXX priority A-1(c) Deposits of money XXX A-1/d(1) Taxes owing United XXX States A-1/d(2) Taxes owing states XXX A-1/d(3) Taxes owing other XXX taxing authorities A-2 Secured claims XXX A-3 Unsecured claims XXX without priority ---------------------- Schedule A total $XXX --------------------------------------------------------------------- Property B-1 Real property (total $XXX value) B-2/a Cash on hand XXX B-2/b Deposits XXX B-2/c Household goods XXX B-2/d Books, pictures, and XXX collections B-2/e Wearing apparel and XXX personal possessions B-2/f Automobiles and XXX other vehicles B-2/g Boats, motors, and XXX accessories B-2/h Livestock and other XXX animals B-2/i Farming supplies and XXX implements B-2/j Office equipment and XXX supplies B-2/k Machinery, XXX equipment, and supplies used in business B-2/l Inventory XXX B-2/m Other tangible XXX personal property B-2/n Patents and other XXX general intangibles B-2/o Bonds and other XXX instruments B-2/p Other liquidated XXX debts B-2/q Contingent and XXX unliquidated claims B-2/r Interests in XXX insurance policies B-2/s Annuities XXX B-2/t Interests in XXX corporations and unincorporated companies B-2/u Interests in XXX partnerships B-2/v Equitable and future XXX interests, rights, and powers in personalty B-3/a Property assigned XXX for benefit of creditors B-3/b Property not XXX otherwise scheduled ---------------------- Schedule B total $XXX ------------------------------- UNSWORN DECLARATION UNDER PENALTY OF PERJURY OF INDIVIDUAL TO SCHEDULES A AND B I, XXXXXX, declare under penalty of perjury that I have read the foregoing schedules, consisting of XXX sheets, and that they are true and correct to the best of my knowledge, information and belief. Executed on XXXXXX Signature: XXXXXXXXXX UNSWORN DECLARATION UNDER PENALTY OF PERJURY ON BEHALF OF CORPORATION OR PARTNERSHIP TO SCHEDULES A AND B I, XXXXXX, (the president or other officer or an authorized agent of the corporation) (or a member or an authorized agent of the partnership) named as debtor in this case, declare under penalty of perjury that I have read the foregoing schedules, consisting of XXX sheets, and that they are true and correct to the best of my knowledge, information, and belief. Executed on XXXXXX Signature: XXXXXXXXXX -SOURCE- (As amended Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES These schedules may be used pursuant to Sec. 521(1) of the Code. The unsworn declarations at the end of the form are in conformity with 28 U.S.C. Sec. 1746. See Advisory Committee Note to Form No. 1. NOTES OF ADVISORY COMMITTEE ON RULES - 1986 AMENDMENT Paragraphs c and d in Schedule A-1 have been added to reflect new priorities added to Sec. 507 of the Code by the 1984 amendments. ------DocID 15137 Document 482 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 6A -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 6A. - Schedule of Current Income and Current Expenditures for Individual Debtor -STATUTE- (CAPTION AS IN FORM NO. 2) SCHEDULE OF CURRENT INCOME AND CURRENT EXPENDITURES FOR INDIVIDUAL DEBTOR (Complete this form by answering each question. If your answer to a question is 'none' or 'not applicable' so state.) ------DocID 15138 Document 483 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 7 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 7. - Statement of Financial Affairs for Debtor Not Engaged in Business -STATUTE- (CAPTION AS IN FORM NO. 1) STATEMENT OF FINANCIAL AFFAIRS FOR DEBTOR NOT ENGAGED IN BUSINESS (Each question shall be answered or the failure to answer explained. If the answer is 'none' or 'not applicable' so state. If additional space is needed for the answer to any question, a separate sheet, properly identified and made a part hereof, should be used and attached. The term, 'original petition,' used in the following questions, shall mean the petition filed under Rule 1002 or 1004.) 1. Name and residence. a. What is your full name? b. Have you used, or been known by, any other names within the six years immediately preceding the filing of the original petition herein? (If so, give particulars.) c. Where do you now reside? d. Where else have you resided during the six years immediately preceding the filing of the original petition herein? 2. Occupation and income. a. What is your occupation? b. Where are you now employed? (Give the name and address of your employer, or the address at which you carry on your trade or profession, and the length of time you have been so employed or engaged.) c. Have you been in a partnership with anyone, or engaged in any business during the six years immediately preceding the filing of the original petition herein? (If so, give particulars, including names, dates, and places.) d. What amount of income have you received from your trade or profession during each of the two calendar years immediately preceding the filing of the original petition herein? e. What amount of income have you received from other sources during each of these two years? (Give particulars, including each source, and the amount received therefrom.) 3. Tax returns and refunds. a. Where did you file your federal, state and municipal income tax returns for the two years immediately preceding the filing of the original petition herein? b. What tax refunds (income and other) have you received during the year immediately preceding the filing of the original petition herein? c. To what tax refunds (income or other), if any, are you, or may you be, entitled? (Give particulars, including information as to any refund payable jointly to you and your spouse or any other person.) 4. Financial accounts, certificates of deposit and safe deposit boxes. a. What accounts or certificates of deposit or shares in banks, savings and loan, thrift, building and loan and homestead associations, credit unions, brokerage houses, pension funds and the like have you maintained, alone or together with any other person, and in your own or any other name within the two years immediately preceding the filing of the original petition herein? (Give the name and address of each institution, the name and number under which the account or certificate is maintained, and the name and address of every other person authorized to make withdrawals from such account.) b. What safe deposit box or boxes or other depository or depositories have you kept or used for your securities, cash, or other valuables within the two years immediately preceding the filing of the original petition herein? (Give the name and address of the bank or other depository, the name in which each box or other depository was kept, the name and address of every other person who had the right of access thereto, a brief description of the contents thereof, and, if the box has been surrendered, state when surrendered, or, if transferred, when transferred, and the name and address of the transferee.) 5. Books and records. a. Have you kept books of account or records relating to your affairs within the two years immediately preceding the filing of the original petition herein? b. In whose possession are these books or records? (Give names and addresses.) c. If any of these books or records are not available, explain. d. Have any books of account or records relating to your affairs been destroyed, lost, or otherwise disposed of within the two years immediately preceding the filing of the original petition herein? (If so, give particulars, including date of destruction, loss, or disposition, and reason therefor.) 6. Property held for another person. What property do you hold for any other person? (Give name and address of each person, and describe the property, or value thereof, and all writings relating thereto.) 7. Property held by another. Is any other person holding anything of value in which you have an interest? (Give name and address, location and description of the property, and circumstances of the holding.) 8. Prior bankruptcy. What cases under the Bankruptcy Act or title 11, United States Code, have previously been brought by or against you? (State the location of the bankruptcy court, the nature and number of each case, the date when it was filed, and whether a discharge was granted or denied, the case was dismissed, or a composition, arrangement, or plan was confirmed.) 9. Receiverships, general assignments, and other modes of liquidation. a. Was any of your property, at the time of the filing of the original petition herein, in the hands of a receiver, trustee, or other liquidating agent? (If so, give a brief description of the property, the name and address of the receiver, trustee, or other agent, and, if the agent was appointed in a court proceeding, the name and location of the court, the title and number of the case, and the nature thereof.) b. Have you made any assignment of your property for the benefit of your creditors, or any general settlement with your creditors, within one year immediately preceding the filing of the original petition herein? (If so, give dates, the name and address of the assignee, and a brief statement of the terms of assignment or settlement.) 10. Suits, executions, and attachments. a. Were you a party to any suit pending at the time of the filing of the original petition herein? (If so, give the name and location of the court and the title and nature of the proceeding.) b. Were you a party to any suit terminated within the year immediately preceding the filing of the original petition herein? (If so, give the name and location of the court, the title and nature of the proceeding, and the result.) c. Has any of your property been attached, garnished, or seized under any legal or equitable process within the year immediately preceding the filing of the original petition herein? (If so, describe the property seized or person garnished, and at whose suit.) 11. (a) Payment of loans, installment purchases and other debts. What payments in whole or in part have you made during the year immediately preceding the filing of the orignial petition herein on any of the following: (1) loans; (2) installment purchases of goods and services; and (3) other debts? (Give the names and addresses of the persons receiving payment, the amounts of the loans or other debts and the purchase price of the goods and services, the dates of the original transactions, the amounts and dates of payments and, if any of the payees are your relatives or insiders, the relationship; if the debtor is a partnership and any of the payees is or was a partner or a relative of a partner, state the relationship; if the debtor is a corporation and any of the payees is or was an officer, director, or stockholder, or a relative of an officer, director, or stockholder, state the relationship.) (b) Setoffs. What debts have you owed to any creditor, including any bank, which were setoff by that creditor against a debt or deposit owing by the creditor to you during the year immediately preceding the filing of the original petition herein? (Give the names and addresses of the persons setting off such debts, the dates of the setoffs, the amounts of the debts owing by you and to you and, if any of the creditors are your relatives or insiders, the relationship.) 12. Transfers of property. a. Have you made any gifts, other than ordinary and usual presents to family members and charitable donations, during the year immediately preceding the filing of the original petition herein? (If so, give names and addresses of donees and dates, description, and value of gifts.) b. Have you made any other transfer, absolute or for the purpose of security, or any other disposition, of real or personal property during the year immediately preceding the filing of the original petition herein? (Give a description of the property, the date of the transfer or disposition, to whom transferred or how disposed of, and, if the transferee is a relative or insider, the relationship, the consideration, if any, received therefor, and the disposition of such consideration.) 13. Repossessions and returns. Has any property been returned to, or repossessed by, the seller or by a secured party during the year immediately preceding the filing of the original petition herein? (If so, give particulars, including the name and address of the party getting the property and its description and value.) 14. Losses. a. Have you suffered any losses from fire, theft, or gambling during the year immediately preceding or since the filing of the original petition herein? (If so, give particulars, including dates, names, and places, and the amounts of money or value and general description of property lost.) b. Was the loss covered in whole or part by insurance? (If so, give particulars.) 15. Payments or transfers to attorneys and other persons. a. Have you consulted an attorney during the year immediately preceding or since the filing of the original petition herein? (Give dates, name and address.) b. Have you during the year immediately preceding or since the filing of the original petition herein paid any money or transferred any property to the attorney, to any other person on the attorney's behalf, or to any other person rendering services to you in connection with this case? (If so, give particulars, including amount paid or value of property transferred and date of payment or transfer.) c. Have you, either during the year immediately preceding or since the filing of the original petition herein, agreed to pay any money or transfer any property to an attorney at law, to any other person on the attorney's behalf, or to any other person rendering services to you in connection with this case? (If so, give particulars, including amount and terms of obligation.) I, XXXXXX, declare under penalty of perjury that I have read the answers contained in the foregoing statement of financial affairs and that they are true and correct to the best of my knowledge, information, and belief. Executed on XXXXXX XXXXXXXX, Debtor. -SOURCE- (As amended Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES See Advisory Committee Note to Form No. 1 for discussion of unsworn statement at the end of this form. NOTES OF ADVISORY COMMITTEE ON RULES - 1986 AMENDMENT The introduction preceding paragraph 1 is amended to delete the reference to Rule 1003(a), which has been combined into Rule 1002. Paragraph 15 is amended to implement the amendments to Rule 1006(b), which prohibits payments not only to attorneys but to any other person who renders services to the debtor in connection with the case. ------DocID 15139 Document 484 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 8 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 8. - Statement of Financial Affairs for Debtor Engaged in Business. -STATUTE- (CAPTION AS IN FORM NO. 1) STATEMENT OF FINANCIAL AFFAIRS FOR DEBTOR ENGAGED IN BUSINESS (Each question shall be answered or the failure to answer explained. If the answer is 'none' or 'not applicable,' so state. If additional space is needed for the answer to any question, a separate sheet properly identified and made a part hereof, should be used and attached. If the debtor is a partnership or a corporation, the questions shall be deemed to be addressed to, and shall be answered on behalf of, the partnership or corporation; and the statement shall be certified by a member of the partnership or by a duly authorized officer of the corporation. The term, 'original petition,' used in the following questions, shall mean the petition filed under Rule 1002 or 1004.) 1. Nature, location, and name of business. a. Under what name and where do you carry on your business? b. In what business are you engaged? (If business operations have been terminated, give the date of termination.) c. When did you commence the business? d. Where else, and under what other names, have you carried on business within the six years immediately preceding the filing of the original petition herein? (Give street addresses, the names of any partners, joint adventurers, or other associates, the nature of the business, and the periods for which it was carried on.) 2. Books and records. a. By whom, or under whose supervision, have your books of account and records been kept during the six years immediately preceding the filing of the original petition herein? (Give names, addresses, and periods of time.) b. By whom have your books of account and records been audited during the six years immediately preceding the filing of the original petition herein? (Give names, addresses, and dates of audits.) c. In whose possession are your books of account and records? (Give names and addresses.) d. If any of these books or records are not available, explain. e. Have any books of account or records relating to your affairs been destroyed, lost, or otherwise disposed of within the two years immediately preceding the filing of the original petition herein? (If so, give particulars, including date of destruction, loss, or disposition, and reason therefor.) 3. Financial statements. Have you issued any written financial statements within the two years immediately preceding the filing of the original petition herein? (Give dates, and the name and addresses of the persons to whom issued, including mercantile and trade agencies.) 4. Inventories. a. When was the last inventory of your property taken? b. By whom, or under whose supervision, was this inventory taken? c. What was the amount, in dollars, of the inventory? (State whether the inventory was taken at cost, market, or otherwise.) d. When was the next prior inventory of your property taken? e. By whom, or under whose supervision, was this inventory taken? f. What was the amount, in dollars, of the inventory? (State whether the inventory was taken at cost, market, or otherwise.) g. In whose possession are the records of the two inventories above referred to? (Give names and addresses.) 5. Income other than from operation of business. What amount of income, other than from operation of your business, have you received during each of the two years immediately preceding the filing of the original petition herein? (Give particulars, including each source, and the amount received therefrom.) 6. Tax returns and refunds. a. In whose possession are copies of your federal, state and municipal income tax returns for the three years immediately preceding the filing of the original petition herein? b. What tax refunds (income or other) have you received during the two years immediately preceding the filing of the original petition herein? c. To what tax refunds (income or other), if any, are you, or may you be, entitled? (Give particulars, including information as to any refund payable jointly to you and your spouse or any other person.) 7. Financial accounts, certificates of deposit and safe deposit boxes. What accounts or certificates of deposit or shares in banks, savings and loan, thrift, building and loan and homestead associations, credit unions, brokerage houses, pension funds and the like have you maintained, alone or together with any other person, and in your own or any other name, within the two years immediately preceding the filing of the original petition herein? (Give the name and address of each institution, the name and number under which the account or certificate is maintained, and the name and address of every person authorized to make withdrawals from such account.) b. What safe deposit box or boxes or other depository or depositories have you kept or used for your securities, cash, or other valuables within the two years immediately preceding the filing of the original petition herein? (Give the name and address of the bank or other depository, the name in which each box or other depository was kept, the name and address of every person who had the right of access thereto, a description of the contents thereof, and, if the box has been surrendered, state when surrendered or, if transferred, when transferred and the name and address of the transferee.) 8. Property held for another person. What property do you hold for any other person? (Give name and address of each person, and describe the property, the amount or value thereof and all writings relating thereto.) 9. Property held by another person. Is any other person holding anything of value in which you have an interest? (Give name and address, location and description of the property, and circumstances of the holding.) 10. Prior bankruptcy proceedings. What cases under the Bankruptcy Act or title 11, United States Code have previously been brought by or against you? (State the location of the bankruptcy court, the nature and number of the case, and whether a discharge was granted or denied, the case was dismissed, or a composition, arrangement, or plan was confirmed.) 11. Receiverships, general assignments, and other modes of liquidation. a. Was any of your property, at the time of the filing of the original petition herein, in the hands of a receiver, trustee, or other liquidating agent? (If so, give a brief description of the property and the name and address of the receiver, trustee, or other agent, and, if the agent was appointed in a court proceeding, the name and location of the court, the title and number of the case, and the nature thereof.) b. Have you made any assignment of your property for the benefit of your creditors, or any general settlement with your creditors, within the two years immediately preceding the filing of the original petition herein? (If so, give dates, the name and address of the assignee, and a brief statement of the terms of assignment or settlement.) 12. Suits, executions, and attachments. a. Were you a party to any suit pending at the time of the filing of the original petition herein? (If so, give the name and location of the court and the title and nature of the proceeding.) b. Were you a party to any suit terminated within the year immediately preceding the filing of the original petition herein? (If so, give the name and location of the court, the title and nature of the proceeding, and the result.) c. Has any of your property been attached, garnished, or seized under any legal or equitable process within the year immediately preceding the filing of the original petition herein? (If so, describe the property seized or person garnished, and at whose suit.) 13. a. Payments of loans, installment purchases and other debts. What payments in whole or in part have you made during the year immediately preceding the filing of the original petition herein on any of the following: (1) loans; (2) installment purchases of goods and services; and (3) other debts? (Give the names and addresses of the persons receiving payment, the amounts of the loans or other debts and of the purchase price of the goods and services, the dates of the original transactions, the amounts and dates of payments, and, if any of the payees are your relatives or insiders, the relationship; if the debtor is a partnership and any of the payees is or was a partner or a relative of a partner, state the relationship; if the debtor is a corporation and any of the payees is or was an officer, director, or stockholder, or a relative of an officer, director, or stockholder, state the relationship.) b. Setoffs. What debts have you owed to any creditor, including any bank, which were setoff by that creditor against a debt or deposit owing by the creditor to you during the year immediately preceding the filing of the original petition herein? (Give the names and addresses of the persons setting off such debts, the dates of the setoffs, the amounts of the debts owing by you and to you and, if any of the creditors are your relatives or insiders, the relationship.) 14. Transfers of property. a. Have you made any gifts, other than ordinary and usual presents to family members and charitable donations during the year immediately preceding the filing of the original petition herein? (If so, give names and addresses of donees and dates, description, and value of gifts.) b. Have you made any other transfer, absolute or for the purpose of security, or any other disposition which was not in the ordinary course of business during the year immediately preceding the filing of the original petition herein? (Give a description of the property, the date of the transfer or disposition, to whom transferred or how disposed of, and state whether the transferee is a relative, partner, shareholder, officer, director, or insider, the consideration, if any, received for the property, and the disposition of such consideration.) 15. Accounts and other receivables. Have you assigned, either absolutely or as security, any of your accounts or other receivables during the year immediately preceding the filing of the original petition herein? (If so, give names and addresses of assignees.) 16. Repossessions and returns. Has any property been returned to, or repossessed by, the seller, lessor, or a secured party during the year immediately preceding the filing of the original petition herein? (If so, give particulars, including the name and address of the party getting the property and its description and value.) 17. Business leases. If you are a tenant of business property, what is the name and address of your landlord, the amount of your rental, the date to which rent had been paid at the time of the filing of the original petition herein, and the amount of security held by the landlord? 18. Losses. a. Have you suffered any losses from fire, theft, or gambling during the year immediately preceding the filing of the original petition herein? (If so, give particulars, including dates, names, and places, and the amounts of money or value and general description of property lost.) b. Was the loss covered in whole or part by insurance? (If so, give particulars.) 19. Withdrawals. a. If you are an individual proprietor of your business, what personal withdrawals of any kind have you made from the business during the year immediately preceding the filing of the original petition herein? b. If the debtor is a partnership or corporation, what withdrawals, in any form (including compensation, bonuses or loans), have been made or received by any member of the partnership, or by any officer, director, insider, managing executive, or shareholder of the corporation, during the year immediately preceding the filing of the original petition herein? (Give the name and designation or relationship to the debtor of each person, the dates and amounts of withdrawals, and the nature or purpose thereof.) 20. Payments or transfers to attorneys and other persons. a. Have you consulted an attorney during the year immediately preceding or since the filing of the original petition herein? (Give date, name, and address.) b. Have you during the year immediately preceding or since the filing of the original petition herein paid any money or transferred any property to the attorney, to any other person on the attorney's behalf, or to any other person rendering services to you in connection with this case? (If so, give particulars, including amount paid or value of property transferred and date of payment or transfer.) c. Have you, either during the year immediately preceding or since the filing of the original petition herein, agreed to pay any money or transfer any property to an attorney at law, to any other person on the attorney's behalf, or to any other person rendering services to you in connection with this case? (If so, give particulars, including amount and terms of obligation.) (If the debtor is a partnership or corporation, the following additional questions should be answered.) 21. Members of partnership; officers, directors, managers, and principal stockholders of corporation. a. What is the name and address of each member of the partnership, or the name, title, and address of each officer, director, insider, and managing executive, and of each stockholder holding 20 percent or more of the issued and outstanding stock, of the corporation? b. During the year immediately preceding the filing of the original petition herein, has any member withdrawn from the partnership, or any officer, director, insider, or managing executive of the corporation terminated his relationship, or any stockholder holding 20 percent or more of the issued stock disposed of more than 50 percent of the stockholder's holdings? (If so, give name and address and reason for withdrawal, termination, or disposition, if known.) c. Has any person acquired or disposed of 20 percent or more of the stock of the corporation during the year immediately preceding the filing of the petition? (If so, give name and address and particulars.) I, XXXXXXXX, declare under penalty of perjury that I have read the answers contained in the foregoing statement of affairs and that they are true and correct to the best of my knowledge, information, and belief. Executed on XXXXXX Signature: XXXXXX (Person declaring for partnership or corporation should indicate position or relationship to debtor.) -SOURCE- (As amended Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Many of the questions on this form are the same as on Form No. 7, Statement of Financial Affairs for Debtor Not Engaged in Business. The question regarding loans repaid ( 13) includes installment credit sales of goods or services. The information is helpful with respect to possible preferences. Information regarding leases ( 17) may be helpful with respect to lease termination or extension and whether the landlord may be holding a deposit. NOTES OF ADVISORY COMMITTEE ON RULES - 1986 AMENDMENT Form 8 is amended in the same manner as Form 7. ------DocID 15140 Document 485 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 8A -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 8A. - Chapter 7 Individual Debtor's Statement of Intention -STATUTE- (CAPTION AS IN FORM NO. 2) CHAPTER 7 INDIVIDUAL DEBTOR'S STATEMENT OF INTENTION 1. I, XXXXXX, the debtor, have filed a schedule of assets and liabilities which includes consumer debts secured by property of the estate. 2. My intention with respect to the property of the estate which secures those consumer debts is as follows: a. Property to Be Surrendered. --------------------------------------------------------------------- Description of property Creditor's name --------------------------------------------------------------------- 1. XXXXXXXX XXXXXXXX 2. XXXXXXXX XXXXXXXX 3. XXXXXXXX XXXXXXXX 4. XXXXXXXX XXXXXXXX 5. XXXXXXXX XXXXXXXX ------------------------------- b. Property to Be Retained. (Check applicable statement of debtor's intention) -------------------------------------- Description of property : Creditor's name : The debt will be reaffirmed pursuant to Sec. 524(c) : The property is claimed as exempt and will be redeemed pursuant to Sec. 722 : The creditor's lien will be avoided pursuant to Sec. 522(f) and the property will be claimed as exempt -------------------------------------- -------------------------------------- 1. XXX : XXX : XXX : XXX : XXX 2. XXX : XXX : XXX : XXX : XXX 3. XXX : XXX : XXX : XXX : XXX 4. XXX : XXX : XXX : XXX : XXX 5. XXX : XXX : XXX : XXX : XXX -------------------------------------- 3. I understand that Sec. 521(2)(B) of the Bankruptcy Code requires that I perform the above stated intention within 45 days of the filing of this statement with the court, or within any extension of the 45 day period which the court may grant. Date: XXXXXXX XXXXXXXXXX, Debtor. -SOURCE- (Added Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Section 521(2), as added by the 1984 amendments, requires an individual debtor whose schedule of assets and liabilities includes consumer debts which are secured by property of the estate to file with the clerk a statement of the debtor's intention with regard to such property. This form is designed to implement this requirement. ------DocID 15141 Document 486 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 9 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 9. - List of Creditors Holding 20 Largest Unsecured Claims -STATUTE- (CAPTION AS IN FORM NO. 2) LIST OF CREDITORS HOLDING 20 LARGEST UNSECURED CLAIMS Following is the list of the Debtor's creditors holding the 20 largest unsecured claims which is prepared in accordance with Rule 1007(d) for filing in this chapter 11 (or chapter 9) case. The list does not include those (1) persons who come within the definition of insider set forth in 11 U.S.C. Sec. 101(25), (2) secured creditors unless the value of the collateral is such that the unsecured deficiency places the creditor among the holders of the 20 largest unsecured claims, or (3) governmental units not within the definition of 'person' in 11 U.S.C. Sec. 101(35). -------------------------------------- (1) Name of creditor and complete mailing address including zip code (2): Name, telephone number and complete mailing address including zip code of employee, agent or department of creditor familiar with claim who may be contacted (3): Nature of claim (trade debt, bank loan, type of judgment, etc.) (4): Indicate if claim is contingent, unliquidated, disputed or subject to setoff (5): Amount of claim (if secured also state value of security) -------------------------------------- Date: XXXXXXX XXXXXXXXXX Debtor. -SOURCE- (As amended Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is for use in chapter 11 reorganization and chapter 9 municipality debt adjustment cases to enable the appointment, pursuant to Sec. 1102 and 901 of the Code, of a committee of unsecured creditors. The information contained on the form is to assist in expediting the formation of the committee and to assure adequate creditor representation. In accordance with Sec. 1102 of the Code, the form indicates that insiders should not be listed. 'Insiders' is defined in Sec. 101(25) of the Code to include, inter alia, persons who are related to the debtor, are partners, officers, directors, affiliates as further defined in Sec. 101(2) of the Code, or are otherwise in control of the debtor. Reference should be made to Sec. 101 for the complete listing of insiders. The nature of the claim should be specified to indicate whether it is an institutional debt, a trade debt for merchandise or supplies, a debt based on a judgment and the underlying basis for the judgment, or the like. In column (2), it is important to provide specific information with respect to the person to be contacted. In order to form the committee it may be necessary to write or telephone the creditors. If the creditor company is a large organization individual contact may otherwise be difficult or impossible. A secured creditor should be listed among the 20 largest unsecured creditors only if that creditor is sufficiently undersecured so as to fall within that category. NOTES OF ADVISORY COMMITTEE ON RULES - 1986 AMENDMENT The form has been amended to reflect the definition of 'person' in 11 U.S.C. Sec. 101(35), as modified by the 1984 amendments and renumbered by the 1986 amendments. -REFTEXT- REFERENCES IN TEXT Section 101 of title 11, referred to in Form 9, was subsequently amended, and section 101(25) and (35) no longer define the terms 'insider' and 'person'. However, such terms are defined in pars. (31) and (41), respectively, of that section. ------DocID 15142 Document 487 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 10 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 10. - Chapter 13 Statement -STATUTE- (CAPTION AS IN FORM NO. 1) CHAPTER 13 STATEMENT (Each question shall be answered or the failure to answer explained. If the answer is 'none' or 'not applicable' so state. If additional space is needed for the answer to any question, a separate sheet, properly identified and made a part hereof, should be used and attached. The term 'original petition,' used in the following questions, shall mean the original petition filed under Sec. 301 of the Code or, if the chapter 13 case was converted from another chapter of the Code, shall mean the petition by or against you which originated the first case. This form must be completed in full whether a single or a joint petition is filed. When information is requested for 'each' or 'either spouse filing a petition,' it should be supplied for both when a joint petition is filed.) 1. Name and residence. a. Give full name. Husband (or, if single, Debtor) XXXXX Wife XXXXXXXXXXXXXXXXXXX b. Where does debtor, if single, or each spouse filing a petition now reside? (1) Mailing address of husband (or debtor) XXXXXXXXXXXXXXXXXXXXX City or town, state and zip code XXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXX (2) Mailing address of wife XXXXXXXXXXXXXXXXXXXXX City or town, state and zip code XXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXX (3) Telephone number including area code Husband (or, if single, Debtor) XXX Wife XXXXXXXXXXXXXXXXX c. What does debtor, if single, or each spouse filing a petition consider his or her residence, if different from that listed in b, above? Husband (or Debtor) XXXXXXXXXXX Wife XXXXXXXXXXXXXXXXXXX 2. Occupation and income. a. Give present occupation of debtor, if single, or each spouse filing a petition. (If more than one, list all for debtor or each spouse filing a petition.) Husband (or Debtor) XXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX Wife XXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX b. What is the name, address, and telephone number of present employer (or employers) of debtor, if single, or each spouse filing a petition? (Include also any identifying badge or card number with employer.) Husband (or Debtor) XXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX Wife XXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXX c. How long has debtor, if single, or each spouse filing a petition been employed by present employer? Husband (or Debtor) XXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX Wife XXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX d. If debtor or either spouse filing a petition has not been employed by present employer for a period of one year, state the name of prior employer(s) and nature of employment during that period. Husband (or Debtor) XXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX Wife XXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX e. Has debtor or either spouse filing a petition operated a business, in partnership or otherwise, during the past three years? (If so, give the particulars, including names, dates, and places.) Husband (or Debtor) XXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX Wife XXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX f. Answer the following questions for debtor, if single, or each spouse whether single or joint petition is filed unless spouses are separated and a single petition is filed: --------------------------------------------------------------------- --------------------------------------------------------------------- (1) What are your gross wages, salary, or commissions per pay period Husband Wife (or Debtor) (a) Weekly XX XX (b) Semi-monthly XX XX (c) Monthly XX XX (d) Other (specify) XX XX (2) What are your payroll deductions per pay period for: Husband Wife (or Debtor) (a) Payroll taxes XX XX (including social security) (b) Insurance XX XX (c) Credit union XX XX (d) Union dues XX XX (e) Other (specify) XX XX (3) What is your take-home pay per pay period? Husband Wife (or Debtor) XX XX Husband Wife (or Debtor) XX XX (5) Is your employment subject to seasonal or other change? Husband Wife (or Debtor) XX XX ------------------------------- XXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXX 3. Dependents. (To be answered by debtor if unmarried, otherwise for each spouse whether single or joint petition is filed unless spouses are separated and a single petition is filed.) a. Does either of you pay (or receive) alimony, maintenance, or support? XXXX If so, how much per month? XXXX For whose support? (Give name, age, and relationship to you.) Husband (or Debtor)XXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX WifeXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX b. List all other dependents, other than present spouse, not listed in a, above. (Give name, age and relationship to you.) Husband (or Debtor)XXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX WifeXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX 4. Budget. a. Give your estimated average future monthly income, if unmarried, otherwise for each spouse whether single or joint petition is filed, unless spouses are separated and a single petition is filed. --------------------------------------------------------------------- --------------------------------------------------------------------- (1) Husband's (or Debtor's) XX monthly take-home pay (2) Wife's monthly take-home pay XX (3) Other monthly income XX (specify) ---------------------------------- Total XX (1) Rent or home mortgage XX payment (include lot rental for trailer) (2) Utilities (Electricity XX XXXX, HeatXXXX, WaterXXXX, TelephoneXXX) (3) Food XX (4) Clothing XX (5) Laundry and cleaning XX (6) Newspapers, periodicals, XX and books (including school books) (7) Medical and drug expenses XX (8) Insurance (not deducted from wages) (a) Auto XX (b) Other XX (9) Transportation (not XX including auto payments to be paid under plan) (10) Recreation XX (11) Dues, union, professional, XX social or otherwise (not deducted from wages) (12) Taxes (not deducted from XX wages) (13) Alimony, maintenance, or XX support payments (14) Other payments for support XX of dependents not living at home (15) Religious and other XX charitable contributions (16) Other (specify) XXXXXXXXXXXXXXXX XX XXXXXXXXXXXXXXXX XX ---------------------------------- Total XX c. Excess of estimated future XX monthly income (last line of Item 4a, above) over estimated future expenses (last line of Item 4b, above) d. Total amount to be paid each XX month under plan 5. Payment of attorney. a. How much have you agreed to XX pay or what property have you agreed to transfer to your attorney in connection with this case? b. How much have you paid or XX what have you transferred to the attorney? ------------------------------- 6. Tax refunds. (To be answered by debtor, if unmarried, otherwise for each spouse whether single or joint petition is filed, unless spouses are separated and a single petition is filed.) To what tax refunds (income or other), if any, is either of you, or may either of you be, entitled? (Give particulars, including information as to any refunds payable jointly to you or any other person. All such refunds should also be listed in Item 13b.) XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX 7. Financial accounts, certificates of deposit and safe deposit boxes. (To be answered by debtor, if unmarried, otherwise for each spouse whether single or joint petition is filed unless spouses are separated and a single petition is filed.) a. Does either of you currently have any accounts or certificates of deposit or shares in banks, savings and loan, thrift, building and loan and homestead associations, credit unions, brokerage houses, pension funds and the like? (If so, give name and address of each institution, number and nature of account, current balance, and name and address of every other person authorized to make withdrawals from the account. Such accounts should also be listed in Item 13b.) XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX b. Does either of you currently keep any safe deposit boxes or other depositories? (If so, give name and address of bank or other depository, name and address of every other person who has a right of access thereto, and a brief description of the contents thereof, which should also be listed in Item 13b.) XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX 8. Prior Bankruptcy. What cases under the Bankruptcy Act or Bankruptcy Code have previously been brought by or against you or either spouse filing a petition? (State the location of the bankruptcy court, the nature and number of each case, the date when it was filed, and whether a discharge was granted or denied, the case was dismissed, or a composition, arrangement, or plan was confirmed.) XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX 9. Foreclosures, executions, and attachments. (To be answered by debtor, if unmarried, otherwise for each spouse whether single or joint petition is filed unless spouses are separated and a single petition is filed.) a. Is any of the property of either of you, including real estate, involved in a foreclosure proceeding, in or out of court? (If so, identify the property and the person foreclosing.) XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX b. Has any property or income of either of you been attached, garnished, or seized under any legal or equitable process within the 90 days immediately preceding the filing of the original petition herein? (If so, describe the property seized, or person garnished, and at whose suit.) XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX 10. Repossessions and returns. (To be answered by debtor, if unmarried, otherwise for each spouse whether single or joint petition is filed unless spouses are separated and a single petition is filed.) Has any property of either of you been returned to, repossessed, or seized by the seller or by any other party, including a landlord, during the 90 days immediately preceding the filing of the original petition herein? (If so, give particulars, including the name and address of the party taking the property and its description and value.) XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX 11. Transfers of Property. (To be answered by debtor, if unmarried, otherwise for each spouse whether single or joint petition is filed unless spouses are separated and a single petition is filed.) a. Has either of you made any gifts, other than ordinary and usual presents to family members and charitable donations, during the year immediately preceding the filing of the original petition herein? (If so, give names and addresses of donees and dates, description and value of gifts.) XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX b. Has either of you made any other transfer, absolute or for the purpose of security, or any other disposition, of real or personal property during the year immediately preceding the filing of the original petition herein? (Give a description of the property, the date of the transfer or disposition, to whom transferred or how disposed of, and, if the transferee is a relative or insider, the relationship, the consideration, if any, received therefor, and the disposition of such consideration.) XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX 12. Debts. (To be answered by debtor, if unmarried, otherwise for each spouse whether single or joint petition is filed.) -------------------------------------- A. DEBTS HAVING PRIORITY. --------- (1) Nature of claim (2): Name of creditor and complete mailing address including zip code (3): Specify when claim was incurred and the consideration therefor; when claim is subject to setoff, evidenced by a judgment, negotiable instrument, or other writing (4): Indicate if claim is contingent, unliquidated, or disputed (5): Amount of claim -------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- 1. Wages, salary, and $XXXX commissions, including vacation, severance and sick leave pay owing to employees not exceeding $2,000 to each, earned within 90 days before filing of petition or cessation of business (if earlier specify date). 2. Contributions to $XXXX employee benefit plans for services rendered within 180 days before filing of petition or cessation of business (if earlier specify date). 3. Deposits by $XXXX individuals, not exceeding $900 for each for purchase, lease, or rental of property or services for personal, family, or household use that were not delivered or provided. 4. Taxes owing (itemize by type of tax and taxing authority) (A) To the United $XXXX States (B) To any state XXXX (C) To any other XXXX taxing authority ---------------------- Total $XXXX ------------------------------- -------------------------------------- B. SECURED DEBTS. LIST ALL DEBTS WHICH ARE OR MAY BE SECURED BY REAL OR PERSONAL PROPERTY. (INDICATE IN SIXTH COLUMN, IF DEBT PAYABLE IN INSTALLMENTS, THE AMOUNT OF EACH INSTALLMENT, THE INSTALLMENT PERIOD (MONTHLY, WEEKLY, OR OTHERWISE) AND NUMBER OF INSTALLMENTS IN ARREARS, IF ANY. INDICATE IN LAST COLUMN WHETHER HUSBAND OR WIFE SOLELY LIABLE, OR WHETHER YOU ARE JOINTLY LIABLE.) Creditor's name, account number and complete mailing address including zip code . Consideration or basis for debt: Amount claimed by creditor: If disputed, amount admitted by debtor: Description of collateral (include year and make of automobile): Installment amount, period, and number of installments in arrears: Husband or wife solely liable, or jointly liable: . Consideration or basis for debt: Amount claimed by creditor: If disputed, amount admitted by debtor: Description of collateral (include year and make of automobile): Installment amount, period, and number of installments in arrears: Husband or wife solely liable, or jointly liable: . Consideration or basis for debt: Amount claimed by creditor: If disputed, amount admitted by debtor: Description of collateral (include year and make of automobile): Installment amount, period, and number of installments in arrears: Husband or wife solely liable, or jointly liable: . Consideration or basis for debt: Amount claimed by creditor: If disputed, amount admitted by debtor: Description of collateral (include year and make of automobile): Installment amount, period, and number of installments in arrears: Husband or wife solely liable, or jointly liable: . Consideration or basis for debt: Amount claimed by creditor: If disputed, amount admitted by debtor: Description of collateral (include year and make of automobile): Installment amount, period, and number of installments in arrears: Husband or wife solely liable, or jointly liable: . Consideration or basis for debt: Amount claimed by creditor: If disputed, amount admitted by debtor: Description of collateral (include year and make of automobile): Installment amount, period, and number of installments in arrears: Husband or wife solely liable, or jointly liable: Total secured debts XXXXXXXX Total secured debts XXXXXXXX -------------------------------------- -------------------------------------- C. UNSECURED DEBTS. LIST ALL OTHER DEBTS, LIQUIDATED AND UNLIQUIDATED, INCLUDING TAXES, ATTORNEYS' FEES, AND TORT CLAIMS. Creditor's name, account number and complete mailing address including zip code . Consideration or basis for debt: Amount claimed by creditor: If disputed, amount admitted by debtor: Husband or wife solely liable, or jointly liable: . Consideration or basis for debt: Amount claimed by creditor: If disputed, amount admitted by debtor: Husband or wife solely liable, or jointly liable: . Consideration or basis for debt: Amount claimed by creditor: If disputed, amount admitted by debtor: Husband or wife solely liable, or jointly liable: . Consideration or basis for debt: Amount claimed by creditor: If disputed, amount admitted by debtor: Husband or wife solely liable, or jointly liable: . Consideration or basis for debt: Amount claimed by creditor: If disputed, amount admitted by debtor: Husband or wife solely liable, or jointly liable: . Consideration or basis for debt: Amount claimed by creditor: If disputed, amount admitted by debtor: Husband or wife solely liable, or jointly liable: Total unsecured debts XXXXXXXX Total unsecured debts XXXXXXXX -------------------------------------- 13. Codebtors. (To be answered by debtor, if unmarried, otherwise for each spouse whether single or joint petition is filed.) a. Are any other persons liable, as cosigners, guarantors, or in any other manner, on any of the debts of either of you or is either of you so liable on the debts of others? (If so, give particulars, indicating which spouse is liable and including names of creditors, nature of debt, names and addresses of codebtors, and their relationship, if any, to you.) XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX b. If so, have the codebtors made any payments on the debts? (Give name of each codebtor and amount paid by codebtor.) XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX c. Has either of you made any payments on the debts? (If so, specify total amount paid to each creditor, whether paid by husband or wife, and name of codebtor.) XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX 14. Property and Exemptions. (To be answered by debtor, if unmarried, otherwise for each spouse whether single or joint petition is filed.) -------------------------------------- A. REAL PROPERTY. LIST ALL REAL PROPERTY OWNED BY EITHER OF YOU AT DATE OF FILING OF ORIGINAL PETITION HEREIN. (INDICATE IN LAST COLUMN WHETHER OWNED SOLELY BY HUSBAND OR WIFE, OR JOINTLY.) Description and location of property . Name of any co-owner other than spouse: Present market value (without deduction for mortgage or other security interest): Amount of mortgage or other security interest on this property: Name of mortgagee or other secured creditor: Value claimed exempt (specify federal or state statute creating the exemption): Owned solely by husband or wife or jointly: . Name of any co-owner other than spouse: Present market value (without deduction for mortgage or other security interest): Amount of mortgage or other security interest on this property: Name of mortgagee or other secured creditor: Value claimed exempt (specify federal or state statute creating the exemption): Owned solely by husband or wife or jointly: . Name of any co-owner other than spouse: Present market value (without deduction for mortgage or other security interest): Amount of mortgage or other security interest on this property: Name of mortgagee or other secured creditor: Value claimed exempt (specify federal or state statute creating the exemption): Owned solely by husband or wife or jointly: . Name of any co-owner other than spouse: Present market value (without deduction for mortgage or other security interest): Amount of mortgage or other security interest on this property: Name of mortgagee or other secured creditor: Value claimed exempt (specify federal or state statute creating the exemption): Owned solely by husband or wife or jointly: . Name of any co-owner other than spouse: Present market value (without deduction for mortgage or other security interest): Amount of mortgage or other security interest on this property: Name of mortgagee or other secured creditor: Value claimed exempt (specify federal or state statute creating the exemption): Owned solely by husband or wife or jointly: -------------------------------------- -------------------------------------- B. PERSONAL PROPERTY. LIST ALL OTHER PROPERTY, OWNED BY EITHER OF YOU AT DATE OF FILING OF ORIGINAL PETITION HEREIN. Description Autos (give year and make) . Location of property if not at debtor's residence: Name of any co-owner other than spouse: Present market value (without deduction for mortgage or other security interest): Amount of mortgage or other security interest on this property: Name of mortgagee or other secured creditor: Value claimed exempt, (specify federal or state statute creating the exemption): Owned solely by husband or wife or jointly: Household goods Location of property if not at debtor's residence: Name of any co-owner other than spouse: Present market value (without deduction for mortgage or other security interest): Amount of mortgage or other security interest on this property: Name of mortgagee or other secured creditor: Value claimed exempt, (specify federal or state statute creating the exemption): Owned solely by husband or wife or jointly: Personal effects Location of property if not at debtor's residence: Name of any co-owner other than spouse: Present market value (without deduction for mortgage or other security interest): Amount of mortgage or other security interest on this property: Name of mortgagee or other secured creditor: Value claimed exempt, (specify federal or state statute creating the exemption): Owned solely by husband or wife or jointly: Cash or financial account Location of property if not at debtor's residence: Name of any co-owner other than spouse: Present market value (without deduction for mortgage or other security interest): Amount of mortgage or other security interest on this property: Name of mortgagee or other secured creditor: Value claimed exempt, (specify federal or state statute creating the exemption): Owned solely by husband or wife or jointly: Other (specify) Other (specify) -------------------------------------- (To be signed by both spouses when joint petition is filed.) I, XXXXXXXX, (if joint petition is filed and I, XXXXXXXX,) declare under penalty of perjury that I have read the answers contained in the foregoing statement, consisting of XXX sheets, and that they are true and complete to the best of my knowledge, information, and belief. XXXXXXXXXXXXX Husband (or Debtor) XXXXXXXXXXXXX Wife Executed on XXXXXX -SOURCE- (As amended Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is adapted from former Chapter XIII Official Form No. 13-5. It may be used whether a single chapter 13 petition is filed or a joint petition is filed by husband and wife as authorized by Sec. 302 of the Code. Question 4 of the Statement, calling for a detailed family budget is particularly designed to insure that the debtor and the debtor's attorney will have compiled information relative to the feasibility of the plan prior to the creditors' meeting. Inquiry as to most transactions and developments affecting the financial condition of the debtor is limited to the year preceding the filing of the petition or to a shorter period. The scope of examination at the meeting or at any other time is not restricted by the scope of the inquiries in the Chapter 13 Statement. In Question 14a and b any claim of exempt property should be listed. This information assists the court in comparing the creditors' return under the plan and a possible chapter 7 case. Although Chapter 13 Statements are required by Rule 1007(f) to be filed in the same number as the petition they accompany, only the original need be signed and verified, but the copies must be conformed to the original. See Bankruptcy Rule 9011(c). NOTES OF ADVISORY COMMITTEE ON RULES - 1986 AMENDMENT In paragraph 8 the references to 'proceedings' have been changed to 'cases'. ------DocID 7775 Document 488 of 646------ -CITE- 3 USC Sec. 11 -EXPCITE- TITLE 3 CHAPTER 1 -HEAD- Sec. 11. Disposition of certificates -STATUTE- The electors shall dispose of the certificates so made by them and the lists attached thereto in the following manner: First. They shall forthwith forward by registered mail one of the same to the President of the Senate at the seat of government. Second. Two of the same shall be delivered to the secretary of state of the State, one of which shall be held subject to the order of the President of the Senate, the other to be preserved by him for one year and shall be a part of the public records of his office and shall be open to public inspection. Third. On the day thereafter they shall forward by registered mail two of such certificates and lists to the Archivist of the United States at the seat of government, one of which shall be held subject to the order of the President of the Senate. The other shall be preserved by the Archivist of the United States for one year and shall be a part of the public records of his office and shall be open to public inspection. Fourth. They shall forthwith cause the other of the certificates and lists to be delivered to the judge of the district in which the electors shall have assembled. -SOURCE- (June 25, 1948, ch. 644, 62 Stat. 674; Oct. 31, 1951, ch. 655, Sec. 7, 65 Stat. 712; Oct. 19, 1984, Pub. L. 98-497, title I, Sec. 107(e)(1), 98 Stat. 2291.) -MISC1- AMENDMENTS 1984 - Pub. L. 98-497 substituted 'Archivist of the United States' for 'Administrator of General Services' two places in par. 'Third'. 1951 - Act Oct. 31, 1951, substituted 'Administrator of General Services' for 'Secretary of State' two places in par. 'Third'. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98-497 effective Apr. 1, 1985, see section 301 of Pub. L. 98-497, set out as a note under section 2102 of Title 44, Public Printing and Documents. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 12 of this title. ------DocID 15144 Document 489 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 12 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 12. - Involuntary Case Against Partnership: Partner's Petition -STATUTE- (CAPTION AS IN FORM NO. 1) INVOLUNTARY CASE AGAINST PARTNERSHIP: PARTNER'S PETITION 1. Petitioner, XXXXXX XXXXXXXX, of *XXXXXXXX is one of the general partners of XXXXXXXXXXXXXX, a partnership, of *XXXXXXXX (include county) 2. The other general partners of the debtor are XXX XXXXX, of *XXXXXXXX and XXX XXXXX of *XXXXXXXXXXXXXX. 3. The debtor has had its principal place of business (or its principal assets or its domicile or its residence) within this district for the 180 days preceding the filing of this petition (or for a longer portion of the 180 days preceding the filing of this petition than in any other district). 4. The debtor is a person against whom an order for relief may be entered under title 11, United States Code. 5. (The debtor is generally not paying its debts which are not subject to bona fide dispute as they become due as indicated by the following XXXXXXXX) or (Within 120 days preceding the filing of this petition, a custodian was appointed for or has taken possession of substantially all of the property of the debtor, as follows: XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX.) WHEREFORE, petitioner prays that an order of relief be entered against XXXXXXXX under chapter 7 (or 11) of title 11, United States Code. Signed: XXXXXXXXXXXXXX, Attorney for Petitioner. Address: XXXXXXXXXXXXXX, XXXXXXXXXXXXXX, (Petitioner signs if not represented by attorney) XXXXXXXXXXXXXX, Petitioner. I, XXXXXXXX, the petitioner named in the foregoing petition, declare under penalty of perjury that the foregoing is true and correct according to the best of my knowledge, information and belief. Executed on XXXXXXXX Signature: XXXXXXXX, Petitioner. * State mailing address. -SOURCE- (As amended Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Pursuant to Sec. 303(b)(3)(A) of the Code, a petition by fewer than all of the general partners seeking an order for relief with respect to the partnership is treated as an involuntary petition. It is adversarial in character because not all of the partners are joining in the petition. Section 303(b)(3)(B) permits a petition against the partnership if relief has been ordered under the Code with respect to all of the general partners. In that event, the petition may be filed by a general partner, a trustee of a general partner's estate, or a creditor of the partnership. This form may be adapted for use in that type of case. 28 U.S.C. Sec. 1472(1) specifies the proper venue alternatives for all persons, including partnerships, as domicile, residence, principal place of business or location of principal assets. These options are set forth in paragraph (3) of the form. The paragraph may be adapted for use when venue is based on a pending case commenced by an affiliate pursuant to 28 U.S.C. Sec. 1472(2). NOTES OF ADVISORY COMMITTEE ON RULES - 1986 AMENDMENT The inclusion in paragraph 5 of the allegation that the debts are not subject to a bona fide dispute reflects the requirement added to Sec. 303(h)(1) of the Code by the 1984 amendments. ------DocID 15145 Document 490 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 13 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 13. - Summons to Debtor. -STATUTE- (CAPTION AS IN FORM NO. 1) SUMMONS To the above-named debtor: A petition under title 11, United States Code having been filed against you on XXXXXX, in this bankruptcy court, praying for an order for relief under 11 U.S.C. chapter 7 (or 11), You are hereby summoned and required to file with this court and to serve upon XXXXXX, the petitioners' attorney, whose address is XXXXXXXXXX, a motion or an answer * to the petition which is herewith served upon you, on or before XXXXXX. If you fail to do so, the order for relief will be entered. XXXXXXXXXXXXXXXXX, Clerk of the Bankruptcy Court. By: XXXXXXXXXXXXXXXX Deputy Clerk. (SEAL OF THE UNITED STATES BANKRUPTCY COURT) Date of issuance: XXXXXX * If you make a motion, Bankruptcy Rule 1011 governs the time within which your answer must be served. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is to be used as provided in Rule 1010. ------DocID 15146 Document 491 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 14 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 14. - Order for Relief -STATUTE- (CAPTION AS IN FORM NO. 1) ORDER FOR RELIEF On consideration of the petition filed on XXXXXX against the above-named debtor, an order for relief under chapter 7 (or 11) of title 11 of the United States Code is GRANTED. Dated: XXXXXX BY THE COURT XXXXXXXXXXXXXX Bankruptcy Judge. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is an adaptation of former Official Form No. 11. It is appropriate for use when relief is ordered on an involuntary petition filed under Sec. 303 of the Code with respect to chapter 7 (liquidation) or chapter 11 (reorganization). If a contested petition is tried by the court without a jury (or with an advisory jury), the findings of fact and conclusions of law thereon must be stated separately. See Rule 7052(a), which is made applicable to proceedings on a contested petition by Rule 1018. ------DocID 15147 Document 492 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 15 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 15. - Appointment of Committee of Unsecured Creditors in Chapter 9 Municipality or Chapter 11 Reorganization Case -STATUTE- (CAPTION AS IN FORM NO. 1) APPOINTMENT OF COMMITTEE OF UNSECURED CREDITORS IN A CHAPTER 9 MUNICIPALITY OR CHAPTER 11 REORGANIZATION CASE The following creditors of the above-named debtor holding the 7 largest unsecured claims (or who are members of a committee organized by creditors before commencement of this case under chapter 9 (or 11) of the Bankruptcy Code which was fairly chosen and is representative of the different kinds of claims to be represented) and who are willing to serve are appointed to the committee of unsecured creditors: 1. XXXXXX XXXXXX of *XXXXXXXX 2. XXXXXX XXXXXX of *XXXXXXXX 3. XXXXXX XXXXXX of *XXXXXXXX 4. XXXXXX XXXXXX of *XXXXXXXX 5. XXXXXX XXXXXX of *XXXXXXXX 6. XXXXXX XXXXXX of *XXXXXXXX 7. XXXXXX XXXXXX of *XXXXXXXX Dated: XXXXXX BY THE COURT XXXXXXXXXXXXXX Bankruptcy Judge. * State mailing address. -SOURCE- (As amended Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is new. Pursuant to Sec. 1102 of the Code the court is to appoint a committee of unsecured creditors which ordinarily is to consist of the creditors holding the 7 largest claims and who are willing to serve. If, however, a committee has been organized prior to the filing of the petition, is representative and was fairly chosen, that committee may be continued as the official or statutory committee. This form can be adapted for use by the United States trustee who, pursuant to Sec. 151102 of the Code, will appoint the committee. It may also be adapted for use if the court (or United States trustee on order of the court) appoints any other committee, e.g., of equity security holders. Pursuant to Sec. 901(a) of the Code, the provisions of Sec. 1102, including subsection (a)(1), apply in a case under chapter 9, Adjustment of Debts of Municipality. In a chapter 9 case, only the court will appoint the committee. There is no provision in chapter 15 for a United States trustee to have any appointing function in that type of a case. Subsection (a)(1) of Sec. 1102 is not applicable in a railroad reorganization case and, therefore, the court will not appoint an unsecured creditor's committee. NOTES OF ADVISORY COMMITTEE ON RULES - 1986 AMENDMENT This form is amended to conform to the 1984 amendments to Sec. 1102(b)(1) of the Code. ------DocID 15148 Document 493 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 16 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 16. - Order for Meeting of Creditors and Related Orders, Combined With Notice Thereof and of Automatic Stay -STATUTE- (CAPTION AS IN FORM NO. 1) ORDER FOR MEETING OF CREDITORS AND FIXING TIMES FOR FILING OBJECTIONS TO DISCHARGE AND FOR FILING COMPLAINTS TO DETERMINE DISCHARGEABILITY OF CERTAIN DEBTS, COMBINED WITH NOTICE THEREOF AND OF AUTOMATIC STAY To the debtor, creditors, and other parties in interest: An order for relief under 11 U.S.C. chapter 7 (or, 11, or 13) having been entered on a petition filed by (or against) XXXXXXXXXX of *XXXXXX, on XXXXXX it is ordered, and notice is hereby given, that: (MEETING OF CREDITORS) 1. A meeting of creditors pursuant to 11 U.S.C. Sec. 341(a) has been scheduled for XXXXXXXX at XXXX o'clock XXm. at XXXXXXXX. 2. The debtor shall appear in person (or, if the debtor is a partnership, by a general partner, or, if the debtor is a corporation, by its president or other executive officer) at that time and place for the purpose of being examined. (DEADLINE TO OBJECT TO DISCHARGE OR DETERMINE NONDISCHARGEABILITY OF CERTAIN DEBTS) 3. (If the debtor is an individual) XXXXXXXX is fixed as the last day for the filing of objections to the discharge of the debtor pursuant to 11 U.S.C. Sec. 727. 4. (If the debtor is an individual) XXXXXXXX is fixed as the last day for the filing of a complaint to determine the dischargeability of any debt pursuant to 11 U.S.C. Sec. 523(c). (ADDITIONAL INFORMATION CONCERNING THE MEETING, THE AUTOMATIC STAY AND THE DISCHARGE) You are further notified that: The meeting may be continued or adjourned from time to time by notice at the meeting, without further written notice to creditors. Attendance by creditors at the meeting is welcomed, but not required. At the meeting the creditors may file their claims, (elect a trustee as permitted by law, designate a person to supervise the meeting, elect a committee of creditors,) examine the debtor, and transact such other business as may properly come before the meeting. As a result of the filing of the petition, certain acts and proceedings against the debtor and property of the estate and of the debtor are stayed as provided in 11 U.S.C. Sec. 362(a). (If the debtor is an individual) If no objection to the discharge of the debtor is filed on or before the last day fixed therefor as stated in subparagraph 3 above, the debtor will be granted a discharge. If no complaint to determine the dischargeability of a debt under clause (2), (4), or (6) of 11 U.S.C. Sec. 523(a) is filed within the time fixed therefor as stated in subparagraph 4 above, the debt may be discharged. (FILING OF CLAIMS) (For a chapter 7 or 13 case) In order to have a claim allowed so that a creditor may share in any distribution from the estate, a creditor must file a claim, whether or not the creditor is included in the list of creditors filed by the debtor. Claims which are not filed within 90 days following the above date set for the meeting of creditors will not be allowed, except as otherwise provided by law. A claim may be filed in the office of the clerk of the bankruptcy court on an official form prescribed for a proof of claim. (If a no-asset or nominal asset case, the following paragraph may be used in lieu of the preceding paragraph.) It appears from the schedules of the debtor that there are no assets from which any dividend can be paid to creditors. It is unnecessary for any creditor to file a claim at this time in order to share in any distribution from the estate. If it subsequently appears that there are assets from which a dividend may be paid, creditors will be so notified and given an opportunity to file their claims. (For a chapter 11 case) The debtor (or trustee) has filed or will file a list of creditors and equity security holders pursuant to Rule 1007. Any creditor holding a listed claim which is not listed as disputed, contingent, or unliquidated as to amount, may, but need not, file a proof of claim in this case. Creditors whose claims are not listed or whose claims are listed as disputed, contingent, or unliquidated as to amount and who desire to participate in the case or share in any distribution must file their proofs of claim on or before XXXXXX, which date is hereby fixed as the last day for filing a proof of claim (or, if appropriate, on or before a date to be later fixed of which you will be notified). Any creditor who desires to rely on the list has the responsibility for determining that the claim is accurately listed. (OBJECTION TO CLAIM OF EXEMPTIONS) Unless the court extends the time, any objection to the debtor's claim of exempt property (Schedule B-4) must be filed within 30 days after the conclusion of the meeting of creditors. (TRUSTEE) (If appropriate) XXXXXX of* XXXXXX has been appointed (interim) trustee of the estate of the above-named debtor. Dated: XXXXXX BY THE COURT XXXXXXXXXXXXXX, Bankruptcy Judge. * State mailing address. -SOURCE- (As amended Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form can be used for cases filed under chapter 7, 11, or 13. It conforms with Rule 2003 which specifies that the court is to call the meeting of creditors even though, under the Code, it may not preside at such meeting. This form revises former Official Form No. 12. The alternative paragraph is to be used when the court exercises the option under Rule 2002(e) to notify the creditors that no dividends are to be anticipated and no claims need be filed. ------DocID 15149 Document 494 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 17 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 17. - General Power of Attorney -STATUTE- (CAPTION AS IN FORM NO. 2) GENERAL POWER OF ATTORNEY To XXX XXXXX of *XXXXXXXX, and XXX XXXXX of *XXXXXXXX: The undersigned claimant hereby authorizes you, or any one of you, as attorney in fact for the undersigned and with full power of substitution, to vote on any question that may be lawfully submitted to creditors of the debtor in the above-entitled case; (if appropriate) to vote for a trustee of the estate of the debtor and for a committee of creditors; to receive dividends; and in general to perform any act not constituting the practice of law for the undersigned in all matters arising in this case. Dated: XXXXXX Signed: XXXXXXXXXX (If appropriate) By XXXXXXXXXX as XXXXXXXXXX Address: XXXXXXXXXX XXXXXXXXXX (If executed by an individual) Acknowledged before me on XXXXXX. (If executed on behalf of a partnership) Acknowledged before me on XXXXXX, by XXXXXXXX, who says that he (or she) is a member of the partnership named above and is authorized to execute this power of attorney in its behalf. (If executed on behalf of a corporation) Acknowledged before me on XXXXXX, by XXXXXXXX, who says that he (or she) is XXXXXX of the corporation named above and is authorized to execute this power of attorney in its behalf. XXXXXXXXXXXX, XXXXXXXXXXXX (Official character.) * State mailing address. -SOURCE- (As amended Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rule 9010(c) requires a general power of attorney to be prepared substantially in conformity with this form which is derived from former Official Form No. 13. While a power of attorney may of course be executed in favor of an attorney at law who is also retained as such to represent the creditor executing the form, the power of attorney does not purport to confer the right to act as an attorney at law. The corollary is that one not an attorney at law may act under a general power of attorney within the limitations prescribed in the form. ------DocID 15150 Document 495 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 18 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 18. - Special Power of Attorney -STATUTE- (CAPTION AS IN FORM NO. 2) SPECIAL POWER OF ATTORNEY To XXX XXXXX of *XXXXXXXX, and XXXXXXXX of *XXXXXXXX: The undersigned claimant hereby authorizes you, or any one of you, as attorney in fact for the undersigned (if desired: and with full power of substitution,) to attend the meeting of creditors of the debtor or any adjournment thereof, and to vote in my behalf on any question that may be lawfully submitted to creditors at such meeting or adjourned meeting, and for a trustee or trustees of the estate of the debtor. Dated: XXXXXX Signed: XXXXXXXXXX (If appropriate) By XXXXXXXXXX as XXXXXXXXXX Address: XXXXXXXXXX, XXXXXXXXXX (If executed by an individual) Acknowledged before me on XXXXXX. (If executed on behalf of a partnership) Acknowledged before me on XXXXXX, by XXXXXXXX, who says that he (or she) is a member of the partnership named above and is authorized to execute this power of attorney in its behalf. (If executed on behalf of a corporation) Acknowledged before me on XXXXXX, by XXXXXXXX, who says that he (or she) is XXXXXX of the corporation named above and is authorized to execute this power of attorney in its behalf. XXXXXXXXXXXX XXXXXXXXXXXX (Official character.) * State mailing address. -SOURCE- (As amended Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES A special power of attorney shall conform substantially with this official form, as provided in Rule 9010(c), but it may grant either more or less authority in accordance with the language used. The form is derived from former Official Form No. 14. ------DocID 15151 Document 496 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 19 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 19. - Proof of Claim -STATUTE- (CAPTION AS IN FORM NO. 2) PROOF OF CLAIM 1. (If claimant is an individual) The undersigned, XXXXXX who is the claimant herein, resides at *XXXXXX. (If claimant is a partnership claiming through a member) The undersigned, XXXXXX, who resides at *XXXXXX, is a member of XXXXXX, a partnership, composed of the undersigned and XXXXXX, of *XXXXXX, and doing business at *XXXXXX, and is authorized to make this proof of claim in behalf of the partnership. (If claimant is a corporation claiming through an authorized officer) The undersigned, XXXXXX, who resides at *XXXXXX, is the XXXXXX of XXXXXX, a corporation organized under the laws of XXXXXX and doing business at *XXXXXX, and is authorized to make this proof of claim on behalf of the corporation. (If claim is made by agent) The undersigned, XXXXXX, who resides at *XXXXXX, is the agent of XXXXXX, of *XXXXXX, and is authorized to make this proof of claim on behalf of the claimant. 2. The debtor was, at the time of the filing of the petition, initiating this case, and still is indebted (or liable) to this claimant, in the sum of $XXXX. 3. The consideration for this debt (or ground of liability) is as follows: XXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX (If filed in a chapter 7 or 13 case) This claim consists of $XXXX in principal amount and $XXXX in additional charges (or no additional charges). (Itemize all charges in addition to principal amount of debt, state basis for inclusion and computation, and set forth any other consideration relevant to the legality of the charge.) XXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX 4. (If the claim is founded on writing) The writing on which this claim is founded (or a duplicate thereof) is attached hereto (or cannot be attached for the reason set forth in the statement attached hereto). 5. (If appropriate) This claim is founded on an open account, which became (or will become) due on XXXXXX, as shown by the itemized statement attached hereto. Unless it is attached hereto or its absence is explained in an attached statement, no note or other negotiable instrument has been received for the account or any part of it. 6. No judgment has been rendered on the claim except XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX 7. The amount of all payments on this claim has been credited and deducted for the purpose of making this proof of claim. 8. This claim is not subject to any setoff or counterclaim exceptXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX 9. No security interest is held for this claim except XXXXXX (If security interest in property of the debtor is claimed) The undersigned claims the security interest under the writing referred to in paragraph 4 hereof (or under a separate writing which (or a duplicate of which) is attached hereto, or under a separate writing which cannot be attached hereto for the reason set forth in the statement attached hereto). Evidence of perfection of such security interest is also attached hereto. 10. This claim is a general unsecured claim, except to the extent that the security interest, if any, described in paragraph 9 is sufficient to satisfy the claim. (If priority is claimed, state the amount and basis thereof.) XXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX Dated: XXXXXX Signed: XXXXXXXXXXX Penalty for Presenting Fraudulent Claim. Fine of not more than $5,000 or imprisonment for not more than 5 years or both - Title 18, U.S.C., Sec. 152. * State mailing address. -SOURCE- (As amended Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is derived from former Official Form No. 15. It may be used by any claimant, including a wage earner for whom alternative short forms have been specially prepared (Form No. 20 and No. 21), or by an agent or attorney for any claimant. Such a combined form is commonly used in practice. If a security interest in the debtor's property is claimed, paragraph 9 requires that any security agreement (if not included in the writing on which the claim is founded and which is required by paragraph 4 to be attached) be attached to the proof of claim or that the reason why it cannot be attached be set forth. Paragraph 9 further requires evidence of perfection of the security interest to be attached to the proof of claim. See the Note to Rule 3001(d) as to what constitutes satisfactory evidence of perfection. The information so required will expedite determination of the validity of any claimed security interest as against the trustee. Paragraph 10, requiring an explicit statement as to whether the claim is filed as a general, priority, or secured claim, will facilitate administration and minimize troublesome litigation over the question whether a proof of claim was intended as a waiver of security. See, e.g., United States National Bank v. Chase National Bank, 331 U.S. 28, 35-36 (1947); 3 Collier, Bankruptcy 57.07(3.1) (14th ed. 1961). ------DocID 15152 Document 497 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 20 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 20. - Proof of Claim for Wages, Salary, or Commissions -STATUTE- (CAPTION AS IN FORM NO. 2) PROOF OF CLAIM FOR WAGES, SALARY, OR COMMISSIONS 1. The undersigned, XXXXXXX, claimant herein resides at XXXXXXXXXXXX and has social security number XXXXXXXXX. --------------------------------------------------------------------- --------------------------------------------------------------------- 2. The debtor owes the claimant $XXXX computed as follows: (a) wages, salary, or commissions for services performed from XXXX to XXXX, at the following rate or rates of compensation XXXXXXX XXXXXXXXXXXXXXX $XXXX (if appropriate) (b) allowances and benefits, such as vacation, severance and sick leave pay (specify) XXXXXXXXXXXXXXX XXXXXXXXXXXXXXX $XXXX Total amount claimed $XXXX ------------------------------- 3. The claimant demands priority to the extent permitted by 11 U.S.C. Sec. 507(a)(3). 4. The claimant has received no payment, no security, and no check or other evidence of this debt except as follows: XXXXXXX. Dated: XXXXXX Signed: XXXXXXXXXX Claimant. Penalty for Presenting Fraudulent Claim. Fine of not more than $5,000 or imprisonment for not more than 5 years or both - Title 18, U.S.C., Sec. 152. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is an adaptation of former Official Form No. 16 for the exclusive use of claimants for personal earnings in cases under the Code. Its limited purpose permits elimination of recitals that are appropriate for other classes of claimants. Most claimants using the form will be entitled to priority under Sec. 507(a)(3) of the Code. If the claim as filed includes an amount not entitled to priority because, for example, not earned within the applicable 90 day period, reference to payroll records will ordinarily permit determination of the amount of the priority, if any, to which the claimant is entitled. If such records are unavailable, the claimant may be required to supply additional information as a condition to allowance of the claim with priority. ------DocID 15153 Document 498 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 21 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 21. - Proof of Multiple Claims for Wages, Salary, or Commissions -STATUTE- (CAPTION AS IN FORM NO. 2) PROOF OF MULTIPLE CLAIMS FOR WAGES, SALARY, OR COMMISSIONS 1. The undersigned, XXXXXX, whose address is *XXXXXX, is the agent of the claimants listed in the statement appended to this proof of claim and is authorized to make this proof of claims on their behalf. 2. The debtor owes the claimants $XXXXX, computed as indicated in the appended statement. 3. The claimants demand priority to the extent permitted by 11 U.S.C. Sec. 507(a)(3) and (4). 4. The claimants have received no payment, no security, and no check or other evidence of this debt except as follows:XXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX Dated: XXXXXX Signed: XXXXXXXXXX Penalty for Presenting Fraudulent Claim. Fine of not more than $5,000 or imprisonment for not more than 5 years or both - Title 18, U.S.C., Sec. 152. Statement of Wage Claims --------------------------------------------------------------------- Name, Address, :Dates services :Contributions :Amounts Claimed & Social : rendered, : to employee : Security : rates of pay, : benefit plans : Numbers : and fringe : : : benefits : : --------------------------------------------------------------------- ------------------------------- -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is an alternative for Form No. 20 provided for use when there are numerous claimants for wages, salary, or commissions against a debtor's estate and they wish to have their proofs of claim executed and filed by a common agent. Use of the form should not only simplify the filing procedure for the claimants but facilitate the handling of the claims by the court. ------DocID 15154 Document 499 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 22 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 22. - Order Appointing Interim Trustee and Fixing Amount of Bond -STATUTE- (ABROGATED SEPT. 19, 1986) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form may be promulgated by the Director of the Administrative Office pursuant to Rule 9009. ------DocID 15155 Document 500 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 23 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 23. - Order Approving Election of Trustee and Fixing Amount of Bond -STATUTE- (ABROGATED SEPT. 19, 1986) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form may be promulgated by the Director of the Administrative Office pursuant to Rule 9009. ------DocID 15156 Document 501 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 24 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 24. - Notice to Trustee of Selection and of Time Fixed for Filing a Complaint Objecting to Discharge of Debtor -STATUTE- (CAPTION AS IN FORM NO. 2) NOTICE TO TRUSTEE OF SELECTION AND OF TIME FIXED FOR FILING A COMPLAINT OBJECTING TO DISCHARGE OF DEBTOR To XXXXXX, of *XXXXXXXX: You are hereby notified of your election (or appointment) as trustee of the estate of the above-named debtor. The amount of your bond has been fixed at $XXXX. You are required to notify XXXXXX, Bankruptcy Judge, at XXXXXXXX, in writing within five days following receipt of this notice of your acceptance or rejection of the office. If you accept, your bond must be filed with the court on or before XXXXXX. (If appropriate) You are further notified that XXXXXX has been fixed as the last day for the filing by you or any other party in interest of a complaint objecting to the discharge of the debtor. Dated: XXXXXX XXXXXXXXXXX Clerk of the Bankruptcy Court. * State mailing address. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is to be used in giving the notice required by Rule 2008. If a blanket bond has been authorized pursuant to Rule 2010(a), the second sentence of the form and the last sentence of the first paragraph may be deleted. ------DocID 15157 Document 502 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 25 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 25. - Bond and Order Approving Bond of Trustee -STATUTE- (CAPTION AS IN FORM NO. 2) BOND AND ORDER APPROVING BOND OF TRUSTEE We, XXXXXX, of *XXXXXX, as principal, and XXXXXX, of *XXXXXX, as surety, bind ourselves to the United States in the sum of $XXXX for the faithful performance by the undersigned principal of official duties as trustee of the estate of the above-named debtor. Dated: XXXXXX XXXXXXXXXX Principal XXXXXXXXXX Surety The bond filed by XXXXXX of *XXXXXX as trustee of the estate of the above-named debtor is hereby approved. Dated: XXXXXX BY THE COURT XXXXXXXXXXXXXX, Bankruptcy Judge. * State mailing address. -SOURCE- (As amended Sept. 19, 1986, eff. Sept. 19, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form may be used in an individual case under Sec. 322(a) of the Code, or, by modification of the caption, the reference in the bond to debtor, and, where necessary, the reference to the principal, it may be adapted for use in a series of cases when a blanket bond is given pursuant to Rule 2010(a). Unless otherwise provided by local rule, the completed bond is to be filed with the court in accordance with Sec. 322(a). ------DocID 15158 Document 503 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 26 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 26. - Certificate of Retention of Debtor in Possession -STATUTE- (CAPTION AS IN FORM NO. 1) CERTIFICATE OF RETENTION OF DEBTOR IN POSSESSION I hereby certify that the above-named debtor continues in possession of its estate as debtor in possession, no trustee having been appointed. Dated: XXXXXX XXXXXXXXXXXXXXXX, Clerk of the Bankruptcy Court. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form may be used in chapter 11 reorganization cases. Usually, a trustee will not be appointed in which event the debtor is automatically continued in possession pursuant to Sec. 1101(a) of the Code. When evidence of debtor in possession status is required, this certificate may be used in accordance with Rule 2011. ------DocID 15159 Document 504 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 27 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 27. - Discharge of Debtor -STATUTE- (CAPTION AS IN FORM NO. 1) DISCHARGE OF DEBTOR It appearing that the person named above has filed a petition commencing a case under title 11, United States Code on XXXXXX, and an order for relief was entered under chapter 7 and that no complaint objecting to the discharge of the debtor was filed within the time fixed by the court (or that a complaint objecting to discharge of the debtor was filed and, after due notice and hearing, was not sustained); it is ordered that 1. The above-named debtor is released from all dischargeable debts. 2. Any judgment heretofore or hereafter obtained in any court other than this court is null and void as a determination of the personal liability of the debtor with respect to any of the following: (a) debts dischargeable under 11 U.S.C. Sec. 523; (b) unless heretofore or hereafter determined by order of this court to be nondischargeable, debts alleged to be excepted from discharge under clauses (2), (4) and (6) of 11 U.S.C. Sec. 523(a); (c) debts determined by this court to be discharged. 3. All creditors whose debts are discharged by this order and all creditors whose judgments are declared null and void by paragraph 2 above are enjoined from instituting or continuing any action or employing any process or engaging in any act to collect such debts as personal liabilities of the above-named debtor. Dated: XXXXXX BY THE COURT XXXXXXXXXXXXXX Bankruptcy Judge. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is a revision of former Official Form No. 24. It takes into account the features of Sec. 523 of the Code which in turn, were derived from the 1970 amendments to the Bankruptcy Act. ------DocID 15160 Document 505 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 28 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 28. - Order and Notice for Hearing on Disclosure Statement -STATUTE- (CAPTION AS IN FORM NO. 1) ORDER AND NOTICE FOR HEARING ON DISCLOSURE STATEMENT To the debtor, its creditors, and other parties in interest: A disclosure statement and a plan under chapter 11 (or chapter 9) of the Bankruptcy Code having been filed by XXXXXX on XXXXXX, it is ordered and notice is hereby given, that: 1. The hearing to consider the approval of the disclosure statement shall be held at XXXXXX, on XXXXXX, at XXXX o'clock XX m. 2. XXXXXX is fixed as the last day for filing and serving in accordance with Rule 3017(a) written objections to the disclosure statement. 3. Within XXXXXX days after entry of this order, the debtor in possession (or trustee or debtor or XXXXXX, proponent of the plan) shall transmit the disclosure statement and plan to the debtor, trustee, each committee appointed pursuant to Sec. 1102 of the Code, the Securities and Exchange Commission and any party in interest who has requested or requests in writing a copy of the disclosure statement and plan. 4. Requests for copies of the disclosure statement and plan shall be mailed to the debtor in possession (or trustee or debtor or XXXXXX) at *XXXXXX. Dated: XXXXXX BY THE COURT XXXXXXXXXXXXXX Bankruptcy Judge. * State mailing address. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is new and is related to Rule 3017(a). Section 1125 of the Code requires court approval of a disclosure statement before votes may be solicited for or against a plan in either chapter 11, reorganization or chapter 9, municipality cases. Before the court may approve a disclosure statement it must find that it contains adequate information to enable creditors whose votes will be solicited to be able to make an informed judgment about the plan. Objections may be filed to the disclosure statement. Rule 3017(a) specifies that the court may fix a time for filing of objections or they can be filed at any time prior to approval of the statement. Rule 3017(a) also specifies the persons who are to receive copies of the statement and plan prior to the hearing. These documents will not be sent to all parties in interest because at this stage of the case it could be unnecessarily expensive and confusing. However, any party in interest may request copies. The request should be made in writing (Rule 3017(a)), and sent to the person mailing the statement and plan which, as the form indicates, would usually be the proponent of the plan. ------DocID 15161 Document 506 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 29 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 29. - Order Approving Disclosure Statement and Fixing Time for Filing Acceptances or Rejections of Plan, Combined With Notice Thereof -STATUTE- (CAPTION AS IN FORM NO. 1) ORDER APPROVING DISCLOSURE STATEMENT AND FIXING TIME FOR FILING ACCEPTANCES OR REJECTIONS OF PLAN, COMBINED WITH NOTICE THEREOF A disclosure statement under chapter 11 of the Bankruptcy Code having been filed by XXXXXX, on XXXXXX (if appropriate, and by XXXXXX, on XXXXXX), referring to a plan under chapter 11 of the Code filed by XXXXXX, on XXXXXX (if appropriate, and by XXXXXX, on XXXXXX respectively) (if appropriate, as modified by a modification filed on XXXXXX); and It having been determined after hearing on notice that the disclosure statement (or statements) contain(s) adequate information; It is ordered, and notice is hereby given, that: A. The disclosure statement filed by XXXXXX dated XXXXXX (if appropriate, and by XXXXXX, dated XXXXXX) is (are) approved. B. XXXXXX is fixed as the last day for filing written acceptances or rejections of the plan (or plans) referred to above. C. Within XXX days after the entry of this order, the plan (or plans) (or a summary or summaries thereof approved by the court), (if appropriate a summary approved by the court of its opinion, if any, dated XXXXXX, approving the disclosure statement (or statements)), the disclosure statement (or statements) and a ballot conforming to Official Form No. 29 shall be transmitted by mail to creditors, equity security holders and other parties in interest as provided in Rule 3017(d). D. If acceptances are filed for more than one plan, preferences among the plans so accepted may be indicated. (If appropriate) E. XXXXXX is fixed for the hearing on confirmation of the plan (or plans). (If appropriate) F. XXXXXX is fixed as the last day for filing and serving pursuant to Rule 3020(b)(1) written objections to confirmation of the plan. Dated: XXXXXX BY THE COURT XXXXXXXXXXXXXX Bankruptcy Judge. (If the court directs that a copy of the opinion should be transmitted in lieu of or in addition to the summary thereof, the appropriate change should be made in paragraph C of this order.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is new. As provided in Sec. 1125 of the Code, a disclosure statement must be approved by the court prior to the solicitation of votes to a plan. This form may be used for such approval, to give notice of the time fixed for filing acceptances or rejections and the time fixed for the hearing on confirmation if such a time has been fixed. ------DocID 15162 Document 507 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 30 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 30. - Ballot for Accepting or Rejecting Plan -STATUTE- (CAPTION AS IN FORM NO. 1) BALLOT FOR ACCEPTING OR REJECTING PLAN Filed by XXXXXX on XXXXXX The plan referred to in this ballot can be confirmed by the court and thereby made binding on you if it is accepted by the holders of two-thirds in amount and more than one-half in number of claims in each class and the holders of two-thirds in amount of equity security interests in each class voting on the plan. In the event the requisite acceptances are not obtained, the court may nevertheless confirm the plan if the court finds that the plan accords fair and equitable treatment to the class rejecting it. To have your vote count you must complete and return this ballot. (If equity security holder) The undersigned, the holder of (state number) XXXXXX shares of (describe type) XXXXXXXXX stock of the above-named debtor, represented by Certificate(s) No. XXXXXX, registered in the name of XXXXXX. (If bondholder, debenture holder, or other debt security holder) The undersigned, the holder of (state unpaid principal amount) $XXXX of (describe security) XXXXXX of the above-named debtor, with a stated maturity date of XXXXXX (if applicable registered in the name of XXXXXX) (if applicable bearing serial number(s) XXXXXX) (If holder of general claim) The undersigned, a creditor of the above-named debtor in the unpaid principal amount of $XXXX, (CHECK ONE BOX) Accepts Rejects the plan for the reorganization of the above-named debtor. (If more than one plan is accepted, the following may but need not be completed.) The undersigned prefers the plans accepted in the following order: (Identify plans) 1. XXXXXXXXXXXXXXXXXXXXXX 2. XXXXXXXXXXXXXXXXXXXXXX Dated: XXXXXX Print or type name: XXXXXXXXXX Signed: XXXXXXXXXX (If appropriate) By: XXXXXXXXXX as: XXXXXXXXXX Address: XXXXXXXXXX XXXXXXXXXX Return this ballot on or before XXXXXX TO: Name: XXXXXXXXXX Address: XXXXXXXXXX -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form may be modified as necessary to include identification of as many plans as may have been transmitted on which a vote will be taken. The form can also be modified to take account of the types of parties who will vote as among equity security holders (see Sec. 101(15) of the Code for definition of equity security), security holders (see Sec. 101(35) for definition of security), secured creditors and unsecured creditors. Before the form is transmitted, the blanks identifying the plan and the name and address of the person to whom it should be returned should be completed for the information of creditors and equity security holders. ------DocID 15163 Document 508 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 31 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 31. - Order Confirming Plan -STATUTE- (CAPTION AS IN FORM NO. 1) ORDER CONFIRMING PLAN The plan under chapter 11 of the Bankruptcy Code filed by XXXXXX, on XXXXXX (if appropriate, as modified by a modification filed on XXXXXX,) or a summary thereof having been transmitted to creditors and equity security holders; and It having been determined after hearing on notice that: 1. The plan has been accepted in writing by the creditors and equity security holders whose acceptance is required by law; and 2. The provisions of chapter 11 of the Code have been complied with; that the plan has been proposed in good faith and not by any means forbidden by law; and 3. Each holder of a claim or interest has accepted the plan (or will receive or retain under the plan property of a value, as of the effective date of the plan, that is not less than the amount that such holder would receive or retain if the debtor were liquidated under chapter 7 of the Code on such date) (or The plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted the plan); and 4. All payments made or promised by the debtor or by a person issuing securities or acquiring property under the plan or by any other person for services or for costs and expenses in, or in connection with, the plan and incident to the case, have been fully disclosed to the court and are reasonable or, if to be fixed after confirmation of the plan, will be subject to the approval of the court; and 5. The identity, qualifications, and affiliations of the persons who are to be directors or officers, or voting trustees, if any, of the debtor (and an affiliate of the debtor participating in a joint plan with the debtor) (or a successor to the debtor under the plan), after confirmation of the plan, have been fully disclosed, and the appointment of such persons to such offices, or their continuance therein, is equitable, and consistent with the interests of the creditors and equity security holders and with public policy; and 6. The identity of any insider that will be employed or retained by the debtor and his compensation have been fully disclosed; and 7. (If applicable) Any regulatory commission with jurisdiction, after confirmation of the plan, over the rates of the debtor has approved any rate change provided for in the plan (or any rate change is expressly conditioned on approval of any regulatory agency having jurisdiction over the rates of the debtor); and 8. (If appropriate) Confirmation of the plan 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 under the plan): It is ordered that: The plan filed by XXXXXXXXXX, on XXXXXX, a copy of which plan is attached hereto, is confirmed. Dated: XXXXXX BY THE COURT XXXXXXXXXXXXXX Bankruptcy Judge. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES The order of confirmation specifies those matters heard and determined by the court at the hearing on confirmation which are required by the Code in order for a plan to be confirmed. In the case of an individual chapter 11 debtor, Form No. 27 may be adapted for use together with this form. ------DocID 15164 Document 509 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 32 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 32. - Notice of Filing Final Account -STATUTE- (CAPTION AS IN FORM NO. 1) NOTICE OF FILING FINAL ACCOUNT(S) OF TRUSTEE, OF HEARING ON APPLICATIONS FOR COMPENSATION (AND OF HEARING ON ABANDONMENT OF PROPERTY BY THE TRUSTEE) To the creditors: The final report(s) and account(s) of the trustee in this case having been filed, Notice is hereby given, that there will be a hearing held at XXXX, XXXXXX, on XXXXXX, at XXXXXX, o'clock XXm., for the purpose (as appropriate) of examining and passing on the report(s) and account(s), acting on applications for compensation, and transacting such other business as may properly come before the court. Attendance by creditors is welcomed but not required. The following applications for compensation have been filed: --------------------------------------------------------------------- --------------------------------------------------------------------- Commission Applicants or Fees Expenses XXXXXXXXXXXXXXXXX $XXXXX $XXXXX Interim Trustee XXXXXXXXXXXXXXXXX $XXXXX $XXXXX Trustee XXXXXXXXXXXXXXXXX $XXXXX $XXXXX Attorney for debtor XXXXXXXXXXXXXXXXX $XXXXX $XXXXX Attorney for interim trustee XXXXXXXXXXXXXXXXX $XXXXX $XXXXX Attorney for trustee XXXXXXXXXXXXXXXXX $XXXXX $XXXXX Attorney for petitioning creditors XXXXXXXXXXXXXXXXX $XXXXX $XXXXX ------------------------------- Creditors may be heard before the applications are determined. The account of the trustee shows total receipts of $XXXX and total disbursements of $XXXX. The balance on hand is $XXXX. In addition to expenses of administration as may be allowed by the court, liens and priority claims totalling $XXXX, must be paid in advance of any dividend to general creditors. Claims of general creditors totalling $XXXX have been allowed. (If appropriate) The trustee's application to abandon the following property will be heard and acted on: XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX The debtor has (not) been discharged. Dated: XXXXXX BY THE COURT XXXXXXXXXXXXXX, Bankruptcy Judge. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is adapted from former Official Form No. 29 which is an adaptation of a form which has been made available to bankruptcy judges by the Administrative Office of the United States Courts and used for a number of years. ------DocID 15165 Document 510 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 33 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 33. - Final Decree -STATUTE- (CAPTION AS IN FORM NO. 1) FINAL DECREE The estate of the above-named debtor having been fully administered (if appropriate and the deposit required by the plan having been distributed) It is ordered that: 1. (If applicable) XXXXXXXXXX is hereby discharged as trustee of the estate of the above-named debtor and the bond is cancelled. 2. (Add provisions by way of injunction or otherwise as may be equitable.) 3. The chapter 7 (or 9 or 11 or 13) case of the above-named debtor is closed. Dated:XXXXXX BY THE COURT XXXXXXXXXXXXXX, Bankruptcy Judge. -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is to be used in conjunction with Rule 3022. The final decree may discharge the trustee if one was appointed and if the trustee had not been discharged at an earlier time. Section 350 of the Code requires the court to close the case after an estate has been fully administered and the trustee discharged. That section is applicable to chapter 7, 9, 11 and 13 cases and this form may be adapted to the circumstances of the particular case. ------DocID 15166 Document 511 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 34 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 34. - Caption of Adversary Proceedings -STATUTE- UNITED STATES BANKRUPTCY COURT XXXXXXXX DISTRICT OF XXXXXXXX XXXXXXXXXXXXXXXX In re Case No. XXX XXXXXXXXXXXXXXX, Debtor, XXXXXXXXXXXXXXX, Adv. Pro. No. XX Plaintiff, v. XXXXXXXXXXXXXXX, Defendant. XXXXXXXXXXXXXXXX COMPLAINT (OR OTHER DESIGNATION) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES Rule 7010 requires the caption of a pleading in an adversary proceeding to conform substantially to this form. ------DocID 15167 Document 512 of 646------ -CITE- 11 USC APPENDIX - BANKRUPTCY RULES Form 35 -EXPCITE- TITLE 11 APPENDIX BANKRUPTCY RULES AND OFFICIAL FORMS OFFICIAL FORMS -HEAD- Form 35. - Notice of Appeal to a District Court or Bankruptcy Appellate Panel From a Judgment of a Bankruptcy Court Entered in an Adversary Proceeding -STATUTE- UNITED STATES BANKRUPTCY COURT XXXXXXXX DISTRICT OF XXXXXXXX XXXXXXXXXXXXXXXX In re Case No. XXX XXXXXXXXXXXXXXX, Debtor, XXXXXXXXXXXXXXX, Adv. Pro. No. XX Plaintiff, v. XXXXXXXXXXXXXXX, Defendant. XXXXXXXXXXXXXXXX NOTICE OF APPEAL XXXXXXXX, the plaintiff (or defendant or other party) appeals to the district court (or the bankruptcy appellate panel), from the final judgment (or final order or final decree (describe it)) of the bankruptcy court entered in this adversary proceeding on the XXXX day of XXXXXX. The parties to the judgment (or order or decree) appealed from and the names and addresses of their respective attorneys are as follows: XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX Dated: XXXXXX Signed: XXXXXXXX, Attorney for Appellant. Address: XXXXXXXXXXXXXXX -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This form is an adaptation of the suggested form of notice of appeal which accompanies the Federal Rules of Appellate Procedure. If the appeal does not arise in an adversary proceeding the caption should conform to that in Official Form No. 2. This form may be modified for an appeal from an interlocutory order. See Rule 8001(b). ------DocID 15181 Document 513 of 646------ -CITE- 12 USC Sec. 11 -EXPCITE- TITLE 12 CHAPTER 1 -HEAD- Sec. 11. Interest in national banks -STATUTE- It shall not be lawful for the Comptroller or the Deputy Comptroller of the Currency, either directly or indirectly, to be interested in any association issuing national currency under the laws of the United States. -SOURCE- (R.S. Sec. 329.) -COD- CODIFICATION R.S. Sec. 329 derived from act June 3, 1864, ch. 106, Sec. 1, 13 Stat. 99, which was the National Bank Act. See section 38 of this title. ------DocID 15869 Document 514 of 646------ -CITE- 12 USC CHAPTER 11 -EXPCITE- TITLE 12 CHAPTER 11 -HEAD- CHAPTER 11 - FEDERAL HOME LOAN BANKS -MISC1- Sec. 1421. Short title. 1422. Definitions. 1422a. Federal Housing Finance Board. (a) Establishment. (b) Management. (c) Chairperson; transitional provisions. (d) Vacancies. 1422b. Powers and duties. (a) General powers. (b) Staff. (c) Receipts of Board. (d) Annual report. 1423. Federal Home Loan Bank districts; number and boundaries; establishment of Federal Home Loan Banks; names. 1424. Eligibility for membership. (a) Criteria for eligibility. (b) Location requirement. (c) Inspection and regulation requirements. 1425 to 1425b. Repealed. 1426. Capital stock. (a) Par value of shares. (b) Minimum subscriptions; retirement of oversubscriptions; limitations; cancellation of oversubscriptions; aggregate unpaid loan principal; reports and information. (c) Payments for stock. (d) Transfer or hypothecation of stock. (e) Withdrawal or removal of members; surrender and cancellation of stock; prepayment penalties. (f) Disposal of stock. (g) Dividends. (h) Acquisition of membership after expiration of period of withdrawal. 1427. Directors. (a) Number; appointment and election; qualifications; conflicts of interest. (b) Elective directorships; qualifications; nominations and election. (c) Apportionment among States in bank district; designation of State location. (d) Terms; rules and regulations governing nominations and elections. (e) Continuation of existing terms; directorship for the Commonwealth of Puerto Rico. (f) Vacancies. (g) Chairman and vice chairman. (h) Appointment where members hold less than $1,000,000 of capital stock. (i) Compensation and expenses of director. (j) Duties of directors. (k) Indemnification of directors, officers, and employees. 1428. Examination of State laws, regulations, and procedures; studies of values, etc. 1428a. Repealed. 1429. Eligibility to secure advances. 1430. Advances. (a) Authorization to make secured advances. (b) Appraisals and other investigations; acceptance of home mortgages as collateral security only by formal Board resolution. (c) Notes of borrowing members; interest rate; limitations on loans; lien on stock. (d) Obligation to repay; additional security; sale of advances to other banks. (e) Qualified thrift lender status. (e) Priority of certain secured interests. (g) Community support requirements. (h) Special liquidity advances. (i) Community investment program. (j) Affordable housing program. 1430a. Omitted. 1430b. Advances to nonmember mortgagee; terms and conditions. 1431. Powers and duties of banks. (a) Borrowing money; issuing bonds and debentures; general powers. (b) Issuance of consolidated Federal Home Loan Bank debentures; restrictions. (c) Issuance of Federal Home Loan Bank bonds. (d) Additional or substituted collateral on adjustment of equities. (e) Acceptance of deposits; restrictions on transaction of banking business; collection and settlement of checks, drafts, etc.; charges; rules and regulations. (f) Rediscount of notes held by other banks; purchase of bonds of other banks. (g) Reserves. (h) Investment of surplus funds. (i) Treasury purchase of banks' obligations; exercise of authority. (j) Audits. (k) Bank loans to SAIF. 1432. Incorporation of banks; corporate powers; housing project loans. 1433. Exemption from taxation; obligations acceptable as credit on debt of home owner. 1434. Depositaries of public money; financial agents. 1435. Obligations as lawful investments; liability of United States for debentures, etc., issued by banks. 1436. Reserves and dividends; emergency suspensions of requirements. (a) Accumulation and maintenance of reserves; payment of dividends. (b) Assistance to member institutions in event of severe financial conditions. (c) Exception in case of losses in connection with Financing Corporation stock. 1437. Repealed. 1438. Administrative expenses. (a) Repealed. (b) Assessments for administrative expenses. (c) Quarters and facilities; advances of funds; obligations of United States; legal investments; approval of plans and designs; custody, management, and control; receipts; expense exclusions; property defined; budget preparation program; audit; zoning regulations; delegation of functions; limitation on obligations. 1438a. Nonadministrative expenses; expenses of studies and investigations. 1439, 1439-1. Repealed. 1439a. Deposits in special fund; availability for all purposes of Federal Home Loan Bank Board and Federal Home Loan Bank Administration. 1440. Examinations and audits. 1441. Financing Corporation. (a) Establishment. (b) Management of Financing Corporation. (c) Powers of Financing Corporation. (d) Capitalization of Financing Corporation. (e) Obligations of Financing Corporation. (f) Sources of funds for interest payments; Financing Corporation assessment authority. (g) Use and disposition of assets of Financing Corporation not invested in FSLIC. (h) Miscellaneous provisions relating to Financing Corporation. (i) Termination of Financing Corporation. (j) Regulations. (k) Definitions. 1441a. Oversight Board and Resolution Trust Corporation. (a) Oversight Board established. (b) Resolution Trust Corporation established. (c) Disposition of eligible residential properties. (d) National and regional advisory boards. (e) Institutions organized by Corporation. (f) Limitation on certain Corporation activities. (g) Exemption from State and local taxation. (h) Guarantees of FSLIC. (i) Borrowing. (j) Maximum amount limitations on outstanding obligations. (k) Reporting and disclosure obligations. (l) Power to remove; jurisdiction. (m) Intervention by Oversight Board in extraordinary circumstances. (n) Operation of Corporation after exercise of powers under subsection (m). (o) Termination. (p) Conflict of interest. 1441a-1. Definitions. 1441a-2. Authorization for State housing finance agencies and nonprofit entities to purchase mortgage-related assets. (a) Authorization. (b) Investment requirement. 1441a-3. RTC and FDIC properties. (a) Reports. (b) Limitation on transfer. (c) Definitions. 1441b. Resolution Funding Corporation established. (a) Purpose. (b) Establishment. (c) Management of Funding Corporation. (d) Powers of Funding Corporation. (e) Capitalization of Funding Corporation, etc. (f) Obligations of Funding Corporation. (g) Use and disposition of assets of Funding Corporation not transferred to Resolution Trust Corporation. (h) Miscellaneous provisions. (i) Annual report. (j) Termination of Funding Corporation. (k) Definitions. (l) Regulations. 1442. Member financial information. (a) In general. (b) Consent by members. 1442a. Informal review of certain supervisory decisions. (a) Review of certain supervisory decisions. (b) Standards for review. (c) Appointment of independent arbiter. (d) Consolidation of reviews of related decisions. (e) 25-day arbiter review period; 20-day PSA review period. (f) Clarification of relationship between informal review and other available review. (g) Expenses of review borne by association, institution, or member. 1443. Forms of bank stock and obligations. 1444. Eligibility to membership in banks. 1445. Succession of Federal Home Loan Banks. 1446. Liquidation or reorganization; acquisition of assets by other banks; assumption of liabilities. 1447. Repealed. 1448. Effect of partial invalidity of chapter. 1449. Reservation of right to amend or repeal chapter. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in section 1464 of this title. ------DocID 15994 Document 515 of 646------ -CITE- 12 USC Sec. 1701z-11 -EXPCITE- TITLE 12 CHAPTER 13 -HEAD- Sec. 1701z-11. Management and disposal of multifamily housing projects -STATUTE- (a) Goals The Secretary of Housing and Urban Development (in this section referred to as the 'Secretary') shall manage or dispose of multifamily housing projects that are owned by the Secretary, or that are subject to a mortgage held by the Secretary that is either delinquent, under a workout agreement, or being foreclosed upon by the Secretary, in a manner that is consistent with the National Housing Act (12 U.S.C. 1701 et seq.) and this section and that will, in the least costly fashion among the reasonable alternatives available, further the goals of - (1) preserving so that they are available to and affordable by low- and moderate-income persons - (A) all units in multifamily housing projects that are subsidized projects or formerly subsidized projects; (B) in other multifamily housing projects owned by the Secretary, at least the units that are occupied by low- and moderate-income persons; and (C) in all other multifamily housing projects, at least the units that are occupied by low- and moderate-income persons on the date of assignment or foreclosure (whichever is greater); (2) preserving and revitalizing residential neighborhoods; (3) maintaining the existing housing stock in a decent, safe, and sanitary condition; (4) minimizing the involuntary displacement of tenants; (5) minimizing the need to demolish projects; and (6) maintaining the project for the purpose of providing rental or cooperative housing. The Secretary, in determining the manner by which a project shall be managed or disposed of, may balance competing goals relating to individual projects in a manner which will further the achievement of the overall purpose of this section. (b) Management or disposal of property by negotiated competitive bids The Secretary is authorized, in carrying out this section - (1) to dispose of a multifamily housing project owned by the Secretary on a negotiated, competitive bid, or other basis, on such terms as the Secretary deems appropriate considering the low- and moderate-income character of the project, including the number of units in the project occupied by low- and moderate-income persons, and the requirements of subsection (a) of this section, to a purchaser determined by the Secretary to be capable of (A) satisfying the conditions of the disposition; (B) implementing a sound financial and physical management program; (C) responding to the needs of the tenants and working cooperatively with resident organizations; (D) providing adequate organizational, staff and financial resources to the project; and (E) meeting such other requirements as the Secretary may determine; and (2)(A) to contract for management services for a multifamily housing project subject to subsection (a) of this section that is owned by the Secretary (or for which the Secretary is mortgagee in possession), on a negotiated, competitive bid, or other basis at a price determined by the Secretary to be reasonable, with a manager the Secretary has determined is capable of (i) implementing a sound financial and physical management program, (ii) responding to the needs of the tenants and working cooperatively with resident organizations, (iii) providing adequate organizational, staff, and other resources to implement a management program determined by the Secretary, and (iv) meeting such other requirements as the Secretary may determine; and (B) to require the owner of a multifamily housing project subject to subsection (a) of this section that is not owned by the Secretary (and for which the Secretary is not mortgagee in possession), to contract for management services for the project in the manner described in subparagraph (A). (c) Maintenance of housing projects (1) In the case of multifamily housing projects subject to subsection (a) of this section that are owned by the Secretary (or for which the Secretary is mortgagee in possession), the Secretary shall - (A) to the greatest extent possible, maintain all such occupied projects in a decent, safe, and sanitary condition; (B) to the greatest extent possible, maintain full occupancy in all such projects; and (C) maintain all such projects for purposes of providing rental or cooperative housing for the longest feasible period. (2) In the case of any multifamily housing project subject to subsection (a) of this section that is not owned by the Secretary (and for which the Secretary is not mortgagee in possession), the Secretary shall require the owner of the project to carry out the requirements of paragraph (1). (d) Financial assistance to owner In carrying out the goals specified in subsection (a)(1) of this section the Secretary shall take not less than one of the following actions: (1) Enter into contracts under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f), to the extent budget authority is available for such section 8, with owners of multifamily housing projects that are acquired by a purchaser other than the Secretary at foreclosure or after sale by the Secretary. Such contracts shall provide assistance to the project involved for a period of not less than 15 years. Such contracts shall be sufficient to assist (A) all units in multifamily housing projects that are subsidized projects or formerly subsidized projects; (B) in other multifamily housing projects owned by the Secretary, the units that, on the date title to the projects is acquired by the Secretary, are occupied by lower income families eligible for assistance under such section 8; and (C) in all other multifamily housing projects, the units that are occupied by lower income families eligible for assistance under such section 8 on the date of assignment or foreclosure (whichever is greater). In order to make available to families any units in subsidized or formerly subsidized projects that are occupied by persons not eligible for assistance under such section 8, but that subsequently become vacant, the contract shall also provide that when any such vacancy occurs the owner involved shall lease the available unit to a family eligible for assistance under such section 8. The Secretary shall provide such contracts at contract rents that, consistent with subsection (a) of this section, provide for the rehabilitation of such project and do not exceed the most recently adjusted fair market rents for substantially rehabilitated units published by the Secretary in the Federal Register. (2) In the case of multifamily housing projects (other than subsidized or formerly subsidized projects) that are acquired by a purchaser other than the Secretary at foreclosure or after sale by the Secretary, enter into annual contribution contracts with public housing agencies to provide vouchers or certificates under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) to all low-income families who are eligible for such assistance on the date that the project is acquired by the purchaser. The Secretary shall take action under this paragraph only after making a determination that the requirements under subsection (e) of this section have been complied with and there is available in the area an adequate supply of habitable affordable housing for low-income families. (3) In accordance with the authority provided under the National Housing Act (12 U.S.C. 1701 et seq.), provide purchase-money mortgages, reduce the selling price, or provide other financial assistance to the owners of multifamily housing projects that are acquired by a purchaser other than the Secretary at foreclosure, or after sale by the Secretary, on terms that will ensure that, for a period of not less than 15 years (A) the project will remain available to and affordable by low- and moderate-income persons; and (B) such persons shall pay not more than the amount payable as rent under section 3(a) of the United States Housing Act of 1937 (42 U.S.C. 1437a(a)). (e) Right of first refusal (1) Prior to the sale of a multifamily housing project that is owned by the Secretary, the Secretary shall develop a disposition plan for the project that specifies the minimum terms and conditions of the Secretary for disposition of the project, including the initial sales price that is acceptable to the Secretary and the assistance that the Secretary plans to make available to a prospective purchaser in accordance with subsections (a) and (d) of this section. The initial sales price shall reflect the value of the project as housing affordable to low- and moderate-income persons for the period required in subsection (d) of this section. (2) Upon approval of a disposition plan for a project, the Secretary shall notify the local government and the State housing finance agency (or other agency or agencies designated by the Governor) of the terms and conditions of the disposition plan. The local government and the designated State agency shall have 90 days to make an offer to purchase the project. (3) The Secretary shall accept an offer that complies with the terms and conditions of the disposition plan. The Secretary may accept an offer that does not comply with the terms and conditions of the disposition plan if the Secretary determines that the offer will further the preservation objectives of subsection (a) of this section by actions that include extension of the duration of low- and moderate-income affordability restrictions or otherwise restructuring the transaction in a manner that enhances the long-term affordability for low- and moderate-income persons. The Secretary shall, in particular, have discretion to reduce the initial sales price in exchange for the extension of low- and moderate-income affordability restrictions beyond the 15-year period contemplated by the attachment of assistance pursuant to subsection (d)(1) of this section. If the Secretary and the local government or designated State agency cannot reach agreement within 90 days, the Secretary may offer the project for sale to the general public. (4) The Secretary shall prohibit any local government or designated State agency from transferring projects acquired under a right of first refusal under this subsection to a private entity, unless the local government or designated State agency solicits proposals from such entities through a public process. The solicitation of proposals shall be based on prescribed criteria, which shall include the extension of low- and moderate-income affordability restrictions beyond the 15-year period contemplated by the attachment of assistance pursuant to subsection (d)(1) of this section. (5) Notwithstanding any other provision of law to the contrary, a local government (including a public housing agency) or designated State agency may purchase a subsidized or formerly subsidized project in accordance with this subsection. (f) Displacement of tenants and relocation assistance (1) Whenever tenants will be displaced as a result of the disposition of, or repairs to, a multifamily housing project subject to subsection (a) of this section that is owned by the Secretary (or for which the Secretary is mortgagee in possession), the Secretary shall identify tenants who will be displaced, and shall notify all such tenants of their pending displacement and of any relocation assistance which may be available. In the case of a multifamily housing project subject to subsection (a) of this section that is not owned by the Secretary (and for which the Secretary is not mortgagee in possession), the Secretary shall require the owner of the project to carry out the requirements of this paragraph. (2) The Secretary shall assure for any such tenant (who continues to meet applicable qualification standards) the right - (A) to return, whenever possible, to a repaired unit; (B) except for tenants of above-moderate income, to occupy a unit in another multifamily housing project owned by the Secretary; (C) except for tenants of above-moderate income, to obtain housing assistance under the United States Housing Act of 1937 (42 U.S.C. 1437 et seq.); or (D) to receive any other available relocation assistance as the Secretary determines to be appropriate. (g) Assignment or partial payment of mortgages Notwithstanding any other provision of law, whenever the Secretary is requested to accept assignment of a mortgage insured by the Secretary which covers a multifamily housing project, and the Secretary determines that partial payment would be less costly to the Federal Government than other reasonable alternatives for maintaining the low- and moderate-income character of the project, the Secretary may request the mortgagee in lieu of assignment, to accept partial payment of the claim under the mortgage insurance contract and to recast the mortgage, under such terms and conditions as the Secretary may determine. As a condition to a partial claim payment under this section, the mortgagor shall agree to repay to the Secretary the amount of such payment and such obligation shall be secured by a second mortgage on the property on such terms and conditions as the Secretary may determine. (h) Limitations on certain project, loan, and mortgage sales (1) The Secretary may not approve the sale of any loan or mortgage held by the Secretary (including any loan or mortgage owned by the Government National Mortgage Association) on any subsidized project or formerly subsidized project unless such sale is made as part of a transaction that will ensure that such project will continue to operate at least until the maturity date of such loan or mortgage in a manner that will provide rental housing on terms at least as advantageous to existing and future tenants as the terms required by the program under which the loan or mortgage was made or insured prior to the assignment of the loan or mortgage on such project to the Secretary. (2) The Secretary may not approve the sale of any subsidized project (A) that is subject to a mortgage held by the Secretary; or (B) if the sale transaction involves the provision of any additional subsidy funds by the Secretary or a recasting of the mortgage, unless such sale is made as part of a transaction that will ensure that such project will continue to operate at least until the maturity date of the loan or mortgage in a manner that will provide rental housing on terms at least as advantageous to existing and future tenants as the terms required by the program under which the loan or mortgage was made or insured prior to the proposed sale of the project. (3) Notwithstanding any provision of law that may require competitive sales or bidding, the Secretary may carry out negotiated sales of subsidized or formerly subsidized mortgages held by the Secretary, without the competitive selection of purchasers or intermediaries, to agencies of State or local government, or groups of investors that include at least 1 such agency of State or local government, if the negotiations are conducted with such agencies, except that - (A) the terms of any such sale shall include the agreement of the purchasing agency or agencies of State or local government to act as mortgagee or owner of a beneficial interest in such mortgages in a manner consistent with maintaining the projects that are subject to such mortgages for occupancy by the general tenant group intended to be served by the applicable mortgage insurance program, including, to the extent the Secretary determines appropriate, authorizing such agency of State or local government to enforce the provisions of any regulatory agreement or other program requirements applicable to the related projects; and (B) the sales prices for such mortgages shall be, in the determination of the Secretary, the best price that may be obtained for such mortgages from an agency of State or local government, consistent with the expectation and intention that the projects financed will be retained for use under the applicable mortgage insurance program for the life of the initial mortgage insurance contract. (i) Definitions (1) For the purpose of this section, the term 'multifamily housing project' means any multifamily rental housing project which is, or prior to acquisition by the Secretary was, assisted or insured under the National Housing Act (12 U.S.C. 1701 et seq.), or was subject to a loan under section 202 of the Housing Act of 1959 (12 U.S.C. 1701q), or section 312 of the Housing Act of 1964 (42 U.S.C. 1452b), or which is acquired by the Secretary pursuant to any other provision of law. (2) For the purpose of this section, the term 'subsidized project' means a multifamily housing project receiving any of the following assistance immediately prior to the assignment of the mortgage on such project to, or the acquisition of such mortgage by, the Secretary: (A) below market interest rate mortgage insurance under the proviso of section 221(d)(5) of the National Housing Act (12 U.S.C. 1715l(d)(5)); (B) interest reduction payments made in connection with mortgages insured under section 236 of the National Housing Act (12 U.S.C. 1715z-1); (C) rent supplement payments under section 101 of the Housing and Urban Development Act of 1965 (12 U.S.C. 1701s); (D) direct loans at below market interest rates, made under section 202 of the Housing Act of 1959 (12 U.S.C. 1701q) or to a multifamily housing project under section 312 of the Housing Act of 1964 (42 U.S.C. 1452b); or (E) housing assistance payments made under section 23 of the United States Housing Act of 1937 (42 U.S.C. 1421b) (as in effect before January 1, 1975) or section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) (excluding payments made for certificates under subsection (b)(1) of this section or vouchers under subsection (o) of this section), if (except for purposes of paragraphs (1) and (2) of subsection (h) of this section and section 183(c) of the Housing and Community Development Act of 1987) such housing assistance payments are made to more than 50 percent of the units in the project. (3) For the purpose of this section, the term 'formerly subsidized project' means a multifamily housing project owned by the Secretary that was a subsidized project immediately prior to its acquisition by the Secretary. (4) For purposes of subsection (a)(1)(C) of this section and subsection (d) of this section - (A) the term 'date of assignment' means the date of assignment, without regard to whether such date occurs before, on, or after February 5, 1988; and (B) in the case of a multifamily housing project assigned before November 7, 1988, and for which there are no records identifying the number of low- and moderate-income persons occupying units in the project on the date of assignment, the number of low- and moderate-income persons occupying units in the project within 120 days of November 7, 1988, shall be used instead. (j) Rules and regulations The Secretary shall issue such rules and regulations as may be necessary to carry out the provisions of this section within 90 days after October 31, 1978. (k) Annual report describing status of projects The Secretary shall annually submit to the Congress on June 1 of each year a report describing the status of multifamily housing projects that are subject to subsection (a) of this section, which report shall include - (1) the name, address, and size of each project; (2) the nature and date of assignment; (3) the status of the mortgage; (4) the physical condition of the project; (5) the proportion of units in a project that are vacant; (6) the date on which the Secretary became mortgagee in possession or the date of imposition of any receivership; (7) the date and conditions of any foreclosure sale; (8) the date of acquisition by the Secretary; and (9) the date and conditions of any property disposition sale. The report shall describe the activities carried out under subsection (e) of this section during the preceding year, and shall contain a description and assessment of the rules, guidelines and practices governing the Department's assumption of management responsibilities in multifamily housing projects subject to subsection (a) of this section that are owned by the Secretary (or for which the Secretary is mortgagee in possession) as well as the steps that the Secretary has taken or plans to take to expedite the assumption of management responsibilities of the Department and improve the management performance of the Department, including the expedited repair and turnover of vacant units. -SOURCE- (Pub. L. 95-557, title II, Sec. 203, Oct. 31, 1978, 92 Stat. 2088; Pub. L. 96-153, title II, Sec. 208, Dec. 21, 1979, 93 Stat. 1109; Pub. L. 96-399, title II, Sec. 213, Oct. 8, 1980, 94 Stat. 1636; Pub. L. 100-242, title I, Sec. 181, Feb. 5, 1988, 101 Stat. 1868; Pub. L. 100-628, title X, Sec. 1010, Nov. 7, 1988, 102 Stat. 3266; Pub. L. 101-235, title II, Sec. 204(a), Dec. 15, 1989, 103 Stat. 2039; Pub. L. 101-625, title V, Sec. 579, Nov. 28, 1990, 104 Stat. 4245.) -REFTEXT- REFERENCES IN TEXT The National Housing Act, referred to in subsecs. (a), (d)(3), and (i)(1), is act June 27, 1934, ch. 847, 48 Stat. 1246, as amended, which is classified principally to this chapter (Sec. 1701 et seq.). For complete classification of this Act to the Code, see section 1701 of this title and Tables. The United States Housing Act of 1937, as amended, referred to in subsec. (f)(2)(C), is act Sept. 1, 1937, ch. 896, as revised generally by Pub. L. 93-383, title II, Sec. 201(a), Aug. 22, 1974, 88 Stat. 653, which is classified generally to chapter 8 (Sec. 1437 et seq.) of Title 42, The Public Health and Welfare. For complete classification of this Act to the Code, see Short Title note set out under section 1437 of Title 42 and Tables. Section 101 of the Housing and Urban Development Act of 1965, referred to in subsec. (i)(2)(C), is section 101 of Pub. L. 89-117, title I, Aug. 10, 1965, 79 Stat. 451, as amended, which enacted section 1701s of this title and amended sections 1451 and 1465 of Title 42. Section 23 of the United States Housing Act, referred to in subsec. (i)(2)(E), was classified to section 1421b of Title 42 and was omitted from the Code following the general revision of the United States Housing Act of 1937 by Pub. L. 93-383, title II, Sec. 201(a), Aug. 22, 1974, 88 Stat. 653. Section 183(c) of the Housing and Community Development Act of 1987, referred to in subsec. (i)(2)(E), is section 183(c) of Pub. L. 100-242, which is set out as a note under section 1437f of Title 42. -COD- CODIFICATION Section was enacted as part of the Housing and Community Development Amendments of 1978, and not as part of the National Housing Act which comprises this chapter. -MISC3- AMENDMENTS 1990 - Subsec. (a)(1)(B). Pub. L. 101-625, Sec. 579(a), struck out 'or vacant' after 'moderate-income persons'. Subsec. (d)(1). Pub. L. 101-625, Sec. 579(b)(1), struck out 'or are vacant (which units shall be made available for such families as soon as possible)' before semicolon at end of cl. (B). Subsec. (d)(2), (3). Pub. L. 101-625, Sec. 579(b)(2), (3), added par. (2) and redesignated former par. (2) as (3). 1989 - Subsec. (k). Pub. L. 101-235 amended subsec. (k) generally. Prior to amendment, subsec. (k) read as follows: 'The Secretary shall annually submit to the Congress a report describing the activities carried out under subsection (e) of this section during the preceding year.' 1988 - Subsec. (a). Pub. L. 100-628, Sec. 1010(a), substituted 'occupied by low- and moderate-income persons on the date of assignment or foreclosure (whichever is greater)' for ', on the date of assignment, occupied by low- and moderate-income persons' in par. (1)(C). Pub. L. 100-242, Sec. 181(a), substituted introductory provisions and par. (1) for former introductory provisions and par. (1) which read as follows: 'It is the policy of the United States that the Secretary of Housing and Urban Development (hereinafter referred to as the 'Secretary') shall manage and dispose of multifamily housing projects which are owned by the Secretary in a manner consistent with the National Housing Act and this section. The purpose of the property management and disposition program of the Department of Housing and Urban Development shall be to manage and dispose of projects in a manner which will protect the financial interests of the Federal Government and be less costly to the Federal Government than other reasonable alternatives by which the Secretary can further the goals of - '(1) preserving the housing units so that at least those units which are occupied by low- and moderate-income persons or which are vacant, at the time of acquisition, are available to and affordable by such persons;'. Subsec. (b)(2). Pub. L. 100-242, Sec. 181(b), designated existing provisions as subpar. (A) and redesignated former cls. (A) to (D) as cls. (i) to (iv), substituted 'subject to subsection (a) of this section that is owned by the Secretary (or for which the Secretary is mortgagee in possession)' for ', owned by the Secretary', substituted 'may determine; and' for 'may determine.', and added subpar. (B). Subsec. (c). Pub. L. 100-242, Sec. 181(c), amended subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: 'Except where the Secretary has determined on a case-by-case basis that it would be clearly inappropriate, given the manner by which an individual project is to be managed or disposed of pursuant to subsection (a) of this section, the Secretary shall seek to - '(1) maintain all occupied multifamily housing projects owned by the Secretary in a decent, safe, and sanitary condition; '(2) to the greatest extent possible, maintain full occupancy in all multifamily housing projects owned by the Secretary; and '(3) maintain the project for purposes of providing rental or cooperative housing for the longest feasible period.' Subsec. (d). Pub. L. 100-628, Sec. 1010(b), amended third sentence of par. (1) generally. Prior to amendment, third sentence read as follows: 'Such contracts shall be sufficient to assist all units in subsidized or formerly subsidized projects, and all units in other projects that are occupied by lower income families eligible for assistance under such section 8 at the time of foreclosure or sale, as the case may be, and all units that are vacant at such time (which units shall be made available for such families as soon as possible).' Pub. L. 100-242, Sec. 181(d), added subsec. (d). Former subsec. (d) redesignated (f). Subsec. (e). Pub. L. 100-628, Sec. 1010(c), amended subsec. (e) generally. Prior to amendment, subsec. (e) read as follows: 'Upon receipt of a bona fide offer to purchase a project subject to subsection (a) of this section, the Secretary shall notify the local government and the State housing finance agency (or other agency or agencies designated by the Governor) of the proposed terms and conditions of the offer, including the assistance that the Secretary plans to make available to the prospective purchaser. The local government and the designated State agency shall have 90 days to match the offer and purchase the project. In administering the right of first refusal provided in this subsection, the Secretary shall offer assistance to the local government or designated State agency on terms and conditions at least as favorable as made available to the prospective purchaser. Notwithstanding any other provision of law to the contrary, a local government (including a public housing agency) or designated State agency may purchase a subsidized project or formerly subsidized project in accordance with this subsection.' Pub. L. 100-242, Sec. 181(d)(1), (e), added subsec. (e). Former subsec. (e) redesignated (g). Subsec. (f). Pub. L. 100-242, Sec. 181(d)(1), (e)(1), (g)(1), redesignated former subsec. (d) as (f). Former subsec. (f) redesignated (i). Subsec. (f)(1). Pub. L. 100-242, Sec. 181(f), substituted 'subject to subsection (a) of this section that is owned by the Secretary (or for which the Secretary is mortgagee in possession)' for 'owned by the Secretary', and inserted at end 'In the case of a multifamily housing project subject to subsection (a) of this section that is not owned by the Secretary (and for which the Secretary is not mortgagee in possession), the Secretary shall require the owner of the project to carry out the requirements of this paragraph.' Subsec. (g). Pub. L. 100-242, Sec. 181(d)(1), (e)(1), redesignated former subsec. (e) as (g). Former subsec. (g) redesignated (j). Subsec. (h). Pub. L. 100-242, Sec. 181(d)(1), (e)(1), (g), added subsec. (h). Subsec. (i). Pub. L. 100-628, Sec. 1010(d), (e), substituted '(excluding payments made for certificates under subsection (b)(1) or vouchers under subsection (o) of this section), if (except for purposes of paragraphs (1) and (2) of subsection (h) of this section), and section 183(c) of the Housing and Community Development Act of 1987) such housing assistance payments are made to more than 50 percent of the units in the project' for '(other than subsection (b)(1) of such section), without regard to whether such payments are made to all or a portion of the units in the project' in par. (2) (E) and added par. (4). Pub. L. 100-242, Sec. 181(e)(1), (g)(1), (h), redesignated former subsec. (f) as (i), designated existing provisions as par. (1), and added pars. (2) and (3). Subsec. (j). Pub. L. 100-242, Sec. 181(g)(1), redesignated former subsec. (g) as (j). Subsec. (k). Pub. L. 100-628, Sec. 1010(f), added subsec. (k). 1980 - Subsec. (a). Pub. L. 96-399, Sec. 213(a), in par. (1) inserted provisions respecting occupation of units by low- and moderate-income persons or units vacant at the time of acquisition, and added par. (6). Subsec. (b)(1). Pub. L. 96-399, Sec. 213(b), inserted provisions relating to the number of project units occupied by low- and moderate-income persons. Subsec. (c)(3). Pub. L. 96-399, Sec. 213(c), added par. (3). Subsec. (d)(2)(B), (C). Pub. L. 96-399, Sec. 213(d), inserted exception for tenants of above-moderate income. Subsec. (f). Pub. L. 96-399, Sec. 213(e), substituted provisions respecting applicability to projects assisted or insured under this chapter, or subject to loans under section 1701q of this title or section 1452b of title 42, or projects acquired by the Secretary pursuant to any other provision of law, for provisions respecting applicability to assistance under section 1715z-1 of this title, the proviso of section 1715l(d)(5) of this title, or section 101 of the Housing and Urban Development Act of 1965, and projects insured under this chapter. 1979 - Subsec. (d)(2). Pub. L. 96-153 substituted 'assure for any such tenant (who continues to meet applicable qualification standards) the right' for 'seek to assure the maximum opportunity for any such tenant'. MULTIFAMILY HOUSING DISPOSITION PARTNERSHIP Section 184 of Pub. L. 100-242, as amended by Pub. L. 101-625, title V, Sec. 580, Nov. 28, 1990, 104 Stat. 4245, provided that: '(a) Establishment of Demonstration Program. - The Secretary of Housing and Urban Development (referred to in this section as the 'Secretary') shall carry out a program to demonstrate the effectiveness of disposing of distressed multifamily housing projects owned by the Department of Housing and Urban Development through a partnership with State housing finance agencies. The demonstration program may be carried out with not more than 4 State housing finance agencies and shall be designed to determine the feasibility of entering into similar relationships with other State housing finance agencies. '(b) Requirements of Demonstration Program. - '(1) Opportunity to participate in sale. - Not less than 30 days before offering to sell any multifamily housing project that is located in a State participating in the demonstration program and that is subject to section 204 of the Housing and Community Development Amendments of 1978 (12 U.S.C. 1701z-12), the Secretary shall - '(A) notify the State housing finance agency of the plan of the Secretary to sell the project; and '(B) provide the State housing finance agency with the option to provide the long-term financing for the sale of the project through the co-insurance program of the Secretary, if the project complies with the State laws applicable to the State housing finance agency. '(2) Terms of participation. - If the State housing finance agency agrees to participate in the sale of a project under this section, the terms of the sale shall be as follows: '(A) The State housing finance agency shall provide a loan to the purchaser of the property. '(B) The mortgage securing the loan shall be insured by the Secretary and the State housing finance agency under paragraph (3) or (4) of section 221(d) of the National Housing Act (12 U.S.C. 1715l(d)(3), (4)). '(C) The terms and conditions of the loan shall be consistent with the terms and conditions of the sale. '(3) Cooperative agreement. - Not later than the expiration of the 3-month period beginning on the date of the enactment of this Act (Feb. 5, 1988), the Secretary shall enter into cooperative agreements with State housing finance agencies to carry out the demonstration program under this section. '(c) Termination of Demonstration Program. - '(1) In general. - Except as provided in paragraph (2), the demonstration program under this section shall terminate at the end of September 30, 1991. '(2) Continuation of program. - '(A) The Secretary may continue the demonstration program under this section after the termination date established in paragraph (1) for such additional period as the Secretary determines to be appropriate. '(B) The Secretary shall continue the demonstration program under this section with respect to any project for which the Secretary notifies the State housing finance agency under subsection (b)(1)(A) before the termination date established in paragraph (1) or under subparagraph (A). '(d) Report to Congress. - Not later than 6 months after the termination date established in subsection (c)(1), the Secretary shall submit to the Congress a report evaluating the effectiveness of the demonstration program under this section as a national model for the disposition of distressed multifamily housing projects owned by the Department of Housing and Urban Development.' -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1713, 3706, 4102 of this title. ------DocID 16066 Document 516 of 646------ -CITE- 12 USC Sec. 1715z-11 -EXPCITE- TITLE 12 CHAPTER 13 SUBCHAPTER II -HEAD- Sec. 1715z-11. Sale to cooperatives of multifamily housing projects acquired by Secretary; acceptance of purchase money mortgage for sale or insurance of mortgage; principal amount of mortgage; expenditures for repairs, etc., prior to sale -STATUTE- In any case which the Secretary sells a multifamily housing project acquired as the result of a default on a mortgage which was insured under this chapter to a cooperative which will operate it on a nonprofit basis and restrict permanent occupancy of its dwellings to members, or to a nonprofit corporation which operates as a consumer cooperative as defined by the Secretary, the Secretary may accept a purchase money mortgage, or upon application of the mortgagee, insure a mortgage under this section upon such terms and conditions as the Secretary determines are reasonable and appropriate, in a principal amount equal to the value of the property at the time of purchase, which value shall be based upon a mortgage amount on which the debt service can be met from the income of property when operated on a nonprofit basis after payment of all operating expenses, taxes, and required reserves; except that the Secretary may add to the mortgage amount an amount not greater than the amount of prepaid expenses and costs involved in achieving cooperative ownership, or make such other provisions for payment of such expenses and costs as the Secretary deems reasonable and appropriate. Prior to such disposition of a project, funds may be expended by the Secretary for necessary repairs and improvements. -SOURCE- (June 27, 1934, ch. 847, title II, Sec. 246, as added Aug. 22, 1974, Pub. L. 93-383, title III, Sec. 315, 88 Stat. 684, and amended Oct. 31, 1978, Pub. L. 95-557, title III, Sec. 322, 92 Stat. 2102.) -MISC1- AMENDMENTS 1978 - Pub. L. 95-557 inserted 'or to a nonprofit corporation which operates as a consumer cooperative as defined by the Secretary' after 'dwellings to members' and 'or upon application of the mortgagee, insure a mortgage under this section upon such terms and conditions as the Secretary determines are reasonable and appropriate' after 'purchase money mortgage' and substituted 'the value of the property at the time of purchase, which value shall be based upon a mortgage amount on which the debt service can be met from the income of property when operated on a nonprofit basis after payment of all operating expenses, taxes, and required reserves; except that the Secretary may add to the mortgage amount an amount not greater than the amount of prepaid expenses and costs involved in achieving cooperative ownership, or make such other provision for payment of such expenses and costs as the Secretary deems reasonable and appropriate' for 'the sum of (1) the appraised value of the property at the time of purchase, which value shall be based upon a mortgage amount on which the debt service can be met from the income of the property when operated on a nonprofit basis and after payment of all operating expenses, taxes and required reserves, and (2) the amount of prepaid expenses and costs involved in achieving cooperative ownership'. ------DocID 16127 Document 517 of 646------ -CITE- 12 USC Sec. 1735f-11 -EXPCITE- TITLE 12 CHAPTER 13 SUBCHAPTER V -HEAD- Sec. 1735f-11. Direction to the Secretary to require mortgagees with above normal rates of early, serious defaults and claims to submit reports and take corrective action -STATUTE- (a) To reduce losses in connection with mortgage insurance programs under this chapter, the Secretary shall review, at least once a year, the rate of early serious defaults and claims involving mortgagees approved under this chapter. On the basis of this review, the Secretary shall notify each mortgagee which, as determined by the Secretary, had a rate of early serious defaults and claims during the preceding year which was higher than the normal rate for the geographic area or areas in which that mortgagee does business. In the notification, the Secretary shall require each mortgagee to submit a report, within a time determined by the Secretary, containing the mortgagee's (1) explanation for the above normal rate of early serious defaults and claims; (2) plan for corrective action, if applicable, both with regard to (A) mortgages in default; and (B) its mortgage-processing system in general; and (3) a timeframe within which this corrective action will be begun and completed. If the Secretary does not agree with this timeframe or plan, a mutually agreeable timeframe and plan will be determined. (b) Failure of the mortgagee to submit a report required under subsection (a) of this section within the time determined by the Secretary or to commence or complete the plan for corrective action within the timeframe agreed upon by the Secretary may be cause for suspension of the mortgagee from participation in programs under this chapter. -SOURCE- (June 27, 1934, ch. 847, title V, Sec. 533, as added Feb. 5, 1988, Pub. L. 100-242, title IV, Sec. 407(b), 101 Stat. 1902.) -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1709 of this title. ------DocID 16211 Document 518 of 646------ -CITE- 12 USC Sec. 1749bbb-11 -EXPCITE- TITLE 12 CHAPTER 13 SUBCHAPTER IX-C Part D -HEAD- Sec. 1749bbb-11. Submission of claims; judicial review; jurisdiction; limitations -STATUTE- (a) All reinsurance or direct insurance claims for losses under this subchapter shall be submitted by insurers or property owners in accordance with such terms and conditions as may be established by the Director. (b)(1) Upon disallowance of any claim under color of reinsurance or direct insurance made available under this subchapter, or upon refusal of the claimant to accept the amount allowed upon any such claim, the claimant may institute an action against the Director on such claim in the United States district court for the district in which a major portion (in terms of value) of the claim arose. (2) Any such action must be begun within one year after the date upon which the claimant received written notice of disallowance or partial disallowance of the claim, and exclusive jurisdiction is hereby conferred upon United States district courts to hear and determine such actions without regard to the amount in controversy. -SOURCE- (June 27, 1934, ch. 847, title XII, Sec. 1241, formerly Sec. 1231, as added Aug. 1, 1968, Pub. L. 90-448, title XI, Sec. 1103, 82 Stat. 563, renumbered and amended Dec. 31, 1970, Pub. L. 91-609, title VI, Sec. 602(d), (g), (h), 84 Stat. 1789, 1790; Nov. 30, 1983, Pub. L. 98-181, title IV, Sec. 452(b)(1), 97 Stat. 1230.) -MISC1- AMENDMENTS 1983 - Subsecs. (a), (b)(1). Pub. L. 98-181 substituted 'Director' for 'Secretary'. 1970 - Subsec. (a). Pub. L. 91-609, Sec. 602(g), provided for direct insurance claims and submission of claims by property owners. Subsec. (b)(1). Pub. L. 91-609, Sec. 602(h), provided for disallowance of claim under color of direct insurance. ------DocID 16571 Document 519 of 646------ -CITE- 12 USC Sec. 2277a-11 -EXPCITE- TITLE 12 CHAPTER 23 SUBCHAPTER V Part E -HEAD- Sec. 2277a-11. Investment of funds -STATUTE- Money of the Corporation not otherwise employed shall be invested in obligations of the United States or in obligations guaranteed as to principal and interest by the United States. -SOURCE- (Pub. L. 92-181, title V, Sec. 5.62, as added Pub. L. 100-233, title III, Sec. 302, Jan. 6, 1988, 101 Stat. 1618.) ------DocID 16588 Document 520 of 646------ -CITE- 12 USC Sec. 2278a-11 -EXPCITE- TITLE 12 CHAPTER 23 SUBCHAPTER VI Part A -HEAD- Sec. 2278a-11. Exemption from taxation -STATUTE- The Assistance Board, the capital, reserves, and surplus thereof, and the income derived therefrom, shall be exempt from Federal, State, municipal, and local taxation, except taxes on real estate held by the Assistance Board to the same extent, according to its value, as other similar property held by other persons is taxed. -SOURCE- (Pub. L. 92-181, title VI, Sec. 6.11, as added Pub. L. 100-233, title II, Sec. 201, Jan. 6, 1988, 101 Stat. 1594.) ------DocID 16603 Document 521 of 646------ -CITE- 12 USC Sec. 2278b-11 -EXPCITE- TITLE 12 CHAPTER 23 SUBCHAPTER VI Part B -HEAD- Sec. 2278b-11. Termination -STATUTE- (a) Financial Assistance Corporation The Financial Assistance Corporation and the authority provided to such Corporation by this part shall terminate on the maturity and full payment of all debt obligations issued under section 2278b-6(a) of this title. (b) Accounts Simultaneously with the termination of the Financial Assistance Corporation as provided in subsection (a) of this section, any funds in the accounts established under section 2278b-5 of this title shall be transferred to the Insurance Fund established under section 2277a-9 of this title. -SOURCE- (Pub. L. 92-181, title VI, Sec. 6.31, as added Pub. L. 100-233, title II, Sec. 201, Jan. 6, 1988, 101 Stat. 1605.) ------DocID 16641 Document 522 of 646------ -CITE- 12 USC Sec. 2279aa-11 -EXPCITE- TITLE 12 CHAPTER 23 SUBCHAPTER VIII -HEAD- Sec. 2279aa-11. Supervision, examination, and report of condition -STATUTE- (a) Regulation (1) Authority Notwithstanding any other provision of this chapter, the Farm Credit Administration shall have the authority to - (A) provide for the examination of the condition of the Corporation and its affiliates; and (B) provide for the general supervision of the safe and sound performance of the powers, functions, and duties vested in the Corporation and its affiliates by this subchapter, including through the use of the enforcement powers of the Farm Credit Administration under part C of subchapter V of this chapter. (2) Considerations In exercising its authority pursuant to this section, the Farm Credit Administration shall consider - (A) the purposes for which the Corporation was created; (B) the practices appropriate to the conduct of secondary markets in agricultural loans; and (C) the reduced levels of risk associated with appropriately structured secondary market transactions. (b) Examinations and audits (1) In general The financial transactions of the Corporation shall be examined by examiners of the Farm Credit Administration in accordance with the principles and procedures applicable to commercial corporate transactions under such rules and regulations as may be prescribed by the Administration. (2) Frequency The examinations shall occur at such times as the Farm Credit Administration Board may determine, but in no event less than once each year. (3) Access The examiners shall - (A) have access to all books, accounts, financial records, reports, files, and all other papers, things, or property belonging to or in use by the Corporation and necessary to facilitate the audit; and (B) be afforded full access for verifying transactions with certified facilities and other entities with whom the Corporation conducts transactions. (c) Annual report of condition The Corporation shall make and publish an annual report of condition as prescribed by the Farm Credit Administration. Each report shall contain financial statements prepared in accordance with generally accepted accounting principles and contain such additional information as the Farm Credit Administration may by regulation prescribe. The financial statements of the Corporation shall be audited by an independent public accountant. (d) FCA assessments to cover costs The Farm Credit Administration shall assess the Corporation for the cost to the Administration of any regulatory activities conducted under this section, including the cost of any examination. (e) 'Affiliate' defined As used in this subchapter, the term 'affiliate' shall mean an entity effectively controlled or owned by the Corporation, except that such term shall not include a certified facility or an originator (as defined in paragraphs (3) and (7), respectively, of section 2279aa of this title). -SOURCE- (Pub. L. 92-181, title VIII, Sec. 8.11, as added Pub. L. 100-233, title VII, Sec. 702, Jan. 6, 1988, 101 Stat. 1702, and amended Pub. L. 101-624, title XVIII, Sec. 1840, Nov. 28, 1990, 104 Stat. 3835.) -MISC1- AMENDMENTS 1990 - Subsec. (a)(1). Pub. L. 101-624, Sec. 1840(1), amended par. (1) generally. Prior to amendment, par. (1) read as follows: 'Notwithstanding any other provision of this chapter, the regulatory authority of the Farm Credit Administration with respect to the Corporation shall be confined to - '(A) providing for the examination of the condition of the Corporation; and '(B) providing for the general supervision of the safe and sound performance of the powers, functions, and duties vested in the Corporation by this subchapter, including through the use of the enforcement powers of the Farm Credit Administration under part C of subchapter V of this chapter.' Subsec. (e). Pub. L. 101-624, Sec. 1840(2), added subsec. (e). ------DocID 16991 Document 523 of 646------ -CITE- 13 USC Sec. 11 -EXPCITE- TITLE 13 CHAPTER 1 SUBCHAPTER I -HEAD- Sec. 11. Authorization of appropriations -STATUTE- There is authorized to be appropriated, out of the Treasury of the United States, such sums as may be necessary to carry out all provisions of this title. -SOURCE- (Aug. 31, 1954, ch. 1158, 68 Stat. 1014.) -MISC1- HISTORICAL AND REVISION NOTES Section is new, and has been inserted to supply the customary authorization of appropriations necessary in carrying out any of the provisions of this title. -CROSS- CROSS REFERENCES Collection and publication of foreign commerce and trade statistics, applicability of section to, see section 307 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 307 of this title. ------DocID 17135 Document 524 of 646------ -CITE- 14 USC CHAPTER 11 -EXPCITE- TITLE 14 PART I CHAPTER 11 -HEAD- CHAPTER 11 - PERSONNEL -MISC1- OFFICERS A. APPOINTMENTS Sec. 211. Original appointment of permanent commissioned officers. 212. Original appointment of permanent commissioned warrant officers. 213. Original appointment of permanent warrant officers (W-1). 214. Original appointment of temporary officers. (221 to 248. Repealed.) B. SELECTION FOR PROMOTION 251. Selection boards; convening of boards. 252. Selection boards; composition of boards. 253. Selection boards; notice of convening; communication with board. 254. Selection boards; oath of members. 255. Number of officers to be selected for promotion. 256. Promotion zones. 256a. Promotion year; defined. 257. Eligibility of officers for consideration for promotion. 258. Selection boards; information to be furnished boards. 259. Officers to be recommended for promotion. 260. Selection boards; reports. 261. Selection boards; submission of reports. 262. Failure of selection for promotion. C. PROMOTIONS 271. Promotions; appointments. 272. Removal of officer from list of selectees for promotion. 273. Promotions; acceptance; oath of office. 274. Promotions; pay and allowances. 275. Wartime temporary service promotions. 276. Promotion of officers not included on active duty promotion list. 277. Temporary promotions of warrant officers. D. DISCHARGES; RETIREMENTS; REVOCATION OF COMMISSIONS 281. Revocation of commissions during first three years of commissioned service. 282. Regular lieutenants (junior grade); separation for failure of selection for promotion. 283. Regular lieutenants, separation for failure of selection for promotion; continuation. 284. Regular Coast Guard; officers serving under temporary appointments. 285. Regular lieutenant commanders and commanders; retirement for failure of selection for promotion. 286. Discharge in lieu of retirement; severance pay. 286a. Regular warrant officers: severance pay. 287. Separation for failure of selection for promotion or continuation; time of. 288. Regular captains; retirement. 289. Captains; continuation on active duty; involuntary retirement. 290. Rear admirals and rear admirals (lower half); continuation on active duty; involuntary retirement. 291. Voluntary retirement after twenty years' service. 292. Voluntary retirement after thirty years' service. 293. Compulsory retirement at age of sixty-two. 294. Retirement for physical disability after selection for promotion; grade in which retired. 295. Deferment of retirement or separation for medical reasons. (301 to 315. Repealed.) E. SEPARATION FOR CAUSE 321. Review of records of officers. 322. Boards of inquiry. 323. Boards of review. 324. Composition of boards. 325. Rights and procedures. 326. Removal of officer from active duty; action by Secretary. 327. Officers considered for removal; retirement or discharge; severance benefits. F. MISCELLANEOUS PROVISIONS 331. Recall to active duty during war or national emergency. 332. Recall to active duty with consent of officer. 333. Relief of retired officer promoted while on active duty. 334. Grade on retirement. 335. Physical fitness of officers. 336. United States Coast Guard Band; composition; director. ENLISTED MEMBERS 350. Recruiting campaigns. 351. Enlistments; term, grade. 352. Promotion. 353. Compulsory retirement at age of sixty-two. 354. Voluntary retirement after thirty years' service. 355. Voluntary retirement after twenty years' service. (356. Repealed.) 357. Enlisted Personnel Board. (358. Repealed.) 359. Recall to active duty during war or national emergency. 360. Recall to active duty with consent of member. 361. Relief of retired enlisted member promoted while on active duty. 362. Retirement in cases where higher grade or rating has been held. (363, 364. Repealed.) 365. Extension of enlistments. 366. Retention beyond term of enlistment in case of disability. 367. Detention beyond term of enlistment. (368. Repealed.) 369. Inclusion of certain conditions in enlistment contract. 370. Discharge within three months before expiration of enlistment. 371. Aviation cadets; procurement; transfer. 372. Aviation cadets; benefits. 373. Aviation cadets; appointment as Reserve officers. GENERAL PROVISIONS 421. Retirement. 422. Status of recalled personnel. 423. Computation of retired pay. 424. Limitations on retirement and retired pay. (425. Repealed.) SPECIAL PROVISIONS (431. Repealed.) 432. Personnel of former Lighthouse Service. (433 to 440. Repealed.) HISTORICAL AND REVISION NOTES This chapter, dealing with the appointment, enlistment, promotion, retirement and recall of all military personnel, covers subject matter which has been greatly affected by war-time legislation and, therefore, has required rather extensive rewriting of existing law in order to correlate all of the various provisions. An attempt has been made to provide for enlisted men and warrant officers in a manner similar to the way that commissioned officers are provided for; for example, the act of February 21, 1946, ch. 34, 60 Stat. 29 (title 14, U.S.C., 1946 ed., Sec. 162a), made provision for the retirement of commissioned officers on half pay after twenty years naval service, and a prewar statute provided for twenty year retirement of enlisted men on half pay. This leaves warrant officers the only military group not eligible for retirement in twenty years, and a provision such as found in section 305 of this title, granting such retirement, seems clearly indicated in order to avoid unjust discrimination. The subject matter seemed to break down into the sub-heads of 'Commissioned Officers', 'Warrant Officers', 'Enlisted Men', and 'General Provisions'. Each of the first three sub-heads parallels the other two, insofar as the applicability of statutes of the three groups permits. The last sub-head includes the broad provisions which, in the same terms, can be made applicable to all military personnel. In accord with existing Navy and Coast Guard law, the term 'commissioned officer' includes commissioned warrant officers unless specifically excepted, or manifestly inapplicable. Heretofore Coast Guard statutes have designated commissioned warrant officers as chief warrant officers; in line with Navy designation it is changed to commissioned warrant officers throughout this title. Terms such as 'Coast Guard personnel' or 'personnel of the Coast Guard', as used throughout this title, are intended to include all employees of the Service, civilian and military. 81st Congress, House Report No. 557. AMENDMENTS 1986 - Pub. L. 99-640, Sec. 10(a)(6)(B), Nov. 10, 1986, 100 Stat. 3549, struck out items 431, 433, 434, and 438. 1985 - Pub. L. 99-145, title V, Sec. 514(c)(2)(B), Nov. 8, 1985, 99 Stat. 629, substituted 'rear admirals (lower half)' for 'commodores' in item 290. 1984 - Pub. L. 98-557, Sec. 15(a)(4)(B)(ii), (C)(ii), (E)(ii), 17(b)(2)(B), Oct. 30, 1984, 98 Stat. 2865, 2866, 2867, added item 295, in heading preceding item 350 substituted 'MEMBERS' for 'MEN', in item 360 substituted 'member' for 'man', and in item 361 substituted 'enlisted member' for 'man'. 1983 - Pub. L. 97-417, Sec. 2(9)(B), Jan. 4, 1983, 96 Stat. 2086, inserted 'and commodores' after 'Rear admirals' in item 290. 1982 - Pub. L. 97-322, title I, Sec. 115(b)(2), Oct. 15, 1982, 96 Stat. 1585, struck out item 368. 1980 - Pub. L. 96-513, title V, Sec. 505(a)(2), Dec. 12, 1980, 94 Stat. 2918, added item 286a. 1976 - Pub. L. 94-546, Sec. 1(18), Oct. 18, 1976, 90 Stat. 2520, added item 256a. 1972 - Pub. L. 92-451, Sec. 1(9), Oct. 2, 1972, 86 Stat. 757, substituted 'continuation on active duty' for 'retention on the active list' in item 290. 1966 - Pub. L. 89-444, Sec. 1(25), June 9, 1966, 80 Stat. 197, substituted 'Grade on retirement' for 'Retirement in cases where higher grade has been held' in item 334, and added items 371, 372, and 373. 1965 - Pub. L. 89-189, Sec. 1(2), Sept. 17, 1965, 79 Stat. 820, added item 336. 1963 - Pub. L. 88-130, Sec. 1(9), (10)(B), 4(c), Sept. 24, 1963, 77 Stat. 175, 177, 193, added items 211 to 214, 251 to 262, 271 to 277, 281 to 294, 321 to 327, 331 to 335, struck out items 221 to 248, 301 to 313a, 435 to 437, 439, and 440, and struck out headings 'COMMISSIONED OFFICERS' and 'WARRANT OFFICERS' which preceded sections 221 and 301, respectively, of this title. Pub. L. 88-114, Sec. 1(3), Sept. 6, 1963, 77 Stat. 144, struck out item 358. 1959 - Pub. L. 86-155, Sec. 10(a)(2), Aug. 11, 1959, 73 Stat. 338, struck out items 239 and 309. 1958 - Pub. L. 85-861, Sec. 33(b)(2), Sept. 2, 1958, 72 Stat. 1567, added item 440. 1957 - Pub. L. 85-144, Sec. 2(b), 3, Aug. 14, 1957, 71 Stat. 367, added item 313a and struck out items 303, 304, 305, 307, 308, and 313. 1956 - Act Aug. 10, 1956, ch. 1041, Sec. 7(b), 8(b), 9(b), 70A Stat. 620, 623, added items 350 and 435 to 438, and substituted 'Enlistments; term, grade' for 'Enlistments' in item 351. Act July 20, 1956, ch. 647, Sec. 3(b), 70 Stat. 588, added item 439. 1955 - Act Aug. 9, 1955, ch. 684, Sec. 1(1), 69 Stat. 620, added items 245 to 248. Act June 8, 1955, ch. 136, Sec. 1, 69 Stat. 88, added item 370. 1950 - Act Aug. 3, 1950, ch. 536, Sec. 4, 64 Stat. 406, struck out items 233, 245, 246, 306, 314, 315, 356, 363, 364, and 425. YEAR-END STRENGTH FOR ACTIVE DUTY PERSONNEL AND AVERAGE MILITARY TRAINING STUDENT LOADS FOR EACH FISCAL YEAR AFTER FISCAL YEAR 1977; AUTHORIZATION AND APPROPRIATIONS Pub. L. 94-406, Sec. 6, Sept. 10, 1976, 90 Stat. 1236, which had required that Congress set the active duty end strength and average training student loads for each fiscal year for the Coast Guard, appropriations for those years not to be spent relating to those areas until Congress made such determination, was repealed and reenacted as section 661 of this title by Pub. L. 97-295, Sec. 2(20)(A), 6(b), Oct. 12, 1982, 96 Stat. 1302, 1314. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in section 728 of this title. ------DocID 17439 Document 525 of 646------ -CITE- 15 USC Sec. 11 -EXPCITE- TITLE 15 CHAPTER 1 -HEAD- Sec. 11. Forfeiture of property in transit -STATUTE- Any property owned under any contract or by any combination, or pursuant to any conspiracy, and being the subject thereof, mentioned in section 8 of this title, imported into and being within the United States or being in the course of transportation from one State to another, or to or from a Territory or the District of Columbia, shall be forfeited to the United States, and may be seized and condemned by like proceedings as those provided by law for the forfeiture, seizure, and condemnation of property imported into the United States contrary to law. -SOURCE- (Aug. 27, 1894, ch. 349, Sec. 76, 28 Stat. 570; Feb. 12, 1913, ch. 40, 37 Stat. 667.) -MISC1- AMENDMENTS 1913 - Act Feb. 12, 1913, substituted 'imported into and being within the United States or' for 'and'. -CROSS- CROSS REFERENCES Fines, penalties, and forfeitures, see chapter 163 (Sec. 2461 et seq.) of Title 28, Judiciary and Judicial Procedure. Forfeiture of property in transit, see, also, section 6 of this title. ------DocID 17753 Document 526 of 646------ -CITE- 15 USC Sec. 80a-11 -EXPCITE- TITLE 15 CHAPTER 2D SUBCHAPTER I -HEAD- Sec. 80a-11. Offers to exchange securities -STATUTE- (a) Approval by Commission for exchanges of securities on basis other than relative net asset value It shall be unlawful for any registered open-end company or any principal underwriter for such a company to make or cause to be made an offer to the holder of a security of such company or of any other open-end investment company to exchange his security for a security in the same or another such company on any basis other than the relative net asset values of the respective securities to be exchanged, unless the terms of the offer have first been submitted to and approved by the Commission or are in accordance with such rules and regulations as the Commission may have prescribed in respect of such offers which are in effect at the time such offer is made. For the purposes of this section, (A) an offer by a principal underwriter means an offer communicated to holders of securities of a class or series but does not include an offer made by such principal underwriter to an individual investor in the course of a retail business conducted by such principal underwriter, and (B) the net asset value means the net asset value which is in effect for the purpose of determining the price at which the securities, or class or series of securities involved, are offered for sale to the public either (1) at the time of the receipt by the offeror of the acceptance of the offer or (2) at such later times as is specified in the offer. (b) Application of section to offers pursuant to plan of reorganization The provisions of this section shall not apply to any offer made pursuant to any plan of reorganization, which is submitted to and requires the approval of the holders of at least a majority of the outstanding shares of the class or series to which the security owned by the offeree belongs. (c) Application of section to specific exchange offers The provisions of subsection (a) of this section shall be applicable, irrespective of the basis of exchange, (1) to any offer of exchange of any security of a registered open-end company for a security of a registered unit investment trust or registered face-amount certificate company; and (2) to any type of offer of exchange of the securities of registered unit investment trusts or registered face-amount certificate companies for the securities of any other investment company. -SOURCE- (Aug. 22, 1940, ch. 686, title I, Sec. 11, 54 Stat. 808; Dec. 14, 1970, Pub. L. 91-547, Sec. 6, 84 Stat. 1417.) -MISC1- AMENDMENTS 1970 - Subsec. (b). Pub. L. 91-547 struck out item (1) designation of existing provisions and item (2) provision for nonapplication of this section to any offer made pursuant to the right of conversion, at the option of the holder, from one class or series into another class or series of securities issued by the same company upon such terms as are specified in the charter, certificate of incorporation, articles of association, by-laws, or trust indenture subject to which the securities to be converted were issued or are to be issued. EFFECTIVE DATE OF 1970 AMENDMENT Amendment by Pub. L. 91-547 effective Dec. 14, 1970, see section 30 of Pub. L. 91-547, set out as a note under section 80a-52 of this title. -TRANS- TRANSFER OF FUNCTIONS For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, Sec. 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title. -CROSS- CROSS REFERENCES Sales pursuant to offer of exchange, see section 80a-22 of this title. Unlawful acquisition of other investment company securities, dividends as exempt, see section 80a-12 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 80a-6, 80a-12, 80a-22 of this title. ------DocID 17820 Document 527 of 646------ -CITE- 15 USC Sec. 80b-11 -EXPCITE- TITLE 15 CHAPTER 2D SUBCHAPTER II -HEAD- Sec. 80b-11. Rules, regulations, and orders of Commission -STATUTE- (a) Power of Commission The Commission shall have authority from time to time to make, issue, amend, and rescind such rules and regulations and such orders as are necessary or appropriate to the exercise of the functions and powers conferred upon the Commission elsewhere in this subchapter. For the purposes of its rules or regulations the Commission may classify persons and matters within its jurisdiction and prescribe different requirements for different classes of persons or matters. (b) Effective date of regulations Subject to the provisions of chapter 15 of title 44 and regulations prescribed under the authority thereof, the rules and regulations of the Commission under this subchapter, and amendments thereof, shall be effective upon publication in the manner which the Commission shall prescribe, or upon such later date as may be provided in such rules and regulations. (c) Orders of Commission after notice and hearing; type of notice Orders of the Commission under this subchapter shall be issued only after appropriate notice and opportunity for hearing. Notice to the parties to a proceeding before the Commission shall be given by personal service upon each party or by registered mail or certified mail or confirmed telegraphic notice to the party's last known business address. Notice to interested persons, if any, other than parties may be given in the same manner or by publication in the Federal Register. (d) Good faith compliance with rules and regulations No provision of this subchapter imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule, regulation, or order of the Commission, notwithstanding that such rule, regulation, or order may, after such act or omission, be amended or rescinded or be determined by judicial or other authority to be invalid for any reason. -SOURCE- (Aug. 22, 1940, ch. 686, title II, Sec. 211, 54 Stat. 855; June 11, 1960, Pub. L. 86-507, Sec. 1(16), 74 Stat. 201; Sept. 13, 1960, Pub. L. 86-750, Sec. 14, 74 Stat. 888; Dec. 4, 1987, Pub. L. 100-181, title VII, Sec. 705, 101 Stat. 1264.) -MISC1- AMENDMENTS 1987 - Subsec. (b). Pub. L. 100-181 substituted 'chapter 15 of title 44' for 'the Federal Register Act'. 1960 - Subsec. (a). Pub. L. 86-750 inserted 'functions and'. Subsec. (c). Pub. L. 86-507 inserted 'or certified mail' after 'registered mail'. -TRANS- TRANSFER OF FUNCTIONS For transfer of functions of Securities and Exchange Commission, with certain exceptions, to Chairman of such Commission, see Reorg. Plan No. 10 of 1950, Sec. 1, 2, eff. May 24, 1950, 15 F.R. 3175, 64 Stat. 1265, set out under section 78d of this title. -CROSS- CROSS REFERENCES Rules and regulations under - Investment Company Act of 1940, see section 80a-37 of this title. Public Utility Holding Company Act of 1935, see section 79t of this title. Securities Act of 1933, see section 77s of this title. Securities Exchange Act of 1934, see sections 78c and 78w of this title. Trust Indenture Act of 1939, see section 77sss of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 80b-3 of this title. ------DocID 18052 Document 528 of 646------ -CITE- 15 USC CHAPTER 11 -EXPCITE- TITLE 15 CHAPTER 11 -HEAD- CHAPTER 11 - CAUSTIC POISONS ------DocID 18185 Document 529 of 646------ -CITE- 15 USC Sec. 713a-11 -EXPCITE- TITLE 15 CHAPTER 15 SUBCHAPTER I -HEAD- Sec. 713a-11. Annual appropriations to reimburse Commodity Credit Corporation for net realized loss -STATUTE- There is authorized to be appropriated annually for each fiscal year by means of a current, indefinite appropriation, out of any money in the Treasury not otherwise appropriated, an amount sufficient to reimburse Commodity Credit Corporation for its net realized loss incurred during such fiscal year, as reflected in its accounts and shown in its report of its financial condition as of the close of such fiscal year. Reimbursement of net realized loss shall be with appropriated funds, as provided herein, rather than through the cancellation of notes. -SOURCE- (Pub. L. 87-155, Sec. 2, Aug. 17, 1961, 75 Stat. 391; Pub. L. 100-203, title I, Sec. 1506(a), Dec. 22, 1987, 101 Stat. 1330-28.) -MISC1- AMENDMENTS 1987 - Pub. L. 100-203 substituted 'by means of a current, indefinite appropriation' for ', commencing with the fiscal year ending June 30, 1961'. EFFECTIVE DATE OF 1987 AMENDMENT Section 1506(c) of Pub. L. 100-203 provided that: 'This section and the amendment made by this section (amending this section and enacting provisions set out as a note below) shall apply beginning with fiscal year 1988.' OPERATING EXPENSES Section 1506(b) of Pub. L. 100-203 provided that: 'No funds may be appropriated for operating expenses of the Commodity Credit Corporation except as authorized under section 2 of Public Law 87-155 (15 U.S.C. 713a-11) to reimburse the Corporation for net realized losses.' ------DocID 19542 Document 530 of 646------ -CITE- 16 USC Sec. 1a-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER I -HEAD- Sec. 1a-11. Contents of report -STATUTE- The report shall contain - (a) A comprehensive listing of all authorized but unacquired lands within the exterior boundaries of each unit of the National Park System as of November 28, 1990. (b) A priority listing of all such unacquired parcels by individual park unit and for the National Park System as a whole. The list shall describe the acreage and ownership of each parcel, the estimated cost of acquisition for each parcel (subject to any statutory acquisition limitations for such lands), and the basis for such estimate. (c) An analysis and evaluation of the current and future needs of each unit of the National Park System for resource management, interpretation, construction, operation and maintenance, personnel, housing, together with an estimate of the costs thereof. -SOURCE- (Pub. L. 101-628, title XII, Sec. 1215, Nov. 28, 1990, 104 Stat. 4508.) -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1a-9 of this title. ------DocID 19572 Document 531 of 646------ -CITE- 16 USC Sec. 11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER I -HEAD- Sec. 11. Medical attention for employees -STATUTE- The Secretary of the Interior in his administration of the National Park Service is authorized to contract for medical attention and service for employees and to make necessary pay-roll deductions agreed to by the employees therefor. -SOURCE- (May 10, 1926, ch. 277, Sec. 1, 44 Stat. 491.) -TRANS- TRANSFER OF FUNCTIONS For transfer of functions of other officers, employees, and agencies of Department of the Interior, with certain exceptions, to Secretary of the Interior, with power to delegate, see Reorg. Plan No. 3 of 1950, Sec. 1, 2, eff. May 24, 1950, 15 F.R. 3174, 64 Stat. 1262, set out in the Appendix to Title 5, Government Organization and Employees. ------DocID 20248 Document 532 of 646------ -CITE- 16 USC Sec. 403c-5 to 403c-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER XLVI -HEAD- Sec. 403c-5 to 403c-11. Repealed. June 25, 1948, ch. 646, Sec. 39, 62 Stat. 992, eff. Sept. 1, 1948 -MISC1- Section 403c-5, acts Aug. 19, 1937, ch. 703, Sec. 5, 50 Stat. 702; May 15, 1947, ch. 57, 61 Stat. 92, related to appointment and jurisdiction of commissioner. See provisions covering United States magistrate judges in section 631 et seq. of Title 28, Judiciary and Judicial Procedure. Section 403c-6, act Aug. 19, 1937, ch. 703, Sec. 6, 50 Stat. 702, related to jurisdiction of other commissioners. See provisions covering United States magistrate judges in section 631 et seq. of Title 28. Section 403c-7, act Aug. 19, 1937, ch. 703, Sec. 7, 50 Stat. 702, related to issuance of process. See sections 3041 and 3141 of Title 18, Crimes and Criminal Procedure, and rules 4, 5(c), and 9 of Federal Rules of Criminal Procedure, Title 18, Appendix. Section 403c-8, act Aug. 19, 1937, ch. 703, Sec. 8, 50 Stat. 702, related to whom process is directed. See section 3053 of Title 18, rule 4 of Federal Rules of Criminal Procedure, Title 18, Appendix, and rule 4 of Federal Rules of Civil Procedure, Title 28, Appendix, Judiciary and Judicial Procedure. Section 403c-9, act Aug. 19, 1937, ch. 703, Sec. 9, 50 Stat. 702, related to commissioner's (now magistrate judge's) salary. Section 403c-10, act Aug. 19, 1937, ch. 703, Sec. 10, 50 Stat. 703, related to fees, costs, and expenses against United States. See section 604 of Title 28, Judiciary and Judicial Procedure. Section 403c-11, act Aug. 19, 1937, ch. 703, Sec. 11, 50 Stat. 703, related to disposition of fines and costs. See section 634 of Title 28. ------DocID 20261 Document 533 of 646------ -CITE- 16 USC Sec. 403h-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER XLVI -HEAD- Sec. 403h-11. Further additions for construction of scenic parkway -STATUTE- The Secretary of the Interior is authorized to accept, on behalf of the United States, donations of land and interests in land in the State of Tennessee for the construction of a scenic parkway to be located generally parallel to the boundary of the Great Smoky Mountains National Park and connecting with the park, in order to provide an appropriate view of the park from the Tennessee side. The right-of-way to be acquired for the parkway shall be of such width as to comprise an average of one hundred and twenty-five acres per mile for its entire length. The title to real property acquired pursuant to this section shall be satisfactory to the Secretary of the Interior. All property acquired pursuant to this section shall become a part of the Great Smoky Mountains National Park upon acceptance of title thereto by the Secretary, and shall be subject to all laws, rules, and regulations applicable thereto. -SOURCE- (Feb. 22, 1944, ch. 28, 58 Stat. 19.) -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 403h-14 of this title. ------DocID 20287 Document 534 of 646------ -CITE- 16 USC Sec. 404c-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER XLVII -HEAD- Sec. 404c-11. Secretary of the Interior authorized to acquire additional lands; appropriation; approval of title -STATUTE- The Secretary of the Interior is authorized in his discretion to acquire for inclusion within the Mammoth Cave National Park by purchase, condemnation, or otherwise, any lands, interests in lands, and other property within the maximum boundaries thereof as authorized by sections 404 to 404b and 404c of this title, notwithstanding the provisions of sections 404b-1 and 404f of this title, or any action taken thereunder to exclude certain caves from the park area. In order to provide for acquisition of property on behalf of the United States, in accordance with the provisions of this section, there is authorized to be appropriated the sum of not to exceed $350,000. Any of the funds appropriated pursuant to the provisions hereof which are not needed to acquire property as authorized by this section may, in the discretion of the Secretary of the Interior, be used to acquire lands and interests in lands required for the development of a proper and suitable entrance road to Mammoth Cave National Park, as authorized in section 404c-12 of this title. The funds heretofore deposited in the Treasury under special fund receipt account 146664 shall, upon June 30, 1948, be transferred to the general fund of the Treasury as miscellaneous receipts: Provided, That no part of this authorization shall be used for road development or construction until after all the lands within the maximum boundaries, as authorized by sections 404 to 404b and 404c of this title, have been acquired by purchase, condemnation or otherwise. The title to lands, interests in lands, and other property to be acquired pursuant to this Act shall be satisfactory to the Secretary of the Interior. Any property acquired pursuant to said sections upon acquisition by the Federal Government, shall become a part of the park, and shall be subject to all laws and regulations applicable thereto. -SOURCE- (June 5, 1942, ch. 341, Sec. 11, 56 Stat. 319; June 30, 1948, ch. 764, 62 Stat. 1165.) -REFTEXT- REFERENCES IN TEXT Section 404c of this title, referred to in text, was omitted from the Code. This Act, referred to in text, is act June 5, 1942, which is classified to sections 404c-1 to 404c-12 of this title. For complete classification of this Act to the Code, see Tables. -MISC2- AMENDMENTS 1948 - Act June 30, 1948, amended section to provide for an appropriation of $350,000 to acquire additional cave lands. ------DocID 20423 Document 535 of 646------ -CITE- 16 USC Sec. 410cc-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER LIX-A Part A -HEAD- Sec. 410cc-11. Establishment of Lowell National Historical Park -STATUTE- (a) Establishment and administration of Lowell Historic Preservation District (1) To carry out the purpose of this subchapter, there is established as a unit of the National Park System in the city of Lowell, Massachusetts, the Lowell National Historical Park. There is further established in an area adjacent to the park the Lowell Historic Preservation District, which will be administered by the Secretary and by the Commission in accordance with this subchapter. The boundaries of the park and preservation district shall be the boundaries depicted on the map entitled 'Lowell National Historical Park, Massachusetts', dated March 1978, and numbered 'Lowe - 80,008A'. Such map shall be on file and available for inspection in the office of the National Park Service, Department of the Interior, and in the office of the city clerk, city of Lowell. (2) The Secretary shall publish in the Federal Register, as soon as practicable after June 5, 1978, a detailed description and map of the boundaries established under paragraph (1) of this subsection. (b) Boundary revisions; publication The Secretary may make minor revisions of the park and preservation district boundaries established under subsection (a)(1) of this section, after consulting with the Commission and the city manager of Lowell, by publication of a revised drawing or other boundary description in the Federal Register; but no waters, lands, or other property outside of the park or preservation district boundaries established under such subsection may be added to the park or preservation district without the consent of the city manager of Lowell and the city council of Lowell. A boundary revision made under this subsection shall be effective only after timely notice in writing is given to the Congress. -SOURCE- (Pub. L. 95-290, title I, Sec. 101, June 5, 1978, 92 Stat. 291.) -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 410cc-1 of this title. ------DocID 20964 Document 536 of 646------ -CITE- 16 USC Sec. 459e-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER LXIII -HEAD- Sec. 459e-11. Authority to accept donation of main dwelling on William Floyd Estate; lease-back of donated property -STATUTE- The Secretary is also authorized to accept the donation of the main dwelling on said lands, which was the birthplace and residence of General William Floyd (a signer of the Declaration of Independence) and the furnishings therein and any outbuildings, subject to like terms, covenants, and conditions. The Secretary is authorized to lease said lands, dwellings, and outbuildings to the grantors thereof for a term of not more than twenty-five years, at $1 per annum, and during the period of the leasehold the Secretary may provide protective custody for such property. -SOURCE- (Pub. L. 89-244, Sec. 2, Oct. 9, 1965, 79 Stat. 967.) ------DocID 20977 Document 537 of 646------ -CITE- 16 USC Sec. 459f-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER LXIII -HEAD- Sec. 459f-11. Comprehensive plan for protection, management, and use of seashore -STATUTE- (a) Contents; transmittal to Congressional committees Within two years of October 21, 1976, the Secretary shall develop and transmit to the Committees on Interior and Insular Affairs of the Senate and the House of Representatives a comprehensive plan for the protection, management, and use of the seashore, to include but not be limited to the following considerations: (1) measures for the full protection and management of the natural resources and natural ecosystems of the seashore; (2) present and proposed uses of the seashore and the lands and waters adjacent or related thereto, the uses of which would reasonably be expected to influence the administration, use, and environmental quality of the seashore; (3) plans for the development of facilities necessary and appropriate for visitor use and enjoyment of the seashore, with identification of resource and user carrying capacities, along with the anticipated costs for all proposed development; (4) plans for visitor transportation systems integrated and coordinated with lands and facilities adjacent to, but outside of, the seashore; and (5) plans for fostering the development of cooperative agreements and land and resource use patterns outside the seashore which would be compatible with the protection and management of the seashore. (b) Consultation by other Federal agencies with Secretary Notwithstanding any other provision of law, no Federal loan, grant, license, or other form of assistance for any project which, in the opinion of the Secretary would significantly adversely affect the administration, use, and environmental quality of the seashore shall be made, issued, or approved by the head of any Federal agency without first consulting with the Secretary to determine whether or not such project is consistent with the plan developed pursuant to this section and allowing him at least thirty days to comment in writing on such proposed action. -SOURCE- (Pub. L. 89-195, Sec. 12, as added Pub. L. 94-578, title III, Sec. 301, Oct. 21, 1976, 90 Stat. 2733.) -CHANGE- CHANGE OF NAME Committee on Interior and Insular Affairs of the Senate abolished and replaced by Committee on Energy and Natural Resources of the Senate, effective Feb. 11, 1977. See Rule XXV of Standing Rules of the Senate, as amended by Senate Resolution 4 (popularly cited as the 'Committee System Reorganization Amendments of 1977'), approved Feb. 4, 1977. ------DocID 21035 Document 538 of 646------ -CITE- 16 USC Sec. 460a-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER LXV -HEAD- Sec. 460a-11. Authorization of appropriations -STATUTE- There is hereby authorized to be appropriated, for construction of the Blue Ridge Parkway extension, not more than $87,536,000, plus or minus such amounts, if any, as may be justified by reason of fluctuations in construction costs as indicated by engineering cost indices applicable to the type of construction involved herein. -SOURCE- (Pub. L. 90-555, Sec. 6, Oct. 9, 1968, 82 Stat. 968.) ------DocID 21076 Document 539 of 646------ -CITE- 16 USC Sec. 460l-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER LXIX Part B -HEAD- Sec. 460l-11. Transfers to and from land and water conservation fund -STATUTE- (a) Motorboat fuel taxes from highway trust fund into conservation fund There shall be set aside in the land and water conservation fund in the Treasury of the United States provided for in this part the amounts specified in section 9503(c)(4)(B) of title 26 (relating to special motor fuels and gasoline used in motorboats). (b) Refunds of gasoline taxes for certain nonhighway purposes or used by local transit systems and motorboat fuel taxes from conservation fund into general fund of Treasury There shall be paid from time to time from the land and water conservation fund into the general fund of the Treasury amounts estimated by the Secretary of the Treasury as equivalent to - (1) the amounts paid before October 1, 1996, under section 6421 of title 26 (relating to amounts paid in respect of gasoline used for certain nonhighway purposes or by local transit systems) with respect to gasoline used after December 31, 1964, in motorboats, on the basis of claims filed for periods ending before October 1, 1995; and (2) 80 percent of the floor stocks refunds made before October 1, 1996, under section 6412(a)(2) of title 26 with respect to gasoline to be used in motorboats. -SOURCE- (Pub. L. 88-578, title II, Sec. 201, Sept. 3, 1964, 78 Stat. 904; Pub. L. 91-605, title III, Sec. 302, Dec. 31, 1970, 84 Stat. 1743; Pub. L. 94-273, Sec. 3(4), Apr. 21, 1976, 90 Stat. 376; Pub. L. 94-280, title III, Sec. 302, May 5, 1976, 90 Stat. 456; Pub. L. 95-599, title V, Sec. 503(b), Nov. 6, 1978, 92 Stat. 2757; Pub. L. 97-424, title V, Sec. 531(c), Jan. 6, 1983, 96 Stat. 2191; Pub. L. 99-514, Sec. 2, title XVIII, Sec. 1875(e), Oct. 22, 1986, 100 Stat. 2095, 2897; Pub. L. 100-17, title V, Sec. 503(c), Apr. 2, 1987, 101 Stat. 258; Pub. L. 101-508, title XI, Sec. 11211(g)(2), Nov. 5, 1990, 104 Stat. 1388-427.) -REFTEXT- REFERENCES IN TEXT Section 6412(a)(2) of title 26, referred to in subsec. (b)(2), was redesignated as 'section 6412(a)(1) of title 26' by Pub. L. 94-455, Sec. 1906(22), Oct. 4, 1976, 90 Stat. 1827. -MISC2- AMENDMENTS 1990 - Subsec. (b). Pub. L. 101-508 substituted '1995' for '1993' and '1996' for '1994' wherever appearing. 1987 - Subsec. (b). Pub. L. 100-17 substituted '1993' for '1988' and '1994' for '1989' wherever appearing. 1986 - Subsec. (a). Pub. L. 99-514, Sec. 2, substituted 'Internal Revenue Code of 1986' for 'Internal Revenue Code of 1954', which for purposes of codification was translated as 'title 26' thus requiring no change in text. Pub. L. 99-514, Sec. 1875(e), substituted 'section 9503(c)(4)(B) of title 26' for 'section 209(f)(5) of the Highway Revenue Act of 1956'. Subsec. (b)(1). Pub. L. 99-514, Sec. 2, substituted 'Internal Revenue Code of 1986' for 'Internal Revenue Code of 1954', which for purposes of codification was translated as 'title 26' thus requiring no change in text. 1983 - Subsec. (b). Pub. L. 97-424 substituted '1989' for '1985' and '1988' for '1984' wherever appearing. 1978 - Subsec. (b). Pub. L. 95-599 substituted '1984' for '1979' and '1985' for '1980' wherever appearing. 1976 - Subsec. (b). Pub. L. 94-280 substituted '1979' for '1977' and '1980' for '1978' wherever appearing. Pub. L. 94-273 substituted 'October' for 'July' wherever appearing. 1970 - Subsec. (b). Pub. L. 91-605 substituted '1977' for '1972' and '1978' for '1973' wherever appearing. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by section 1875(e) of Pub. L. 99-514 effective as if included in the provision of the Tax Reform Act of 1984, Pub. L. 98-369, to which such amendment relates, except as otherwise provided, see section 1881 of Pub. L. 99-514, set out as a note under section 48 of Title 26, Internal Revenue Code. EFFECTIVE DATE OF 1983 AMENDMENT Amendment by Pub. L. 97-424 effective Jan. 1, 1983, see section 531(e) of Pub. L. 97-424, set out as an Effective Date; Savings Provision note under section 9503 of Title 26, Internal Revenue Code. EFFECTIVE DATE Section effective Jan. 1, 1965, see note set out under section 460l-4 of this title. PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989 For provisions directing that if any amendments made by subtitle A or subtitle C of title XI (Sec. 1101-1147 and 1171-1177) of title XVIII (Sec. 1800-1899A) of Pub. L. 99-514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99-514, as amended, set out as a note under section 401 of Title 26, Internal Revenue Code. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 460l-5 of this title. ------DocID 21103 Document 540 of 646------ -CITE- 16 USC Sec. 460m-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER LXXI -HEAD- Sec. 460m-11. Water resource projects -STATUTE- The Federal Energy Regulatory Commission shall not license the construction of any dam, water conduit, reservoir, powerhouse, transmission line, or other project works under the Federal Power Act (41 Stat. 1063), as amended (16 U.S.C. 791a et seq.), on or directly affecting the Buffalo National River and no department or agency of the United States shall assist by loan, grant, license, or otherwise in the construction of any water resources project that would have a direct and adverse effect on the values for which such river is established, as determined by the Secretary. Nothing contained in the foregoing sentence, however, shall preclude licensing of, or assistance to, developments below or above the Buffalo National River or on any stream tributary thereto which will not invade the area or unreasonably diminish the scenic, recreational, and fish and wildlife values present in the area on March 1, 1972. No department or agency of the United States shall recommend authorization of any water resources project that would have a direct and adverse effect on the values for which such river is established, as determined by the Secretary, nor shall such department or agency request appropriations to begin construction on any such project, whether heretofore or hereafter authorized, without, at least sixty days in advance, (i) advising the Secretary, in writing, of its intention so to do and (ii) reporting to the Committees on Interior and Insular Affairs of the United States House of Representatives and the United States Senate, respectively, the nature of the project involved and the manner in which such project would conflict with the purposes of this subchapter or would affect the national river and the values to be protected by it under this subchapter. -SOURCE- (Pub. L. 92-237, Sec. 4, Mar. 1, 1972, 86 Stat. 45; Pub. L. 95-91, title IV, Sec. 402(a)(1)(A), Aug. 4, 1977, 91 Stat. 583.) -REFTEXT- REFERENCES IN TEXT The Federal Power Act, referred to in text, is act June 10, 1920, ch. 285, 41 Stat. 1063, as amended, which is classified generally to chapter 12 (Sec. 791a et seq.) of this title. For complete classification of this Act to the Code, see section 791a of this title and Tables. -CHANGE- CHANGE OF NAME Committee on Interior and Insular Affairs of the Senate abolished and replaced by Committee on Energy and Natural Resources of the Senate, effective Feb. 11, 1977. See Rule XXV of Standing Rules of the Senate, as amended by Senate Resolution 4 (popularly cited as the 'Committee System Reorganization Amendments of 1977'), approved Feb. 4, 1977. -TRANS- TRANSFER OF FUNCTIONS 'Federal Energy Regulatory Commission' substituted for 'Federal Power Commission' in text pursuant to Pub. L. 95-91, Sec. 402(a)(1)(A), which is classified to section 7172(a)(1)(A) of Title 42, The Public Health and Welfare. Federal Power Commission terminated and functions, personnel, property, funds, etc., transferred to Secretary of Energy (except for certain functions transferred to Federal Energy Regulatory Commission) by sections 7151(b), 7171(a), 7172(a), 7291, and 7293 of Title 42. ------DocID 21180 Document 541 of 646------ -CITE- 16 USC Sec. 460s-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER LXXVII -HEAD- Sec. 460s-11. Zoning bylaws; assistance and consultation with township or county officers or employees; technical aid payments -STATUTE- The Secretary shall, at the request of any township or county in or adjacent to the lakeshore affected by this subchapter, assist and consult with the appropriate officers and employees of such township or county in establishing zoning bylaws. Such assistance may include payments to the county or township for technical aid. -SOURCE- (Pub. L. 89-668, Sec. 12, Oct. 15, 1966, 80 Stat. 925.) ------DocID 21201 Document 542 of 646------ -CITE- 16 USC Sec. 460u-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER LXXIX -HEAD- Sec. 460u-11. Legal cooling, process, or surface drainage into Little Calumet River; Federal, State or local air and water pollution standards not affected -STATUTE- (a) Nothing in this subchapter shall be construed as prohibiting any otherwise legal cooling, process, or surface drainage into the part of the Little Calumet River located within the lakeshore: Provided, That this subsection shall not affect nor in any way limit the Secretary's authority and responsibility to protect park resources. (b) The authorization of lands to be added to the lakeshore by the Ninety-fourth Congress and the administration of such lands as part of the lakeshore shall in and of itself in no way operate to render more restrictive the application of Federal, State, or local air and water pollution standards to the uses of property outside the boundaries of the lakeshore, nor shall it be construed to augment the control of water and air pollution sources in the State of Indiana beyond that required pursuant to applicable Federal, State, or local law. -SOURCE- (Pub. L. 89-761, Sec. 11, formerly Sec. 12, added and renumbered Pub. L. 94-549, Sec. 1(8), (9), Oct. 18, 1976, 90 Stat. 2531, 2533.) ------DocID 21246 Document 543 of 646------ -CITE- 16 USC Sec. 460x-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER LXXXII -HEAD- Sec. 460x-11. Scenic roads -STATUTE- (a) Authority of Secretary for construction, administration, and procurement of land In order to facilitate visitor travel, provide scenic overlooks for public enjoyment and interpretation of the national lakeshore and related features, and in order to enhance recreational opportunities, the Secretary is authorized to construct and administer as a part of the national lakeshore scenic roads of parkway standards generally lying within Benzie County and within the parkway zone designated on the map specified in section 460x-1(a) of this title. Such scenic roads shall include necessary connections, bridges, and other structural utilities. Notwithstanding any other provision of this subchapter, the Secretary may procure for this purpose land, or interest therein, by donation, purchase with appropriated or donated funds, or otherwise: Provided, That land and interest so procured shall not exceed one hundred and fifty acres per mile of scenic road, except that tracts may be procured in their entirety in order to avoid severances. Property so acquired in excess of the acreage limitation provided in this section may be exchanged by the Secretary for any land of approximately equal value authorized for acquisition by this subchapter. (b) Exchange or sale of lands in Leelanau County Except as provided in subsection (c) of this section, any lands in Leelanau County acquired by the Secretary under this section before October 22, 1982, which are within the parkway zone depicted on the map specified in section 460x-1(a) of this title but which are not within, or contiguous to, the lakeshore zone as depicted on such map may be exchanged by the Secretary for other lands of approximately equal value in the lakeshore. If the Secretary is unable to effect such an exchange, such lands may be offered for sale to the person who owned such lands immediately before their acquisition by the Secretary. If such previous owner declines such offer, the Secretary may sell such lands to any buyer. Proceeds from any sale under this subsection shall be credited to the account established under section 17 of this Act. (c) Administration of certain lands as Resource Preservation Areas The Secretary is authorized to obtain and administer, according to the provisions of this section, as a part of the lakeshore as Resource Preservation Areas certain interests in the following lands: (1) Approximately 600 acres designated as 'Miller Hill' on the map numbered 634-91,001, dated September 1982. (2) Approximately 975 acres as designated as 'Bow Lakes' on the map numbered 634-91-002, dated September 1982. (d) Preservation of scenic values in certain lands; use of lands for educational purposes (1) The Secretary may obtain fee title under subsection (e) of this section to lands described in subsection (c)(1) of this section or easements or other restrictive agreements for the preservation of scenic values in such lands. (2) The Secretary may obtain fee title under subsection (e) of this section to lands described in subsection (c)(2) of this section, or public access easements or other restrictive agreements consistent with use of such lands for educational purposes and for research and interpretation of natural features. (e) Manner of acquiring fee title or lesser interest in land (1) Except as provided under paragraph (4), the Secretary may obtain fee title or other lesser interests to lands described in subsection (c) of this section only - (A) by gift, donation, or bequest; (B) by purchase from a willing seller under paragraph (2); or (C) as an exercise of a right of first refusal under paragraph (3). (2) The Secretary may negotiate with willing sellers for the transfer of fee title to other lesser interests to lands described in subsection (c) of this section. If the Secretary and such willing seller are unable to agree to a fair purchase price, that question may, by mutual consent be submitted to the appropriate United States District Court for adjudication. (3) If the owner of any lands described in subsection (c) of this section intends to transfer any interest in such lands except by gift, donation, or bequest, such owner must notify the Secretary of such intention. The Secretary shall have 90 days after notification in which to exercise a right of first refusal to match any bona fide offer to obtain such interest under the same terms and conditions as are contained in such offer. If the Secretary has not exercised such right within 90 days, the owner may transfer such interest. (4) Condemnation may be used with respect to any lands described in subsection (c) of this section only - (A) to clear title if necessary for any transfer to the Secretary under this subsection; or (B) to purchase fee title or such lesser interest as may be sufficient to prevent significant damage to the scenic, soil, or water resources of the lakeshore. Action under this subparagraph shall be used only after attempts to negotiate a solution to the problem have failed. If the Secretary determines that such attempts have failed, the Secretary shall notify in writing the owner of the property involved of the proposed action to be taken under this subparagraph and the Secretary shall seek an injunction to prevent such resource damage. The Secretary may at any time, and if an injunction is granted under this subparagraph the Secretary shall within 30 days after the date of such injunction, send in writing to the owner of the property the Secretary's best and final offer for the purchase of such property. If the owner does not accept such offer, the Secretary may file for condemnation. The Secretary must notify the Committee on Energy and Natural Resources of the United States Senate and the Committee on Interior and Insular Affairs of the United States House of Representatives of any action taken under this subparagraph. (f) Zoning restrictions for protection of scenic resources (1) The Secretary shall enter into discussions with appropriate local government officials to develop mutually agreeable zoning restrictions for the protection of scenic resources with respect to the lands described in subsection (c)(1) of this section. (2) The Secretary shall enter into discussions with appropriate State and local officials responsible for the administration of the Goemaere-Anderson Wetland Protection Act (Michigan, P.A. 203, 1979) to ensure the protection of natural resources with respect to the lands described in subsection (c)(2) of this section. (g) Inclusion of certain lands as part of lakeshore If the owner of the area designated as 'The Kettle' in the General Management Plan dated October 1, 1979, and comprising 240 acres, agrees to donate fee title or a scenic easement to, or other less than fee interest in, such area, the lands in such area may be included as a part of the lakeshore upon publication in the Federal Register by the Secretary of a revised map of the lakeshore which includes such lands. (h) Road maintenance and other services The Secretary may, upon request in writing by any owner or occupier of lands in the lakeshore, provide services, such as road maintenance, subject to reimbursement. -SOURCE- (Pub. L. 91-479, Sec. 12, Oct. 21, 1970, 84 Stat. 1080; Pub. L. 97-361, Sec. 3, Oct. 22, 1982, 96 Stat. 1722.) -REFTEXT- REFERENCES IN TEXT Section 17 of this Act, referred to in subsec. (b), probably means proposed section 17 of Pub. L. 91-479, which was contained in H.R. 3787, 97th Congress, 2d Session, as reported in House Report No. 97-882, page 4, but was omitted in the final version enacted by Congress as Pub. L. 97-361. -MISC2- AMENDMENTS 1982 - Pub. L. 97-361 designated existing provisions as subsec. (a), inserted 'Benzie County and within' after 'generally lying within', and added subsecs. (b) to (h). -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 460x-3 of this title. ------DocID 21274 Document 544 of 646------ -CITE- 16 USC Sec. 460z-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER LXXXIV -HEAD- Sec. 460z-11. Area review; report to the President; wilderness designation -STATUTE- Within three years from March 23, 1972, the Secretary shall review the area within the boundaries of the recreation area and shall report to the President, in accordance with section 1132(b) and (d) of this title, his recommendation as to the suitability or nonsuitability of any area within the recreation area for preservation as a wilderness, and any designation of any such area as a wilderness shall be accomplished in accordance with section 1132(b) and (d) of this title. -SOURCE- (Pub. L. 92-260, Sec. 13, Mar. 23, 1972, 86 Stat. 102.) -COD- CODIFICATION Section 1132(b) and (d) of this title, the first time appearing in text, was in the original 'subsections 3(b) and 3(d) of the Wilderness Act' and, the second time appearing in text, was in the original 'said subsection of the Wilderness Act'. ------DocID 21289 Document 545 of 646------ -CITE- 16 USC Sec. 460aa-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER LXXXV -HEAD- Sec. 460aa-11. Patents; restriction on issuance -STATUTE- Patents shall not hereafter be issued for locations and claims heretofore made in the recreation area under the mining laws of the United States. -SOURCE- (Pub. L. 92-400, Sec. 12, Aug. 22, 1972, 86 Stat. 615.) -REFTEXT- REFERENCES IN TEXT The mining laws of the United States, referred to in text, are classified generally to Title 30, Mineral Lands and Mining. ------DocID 21338 Document 546 of 646------ -CITE- 16 USC Sec. 460gg-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER XCI -HEAD- Sec. 460gg-11. Civil and criminal jurisdiction of Idaho and Oregon -STATUTE- Nothing in this subchapter shall diminish, enlarge, or modify any right of the States of Idaho, Oregon, or any political subdivisions thereof, to exercise civil and criminal jurisdiction within the recreation area or of rights to tax persons, corporations, franchises, or property, including mineral or other interests, in or on lands or waters within the recreation area. -SOURCE- (Pub. L. 94-199, Sec. 14, Dec. 31, 1975, 89 Stat. 1122.) ------DocID 21412 Document 547 of 646------ -CITE- 16 USC Sec. 460uu-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER CVI Part B -HEAD- Sec. 460uu-11. Designation -STATUTE- In order to provide for public appreciation, education, understanding, and enjoyment of certain nationally significant sites of antiquity in New Mexico and eastern Arizona which are accessible by public road, (FOOTNOTE 1) the Secretary, acting through the Director of the National Park Service, with the concurrence of the agency having jurisdiction over such roads, is authorized to designate, by publication of a description thereof in the Federal Register, a vehicular tour route along existing public roads linking prehistoric and historic cultural sites in New Mexico and eastern Arizona. Such a route shall be known as the Masau Trail (hereinafter referred to as the 'trail'). (FOOTNOTE 1) So in original. Probably should be 'roads,'. -SOURCE- (Pub. L. 100-225, title II, Sec. 201, Dec. 31, 1987, 101 Stat. 1540.) -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 460uu-12 of this title. ------DocID 21445 Document 548 of 646------ -CITE- 16 USC Sec. 460vv-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER CVII -HEAD- Sec. 460vv-11. Timber management report -STATUTE- The Secretary of Agriculture shall submit to the Committee on Interior and Insular Affairs and the Committee on Agriculture of the United States House of Representatives and the Committee on Energy and Natural Resources and the Committee on Agriculture, Nutrition, and Forestry of the United States Senate a report on the timber management program on those lands of the Ouachita National Forest located in Le Flore County, Oklahoma, each year after October 18, 1988, for a period of 20 years. Each such report shall include information on timber management practices, sale preparation, harvest levels, reforestation, forest pest and damage problems, multiple use mitigation practices, including wildlife enhancement, recreation, protection of scenery, vegetation conversion, roads, and vegetative cover along streams, roads and trails. The report shall also include an economic impact statement of the Ouachita National Forest in Le Flore County, Oklahoma, on the timber industry and the tourism and recreation industry. -SOURCE- (Pub. L. 100-499, Sec. 13, Oct. 18, 1988, 102 Stat. 2497.) ------DocID 21482 Document 549 of 646------ -CITE- 16 USC Sec. 460zz-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER CXI Part B -HEAD- Sec. 460zz-11. Tri-Rivers Management Board -STATUTE- (a) Federal representatives In furtherance of the integrated management of those portions of the Mississippi, Saint Croix, and Minnesota Rivers within the Saint Paul-Minneapolis Metropolitan Area, the Secretary of the Interior and the Secretary of the Army are authorized and directed to appoint representatives to a Tri-Rivers Management Board (hereinafter referred to as the 'Board'), or any similar organization, which may be established by the State of Minnesota to assist in the development and implementation of consistent and coordinated land use planning and management policy for such portions of such rivers. (b) Personnel Upon request of the Board, the Secretary of the Interior and the Secretary of the Army may detail, on a reimbursable basis, any personnel to the Board. (c) Authorization of appropriations There is hereby authorized to carry out the purposes of this part the sum of $100,000 annually; except that the Federal contribution to the Board shall not exceed one-third of the annual operating costs of the Board. -SOURCE- (Pub. L. 100-696, title VII, Sec. 711, Nov. 18, 1988, 102 Stat. 4607.) ------DocID 21505 Document 550 of 646------ -CITE- 16 USC Sec. 460bbb-11 -EXPCITE- TITLE 16 CHAPTER 1 SUBCHAPTER CXIII -HEAD- Sec. 460bbb-11. Authorization of appropriations -STATUTE- There are authorized to be appropriated such funds as may be necessary to carry out this subchapter and the amendments made by this Act. -SOURCE- (Pub. L. 101-612, Sec. 14, Nov. 16, 1990, 104 Stat. 3222.) -REFTEXT- REFERENCES IN TEXT The amendments made by this Act, referred to in text, means the amendments made by Pub. L. 101-612, Nov. 16, 1990, 104 Stat. 3209, which amended section 1274 of this title. ------DocID 22002 Document 551 of 646------ -CITE- 16 USC Sec. 590z-11 -EXPCITE- TITLE 16 CHAPTER 3C SUBCHAPTER II -HEAD- Sec. 590z-11. Delegation of powers and duties by Secretary of the Interior -STATUTE- For the purpose of facilitating and simplifying the administration of the Federal reclamation laws (Act of June 17, 1902, 32 Stat. 388, and Acts amendatory thereof or supplementary thereto) and this subchapter, the Secretary of the Interior is authorized to delegate, from time to time and to the extent and under such regulations as he deems proper, his powers and duties under said laws to the Commissioner of Reclamation, an Assistant Commissioner, or the officer in charge of any office, division, district, or project of the Bureau of Reclamation. -SOURCE- (Dec. 19, 1941, ch. 595, 55 Stat. 842.) -REFTEXT- REFERENCES IN TEXT The Federal reclamation laws, referred to in text, are classified generally to chapter 12 (Sec. 371 et seq.) of Title 43, Public Lands. Act of June 17, 1902, 32 Stat. 388, referred to in text, is popularly known as the 'Reclamation Act' and is classified generally to chapter 12 (Sec. 371 et seq.) of Title 43. For complete classification of this Act to the Code, see Short Title note set out under section 371 of Title 43 and Tables. -COD- CODIFICATION This section was not enacted as part of act Aug. 11, 1939, ch. 717, 53 Stat. 1418, which comprises this subchapter. -TRANS- TRANSFER OF FUNCTIONS For transfer of functions of other officers, employees, and agencies of Department of the Interior, with certain exceptions, to Secretary of the Interior, with power to delegate, see Reorg. Plan No. 3 of 1950, Sec. 1, 2, eff. May 24, 1950, 15 F.R. 3174, 64 Stat. 1262, set out in the Appendix to Title 5, Government Organization and Employees. ------DocID 22372 Document 552 of 646------ -CITE- 16 USC Sec. 760-11 -EXPCITE- TITLE 16 CHAPTER 9A -HEAD- Sec. 760-11. Acceptance and development of fish hatchery in South Carolina -STATUTE- The Secretary of the Interior is authorized, in his discretion and upon such terms and conditions as he shall consider to be in the public interest, to accept by donation on behalf of the United States, title to the Orangeburg County, South Carolina, fish hatchery, together with the right to take adequate water from Orangeburg County Lake therefor. The Secretary is authorized to rehabilitate and expand the rearing ponds and other hatchery facilities, to purchase lands adjoining such station in connection with the rehabilitation and expansion of such facilities, and to equip, operate, and maintain said fish hatchery. -SOURCE- (Pub. L. 86-572, Sec. 1, July 5, 1960, 74 Stat. 311.) -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 760-12 of this title. ------DocID 22427 Document 553 of 646------ -CITE- 16 USC CHAPTER 11 -EXPCITE- TITLE 16 CHAPTER 11 -HEAD- CHAPTER 11 - REGULATION OF LANDING, CURING, AND SALE OF SPONGES TAKEN FROM GULF OF MEXICO AND STRAITS OF FLORIDA -MISC1- Sec. 781. Taking or catching, in waters of Gulf or Straits of Florida, commercial sponges of less than prescribed size, and landing or possession of same. 782. Sponges of less than prescribed size; possession prima facie evidence. 783. Punishment for violations of law; liability of vessels. 784. Jurisdiction of prosecutions. 785. Enforcement of law prohibiting taking of sponges of specified sizes; employment of Coast Guard vessels and Customs Service employees. ------DocID 23796 Document 554 of 646------ -CITE- 18 USC Sec. 11 -EXPCITE- TITLE 18 PART I CHAPTER 1 -HEAD- Sec. 11. Foreign government defined -STATUTE- The term 'foreign government', as used in this title except in sections 112, 878, 970, 1116, and 1201, includes any government, faction, or body of insurgents within a country with which the United States is at peace, irrespective of recognition by the United States. -SOURCE- (June 25, 1948, ch. 645, 62 Stat. 686; Oct. 8, 1976, Pub. L. 94-467, Sec. 11, 90 Stat. 2001.) -MISC1- HISTORICAL AND REVISION NOTES Based on title 18, U.S.C., 1940 ed., Sec. 98, 288, 349; section 235 of title 22 U.S.C., 1940 ed., Foreign Relations and Intercourse; section 41 of title 50, U.S.C., 1940 ed., War and National Defense (June 15, 1917, ch. 30, title VIII, Sec. 4, 40 Stat. 226). The definition of 'foreign government' contained in this section, with minor changes in phraseology, is from section 4 of title VIII of act June 15, 1917 (Ch. 30, 40 Stat. 217, 226), known as the Espionage Act of 1917. This definition was incorporated in sections 98, 288, and 349 of title 18 and in section 235 of title 22, Foreign Relations and Intercourse, and in section 41 of Title 50, War and National Defense, U.S.C., all in 1940 ed., since the definition was specifically enacted with reference to said sections and others not material here. The remaining provisions of said sections 98 and 349 of title 18, U.S.C., 1940 ed., which were derived from sources other than said section 4 of title VIII of the act of June 15, 1917, are incorporated in sections 502 and 957 of this title. AMENDMENTS 1976 - Pub. L. 94-467 inserted 'except in sections 112, 878, 970, 1116, and 1201' after 'title'. -CROSS- CANAL ZONE Applicability of section to Canal Zone, see section 14 of this title. FEDERAL RULES OF CRIMINAL PROCEDURE Foreign relations, etc., grounds for issuance of search warrant, see rule 41, Appendix to this title. Subpoena, circumstances and manner of service abroad, see rule 17. Witnesses in foreign country, nonapplicability of rules to proceedings against witness, see rule 54. CROSS REFERENCES Extradition, certification of amounts to be paid by foreign government on account of fees and costs, see section 3195 of this title. Foreign relations generally, see section 951 et seq. of this title. Transportation, sale or receipt of stolen securities, application to obligations of foreign government, see sections 2314, 2315 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 14 of this title. ------DocID 23838 Document 555 of 646------ -CITE- 18 USC CHAPTER 11 -EXPCITE- TITLE 18 PART I CHAPTER 11 -HEAD- CHAPTER 11 - BRIBERY, GRAFT, AND CONFLICTS OF INTEREST -MISC1- Sec. 201. Bribery of public officials and witnesses. 202. Definitions. 203. Compensation to Members of Congress, officers and others, (FOOTNOTE 1) in matters affecting the Government. (FOOTNOTE 1) So in original. Does not conform to section catchline. 204. Practice in United States Claims Court or (FOOTNOTE 1) United States Court of Appeals for the Federal Circuit by Members of Congress. 205. Activities of officers and employees in claims against and other matters affecting the Government. 206. Exemption of retired officers of the uniformed services. 207. Restrictions on former officers, employees, and elected officials of the executive and legislative branches. 208. Acts affecting a personal financial interest. 209. Salary of Government officials and employees payable only by United States. 210. Offer to procure appointive public office. 211. Acceptance or solicitation to obtain appointive public office. 212. Offer of loan or gratuity to bank examiner. 213. Acceptance of loan or gratuity by bank examiner. 214. Offer for procurement of Federal Reserve bank loan and discount of commercial paper. 215. Receipt of commissions or gifts for procuring loans. 216. Penalties and injunctions. 217. Acceptance of consideration for adjustment of farm indebtedness. 218. Voiding transactions in violation of chapter; recovery by the United States. 219. Officers and employees acting as agents of foreign principals. (220 to 222. Redesignated.) (223. Repealed.) 224. Bribery in sporting contests. 225. Continuing financial crimes enterprise. AMENDMENTS 1990 - Pub. L. 101-647, title XXV, Sec. 2510(b), title XXXV, Sec. 3509, Nov. 29, 1990, 104 Stat. 4863, 4922, substituted 'to Members' for 'of Members' in item 203, substituted 'United States Claims Court or United States Court of Appeals for the Federal Circuit' for 'Court of Claims' in item 204, and added item 225. 1989 - Pub. L. 101-194, title I, Sec. 101(b), title IV, Sec. 407(b), Nov. 30, 1989, 103 Stat. 1724, 1753, substituted 'Restrictions on former officers, employees, and elected officials of the executive and legislative branches' for 'Disqualification of former officers and employees; disqualification of partners of current officers and employees' in item 207 and added item 216. 1984 - Pub. L. 98-473, title II, Sec. 1107(b), Oct. 12, 1984, 98 Stat. 2146, substituted 'Repealed' for 'Receipt or charge of commissions or gifts for farm loan, land bank, or small business transactions' in item 216. 1978 - Pub. L. 95-521, title V, Sec. 501(b), Oct. 26, 1978, 92 Stat. 1867, struck out 'in matters connected with former duties or official responsibilities' after 'officers and employees' and inserted 'of current officers and employees' after 'partners of' in item 207. 1966 - Pub. L. 89-486, Sec. 8(c)(2), July 4, 1966, 80 Stat. 249, added item 219. 1964 - Pub. L. 88-316, Sec. 1(b), June 6, 1964, 78 Stat. 204, added item 224. 1962 - Pub. L. 87-849, Sec. 1(a), Oct. 23, 1962, 76 Stat. 1119, included conflicts of interests in chapter heading, and amended analysis generally to contain items 201 to 218. Prior to amendment, the analysis contained items 201 to 223. 1958 - Pub. L. 85-699, title VII, Sec. 702(d), Aug. 21 1958, 72 Stat. 698, included small business transactions in item 221. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in title 15 sections 1942, 2625; title 22 section 3622; title 43 section 1817. ------DocID 25065 Document 556 of 646------ -CITE- 18 USC APPENDIX - CLASSIFIED INFORMATION PROCEDURES ACT Sec. 11 -EXPCITE- TITLE 18 CLASSIFIED INFORMATION PROCEDURES ACT -HEAD- Sec. 11. Amendments to the Act -STATUTE- Sections 1 through 10 of this Act may be amended as provided in section 2076, title 28, United States Code. -SOURCE- (Pub. L. 96-456, Sec. 11, Oct. 15, 1980, 94 Stat. 2029.) -REFTEXT- REFERENCES IN TEXT This Act, referred to in catchline, is Pub. L. 96-456, Oct. 15, 1980, 94 Stat. 2025, known as the 'Classified Information Procedures Act'. ------DocID 25088 Document 557 of 646------ -CITE- 18 USC APPENDIX - RULES OF CRIMINAL PROCEDURE Rule 11 -EXPCITE- TITLE 18 RULES OF CRIMINAL PROCEDURE FOR THE UNITED STATES DISTRICT COURTS IV -HEAD- Rule 11. Pleas -STATUTE- (a) Alternatives. (1) In General. A defendant may plead not guilty, guilty, or nolo contendere. If a defendant refuses to plead or if a defendant corporation fails to appear, the court shall enter a plea of not guilty. (2) Conditional Pleas. With the approval of the court and the consent of the government, a defendant may enter a conditional plea of guilty or nolo contendere, reserving in writing the right, on appeal from the judgment, to review of the adverse determination of any specified pretrial motion. A defendant who prevails on appeal shall be allowed to withdraw the plea. (b) Nolo Contendere. A defendant may plead nolo contendere only with the consent of the court. Such a plea shall be accepted by the court only after due consideration of the views of the parties and the interest of the public in the effective administration of justice. (c) Advice to Defendant. Before accepting a plea of guilty or nolo contendere, the court must address the defendant personally in open court and inform the defendant of, and determine that the defendant understands, the following: (1) the nature of the charge to which the plea is offered, the mandatory minimum penalty provided by law, if any, and the maximum possible penalty provided by law, including the effect of any special parole or supervised release term, the fact that the court is required to consider any applicable sentencing guidelines but may depart from those guidelines under some circumstances, and, when applicable, that the court may also order the defendant to make restitution to any victim of the offense; and (2) if the defendant is not represented by an attorney, that the defendant has the right to be represented by an attorney at every stage of the proceeding and, if necessary, one will be appointed to represent the defendant; and (3) that the defendant has the right to plead not guilty or to persist in that plea if it has already been made, the right to be tried by a jury and at that trial the right to the assistance of counsel, the right to confront and cross-examine adverse witnesses, and the right against compelled self-incrimination; and (4) that if a plea of guilty or nolo contendere is accepted by the court there will not be a further trial of any kind, so that by pleading guilty or nolo contendere the defendant waives the right to a trial; and (5) if the court intends to question the defendant under oath, on the record, and in the presence of counsel about the offense to which the defendant has pleaded, that the defendant's answers may later be used against the defendant in a prosecution for perjury or false statement. (d) Insuring That the Plea Is Voluntary. The court shall not accept a plea of guilty or nolo contendere without first, by addressing the defendant personally in open court, determining that the plea is voluntary and not the result of force or threats or of promises apart from a plea agreement. The court shall also inquire as to whether the defendant's willingness to plead guilty or nolo contendere results from prior discussions between the attorney for the government and the defendant or the defendant's attorney. (e) Plea Agreement Procedure. (1) In General. The attorney for the government and the attorney for the defendant or the defendant when acting pro se may engage in discussions with a view toward reaching an agreement that, upon the entering of a plea of guilty or nolo contendere to a charged offense or to a lesser or related offense, the attorney for the government will do any of the following: (A) move for dismissal of other charges; or (B) make a recommendation, or agree not to oppose the defendant's request, for a particular sentence, with the understanding that such recommendation or request shall not be binding upon the court; or (C) agree that a specific sentence is the appropriate disposition of the case. The court shall not participate in any such discussions. (2) Notice of Such Agreement. If a plea agreement has been reached by the parties, the court shall, on the record, require the disclosure of the agreement in open court or, on a showing of good cause, in camera, at the time the plea is offered. If the agreement is of the type specified in subdivision (e)(1)(A) or (C), the court may accept or reject the agreement, or may defer its decision as to the acceptance or rejection until there has been an opportunity to consider the presentence report. If the agreement is of the type specified in subdivision (e)(1)(B), the court shall advise the defendant that if the court does not accept the recommendation or request the defendant nevertheless has no right to withdraw the plea. (3) Acceptance of a Plea Agreement. If the court accepts the plea agreement, the court shall inform the defendant that it will embody in the judgment and sentence the disposition provided for in the plea agreement. (4) Rejection of a Plea Agreement. If the court rejects the plea agreement, the court shall, on the record, inform the parties of this fact, advise the defendant personally in open court or, on a showing of good cause, in camera, that the court is not bound by the plea agreement, afford the defendant the opportunity to then withdraw the plea, and advise the defendant that if the defendant persists in a guilty plea or plea of nolo contendere the disposition of the case may be less favorable to the defendant than that contemplated by the plea agreement. (5) Time of Plea Agreement Procedure. Except for good cause shown, notification to the court of the existence of a plea agreement shall be given at the arraignment or at such other time, prior to trial, as may be fixed by the court. (6) Inadmissibility of Pleas, Plea Discussions, and Related Statements. Except as otherwise provided in this paragraph, evidence of the following is not, in any civil or criminal proceeding, admissible against the defendant who made the plea or was a participant in the plea discussions: (A) a plea of guilty which was later withdrawn; (B) a plea of nolo contendere; (C) any statement made in the course of any proceedings under this rule regarding either of the foregoing pleas; or (D) any statement made in the course of plea discussions with an attorney for the government which do not result in a plea of guilty or which result in a plea of guilty later withdrawn. However, such a statement is admissible (i) in any proceeding wherein another statement made in the course of the same plea or plea discussions has been introduced and the statement ought in fairness be considered contemporaneously with it, or (ii) in a criminal proceeding for perjury or false statement if the statement was made by the defendant under oath, on the record, and in the presence of counsel. (f) Determining Accuracy of Plea. Notwithstanding the acceptance of a plea of guilty, the court should not enter a judgment upon such plea without making such inquiry as shall satisfy it that there is a factual basis for the plea. (g) Record of Proceedings. A verbatim record of the proceedings at which the defendant enters a plea shall be made and, if there is a plea of guilty or nolo contendere, the record shall include, without limitation, the court's advice to the defendant, the inquiry into the voluntariness of the plea including any plea agreement, and the inquiry into the accuracy of a guilty plea. (h) Harmless Error. Any variance from the procedures required by this rule which does not affect substantial rights shall be disregarded. -SOURCE- (As amended Feb. 28, 1966, eff. July 1, 1966; Apr. 22, 1974, eff. Dec. 1, 1975; July 31, 1975, Pub. L. 94-64, Sec. 3(5)-(10), 89 Stat. 371, 372; Apr. 30, 1979, eff. Aug. 1, 1979, and Dec. 1, 1980; Apr. 28, 1982, eff. Aug. 1, 1982; Apr. 28, 1983, eff. Aug. 1, 1983; Apr. 29, 1985, eff. Aug. 1, 1985; Mar. 9, 1987, eff. Aug. 1, 1987; Nov. 18, 1988, Pub. L. 100-690, title VII, Sec. 7076, 102 Stat. 4406; Apr. 25, 1989, eff. Dec. 1, 1989.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES 1. This rule is substantially a restatement of existing law and practice, 18 U.S.C. (former) 564 (Standing mute); Fogus v. United States, 34 F.2d 97 (C.C.A. 4th) (duty of court to ascertain that plea of guilty is intelligently and voluntarily made). 2. The plea of nolo contendere has always existed in the Federal courts, Hudson v. United States, 272 U.S. 451; United States v. Norris, 281 U.S. 619. The use of the plea is recognized by the Probation Act, 18 U.S.C. 724 (now 3651). While at times criticized as theoretically lacking in logical basis, experience has shown that it performs a useful function from a practical standpoint. NOTES OF ADVISORY COMMITTEE ON RULES - 1966 AMENDMENT The great majority of all defendants against whom indictments or informations are filed in the federal courts plead guilty. Only a comparatively small number go to trial. See United States Attorneys Statistical Report, Fiscal Year 1964, p. 1. The fairness and adequacy of the procedures on acceptance of pleas of guilty are of vital importance in according equal justice to all in the federal courts. Three changes are made in the second sentence. The first change makes it clear that before accepting either a plea of guilty or nolo contendere the court must determine that the plea is made voluntarily with understanding of the nature of the charge. The second change expressly requires the court to address the defendant personally in the course of determining that the plea is made voluntarily and with understanding of the nature of the charge. The reported cases reflect some confusion over this matter. Compare United States v. Diggs, 304 F.2d 929 (6th Cir. 1962); Domenica v. United States, 292 F.2d 483 (1st Cir. 1961); Gundlach v. United States, 262 F.2d 72 (4th Cir. 1958), cert. den., 360 U.S. 904 (1959); and Julian v. United States, 236 F.2d 155 (6th Cir. 1956), which contain the implication that personal interrogation of the defendant is the better practice even when he is represented by counsel, with Meeks v. United States, 298 F.2d 204 (5th Cir. 1962); Nunley v. United States, 294 F.2d 579 (10th Cir. 1961), cert. den., 368 U.S. 991 (1962); and United States v. Von der Heide, 169 F.Supp. 560 (D.D.C. 1959). The third change in the second sentence adds the words 'and the consequences of his plea' to state what clearly is the law. See, e.g., Von Moltke v. Gillies, 332 U.S. 708, 724 (1948); Kerchevel v. United States, 274 U.S. 220, 223 (1927); Munich v. United States, 337 F.2d 356 (9th Cir. 1964); Pilkington v. United States, 315 F.2d 204 (4th Cir. 1963); Smith v. United States, 324 F.2d 436 (D.C. Cir. 1963); but cf. Marvel v. United States, 335 F.2d 101 (5th Cir. 1964). A new sentence is added at the end of the rule to impose a duty on the court in cases where the defendant pleads guilty to satisfy itself that there is a factual basis for the plea before entering judgment. The court should satisfy itself, by inquiry of the defendant or the attorney for the government, or by examining the presentence report, or otherwise, that the conduct which the defendant admits constitutes the offense charged in the indictment or information or an offense included therein to which the defendant has pleaded guilty. Such inquiry should, e.g., protect a defendant who is in the position of pleading voluntarily with an understanding of the nature of the charge but without realizing that his conduct does not actually fall within the charge. For a similar requirement see Mich. Stat. Ann. Sec. 28.1058 (1954); Mich. Sup. Ct. Rule 35A; In re Valle, 364 Mich. 471, 110 N.W.2d 673 (1961); People v. Barrows, 358 Mich. 267, 99 N.W.2d 347 (1959); People v. Bumpus, 355 Mich. 374, 94 N.W.2d 854 (1959); People v. Coates, 337 Mich. 56, 59 N.W.2d 83 (1953). See also Stinson v. United States, 316 F.2d 554 (5th Cir. 1963). The normal consequence of a determination that there is not a factual basis for the plea would be for the court to set aside the plea and enter a plea of not guilty. For a variety of reasons it is desirable in some cases to permit entry of judgment upon a plea of nolo contendere without inquiry into the factual basis for the plea. The new third sentence is not, therefore, made applicable to pleas of nolo contendere. It is not intended by this omission to reflect any view upon the effect of a plea of nolo contendere in relation to a plea of guilty. That problem has been dealt with by the courts. See e.g., Lott v. United States, 367 U.S. 421, 426 (1961). NOTES OF ADVISORY COMMITTEE ON RULES - 1974 AMENDMENT The amendments to rule 11 are designed to achieve two principal objectives: (1) Subdivision (c) prescribes the advice which the court must give to insure that the defendant who pleads guilty has made an informed plea. (2) Subdivision (e) provides a plea agreement procedure designed to give recognition to the propriety of plea discussions; to bring the existence of a plea agreement out into the open in court; and to provide methods for court acceptance or rejection of a plea agreement. Other less basic changes are also made. The changes are discussed in the order in which they appear in the rule. Subdivision (b) retains the requirement that the defendant obtain the consent of the court in order to plead nolo contendere. It adds that the court shall, in deciding whether to accept the plea, consider the views of the prosecution and of the defense and also the larger public interest in the administration of criminal justice. Although the plea of nolo contendere has long existed in the federal courts, Hudson v. United States, 272 U.S. 451, 47 S.Ct. 127, 71 L.Ed. 347 (1926), the desirability of the plea has been a subject of disagreement. Compare Lane-Reticker, Nolo Contendere in North Carolina, 34 N.C.L.Rev. 280, 290-291 (1956), with Note. The Nature and Consequences of the Plea of Nolo Contendere, 33 Neb.L.Rev. 428, 434 (1954), favoring the plea. The American Bar Association Project on Standards for Criminal Justice takes the position that 'the case for the nolo plea is not strong enough to justify a minimum standard supporting its use,' but because 'use of the plea contributes in some degree to the avoidance of unnecessary trials' it does not proscribe use of the plea. ABA, Standards Relating to Pleas of Guilty Sec. 1.1(a) Commentary at 16 (Approved Draft, 1968). A plea of nolo contendere is, for purposes of punishment, the same as the plea of guilty. See discussion of the history of the nolo plea in North Carolina v. Alford, 400 U.S. 25, 35-36 n. 8, 91 S.Ct. 160, 27 L.Ed.2d 162 (1970). Note, The Nature and Consequences of the Plea of Nolo Contendere, 33 Neb.L.Rev. 428, 430 (1954). A judgment upon the plea is a conviction and may be used to apply multiple offender statutes. Lenvin and Meyers, Nolo Contendere: Its Nature and Implications, 51 Yale L.J. 1255, 1265 (1942). Unlike a plea of guilty, however, it cannot be used against a defendant as an admission in a subsequent criminal or civil case. 4 Wigmore Sec. 1066(4), at 58 (3d ed. 1940, Supp. 1970); Rules of Evidence for United States Courts and Magistrates, rule 803(22) (Nov. 1971). See Lenvin and Meyers, Nolo Contendere: Its Nature and Implications, 51 Yale L.J. 1255 (1942); ABA Standards Relating to Pleas of Guilty Sec. 1.1(a) and (b), Commentary at 15-18 (Approved Draft, 1968). The factors considered relevant by particular courts in determining whether to permit the plea of nolo contendere vary. Compare United States v. Bagliore, 182 F.Supp. 714, 716 (E.D.N.Y. 1960), where the view is taken that the plea should be rejected unless a compelling reason for acceptance is established, with United States v. Jones, 119 F.Supp. 288, 290 (S.D.Cal. 1954), where the view is taken that the plea should be accepted in the absence of a compelling reason to the contrary. A defendant who desires to plead nolo contendere will commonly want to avoid pleading guilty because the plea of guilty can be introduced as an admission in subsequent civil litigation. The prosecution may oppose the plea of nolo contendere because it wants a definite resolution of the defendant's guilty or innocence either for correctional purposes or for reasons of subsequent litigation. ABA Standards Relating to Pleas of Guilty Sec. 1.1(b) Commentary at 16-18 (Approved Draft, 1968). Under subdivision (b) of the new rule the balancing of the interests is left to the trial judge, who is mandated to take into account the larger public interest in the effective administration of justice. Subdivision (c) prescribes the advice which the court must give to the defendant as a prerequisite to the acceptance of a plea of guilty. The former rule required that the court determine that the plea was made with 'understanding of the nature of the charge and the consequences of the plea.' The amendment identifies more specifically what must be explained to the defendant and also codifies, in the rule, the requirements of Boykin v. Alabama, 395 U.S. 238, 89 S.Ct. 1709, 23 L.Ed.2d 274 (1969), which held that a defendant must be apprised of the fact that he relinquishes certain constitutional rights by pleading guilty. Subdivision (c) retains the requirement that the court address the defendant personally. See McCarthy v. United States, 394 U.S. 459, 466, 89 S.Ct. 1166, 22 L.Ed.2d 418 (1969). There is also an amendment to rule 43 to make clear that a defendant must be in court at the time of the plea. Subdivision (c)(1) retains the current requirement that the court determine that the defendant understands the nature of the charge. This is a common requirement. See ABA Standards Relating to Pleas of Guilty Sec. 1.4(a) (Approved Draft, 1968); Illinois Supreme Court Rule 402(a)(1) (1970), Ill.Rev.Stat. 1973, ch. 110A, Sec. 402(a)(1). The method by which the defendant's understanding of the nature of the charge is determined may vary from case to case, depending on the complexity of the circumstances and the particular defendant. In some cases, a judge may do this by reading the indictment and by explaining the elements of the offense to the defendants. Thompson, The Judge's Responsibility on a Plea of Guilty 62 W.Va.L.Rev. 213, 220 (1960); Resolution of Judges of U.S. District Court for D.C., June 24, 1959. Former rule 11 required the court to inform the defendant of the 'consequences of the plea.' Subdivision (c)(2) changes this and requires instead that the court inform the defendant of and determine that he understands 'the mandatory minimum penalty provided by law, if any, and the maximum possible penalty provided by law for the offense to which the plea is offered.' The objective is to insure that a defendant knows what minimum sentence the judge must impose and what maximum sentence the judge may impose. This information is usually readily ascertainable from the face of the statute defining the crime, and thus it is feasible for the judge to know specifically what to tell the defendant. Giving this advice tells a defendant the shortest mandatory sentence and also the longest possible sentence for the offense to which he is pleading guilty. It has been suggested that it is desirable to inform a defendant of additional consequences which might follow from his plea of guilty. Durant v. United States, 410 F.2d 689 (1st Cir. 1969), held that a defendant must be informed of his ineligibility for parole. Trujillo v. United States, 377 F.2d 266 (5th Cir. 1967), cert. denied 389 U.S. 899, 88 S.Ct. 224, 19 L.Ed.2d 221 (1967), held that advice about eligibility for parole is not required. It has been suggested that a defendant be advised that a jury might find him guilty only of a lesser included offense. C. Wright, Federal Practice and Procedure: Criminal Sec. 173 at 374 (1969). See contra Dorrough v. United States, 385 F.2d 887 (5th Cir. 1967). The ABA Standards Relating to Pleas of Guilty Sec. 1.4(c)(iii) (Approved Draft, 1968) recommend that the defendant be informed that he may be subject to additional punishment if the offense charged is one for which a different or additional punishment is authorized by reason of the defendant's previous conviction. Under the rule the judge is not required to inform a defendant about these matters, though a judge is free to do so if he feels a consequence of a plea of guilty in a particular case is likely to be of real significance to the defendant. Currently, certain consequences of a plea of guilty, such as parole eligibility, may be so complicated that it is not feasible to expect a judge to clearly advise the defendant. For example, the judge may impose a sentence under 18 U.S.C. Sec. 4202 making the defendant eligible for parole when he has served one third of the judicially imposed maximum; or, under 18 U.S.C. Sec. 4208(a)(1), making parole eligibility after a specified period of time less than one third of the maximum; or, under 18 U.S.C. Sec. 4208(a)(2), leaving eligibility to the discretion of the parole board. At the time the judge is required to advise the defendant of the consequences of his plea, the judge will usually not have seen the presentence report and thus will have no basis for giving a defendant any very realistic advice as to when he might be eligible for parole. Similar complications exist with regard to other, particularly collateral, consequences of a plea of guilty in a given case. Subdivisions (c)(3) and (4) specify the constitutional rights that the defendant waives by a plea of guilty or nolo contendere. These subdivisions are designed to satisfy the requirements of understanding waiver set forth in Boykin v. Alabama, 395 U.S. 238, 89 S.Ct. 1709, 23 L.Ed.2d 274 (1969). Subdivision (c)(3) is intended to require that the judge inform the defendant and determine that he understands that he waives his fifth amendment rights. The rule takes the position that the defendant's right not to incriminate himself is best explained in terms of his right to plead not guilty and to persist in that plea if it has already been made. This is language identical to that adopted in Illinois for the same purpose. See Illinois Supreme Court Rule 402(a)(3) (1970), Ill.Rev.Stat. 1973, ch. 110A, Sec. 402(a)(3). Subdivision (c)(4) assumes that a defendant's right to have his guilt proved beyond a reasonable doubt and the right to confront his accusers are best explained by indicating that the right to trial is waived. Specifying that there will be no future trial of any kind makes this fact clear to those defendants who, though knowing they have waived trial by jury, are under the mistaken impression that some kind of trial will follow. Illinois has recently adopted similar language. Illinois Supreme Court Rule 402(a)(4) (1970), Ill.Rev.Stat. 1973, ch. 110A, Sec. 402(a)(4). In explaining to a defendant that he waives his right to trial, the judge may want to explain some of the aspects of trial such as the right to confront witnesses, to subpoena witnesses, to testify in his own behalf, or, if he chooses, not to testify. What is required, in this respect, to conform to Boykin is left to future case-law development. Subdivision (d) retains the requirement that the court determine that a plea of guilty or nolo contendere is voluntary before accepting it. It adds the requirement that the court also inquire whether the defendant's willingness to plead guilty or nolo contendere results from prior plea discussions between the attorney for the government and the defendant or his attorney. See Santobello v. New York, 404 U.S. 257, 261-262, 92 S.Ct. 495, 30 L.Ed.2d 427 (1971): 'The plea must, of course, be voluntary and knowing and if it was induced by promises, the essence of those promises must in some way be made known.' Subdivisions (d) and (e) afford the court adequate basis for rejecting an improper plea agreement induced by threats or inappropriate promises. The new rule specifies that the court personally address the defendant in determining the voluntariness of the plea. By personally interrogating the defendant, not only will the judge be better able to ascertain the plea's voluntariness, but he will also develop a more complete record to support his determination in a subsequent post-conviction attack. * * * Both of these goals are undermined in proportion to the degree the district judge resorts to 'assumptions' not based upon recorded responses to his inquiries. McCarthy v. United States, 394 U.S. 459, 466, 467, 89 S.Ct. 1166, 22 L.Ed.2d 418 (1969). Subdivision (e) provides a plea agreement procedure. In doing so it gives recognition to the propriety of plea discussions and plea agreements provided that they are disclosed in open court and subject to acceptance or rejection by the trial judge. Although reliable statistical information is limited, one recent estimate indicated that guilty pleas account for the disposition of as many as 95% of all criminal cases. ABA Standards Relating to Pleas of Guilty, pp. 1-2 (Approved Draft, 1968). A substantial number of these are the result of plea discussions. The President's Commission on Law Enforcement and Administration of Justice, Task Force Report: The Courts 9 (1967); D. Newman, Conviction: The Determination of Guilt or Innocence Without Trial 3 (1966); L. Weinreb, Criminal Process 437 (1969); Note, Guilty Plea Bargaining: Compromises by Prosecutors To Secure Guilty Pleas, 112 U.Pa.L.Rev. 865 (1964). There is increasing acknowledgement of both the inevitability and the propriety of plea agreements. See, e.g., ABA Standards Relating to Pleas of Guilty Sec. 3.1 (Approved Draft, 1968); Illinois Supreme Court Rule 402 (1970), Ill.Rev.Stat. 1973, ch. 110A, Sec. 402. In Brady v. United States, 397 U.S. 742, 752-753, 90 S.Ct. 1463, 25 L.Ed.2d 747 (1970), the court said: Of course, that the prevalence of guilty pleas is explainable does not necessarily validate those pleas or the system which produces them. But we cannot hold that it is unconstitutional for the State to extend a benefit to a defendant who in turn extends a substantial benefit to the State and who demonstrates by his plea that he is ready and willing to admit his crime and to enter the correctional system in a frame of mind that affords hope for success in rehabilitation over a shorter period of time than might otherwise be necessary. In Santobello v. New York, 404 U.S. 257, 260, 92 S.Ct. 495, 498, 30 L.Ed.2d 427 (1971), the court said: The disposition of criminal charges by agreement between the prosecutor and the accused, sometimes loosely called 'plea bargaining,' is an essential component of the administration of justice. Properly administered, it is to be encouraged. Administratively, the criminal justice system has come to depend upon pleas of guilty and, hence, upon plea discussions. See, e.g., President's Commission on Law Enforcement and Administration of Justice, Task Force Report. The Courts 9 (1967); Note, Guilty Plea Bargaining: Compromises By Prosecutors To Secure Guilty Pleas, 112 U.Pa.L.Rev. 865 (1964). But expediency is not the basis for recognizing the propriety of a plea agreement practice. Properly implemented, a plea agreement procedure is consistent with both effective and just administration of the criminal law. Santobello v. New York, 404 U.S. 257, 92 S.Ct. 495, 30 L.Ed.2d 427. This is the conclusion reached in the ABA Standards Relating to Pleas of Guilty Sec. 1.8 (Approved Draft, 1968); the ABA Standards Relating to The Prosecution Function and The Defense Function pp. 243-253 (Approved Draft, 1971); and the ABA Standards Relating to the Function of the Trial Judge, Sec. 4.1 (App.Draft, 1972). The Supreme Court of California recently recognized the propriety of plea bargaining. See People v. West, 3 Cal.3d 595, 91 Cal.Rptr. 385, 477 P.2d 409 (1970). A plea agreement procedure has recently been decided in the District of Columbia Court of General Sessions upon the recommendation of the United States Attorney. See 51 F.R.D. 109 (1971). Where the defendant by his plea aids in insuring prompt and certain application of correctional measures, the proper ends of the criminal justice system are furthered because swift and certain punishment serves the ends of both general deterrence and the rehabilitation of the individual defendant. Cf. Note, The Influence of the Defendant's Plea on Judicial Determination of Sentence, 66 Yale L.J. 204, 211 (1956). Where the defendant has acknowledged his guilt and shown a willingness to assume responsibility for his conduct, it has been thought proper to recognize this in sentencing. See also ALI, Model Penal Code Sec. 7.01 (P.O.D. 1962); NPPA Guides for Sentencing (1957). Granting a charge reduction in return for a plea of guilty may give the sentencing judge needed discretion, particularly where the facts of a case do not warrant the harsh consequences of a long mandatory sentence or collateral consequences which are unduly severe. A plea of guilty avoids the necessity of a public trial and may protect the innocent victim of a crime against the trauma of direct and cross-examination. Finally, a plea agreement may also contribute to the successful prosecution of other more serious offenders. See D. Newman, Conviction: The Determination of Guilt or Innocence Without Trial, chs. 2 and 3 (1966); Note, Guilty Plea Bargaining: Compromises By Prosecutors To Secure Guilty Pleas, 112 U.Pa.L.Rev. 865, 881 (1964). Where plea discussions and agreements are viewed as proper, it is generally agreed that it is preferable that the fact of the plea agreement be disclosed in open court and its propriety be reviewed by the trial judge. We have previously recognized plea bargaining as an ineradicable fact. Failure to recognize it tends not to destroy it but to drive it underground. We reiterate what we have said before: that when plea bargaining occurs it ought to be spread on the record (The Bench Book prepared by the Federal Judicial Center for use by United States District Judges now suggests that the defendant be asked by the court 'if he believes there is any understanding or if any predictions have been made to him concerning the sentence he will receive.' Bench Book for United States District Judges, Federal Judicial Center (1969) at 1.05.3.) and publicly disclosed. United States v. Williams, 407 F.2d 940 (4th Cir. 1969). * * * In the future we think that the district judges should not only make the general inquiry under Rule 11 as to whether the plea of guilty has been coerced or induced by promises, but should specifically inquire of counsel whether plea bargaining has occurred. Logically the general inquiry should elicit information about plea bargaining, but it seldom has in the past. Raines v. United States, 423 F.2d 526, 530 (4th Cir. 1970). In the past, plea discussions and agreements have occurred in an informal and largely invisible manner. Enker, Perspectives on Plea Bargaining, in President's Commission on Law Enforcement and Administration of Justice, Task Force Report: The Courts 108, 115 (1967). There has often been a ritual of denial that any promises have been made, a ritual in which judges, prosecutors, and defense counsel have participated. ABA Standards Relating to Pleas of Guilty Sec. 3.1, Commentary at 60-69 (Approved Draft 1968); Task Force Report: The Courts 9. Consequently, there has been a lack of effective judicial review of the propriety of the agreements, thus increasing the risk of real or apparent unfairness. See ABA Standards Relating to Pleas of Guilty Sec. 3.1, Commentary at 60 et seq.; Task Force Report: The Courts 9-13. The procedure described in subdivision (e) is designed to prevent abuse of plea discussions and agreements by providing appropriate and adequate safeguards. Subdivision (e)(1) specifies that the 'attorney for the government and the attorney for the defendant or the defendant when acting pro se may' participate in plea discussions. The inclusion of 'the defendant when acting pro se' is intended to reflect the fact that there are situations in which a defendant insists upon representing himself. It may be desirable that an attorney for the government not enter plea discussions with a defendant personally. If necessary, counsel can be appointed for purposes of plea discussions. (Subdivision (d) makes it mandatory that the court inquire of the defendant whether his plea is the result of plea discussions between him and the attorney for the government. This is intended to enable the court to reject an agreement reached by an unrepresented defendant unless the court is satisfied that acceptance of the agreement adequately protects the rights of the defendant and the interests of justice.) This is substantially the position of the ABA Standards Relating to Pleas of Guilty Sec. 3.1(a), Commentary at 65-66 (Approved Draft, 1968). Apparently, it is the practice of most prosecuting attorneys to enter plea discussions only with defendant's counsel. Note, Guilty Plea Bargaining: Compromises By Prosecutors To Secure Guilty Pleas, 112 U.Pa.L.Rev. 865, 904 (1964). Discussions without benefit of counsel increase the likelihood that such discussions may be unfair. Some courts have indicated that plea discussions in the absence of defendant's attorney may be constitutionally prohibited. See Anderson v. North Carolina, 221 F.Supp. 930, 935 (W.D.N.C.1963); Shape v. Sigler, 230 F.Supp. 601, 606 (D.Neb. 1964). Subdivision (e)(1) is intended to make clear that there are four possible concessions that may be made in a plea agreement. First, the charge may be reduced to a lesser or related offense. Second, the attorney for the government may promise to move for dismissal of other charges. Third, the attorney for the government may agree to recommend or not oppose the imposition of a particular sentence. Fourth, the attorneys for the government and the defense may agree that a given sentence is an appropriate disposition of the case. This is made explicit in subdivision (e)(2) where reference is made to an agreement made 'in the expectation that a specific sentence will be imposed.' See Note, Guilty Plea Bargaining: Compromises By Prosecutors To Secure Guilty Pleas, 112 U.Pa.L.Rev. 865, 898 (1964). Subdivision (e)(1) prohibits the court from participating in plea discussions. This is the position of the ABA Standards Relating to Pleas of Guilty Sec. 3.3(a) (Approved Draft, 1968). It has been stated that it is common practice for a judge to participate in plea discussions. See D. Newman, Conviction: The Determination of Guilt or Innocence Without Trial 32-52, 78-104 (1966); Note, Guilty Plea Bargaining: Compromises By Prosecutors To Secure Guilty Pleas, 112 U.Pa.L.Rev. 865, 891, 905 (1964). There are valid reasons for a judge to avoid involvement in plea discussions. It might lead the defendant to believe that he would not receive a fair trial, were there a trial before the same judge. The risk of not going along with the disposition apparently desired by the judge might induce the defendant to plead guilty, even if innocent. Such involvement makes it difficult for a judge to objectively assess the voluntariness of the plea. See ABA Standards Relating to Pleas of Guilty Sec. 3.3(a), Commentary at 72-74 (Approved Draft, 1968); Note, Guilty Plea Bargaining: Compromises By Prosecutors To Secure Guilty Pleas, 112 U.Pa.L.Rev. 865, 891-892 (1964); Comment, Official Inducements to Plead Guilty: Suggested Morals for a Marketplace, 32 U.Chi.L.Rev. 167, 180-183 (1964); Informal Opinion No. 779 ABA Professional Ethics Committee ('A judge should not be a party to advance arrangements for the determination of sentence, whether as a result of a guilty plea or a finding of guilt based on proof.'), 51 A.B.A.J. 444 (1965). As has been recently pointed out: The unequal positions of the judge and the accused, one with the power to commit to prison and the other deeply concerned to avoid prison, as once raise a question of fundamental fairness. When a judge becomes a participant in plea bargaining he brings to bear the full force and majesty of his office. His awesome power to impose a substantially longer or even maximum sentence in excess of that proposed is present whether referred to or not. A defendant needs no reminder that if he rejects the proposal, stands upon his right to trial and is convicted, he faces a significantly longer sentence. United States ex rel. Elksnis v. Gilligan, 256 F.Supp. 244, 254 (S.D.N.Y. 1966). On the other hand, one commentator has taken the position that the judge may be involved in discussions either after the agreement is reached or to help elicit facts and an agreement. Enker, Perspectives on Plea Bargaining, in President's Commission on Law Enforcement and Administration of Justice, Task Force Report: The Courts 108, 117-118 (1967). The amendment makes clear that the judge should not participate in plea discussions leading to a plea agreement. It is contemplated that the judge may participate in such discussions as may occur when the plea agreement is disclosed in open court. This is the position of the recently adopted Illinois Supreme Court Rule 402(d)(1) (1970), Ill.Rev.Stat. 1973, ch. 110A, Sec. 402(d)(1). As to what may constitute 'participation,' contrast People v. Earegood, 12 Mich.App. 256, 268-269, 162 N.W.2d 802, 809-810 (1968), with Kruse v. State, 47 Wis.2d 460, 177 N.W.2d 322 (1970). Subdivision (e)(2) provides that the judge shall require the disclosure of any plea agreement in open court. In People v. West, 3 Cal.3d 595, 91 Cal.Rptr. 385, 477 P.2d 409 (1970), the court said: (T)he basis of the bargain should be disclosed to the court and incorporated in the record. * * * Without limiting that court to those we set forth, we note four possible methods of incorporation: (1) the bargain could be stated orally and recorded by the court reporter, whose notes then must be preserved or transcribed; (2) the bargain could be set forth by the clerk in the minutes of the court; (3) the parties could file a written stipulation stating the terms of the bargain; (4) finally, counsel or the court itself may find it useful to prepare and utilize forms for the recordation of plea bargains. 91 Cal.Rptr. 393, 394, 477 P.2d at 417, 418. The District of Columbia Court of General Sessions is using a 'Sentence-Recommendation Agreement' form. Upon notice of the plea agreement, the court is given the option to accept or reject the agreement or defer its decision until receipt of the presentence report. The judge may, and often should, defer his decision until he examines the presentence report. This is made possible by rule 32 which allows a judge, with the defendant's consent, to inspect a presentence report to determine whether a plea agreement should be accepted. For a discussion of the use of conditional plea acceptance, see ABA Standards Relating to Pleas of Guilty Sec. 3.3(b), Commentary at 74-76, and Supplement, Proposed Revisions Sec. 3.3(b) at 2-3 (Approved Draft, 1968); Illinois Supreme Court Rule 402(d)(2) (1970), Ill.Rev.Stat. 1973, ch. 110A, Sec. 402(d)(2). The plea agreement procedure does not attempt to define criteria for the acceptance or rejection of a plea agreement. Such a decision is left to the discretion of the individual trial judge. Subdivision (e)(3) makes is mandatory, if the court decides to accept the plea agreement, that it inform the defendant that it will embody in the judgment and sentence the disposition provided in the plea agreement, or one more favorable to the defendant. This serves the purpose of informing the defendant immediately that the agreement will be implemented. Subdivision (e)(4) requires the court, if it rejects the plea agreement, to inform the defendant of this fact and to advise the defendant personally, in open court, that the court is not bound by the plea agreement. The defendant must be afforded an opportunity to withdraw his plea and must be advised that if he persists in his guilty plea or plea of nolo contendere, the disposition of the case may be less favorable to him than that contemplated by the plea agreement. That the defendant should have the opportunity to withdraw his plea if the court rejects the plea agreement is the position taken in ABA Standards Relating to Pleas of Guilty, Supplement, Proposed Revisions Sec. 2.1(a)(ii)(5) (Approved Draft, 1968). Such a rule has been adopted in Illinois. Illinois Supreme Court Rule 402(d)(2) (1970), Ill.Rev.Stat. 1973, ch. 110A, Sec. 402(d)(2). If the court rejects the plea agreement and affords the defendant the opportunity to withdraw the plea, the court is not precluded from accepting a guilty plea from the same defendant at a later time, when such plea conforms to the requirements of rule 11. Subdivision (e)(5) makes it mandatory that, except for good cause shown, the court be notified of the existence of a plea agreement at the arraignment or at another time prior to trial fixed by the court. Having a plea entered at this stage provides a reasonable time for the defendant to consult with counsel and for counsel to complete any plea discussions with the attorney for the government. ABA Standards Relating to Pleas of Guilty Sec. 1.3 (Approved Draft, 1968). The objective of the provision is to make clear that the court has authority to require a plea agreement to be disclosed sufficiently in advance of trial so as not to interfere with the efficient scheduling of criminal cases. Subdivision (e)(6) is taken from rule 410, Rules of Evidence for United States Courts and Magistrates (Nov. 1971). See Advisory Committee Note thereto. See also the ABA Standards Relating to Pleas of Guilty Sec. 2.2 (Approved Draft, 1968); Illinois Supreme Court Rule 402(f) (1970), Ill.Rev.Stat. 1973, ch. 110A, Sec. 402(f). Subdivision (f) retains the requirement of old rule 11 that the court should not enter judgment upon a plea of guilty without making such an inquiry as will satisfy it that there is a factual basis for the plea. The draft does not specify that any particular type of inquiry be made. See Santobello v. New York, 404 U.S. 257, 261, 92 S.Ct. 495, 30 L.Ed.2d 427 (1971); 'Fed.Rule Crim.Proc. 11, governing pleas in federal courts, now makes clear that the sentencing judge must develop, on the record, the factual basis for the plea, as, for example, by having the accused describe the conduct that gave rise to the charge.' An inquiry might be made of the defendant, of the attorneys for the government and the defense, of the presentence report when one is available, or by whatever means is appropriate in a specific case. This is the position of the ABA Standards Relating to Pleas of Guilty Sec. 1.6 (Approved Draft, 1968). Where inquiry is made of the defendant himself it may be desirable practice to place the defendant under oath. With regard to a determination that there is a factual basis for a plea of guilty to a 'lessor or related offense,' compare ABA Standards Relating to Pleas of Guilty Sec. 3.1(b)(ii), Commentary at 67-68 (Approved Draft, 1968), with ALI, Model Penal Code Sec. 1.07(5) (P.O.D. 1962). The rule does not speak directly to the issue of whether a judge may accept a plea of guilty where there is a factual basis for the plea but the defendant asserts his innocence. North Carolina v. Alford, 400 U.S. 25, 91 S.Ct. 160, 27 L.Ed.2d 162 (1970). The procedure in such case would seem to be to deal with this as a plea of nolo contendere, the acceptance of which would depend upon the judge's decision as to whether acceptance of the plea is consistent with 'the interest of the public in the effective administration of justice' (new rule 11(b)). The defendant who asserts his innocence while pleading guilty or nolo contendere is often difficult to deal with in a correctional setting, and it may therefore be preferable to resolve the issue of guilt or innocence at the trial stage rather than leaving that issue unresolved, thus complicating subsequent correctional decisions. The rule is intended to make clear that a judge may reject a plea of nolo contendere and require the defendant either to plead not guilty or to plead guilty under circumstances in which the judge is able to determine that the defendant is in fact guilty of the crime to which he is pleading guilty. Subdivision (g) requires that a verbatim record be kept of the proceedings. If there is a plea of guilty or nolo contendere, the record must include, without limitation, the court's advice to the defendant, the inquiry into the voluntariness of the plea and the plea agreement, and the inquiry into the accuracy of the plea. Such a record is important in the event of a postconviction attack. ABA Standards Relating to Pleas of Guilty Sec. 1.7 (Approved Draft, 1968). A similar requirement was adopted in Illinois: Illinois Supreme Court Rule 402(e) (1970), Ill.Rev.Stat. 1973, ch. 110A, Sec. 402(e). NOTES OF COMMITTEE ON THE JUDICIARY, HOUSE REPORT NO. 94-247; 1975 AMENDMENT A. Amendments Proposed by the Supreme Court. Rule 11 of the Federal Rules of Criminal Procedure deals with pleas. The Supreme Court has proposed to amend this rule extensively. Rule 11 provides that a defendant may plead guilty, not guilty, or nolo contendere. The Supreme Court's amendments to Rule 11(b) provide that a nolo contendere plea 'shall be accepted by the court only after due consideration of the views of the parties and the interest of the public in the effective administration of justice.' The Supreme Court amendments to Rule 11(c) spell out the advise that the court must give to the defendant before accepting the defendant's plea of guilty or nolo contendere. The Supreme Court amendments to Rule 11(d) set forth the steps that the court must take to insure that a guilty or nolo contendere plea has been voluntarily made. The Supreme Court amendments to Rule 11(e) establish a plea agreement procedure. This procedure permits the parties to discuss disposing of a case without a trial and sets forth the type of agreements that the parties can reach concerning the disposition of the case. The procedure is not mandatory; a court is free not to permit the parties to present plea agreements to it. The Supreme Court amendments to Rule 11(f) require that the court, before entering judgment upon a plea of guilty, satisfy itself that 'there is a factual basis for the plea.' The Supreme Court amendments to Rule 11(g) require that a verbatim record be kept of the proceedings at which the defendant enters a plea. B. Committee Action. The proposed amendments to Rule 11, particularly those relating to the plea negotiating procedure, have generated much comment and criticism. No observer is entirely happy that our criminal justice system must rely to the extent it does on negotiated dispositions of cases. However, crowded court dockets make plea negotiating a fact that the Federal Rules of Criminal Procedure should contend with. The Committee accepts the basic structure and provisions of Rule 11(e). Rule 11(e) as proposed permits each federal court to decide for itself the extent to which it will permit plea negotiations to be carried on within its own jurisdiction. No court is compelled to permit any plea negotiations at all. Proposed Rule 11(e) regulates plea negotiations and agreements if, and to the extent that, the court permits such negotiations and agreements. (Proposed Rule 11(e) has been criticized by some federal judges who read it to mandate the court to permit plea negotiations and the reaching of plea agreements. The Advisory Committee stressed during its testimony that the rule does not mandate that a court permit any form of plea agreement to be presented to it. See, e.g., the remarks of United States Circuit Judge William H. Webster in Hearings II, at 196. See also the exchange of correspondence between Judge Webster and United States District Judge Frank A. Kaufman in Hearings II, at 289-90.) Proposed Rule 11(e) contemplates 4 different types of plea agreements. First, the defendant can plead guilty or nolo contendere in return for the prosecutor's reducing the charge to a less serious offense. Second, the defendant can plead guilty or nolo contendere in return for the prosecutor dropping, or not bringing, a charge or charges relating to other offenses. Third, the defendant can plead guilty or nolo contendere in return for the prosecutor's recommending a sentence. Fourth, the defendant and prosecutor can agree that a particular sentence is the appropriate disposition of the case. (It is apparent, though not explicitly stated, that Rule 11(e) contemplates that the plea agreement may bind the defendant to do more than just plead guilty or nolo contendere. For example, the plea agreement may bind the defendant to cooperate with the prosecution in a different investigation. The Committee intends by its approval of Rule 11(e) to permit the parties to agree on such terms in a plea agreement.) The Committee added language in subdivisions (e)(2) and (e)(4) to permit a plea agreement to be disclosed to the court, or rejected by it, in camera. There must be a showing of good cause before the court can conduct such proceedings in camera. The language does not address itself to whether the showing of good cause may be made in open court or in camera. That issue is left for the courts to resolve on a case-by-case basis. These changes in subdivisions (e)(2) and (e)(4) will permit a fair trial when there is substantial media interest in a case and the court is rejecting a plea agreement. The Committee added an exception to subdivision (e)(6). That subdivision provides: Evidence of a plea of guilty, later withdrawn, or a plea of nolo contendere, or of an offer to plead quilty or nolo contendere to the crime charged or any other crime, or of statements made in connection with any of the foregoing pleas or offers, is not admissible in any civil or criminal proceeding against the person who made the plea or offer. The Committee's exception permits the use of such evidence in a perjury or false statement prosecution where the plea, offer, or related statement was made by the defendant on the record, under oath and in the presence of counsel. The Committee recognizes that even this limited exception may discourage defendants from being completely candid and open during plea negotiations and may even result in discouraging the reaching of plea agreements. However, the Committee believes hat, on balance, it is more important to protect the integrity of the judicial process from willful deceit and untruthfulness. (The Committee does not intend its language to be construed as mandating or encouraging the swearing-in of the defendant during proceedings in connection with the disclosure and acceptance or rejection of a plea agreement.) The Committee recast the language of Rule 11(c), which deals with the advice given to a defendant before the court can accept his plea of guilty or nolo contendere. The Committee acted in part because it believed that the warnings given to the defendant ought to include those that Boykin v. Alabama, 395 U.S. 238 (1969), said were constitutionally required. In addition, and as a result of its change in subdivision (e)(6), the Committee thought if only fair that the defendant be warned that his plea of guilty (later withdrawn) or nolo contendere, or his offer of either plea, or his statements made in connection with such pleas or offers, could later be used against him in a perjury trial if made under oath, on the record, and in the presence of counsel. NOTES OF CONFERENCE COMMITTEE, HOUSE REPORT NO. 94-414; 1975 AMENDMENT Note to subdivision (c). Rule 11(c) enumerates certain things that a judge must tell a defendant before the judge can accept that defendant's plea of guilty or nolo contendere. The House version expands upon the list originally proposed by the Supreme Court. The Senate version adopts the Supreme Court's proposal. The Conference adopts the House provision. Note to subdivision (e)(1). Rule 11(e)(1) outlines some general considerations concerning the plea agreement procedure. The Senate version makes nonsubstantive change in the House version. The Conference adopts the Senate provision. Note to subdivision (e)(6). Rule 11(e)(6) deals with the use of statements made in connection with plea agreements. The House version permits a limited use of pleas of guilty, later withdrawn, or nolo contendere, offers of such pleas, and statements made in connection with such pleas or offers. Such evidence can be used in a perjury or false statement prosecution if the plea, offer, or related statement was made under oath, on the record, and in the presence of counsel. The Senate version permits evidence of voluntary and reliable statements made in court on the record to be used for the purpose of impeaching the credibility of the declarant or in a perjury or false statement prosecution. The Conference adopts the House version with changes. The Conference agrees that neither a plea nor the offer of a plea ought to be admissible for any purpose. The Conference-adopted provision, therefore, like the Senate provision, permits only the use of statements made in connection with a plea of guilty, later withdrawn, or a plea of nolo contendere, or in connection with an offer of a guilty or nolo contendere plea. NOTES OF ADVISORY COMMITTEE ON RULES - 1979 AMENDMENT Note to Subdivision (e)(2). The amendment to rule 11(e)(2) is intended to clarify the circumstances in which the court may accept or reject a plea agreement, with the consequences specified in subdivision (e)(3) and (4). The present language has been the cause of some confusion and has led to results which are not entirely consistent. Compare United States v. Sarubbi, 416 F.Supp. 633 (D. N.J. 1976); with United States v. Hull, 413 F.Supp. 145 (E.D. Tenn. 1976). Rule 11(e)(1) specifies three types of plea agreements, namely, those in which the attorney for the government might (A) move for dismissal of other charges; or (B) make a recommendation, or agree not to oppose the defendant's request, for a particular sentence, with the understanding that such recommendation or request shall not be binding upon the court; or (C) agree that a specific sentence is the appropriate disposition of the case. A (B) type of plea agreement is clearly of a different order than the other two, for an agreement to recommend or not to oppose is discharged when the prosecutor performs as he agreed to do. By comparison, critical to a type (A) or (C) agreement is that the defendant receive the contemplated charge dismissal or agreed-to sentence. Consequently, there must ultimately be an acceptance or rejection by the court of a type (A) or (C) agreement so that it may be determined whether the defendant shall receive the bargained-for concessions or shall instead be afforded an opportunity to withdraw his plea. But this is not so as to a type (B) agreement; there is no 'disposition provided for' in such a plea agreement so as to make the acceptance provisions of subdivision (e)(3) applicable, nor is there a need for rejection with opportunity for withdrawal under subdivision (e)(4) in light of the fact that the defendant knew the nonbinding character of the recommendation or request. United States v. Henderson, 565 F.2d 1119 (9th Cir. 1977); United States v. Savage, 561 F.2d 554 (4th Cir. 1977). Because a type (B) agreement is distinguishable from the others in that it involves only a recommendation or request not binding upon the court, it is important that the defendant be aware that this is the nature of the agreement into which he has entered. The procedure contemplated by the last sentence of amended subdivision (e)(2) will establish for the record that there is such awareness. This provision conforms to ABA Standards Relating to Pleas of Guilty Sec. 1.5 (Approved Draft, 1968), which provides that 'the court must advise the defendant personally that the recommendations of the prosecuting attorney are not binding on the court.' Sometimes a plea agreement will be partially but not entirely of the (B) type, as where a defendant, charged with counts 1, 2 and 3, enters into an agreement with the attorney for the government wherein it is agreed that if defendant pleads guilty to count 1, the prosecutor will recommend a certain sentence as to that count and will move for dismissal of counts 2 and 3. In such a case, the court must take particular care to ensure that the defendant understands which components of the agreement involve only a (B) type recommendation and which do not. In the above illustration, that part of the agreement which contemplates the dismissal of counts 2 and 3 is an (A) type agreement, and thus under rule 11(e) the court must either accept the agreement to dismiss these counts or else reject it and allow the defendant to withdraw his plea. If rejected, the defendant must be allowed to withdraw the plea on count 1 even if the type (B) promise to recommend a certain sentence on that count is kept, for a multi-faceted plea agreement is nonetheless a single agreement. On the other hand, if counts 2 and 3 are dismissed and the sentence recommendation is made, then the defendant is not entitled to withdraw his plea even if the sentence recommendation is not accepted by the court, for the defendant received all he was entitled to under the various components of the plea agreement. Note to Subdivision (e)(6). The major objective of the amendment to rule 11(e)(6) is to describe more precisely, consistent with the original purpose of the provision, what evidence relating to pleas or plea discussions is inadmissible. The present language is susceptible to interpretation which would make it applicable to a wide variety of statements made under various circumstances other than within the context of those plea discussions authorized by rule 11(e) and intended to be protected by subdivision (e)(6) of the rule. See United States v. Herman, 544 F.2d 791 (5th Cir. 1977), discussed herein. Fed.R.Ev. 410, as originally adopted by Pub. L. 93-595, provided in part that 'evidence of a plea of guilty, later withdrawn, or a plea of nolo contendere, or of an offer to plead guilty or nolo contendere to the crime charged or any other crime, or of statements made in connection with any of the foregoing pleas or offers, is not admissible in any civil or criminal action, case, or proceeding against the person who made the plea or offer.' (This rule was adopted with the proviso that it 'shall be superseded by any amendment to the Federal Rules of Criminal Procedure which is inconsistent with this rule.') As the Advisory Committee Note explained: 'Exclusion of offers to plead guilty or nolo has as its purpose the promotion of disposition of criminal cases by compromise.' The amendment of Fed.R.Crim.P. 11, transmitted to Congress by the Supreme Court in April 1974, contained a subdivision (e)(6) essentially identical to the rule 410 language quoted above, as a part of a substantial revision of rule 11. The most significant feature of this revision was the express recognition given to the fact that the 'attorney for the government and the attorney for the defendant or the defendant when acting pro se may engage in discussions with a view toward reaching' a plea agreement. Subdivision (e)(6) was intended to encourage such discussions. As noted in H.R.Rep. No. 94-247, 94th Cong., 1st Sess. 7 (1975), the purpose of subdivision (e)(6) is to not 'discourage defendants from being completely candid and open during plea negotiations.' Similarly, H.R.Rep. No. 94-414, 94th Cong., 1st Sess. 10 (1975), states that 'Rule 11(e)(6) deals with the use of statements made in connection with plea agreements.' (Rule 11(e)(6) was thereafter enacted, with the addition of the proviso allowing use of statements in a prosecution for perjury, and with the qualification that the inadmissible statements must also be 'relevant to' the inadmissible pleas or offers. Pub. L. 94-64; Fed.R.Ev. 410 was then amended to conform. Pub. L. 94-149.) While this history shows that the purpose of Fed.R.Ev. 410 and Fed.R.Crim.P. 11(e)(6) is to permit the unrestrained candor which produces effective plea discussions between the 'attorney for the government and the attorney for the defendant or the defendant when acting pro se,' given visibility and sanction in rule 11(e), a literal reading of the language of these two rules could reasonably lead to the conclusion that a broader rule of inadmissibility obtains. That is, because 'statements' are generally inadmissible if 'made in connection with, and relevant to' an 'offer to plead guilty,' it might be thought that an otherwise voluntary admission to law enforcement officials is rendered inadmissible merely because it was made in the hope of obtaining leniency by a plea. Some decisions interpreting rule 11(e)(6) point in this direction. See United States v. Herman, 544 F.2d 791 (5th Cir. 1977) (defendant in custody of two postal inspectors during continuance of removal hearing instigated conversation with them and at some point said he would plead guilty to armed robbery if the murder charge was dropped; one inspector stated they were not 'in position' to make any deals in this regard; held, defendant's statement inadmissible under rule 11(e)(6) because the defendant 'made the statements during the course of a conversation in which he sought concessions from the government in return for a guilty plea'); United States v. Brooks, 536 F.2d 1137 (6th Cir. 1976) (defendant telephoned postal inspector and offered to plead guilty if he got 2-year maximum; statement inadmissible). The amendment makes inadmissible statements made 'in the course of any proceedings under this rule regarding' either a plea of guilty later withdrawn or a plea of nolo contendere, and also statements 'made in the course of plea discussions with an attorney for the government which do not result in a plea of guilty or which result in a plea of guilty later withdrawn.' It is not limited to statements by the defendant himself, and thus would cover statements by defense counsel regarding defendant's incriminating admissions to him. It thus fully protects the plea discussion process authorized by rule 11 without attempting to deal with confrontations between suspects and law enforcement agents, which involve problems of quite different dimensions. See, e.g., ALI Model Code of Pre-Arraignment Procedure, art. 140 and Sec. 150.2(8) (Proposed Official Draft, 1975) (latter section requires exclusion if 'a law enforcement officer induces any person to make a statement by promising leniency'). This change, it must be emphasized, does not compel the conclusion that statements made to law enforcement agents, especially when the agents purport to have authority to bargain, are inevitably admissible. Rather, the point is that such cases are not covered by the per se rule of 11(e)(6) and thus must be resolved by that body of law dealing with police interrogations. If there has been a plea of guilty later withdrawn or a plea of nolo contendere, subdivision (e)(6)(C) makes inadmissible statements made 'in the course of any proceedings under this rule' regarding such pleas. This includes, for example, admissions by the defendant when he makes his plea in court pursuant to rule 11 and also admissions made to provide the factual basis pursuant to subdivision (f). However, subdivision (e)(6)(C) is not limited to statements made in court. If the court were to defer its decision on a plea agreement pending examination of the presentence report, as authorized by subdivision (e)(2), statements made to the probation officer in connection with the preparation of that report would come within this provision. This amendment is fully consistent with all recent and major law reform efforts on this subject. ALI Model Code of Pre-Arraignment Procedure Sec. 350.7 (Proposed Official Draft, 1975), and ABA Standards Relating to Pleas of Guilty Sec. 3.4 (Approved Draft, 1968) both provide: Unless the defendant subsequently enters a plea of guilty or nolo contendere which is not withdrawn, the fact that the defendant or his counsel and the prosecuting attorney engaged in plea discussions or made a plea agreement should not be received in evidence against or in favor of the defendant in any criminal or civil action or administrative proceedings. The Commentary to the latter states: The above standard is limited to discussions and agreements with the prosecuting attorney. Sometimes defendants will indicate to the police their willingness to bargain, and in such instances these statements are sometimes admitted in court against the defendant. State v. Christian, 245 S.W.2d 895 (Mo.1952). If the police initiate this kind of discussion, this may have some bearing on the admissibility of the defendant's statement. However, the policy considerations relevant to this issue are better dealt with in the context of standards governing in-custody interrogation by the police. Similarly, Unif.R.Crim.P. 441(d) (Approved Draft, 1974), provides that except under limited circumstances 'no discussion between the parties or statement by the defendant or his lawyer under this Rule,' i.e., the rule providing 'the parties may meet to discuss the possibility of pretrial diversion * * * or of a plea agreement,' are admissible. The amendment is likewise consistent with the typical state provision on this subject; see, e.g., Ill.S.Ct. Rule 402(f). The language of the amendment identifies with more precision than the present language the necessary relationship between the statements and the plea or discussion. See the dispute between the majority and concurring opinions in United States v. Herman, 544 F.2d 791 (5th Cir. 1977), concerning the meanings and effect of the phrases 'connection to' and 'relevant to' in the present rule. Moreover, by relating the statements to 'plea discussions' rather than 'an offer to plead,' the amendment ensures 'that even an attempt to open plea bargaining (is) covered under the same rule of inadmissibility.' United States v. Brooks, 536 F.2d 1137 (6th Cir. 1976). The last sentence of Rule 11(e)(6) is amended to provide a second exception to the general rule of nonadmissibility of the described statements. Under the amendment, such a statement is also admissible 'in any proceeding wherein another statement made in the course of the same plea or plea discussions has been introduced and the statement ought in fairness be considered contemporaneously with it.' This change is necessary so that, when evidence of statements made in the course of or as a consequence of a certain plea or plea discussions are introduced under circumstances not prohibited by this rule (e.g., not 'against' the person who made the plea), other statements relating to the same plea or plea discussions may also be admitted when relevant to the matter at issue. For example, if a defendant upon a motion to dismiss a prosecution on some ground were able to admit certain statements made in aborted plea discussions in his favor, then other relevant statements made in the same plea discussions should be admissible against the defendant in the interest of determining the truth of the matter at issue. The language of the amendment follows closely that in Fed.R.Evid. 106, as the considerations involved are very similar. The phrase 'in any civil or criminal proceeding' has been moved from its present position, following the word 'against,' for purposes of clarity. An ambiguity presently exists because the word 'against' may be read as referring either to the kind of proceeding in which the evidence is offered or the purpose for which it is offered. The change makes it clear that the latter construction is correct. No change is intended with respect to provisions making evidence rules inapplicable in certain situations. See, e.g., Fed.R.Evid. 104(a) and 1101(d). Unlike ABA Standards Relating to Pleas of Guilty Sec. 3.4 (Approved Draft, 1968), and ALI Model Code of Pre-Arraignment Procedure Sec. 350.7 (Proposed Official Draft, 1975), rule 11(e)(6) does not also provide that the described evidence is inadmissible 'in favor of' the defendant. This is not intended to suggest, however, that such evidence will inevitably be admissible in the defendant's favor. Specifically, no disapproval is intended of such decisions as United States v. Verdoorn, 528 F.2d 103 (8th Cir. 1976), holding that the trial judge properly refused to permit the defendants to put into evidence at their trial the fact the prosecution had attempted to plea bargain with them, as 'meaningful dialogue between the parties would, as a practical matter, be impossible if either party had to assume the risk that plea offers would be admissible in evidence.' NOTES OF ADVISORY COMMITTEE ON RULES - 1982 AMENDMENT Note to Subdivision (c)(1). Subdivision (c)(1) has been amended by specifying 'the effect of any special parole term' as one of the matters about which a defendant who has tendered a plea of guilty or nolo contendere is to be advised by the court. This amendment does not make any change in the law, as the courts are in agreement that such advice is presently required by Rule 11. See, e.g., Moore v. United States, 592 F.2d 753 (4th Cir. 1979); United States v. Eaton, 579 F.2d 1181 (10th Cir. 1978); Richardson v. United States, 577 F.2d 447 (8th Cir. 1978); United States v. Del Prete, 567 F.2d 928 (9th Cir. 1978); United States v. Watson, 548 F.2d 1058 (D.C.Cir. 1977); United States v. Crusco, 536 F.2d 21 (2d Cir. 1976); United States v. Yazbeck, 524 F.2d 641 (1st Cir. 1975); United States v. Wolak, 510 F.2d 164 (6th Cir. 1975). In United States v. Timmreck, 441 U.S. 780 (1979), 99 S.Ct. 2085, 60 L.Ed.2d 634 (1979), the Supreme Court assumed that the judge's failure in that case to describe the mandatory special parole term constituted 'a failure to comply with the formal requirements of the Rule.' The purpose of the amendment is to draw more specific attention to the fact that advice concerning special parole terms is a necessary part of Rule 11 procedure. As noted in Moore v. United States, supra: Special parole is a significant penalty. * * * Unlike ordinary parole, which does not involve supervision beyond the original prison term set by the court and the violation of which cannot lead to confinement beyond that sentence, special parole increases the possible period of confinement. It entails the possibility that a defendant may have to serve his original sentence plus a substantial additional period, without credit for time spent on parole. Explanation of special parole in open court is therefore essential to comply with the Rule's mandate that the defendant be informed of 'the maximum possible penalty provided by law.' As the aforecited cases indicate, in the absence of specification of the requirement in the rule it has sometimes happened that such advice has been inadvertently omitted from Rule 11 warnings. The amendment does not attempt to enumerate all of the characteristics of the special parole term which the judge ought to bring to the defendant's attention. Some flexibility in this respect must be preserved although it is well to note that the unique characteristics of this kind of parole are such that they may not be readily perceived by laymen. Moore v. United States supra, recommends that in an appropriate case the judge inform the defendant and determine that he understands the following: (1) that a special parole term will be added to any prison sentence he receives; (2) the minimum length of the special parole term that must be imposed and the absence of a statutory maximum; (3) that special parole is entirely different from - and in addition to - ordinary parole; and (4) that if the special parole is violated, the defendant can be returned to prison for the remainder of his sentence and the full length of his special parole term. The amendment should not be read as meaning that a failure to comply with this particular requirement will inevitably entitle the defendant to relief. See United States v. Timmreck, supra. Likewise, the amendment makes no change in the existing law to the effect that many aspects of traditional parole need not be communicated to the defendant by the trial judge under the umbrella of Rule 11. For example, a defendant need not be advised of all conceivable consequences such as when he may be considered for parole or that, if he violates his parole, he will again be imprisoned. Bunker v. Wise, 550 F.2d 1155, 1158 (9th Cir. 1977). Note to Subdivision (c)(4). The amendment to subdivision (c)(4) is intended to overcome the present conflict between the introductory language of subdivision (c), which contemplates the advice being given '(b)efore accepting a plea of guilty or nolo contendere,' and thus presumably after the plea has been tendered, and the 'if he pleads' language of subdivision (c)(4) which suggests the plea has not been tendered. As noted by Judge Doyle in United States v. Sinagub, 468 F.Supp. 353 (W.D.Wis.1979): Taken literally, this wording of subsection (4) of 11(c) suggests that before eliciting any plea at an arraignment, the court is required to insure that a defendant understands that if he or she pleads guilty or nolo contendere, the defendant will be waiving the right to trial. Under subsection (3) of 11(c), however, there is no requirement that at this pre-plea stage, the court must insure that the defendant understands that he or she enjoys the right to a trial and, at trial, the right to the assistance of counsel, the right to confront and cross-examine witnesses against him or her, and the right not to be compelled to incriminate himself or herself. It would be incongruous to require that at the pre-plea stage the court insure that the defendant understands that if he enters a plea of guilty or nolo contendere he will be waiving a right, the existence and nature of which need not be explained until after such a plea has been entered. I conclude that the insertion of the words 'that if he pleads guilty or nolo contendere,' as they appear in subsection (4) of 11(c), was an accident of draftsmanship which occurred in the course of Congressional rewriting of 11(c) as it has been approved by the Supreme Court. Those words are to be construed consistently with the words 'Before accepting a plea of guilty or nolo contendere,' as they appear in the opening language of 11(c), and consistently with the omission of the words 'that if he pleads' from subsections (1), (2), and (3) of 11(c). That is, as they appear in subsection (4) of 11(c), the words, 'that if he pleads guilty or nolo contendere' should be construed to mean 'that if his plea of guilty or nolo contendere is accepted by the court.' Although this is a very logical interpretation of the present language, the amendment will avoid the necessity to engage in such analysis in order to determine the true meaning of subdivision (c)(4). Note to Subdivision (c)(5). Subdivision (c)(5), in its present form, may easily be read as contemplating that in every case in which a plea of guilty or nolo contendere is tendered, warnings must be given about the possible use of defendant's statements, obtained under oath, on the record and in the presence of counsel, in a later prosecution for perjury or false statement. The language has prompted some courts to reach the remarkable result that a defendant who pleads guilty or nolo contendere without receiving those warnings must be allowed to overturn his plea on appeal even though he was never questioned under oath, on the record, in the presence of counsel about the offense to which he pleaded. United States v. Artis, No. 78-5012 (4th Cir. March 12, 1979); United States v. Boone, 543 F.2d 1090 (4th Cir. 1976). Compare United States v. Michaelson, 552 F.2d 472 (2d Cir. 1977) (failure to give subdivision (c)(5) warnings not a basis for reversal, 'at least when, as here, defendant was not put under oath before questioning about his guilty plea'). The present language of subdivision (c)(5) may also have contributed to the conclusion, not otherwise supported by the rule, that 'Rule 11 requires that the defendant be under oath for the entirety of the proceedings' conducted pursuant to that rule and that failure to place the defendant under oath would itself make necessary overturning the plea on appeal. United States v. Aldridge, 553 F.2d 922 (5th Cir. 1977). When questioning of the kind described in subdivision (c)(5) is not contemplated by the judge who is receiving the plea, no purpose is served by giving the (c)(5) warnings, which in such circumstances can only confuse the defendant and detract from the force of the other warnings required by Rule 11. As correctly noted in United States v. Sinagub, supra, subsection (5) of section (c) of Rule 11 is qualitatively distinct from the other sections of the Rule. It does not go to whether the plea is knowingly or voluntarily made, nor to whether the plea should be accepted and judgment entered. Rather, it does go to the possible consequences of an event which may or may not occur during the course of the arraignment hearing itself, namely, the administration of an oath to the defendant. Whether this event is to occur is wholly within the control of the presiding judge. If the event is not to occur, it is pointless to inform the defendant of its consequences. If a presiding judge intends that an oath not be administered to a defendant during an arraignment hearing, but alters that intention at some point, only then would the need arise to inform the defendant of the possible consequences of the administration of the oath. The amendment to subdivision (c)(5) is intended to make it clear that this is the case. The amendment limits the circumstances in which the warnings must be given, but does not change the fact, as noted in Sinagub that these warnings are 'qualitatively distinct' from the other advice required by Rule 11(c). This being the case, a failure to give the subdivision (c)(5) warnings even when the defendant was questioned under oath, on the record and in the presence of counsel would in no way affect the validity of the defendant's plea. Rather, this failure bears upon the admissibility of defendant's answers pursuant to subdivision (e)(6) in a later prosecution for perjury or false statement. NOTES OF ADVISORY COMMITTEE ON RULES - 1983 AMENDMENT Note to Subdivision (a). There are many defenses, objections and requests which a defendant must ordinarily raise by pretrial motion. See, e.g., 18 U.S.C. Sec. 3162(a)(2); Fed.R.Crim.P.12(b). Should that motion be denied, interlocutory appeal of the ruling by the defendant is seldom permitted. See United States v. MacDonald, 435 U.S. 850 (1978) (defendant may not appeal denial of his motion to dismiss based upon Sixth Amendment speedy trial grounds); DiBella v. United States, 369 U.S. 121 (1962) (defendant may not appeal denial of pretrial motion to suppress evidence); compare Abney v. United States, 431 U.S. 651 (1977) (interlocutory appeal of denial of motion to dismiss on double jeopardy grounds permissible). Moreover, should the defendant thereafter plead guilty or nolo contendere, this will usually foreclose later appeal with respect to denial of the pretrial motion 'When a criminal defendant has solemnly admitted in open court that he is in fact guilty of the offense with which he is charged, he may not thereafter raise independent claims relating to the deprivation of constitutional rights that occurred prior to the entry of the guilty plea.' Tollett v. Henderson, 411 U.S. 258, (1973). Though a nolo plea differs from a guilty plea in other respects, it is clear that it also constitutes a waiver of all nonjurisdictional defects in a manner equivalent to a guilty plea. Lott v. United States, 367 U.S. 421 (1961). As a consequence, a defendant who has lost one or more pretrial motions will often go through an entire trial simply to preserve the pretrial issues for later appellate review. This results in a waste of prosecutorial and judicial resources, and causes delay in the trial of other cases, contrary to the objectives underlying the Speedy Trial Act of 1974, 18 U.S.C. Sec. 3161 et seq. These unfortunate consequences may be avoided by the conditional plea device expressly authorized by new subdivision (a)(2). The development of procedures to avoid the necessity for trials which are undertaken for the sole purpose of preserving pretrial objections has been consistenly favored by the commentators. See ABA Standards Relating to the Administration of Criminal Justice, standard 21-1.3(c) (2d ed. 1978); Model Code of Pre-Arraignment Procedure Sec. SS 290.1(4)(b) (1975); Uniform Rules of Criminal Procedure, rule 444(d) (Approved Draft, 1974); 1 C. Wright, Federal Practice and Procedure - Criminal Sec. 175 (1969); 3 W. LaFave, Search and Seizure Sec. 11.1 (1978). The Supreme Court has characterized the New York practice, whereby appeals from suppression motions may be appealed notwithstanding a guilty plea, as a 'commendable effort to relieve the problem of congested trial calendars in a manner that does not diminish the opportunity for the assertion of rights guaranteed by the Constitution.' Lefkowitz v. Newsome, 420 U.S. 283, 293 (1975). That Court has never discussed conditional pleas as such, but has permitted without comment a federal appeal on issues preserved by a conditional plea. Jaben v. United States, 381 U.S. 214 (1965). In the absence of specific authorization by statute or rule for a conditional plea, the circuits have divided on the permissibility of the practice. Two circuits have actually approved the entry of conditional pleas, United States v. Burke, 517 F.2d 377 (2d Cir. 1975); United States v. Moskow, 588 F.2d 882 (3d Cir. 1978); and two others have praised the conditional plea concept, United States v. Clark, 459 F.2d 977 (8th Cir. 1972); United States v. Dorsey, 449 F.2d 1104 (D.C.Cir. 1971). Three circuits have expressed the view that a conditional plea is logically inconsistent and thus improper, United States v. Brown, 499 F.2d 829 (7th Cir. 1974); United States v. Sepe, 472 F.2d 784, aff'd en banc, 486 F.2d 1044 (5th Cir. 1973); United States v. Cox, 464 F.2d 937 (6th Cir. 1972); three others have determined only that conditional pleas are not now authorized in the federal system, United States v. Benson, 579 F.2d 508 (9th Cir. 1978); United States v. Nooner, 565 F.2d 633 (10th Cir. 1977); United States v. Matthews, 472 F.2d 1173 (4th Cir. 1973); while one circuit has reserved judgment on the issue, United States v. Warwar, 478 F.2d 1183 (1st Cir. 1973). (At the state level, a few jurisdictions by statute allow appeal from denial of a motion to suppress notwithstanding a subsequent guilty plea, Cal. Penal Code Sec. 1538.5(m); N.Y.Crim. Proc. Law Sec. 710.20(1); Wis.Stat.Ann. Sec. 971.31(10), but in the absence of such a provision the state courts are also in disagreement as to whether a conditional plea is permissible; see cases collected in Comment, 26 U.C.L.A. L.Rev. 360, 373 (1978).) The conditional plea procedure provided for in subdivision (a)(2) will, as previously noted, serve to conserve prosecutorial and judicial resources and advance speedy trial objectives. It will also produce much needed uniformity in the federal system on this matter; see United States v. Clark, supra, noting the split of authority and urging resolution by statute or rule. Also, the availability of a conditional plea under specified circumstances will aid in clarfying the fact that traditional, unqualified pleas do constitute a waiver of nonjurisdictional defects. See United States v. Nooner, supra (defendant sought appellate review of denial of pretrial suppression motion, despite his prior unqualified guilty plea, claiming the Second Circuit conditional plea practice led him to believe a guilty plea did not bar appeal of pretrial issues). The obvious advantages of the conditional plea procedure authorized by subdivision (a)(2) are not outweighed by any significant or compelling disadvantages. As noted in Comment, supra, at 375: 'Four major arguments have been raised by courts disapproving of conditioned pleas. The objections are that the procedure encourages a flood of appellate litigation, militates against achieving finality in the criminal process, reduces effectiveness of appeallate review due to the lack of a full trial record, and forces decision on constitutional questions that could otherwise be avoided by invoking the harmless error doctrine.' But, as concluded therein, those 'arguments do not withstand close analysis.' Ibid. As for the first of those arguments, experience in states which have permitted appeals of suppression motions notwithstanding a subsequent plea of guilty is most relevant, as conditional pleas are likely to be most common when the objective is to appeal that kind of pretrial ruling. That experience has shown that the number of appeals has not increased substantially. See Comment, 9 Hous.L.Rev. 305, 315-19 (1971). The minimal added burden at the appellate level is certainly a small price to pay for avoiding otherwise unnecessary trials. As for the objection that conditional pleas conflict with the government's interest in achieving finality, it is likewise without force. While it is true that the conditional plea does not have the complete finality of the traditional plea of guilty or nolo contendere because 'the essence of the agreement is that the legal guilt of the defendant exists only if the prosecution's case' survives on appeal, the plea continues to serve a partial state interest in finality, however, by establishing admission of the defendant's factual guilt. The defendant stands guilty and the proceedings come to an end if the reserved issue is ultimately decided in the government's favor. Comment, 26 U.C.L.A. L.Rev. 360, 378 (1978). The claim that the lack of a full trial record precludes effective appellate review may on occassion be relevant. Cf. United States v. MacDonald, supra (holding interlocutory appeal not available for denial of defendant's pretrial motion to dismiss, on speedy trial grounds, and noting that 'most speedy trial claims * * * are best considered only after the relevant facts have been developed at trial'). However, most of the objections which would likely be raised by pretrial motion and preserved for appellate review by a conditional plea are subject to appellate resolution without a trial record. Certainly this is true as to the very common motion to suppress evidence, as is indicated by the fact that appeallate courts presently decide such issues upon interlocutory appeal by the government. With respect to the objection that conditional pleas circumvent application of the harmless error doctrine, it must be acknowledged that '(a)bsent a full trial record, containing all the government's evidence against the defendant, invocation of the harmless error rule is arguably impossible.' Comment, supra, at 380. But, the harmless error standard with respect to constitutional objections is sufficiently high, see Chapman v. California, 386 U.S. 18 (1967), that relatively few appellate decisions result in affirmance upon that basis. Thus it will only rarely be true that the conditional plea device will cause an appellate court to consider constitutional questions which could otherwise have been avoided by invocation of the doctrine of harmless error. To the extent that these or related objections would otherwise have some substance, they are overcome by the provision in Rule 11(a)(2) that the defendant may enter a conditional plea only 'with the approval of the court and the consent of the government.' (In this respect, the rule adopts the practice now found in the Second Circuit.) The requirement of approval by the court is most appropriate, as it ensures, for example, that the defendant is not allowed to take an appeal on a matter which can only be fully developed by proceeding to trial; cf. United States v. MacDonald, supra. As for consent by the government, it will ensure that conditional pleas will be allowed only when the decision of the court of appeals will dispose of the case either by allowing the plea to stand or by such action as compelling dismissal of the indictment or suppressing essential evidence. Absent such circumstances, the conditional plea might only serve to postpone the trial and require the government to try the case after substantial delay, during which time witnesses may be lost, memories dimmed, and the offense grown so stale as to lose jury appeal. The government is in a unique position to determine whether the matter at issue would be case-dispositive, and, as a party to the litigation, should have an absolute right to refuse to consent to potentially prejudicial delay. Although it was suggested in United States v. Moskow, supra, that the government should have no right to prevent the entry of a conditional plea because a defendant has no comparable right to block government appeal of a pretrial ruling pursuant to 18 U.S.C. Sec. 3731, that analogy is unconvincing. That statute requires the government to certify that the appeal is not taken for purposes of delay. Moreover, where the pretrial ruling is case-dispositive, Sec. 3731 is the only mechanism by which the government can obtain appellate review, but a defendant may always obtain review by pleading not guilty. Unlike the state statutes cited earlier, Rule 11(a)(2) is not limited to instances in which the pretrial ruling the defendant wishes to appeal was in response to defendant's motion to suppress evidence. Though it may be true that the conditional plea device will be most commonly employed as to such rulings, the objectives of the rule are well served by extending it to other pretrial rulings as well. See, e.g., ABA Standards, supra (declaring the New York provision 'should be enlarged to include other pretrial defenses'); Uniform Rules of Criminal Procedure, rule 444(d) (Approved Draft, 1974) ('any pretrial motion which, if granted, would be dispositive of the case'). The requirement that the conditional plea be made by the defendant 'reserving in writing the right to appeal from the adverse determination of any specified pretrial motion,' though extending beyond the Second Circuit practice, will ensure careful attention to any conditional plea. It will document that a particular plea was in fact conditional, and will identify precisely what pretrial issues have been preserved for appellate review. By requiring this added step, it will be possible to avoid entry of a conditional plea without the considered acquiscence of the government (see United States v. Burke, supra, holding that failure of the government to object to entry of a conditional plea constituted consent) and post-plea claims by the defendant that his plea should be deemed conditional merely because it occurred after denial of his pretrial motions (see United States v. Nooner, supra). It must be emphasized that the only avenue of review of the specified pretrial ruling permitted under a rule 11(a)(2) conditional plea is an appeal, which must be brought in compliance with Fed.R.App.P. 4(b). Relief via 28 U.S.C. Sec. 2255 is not available for this purpose. The Supreme Court has held that certain kinds of constitutional objections may be raised after a plea of guilty. Menna v. New York, 423 U.S. 61 (1975) (double jeopardy violation); Blackledge v. Perry, 417 U.S. 21 (1974) (due process violation by charge enhancement following defendant's exercise of right to trial de novo). Subdivision 11(a)(2) has no application to such situations, and should not be interpreted as either broadening or narrowing the Menna-Blackledge doctrine or as establishing procedures for its application. Note to Subdivision (h). Subdivision (h) makes clear that the harmless error rule of Rule 52(a) is applicable to Rule 11. The provision does not, however, attempt to define the meaning of 'harmless error,' which is left to the case law. Prior to the amendments which took effect on Dec. 1, 1975, Rule 11 was very brief; it consisted of but four sentences. The 1975 amendments increased significantly the procedures which must be undertaken when a defendant tenders a plea of guilty or nolo contendere, but this change was warranted by the 'two principal objectives' then identified in the Advisory Committee Note: (1) ensuring that the defendant has made an informed plea; and (2) ensuring that plea agreements are brought out into the open in court. An inevitable consequence of the 1975 amendments was some increase in the risk that a trial judge, in a particular case, might inadvertently deviate to some degree from the procedure which a very literal reading of Rule 11 would appear to require. This being so, it became more apparent than ever that Rule 11 should not be given such a crabbed interpretation that ceremony was exalted over substance. As stated in United States v. Scarf, 551 F.2d 1124 (8th Cir. 1977), concerning amended Rule 11: 'It is a salutary rule, and district courts are required to act in substantial compliance with it although * * * ritualistic compliance is not required.' As similarly pointed out in United States v. Saft, 558 F.2d 1073 (2d Cir. 1977), the Rule does note say that compliance can be achieved only by reading the specified items in haec verba. Congress meant to strip district judges of freedom to decide what they must explain to a defendant who wishes to plead guilty, not to tell them precisely how to perform this important task in the great variety of cases that would come before them. While a judge who contents himself with literal application of the Rule will hardly be reversed, it cannot be supposed that Congress preferred this to a more meaningful explanation, provided that all the specified elements were covered. Two important points logically flow from these sound observations. One concerns the matter of construing Rule 11: it is not to be read as requiring a litany or other ritual which can be carried out only by word-for-word adherence to a set 'script.' The other, specifically addressed in new subdivision (h), is that even when it may be concluded Rule 11 has not been complied with in all respects, it does not inevitably follow that the defendant's plea of guilty or nolo contendere is invalid and subject to being overturned by any remedial device then available to the defendant. Notwithstanding the declaration in Rule 52(a) that '(a)ny error, defect, irregularity or variance which does not affect substantial rights shall be disregarded,' there has existed for some years considerable disagreement concerning the applicability of the harmless error doctrine to Rule 11 violations. In large part, this is attributable to uncertanity as to the continued vitatlity and the reach of McCarthy v. United States, 394 U.S. 459 (1969). In McCarthy, involving a direct appeal from a plea of guilty because of noncompliance with Rule 11, the Court concluded that prejudice inheres in a failure to comply with Rule 11, for noncompliance deprives the defendant of the Rule's procedural safeguards, which are designed to facilitate a more accurate determination of the voluntariness of his plea. Our holding (is) that a defendant whose plea has been accepted in violation of Rule 11 should be afforded the opportunity to plead anew * * *. McCarthy has been most frequently relied upon in cases where, as in that case, the defendant sought relief because of a Rule 11 violation by the avenue of direct appeal. It has been held that in such circumstances a defendant's conviction must be reversed whenever the 'district court accepts his guilty plea without fully adhering to the procedure provided for in Rule 11,' United States v. Boone, 543 F.2d 1090 (4th Cir. 1976), and that in this context any reliance by the government on the Rule 52(a) harmless error concept 'must be rejected.' United States v. Journet, 544 F.2d 633 (2d Cir. 1976). On the other hand, decisions are to be found taking a harmless error approach on direct appeal where it appeared the nature and extent of the deviation from Rule 11 was such that it could not have had any impact on the defendant's decision to plead or the fairness in now holding him to his plea. United States v. Peters, No. 77-1700 (4th Cir., Dec. 22, 1978) (where judge failed to comply fully with Rule 11(c)(1), in that defendant not correctly advised of maximum years of special parole term but was told it is at least 3 years, and defendant thereafter sentenced to 15 years plus 3-year special parole term, government's motion for summary affirmance granted, as 'the error was harmless'); United States v. Coronado, 554 F.2d 166 (5th Cir. 1977) (court first holds that charge of conspiracy requires some explanation of what conspiracy means to comply with Rule 11(c)(1), but then finds no reversible error 'because the rule 11 proceeding on its face discloses, despite the trial court's failure sufficiently to make the required explicitation of the charges, that Coronado understood them'). But this conflict has not been limited to cases involving nothing more than a direct appeal following defendant's plea. For example, another type of case is that in which the defendant has based a post-sentence motion to withdraw his plea on a Rule 11 violation. Rule 32(d) says that such a motion may be granted 'to correct manifest injustice,' and some courts have relied upon this latter provision in holding that post-sentence plea withdrawal need not be permitted merely because Rule 11 was not fully complied with and that instead the district court should hold an evidentiary hearing to determine 'whether manifest injustice will result if the conviction based on the guilty plea is permitted to stand.' United States v. Scarf, 551 F.2d 1124 (8th Cir. 1977). Others, however, have held that McCarthy applies and prevails over the language of Rule 32(d), so that 'a failure to scrupulously comply with Rule 11 will invalidate a plea without a showing of manifest injustice.' United States v. Cantor, 469 F.2d 435 (3d Cir. 1972). Disagreement has also existed in the context of collateral attack upon pleas pursuant to 28 U.S.C. Sec. 2255. On the one hand, it has been concluded that '(n)ot every violation of Rule 11 requires that the plea be set aside' in a Sec. 2255 proceeding, and that 'a guilty plea will be set aside on collateral attack only where to not do so would result in a miscarriage of justice, or where there exists exceptional circumstances justifying such relief.' Evers v. United States, 579 F.2d 71 (10th Cir. 1978). The contrary view was that McCarthy governed in Sec. 2255 proceedings because 'the Supreme Court hinted at no exceptions to its policy of strict enforcement of Rule 11.' Timmreck v. United States, 577 F.2d 377 (6th Cir. 1978). But a unanimous Supreme Court resolved this conflict in United States v. Timmreck, 441 U.S. 780 (1979), where the Court concluded that the reasoning of Hill v. United States, 368 U.S. 424 (1962) (ruling a collateral attack could not be predicated on a violation of Rule 32(a)) is equally applicable to a formal violation of Rule 11.* * * Indeed, if anything, this case may be a stronger one for foreclosing collateral relief than the Hill case. For the concern with finality served by the limitation on collateral attack has special force with respect to convictions based on guilty pleas. 'Every inroad on the concept of finality undermines confidence in the integrity of our procedures; and, by increasing the volume of judicial work, inevitably delays and impairs the orderly administration of justice. The impact is greatest when new grounds for setting aside guilty pleas are approved because the vast majority of criminal convictions result from such pleas. Moreover, the concern that unfair procedures may have resulted in the conviction of an innocent defendant is only rarely raised by a petition to set aside a guilty plea.' This interest in finality is strongest in the collateral attack context the Court was dealing with in Timmreck, which explains why the Court there adopted the Hill requirement that in a Sec. 2255 proceeding the rule violation must amount to 'a fundamental defect which inherently results in a complete miscarriage of justice' or 'an omission inconsistent with the rudimentary demands of fair procedure.' The interest in finality of guilty pleas described in Timmreck is of somewhat lesser weight when a direct appeal is involved (so that the Hill standard is obviously inappropriate in that setting), but yet is sufficiently compelling to make unsound the proposition that reversal is required even where it is apparent that the Rule 11 violation was of the harmless error variety. Though the McCarthy per se rule may have been justified at the time and in the circumstances which obtained when the plea in that case was taken, this is no longer the case. For one thing, it is important to recall that McCarthy dealt only with the much simpler pre-1975 version of Rule 11, which required only a brief procedure during which the chances of a minor, insignificant and inadvertent deviation were relatively slight. This means that the chances of a truly harmless error (which was not involved in McCarthy in any event, as the judge made no inquiry into the defendant's understanding of the nature of the charge, and the government had presented only the extreme argument that a court 'could properly assume that petitioner was entering that plea with a complete understanding of the charge against him' merely from the fact he had stated he desired to plead guilty) are much greater under present Rule 11 than under the version before the Court in McCarthy. It also means that the more elaborate and lengthy procedures of present Rule 11, again as compared with the version applied in McCarthy, make it more apparent than ever that a guilty plea is not 'a mere gesture, a temporary and meaningless formality reversible at the defendant's whim,' but rather ' 'a grave and solemn act,' which is 'accepted only with care and discernment.' ' United States v. Barker, 514 F.2d 208 (D.C.Cir.1975), quoting from Brady v. United States, 397 U.S. 742 (1970). A plea of that character should not be overturned, even on direct appeal, when there has been a minor and technical violation of Rule 11 which amounts to harmless error. Secondly, while McCarthy involved a situation in which the defendant's plea of guilty was before the court of appeals on direct appeal, the Supreme Court appears to have been primarily concerned with Sec. 2255-type cases, for the Court referred exclusively to cases of that kind in the course of concluding that a per se rule was justified as to Rule 11 violations because of 'the difficulty of achieving (rule 11's) purposes through a post-conviction voluntariness hearing.' But that reasoning has now been substantially undercut by United States v. Timmreck, supra, for the Court there concluded Sec. 2255 relief 'is not available when all that is shown is a failure to comply with the formal requirements of the Rule,' at least absent 'other aggravating circumstances,' which presumably could often only be developed in the course of a later evidentiary hearing. Although all of the aforementioned considerations support the policy expressed in new subdivision (h), the Advisory Committee does wish to emphasize two important cautionary notes. The first is that subdivision (h) should not be read as supporting extreme or speculative harmless error claims or as, in effect, nullifying important Rule 11 safeguards. There would not be harmless error under subdivision (h) where, for example, as in McCarthy, there had been absolutely no inquiry by the judge into defendant's understanding of the nature of the charge and the harmless error claim of the government rests upon nothing more than the assertion that it may be 'assumed' defendant possessed such understanding merely because he expressed a desire to plead guilty. Likewise, it would not be harmless error if the trial judge totally abdicated to the prosecutor the responsibility for giving to the defendant the various Rule 11 warnings, as this 'results in the creation of an atmosphere of subtle coercion that clearly contravenes the policy behind Rule 11.' United States v. Crook, 526 F.2d 708 (5th Cir. 1976). Indeed, it is fair to say that the kinds of Rule 11 violations which might be found to constitute harmless error upon direct appeal are fairly limited, as in such instances the matter 'must be resolved solely on the basis of the Rule 11 transcript' and the other portions (e.g., sentencing hearing) of the limited record made in such cases. United States v. Coronado, supra. Illustrative are: where the judge's compliance with subdivision (c)(1) was not absolutely complete, in that some essential element of the crime was not mentioned, but the defendant's responses clearly indicate his awareness of that element, see United States v. Coronado, supra; where the judge's compliance with subdivision (c)(2) was erroneous in part in that the judge understated the maximum penalty somewhat, but the penalty actually imposed did not exceed that indicated in the warnings, see United States v. Peters, supra; and where the judge completely failed to comply with subdivision (c)(5), which of course has no bearing on the validity of the plea itself, cf. United States v. Sinagub, supra. The second cautionary note is that subdivision (h) should not be read as an invitation to trial judges to take a more casual approach to Rule 11 proceedings. It is still true, as the Supreme Court pointed out in McCarthy, that thoughtful and careful compliance with Rule 11 best serves the cause of fair and efficient administration of criminal justice, as it will help reduce the great waste of judicial resources required to process the frivolous attacks on guilty plea convictions that are encouraged, and are more difficult to dispose of, when the original record is inadequate. It is, therefore, not too much to require that, before sentencing defendants to years of imprisonment, district judges take the few minutes necessary to inform them of their rights and to determine whether they understand the action they are taking. Subdivision (h) makes no change in the responsibilities of the judge at Rule 11 proceedings, but instead merely rejects the extreme sanction of automatic reversal. It must also be emphasized that a harmless error provision has been added to Rule 11 because some courts have read McCarthy as meaning that the general harmless error provision in Rule 52(a) cannot be utilized with respect to Rule 11 proceedings. Thus, the addition of subdivision (h) should not be read as suggesting that Rule 52(a) does not apply in other circumstances because of the absence of a provision comparable to subdivision (h) attached to other rules. NOTES OF ADVISORY COMMITTEE ON RULES - 1985 AMENDMENT Note to Subdivision (c)(1). Section 5 of the Victim and Witness Protection Act of 1982, Pub. L. No. 97-291, 96 Stat. 1248 (1982), adds 18 U.S.C. Sec. 3579, providing that when sentencing a defendant convicted of a Title 18 offense or of violating various subsections of the Federal Aviation Act of 1958, the court 'may order, in addition to or in lieu of any other penalty authorized by law, that the defendant make restitution to any victim of the offense.' Under this law restitution is favored; if the court 'does not order restitution, or orders only partial restitution, . . . the court shall state on the record the reasons therefor.' Because this restitution is deemed an aspect of the defendant's sentence, S. Rept. No. 97-532, 97th Cong., 2d Sess., 30-33 (1982), it is a matter about which a defendant tendering a plea of guilty or nolo contendere should be advised. Because this new legislation contemplates that the amount of the restitution to be ordered will be ascertained later in the sentencing process, this amendment to Rule 11(c)(1) merely requires that the defendant be told of the court's power to order restitution. The exact amount or upper limit cannot and need not be stated at the time of the plea. Failure of a court to advise a defendant of the possibility of a restitution order would constitute harmless error under subdivision (h) if no restitution were thereafter ordered. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The amendments are technical. No substantive change is intended. NOTES OF ADVISORY COMMITTEE ON RULES - 1989 AMENDMENT The amendment mandates that the district court inform a defendant that the court is required to consider any applicable guidelines but may depart from them under some circumstances. This requirement assures that the existence of guidelines will be known to a defendant before a plea of guilty or nolo contendere is accepted. Since it will be impracticable, if not impossible, to know which guidelines will be relevant prior to the formulation of a presentence report and resolution of disputed facts, the amendment does not require the court to specify which guidelines will be important or which grounds for departure might prove to be significant. The advice that the court is required to give cannot guarantee that a defendant who pleads guilty will not later claim a lack of understanding as to the importance of guidelines at the time of the plea. No advice is likely to serve as a complete protection against post-plea claims of ignorance or confusion. By giving the advice, the court places the defendant and defense counsel on notice of the importance that guidelines may play in sentencing and of the possibility of a departure from those guidelines. A defendant represented by competent counsel will be in a position to enter an intelligent plea. The amended rule does not limit the district court's discretion to engage in a more extended colloquy with the defendant in order to impart additional information about sentencing guidelines or to inquire into the defendant's knowledge concerning guidelines. The amended rule sets forth only the minimum advice that must be provided to the defendant by the court. 1988 AMENDMENT Subd. (c)(1). Pub. L. 100-690 inserted 'or term of supervised release' after 'special parole term'. 1975 AMENDMENT Pub. L. 94-64 amended subds. (c) and (e)(1)-(4), (6) generally. EFFECTIVE DATE OF 1979 AMENDMENT Amendment of subd. (e)(6) of this rule by order of the United States Supreme Court of Apr. 30, 1979, effective Dec. 1, 1980, see section 1(1) of Pub. L. 96-42, July 31, 1979, 93 Stat. 326, set out as a note under section 3771 of this title. EFFECTIVE DATE OF AMENDMENTS PROPOSED APRIL 22, 1974; EFFECTIVE DATE OF 1975 AMENDMENTS Amendments of this rule embraced in the order of the United States Supreme Court on Apr. 22, 1974, and the amendments of this rule made by section 3 of Pub. L. 94-64, effective Dec. 1, 1975, except with respect to the amendment adding subd. (e)(6) of this rule, effective Aug. 1, 1975, see section 2 of Pub. L. 94-64, set out as a note under rule 4 of these rules. -CROSS- CROSS REFERENCES Assignment of counsel, see rule 44. Motion before entry of plea or reasonable time thereafter, see rule 12. Pleadings and motions before trial, see rule 12. Withdrawal of plea of guilty, see rule 32. ------DocID 25163 Document 558 of 646------ -CITE- 19 USC Sec. 7 to 11 -EXPCITE- TITLE 19 CHAPTER 1 -HEAD- Sec. 7 to 11. Repealed. Pub. L. 91-271, title III, Sec. 321(c)-(g), June 2, 1970, 84 Stat. 293 -MISC1- Section 7, act Mar. 4, 1923, ch. 251, Sec. 3, 42 Stat. 1453, authorized collectors, comptrollers, surveyors, and appraisers to appoint assistants, and collector at New York to appoint a solicitor to collector, all such appointments subject to approval of Secretary of the Treasury. Section 8, R.S. Sec. 2629; acts Mar. 3, 1905, ch. 1413, Sec. 1, 33 Stat. 983; Mar. 4, 1923, ch. 251, Sec. 4, 42 Stat. 1453, set forth procedure for filling a vacancy in office of a collector, comptroller, surveyor, or appraiser. Section 9, R.S. Sec. 2625, act Mar. 4, 1923, ch. 251, Sec. 3, 42 Stat. 1453, provided for performance of collector's duties in case of his disability. Section 10, R.S. Sec. 2630; acts Mar. 4, 1923, ch. 251, Sec. 2, 3, 42 Stat. 1453, Jan. 13, 1925, ch. 76, 43 Stat. 748, provided that in cases of occasional and necessary absence, or of sickness, any collector could exercise his powers and perform his duties by deputy. Section 11, R.S. Sec. 2632; act June 17, 1930, ch. 497, title IV, Sec. 523, 46 Stat. 740, provided that in cases of occasional and necessary absence, or of sickness, every comptroller and surveyor could, respectively, exercise and perform his functions, powers, and duties by deputy. EFFECTIVE DATE OF REPEAL Repeal effective with respect to articles entered, or withdrawn from warehouse for consumption, on or after Oct. 1, 1970, and such other articles entered or withdrawn from warehouse for consumption prior to such date, or with respect to which a protest has not been disallowed in whole or in part before Oct. 1, 1970, see section 203 of Pub. L. 91-271, set out as an Effective Date of 1970 Amendment note under section 1500 of this title. ------DocID 25785 Document 559 of 646------ -CITE- 19 USC CHAPTER 11 -EXPCITE- TITLE 19 CHAPTER 11 -HEAD- CHAPTER 11 - IMPORTATION OF PRE-COLUMBIAN MONUMENTAL OR ARCHITECTURAL SCULPTURE OR MURALS -MISC1- Sec. 2091. List of stone carvings and wall art; promulgation and revision; criteria for classification. 2092. Export certification requirement. (a) Issuance by country of export. (b) Procedure when certificate lacking. 2093. Forfeiture of unlawful imports. (a) Seizure. (b) Disposition of articles. 2094. Rules and regulations. 2095. Definitions. ------DocID 26061 Document 560 of 646------ -CITE- 20 USC Sec. 11 -EXPCITE- TITLE 20 CHAPTER 2 -HEAD- Sec. 11. Annual appropriations -STATUTE- There is annually appropriated, out of any money in the Treasury not otherwise appropriated, the sums provided in sections 12, 13, and 14 of this title, to be paid to the respective States for the purpose of cooperating with the States in paying the salaries of teachers, supervisors, and directors of agricultural subjects, and teachers of trade, home economics, and industrial subjects, and in the preparation of teachers of agricultural, trade, industrial, and home economics subjects, and the sum provided for in section 15 of this title for the use of the Department of Education for the administration of this chapter and for the purpose of making studies, investigations, and reports to aid in the organization and conduct of vocational education, which sums shall be expended as provided in said sections. -SOURCE- (Feb. 23, 1917, ch. 114, Sec. 1, 39 Stat. 929; Ex. Ord. No. 6166, Sec. 15, June 10, 1933; 1939 Reorg. Plan No. I, Sec. 201, 204, eff. July 1, 1939, 4 F.R. 2728, 53 Stat. 1424; 1953 Reorg. Plan No. 1, Sec. 5, 8, eff. Apr. 11, 1953, 18 F.R. 2053, 67 Stat. 631; Oct. 17, 1979, Pub. L. 96-88, title III, Sec. 301, title V, Sec. 507, 93 Stat. 677, 692.) -REFTEXT- REFERENCES IN TEXT This chapter, referred to in text, was in the original 'this Act', meaning act Feb. 23, 1917, which was classified to sections 11 to 15 and 16 to 28 of this title. Other sections formerly contained in this chapter were based on other acts, and have been omitted or repealed. -MISC2- SHORT TITLE Section 2 of act June 8, 1936, ch. 541, 49 Stat. 1488, as amended by act Aug. 1, 1946, ch. 725, title I, Sec. 101, 60 Stat. 775, provided that the Act approved Feb. 23, 1917, ch. 114, 39 Stat. 929, classified to sections 11 to 15 and 16 to 28 of this title, shall be known as the Smith-Hughes Vocational Education Act. The 1917 act is also known as the Vocational Education Act of 1917. The act of June 8, 1936, ch. 541, 49 Stat. 1488, as amended, which was classified to sections 15i to 15ggg and which was repealed by Pub. L. 90-576, title I, Sec. 103, Oct. 16, 1968, 82 Stat. 1091, was known as the Vocational Education Act of 1946. Section 1 of Pub. L. 87-22, Apr. 24, 1961, 75 Stat. 44, provided: 'That this Act (amending sections 15aa, 15bb, 15cc, and 15jj of this title) may be cited as 'The Practical Nurse Training Extension Act of 1961'.' -TRANS- TRANSFER OF FUNCTIONS 'Department of Education' substituted in text for 'Department of Health, Education, and Welfare' pursuant to sections 301 and 507 of Pub. L. 96-88, which are classified to sections 3441 and 3507 of this title and which transferred functions and offices (relating to education) of Department of Health, Education, and Welfare to Department of Education. Functions of Federal Security Administrator transferred to Secretary of Health, Education, and Welfare and all agencies of Federal Security Agency transferred to Department of Health, Education, and Welfare by section 5 of Reorg. Plan No. 1 of 1953, set out in the Appendix to Title 5, Government Organization and Employees. Federal Security Agency and office of Administrator abolished by section 8 of Reorg. Plan No. 1 of 1953. Federal Board for Vocational Education and its functions abolished by Reorg. Plan No. 2 of 1946, Sec. 8, eff. July 16, 1946, 11 F.R. 7873, 60 Stat. 1095, set out in the Appendix to Title 5. Office of Education in Department of the Interior, including Federal Board for Vocational Education, transferred to Federal Security Agency by Reorg. Plan No. I of 1939, set out in the Appendix to Title 5. Functions of Federal Board for Vocational Education transferred to Department of the Interior and Board required to act in an advisory capacity without compensation by Ex. Ord. No. 6166, set out as a note under section 901 of Title 5. -MISC5- APPROPRIATIONS UNDER VOCATIONAL EDUCATION ACT OF 1963 Pub. L. 90-576, title I, Sec. 104, Oct. 16, 1968, 82 Stat. 1091, as amended by Pub. L. 91-230, title VII, Sec. 709, Apr. 13, 1970, 84 Stat. 189; Pub. L. 94-482, title II, Sec. 203(c)(1), as added Pub. L. 95-40, Sec. 1(29), June 3, 1977, 91 Stat. 207; Pub. L. 98-524, Sec. 4(h), Oct. 19, 1984, 98 Stat. 2489, provided that: 'Funds appropriated by the first section of the Smith-Hughes Act (that is the Act approved February 23, 1917, 39 Stat. 929, as amended (20 U.S.C. 11-15, 16-28)), shall be considered as funds appropriated pursuant to section 3 of the Carl D. Perkins Vocational Education Act (20 U.S.C. 2302).' Pub. L. 94-482, title II, Sec. 203(c)(2), as added by Pub. L. 95-40, Sec. 1(29), June 3, 1977, 91 Stat. 207, provided that: 'The amendments made by this section (amending this note and sections 817, 952, and 953 of Title 29, Labor) shall be effective on and after October 1, 1977.' -CROSS- CROSS REFERENCES School lunch programs, see section 1751 et seq. of Title 42, The Public Health and Welfare. ------DocID 26211 Document 561 of 646------ -CITE- 20 USC Sec. 80q-11 -EXPCITE- TITLE 20 CHAPTER 3 SUBCHAPTER XIII -HEAD- Sec. 80q-11. Inventory, identification, and return of Native Hawaiian human remains and Native Hawaiian funerary objects in possession of Smithsonian Institution -STATUTE- (a) In general The Secretary of the Smithsonian Institution shall - (1) in conjunction with the inventory and identification under section 80q-9 of this title, inventory and identify the Native Hawaiian human remains and Native Hawaiian funerary objects in the possession of the Smithsonian Institution; (2) enter into an agreement with appropriate Native Hawaiian organizations with expertise in Native Hawaiian affairs (which may include the Office of Hawaiian Affairs and the Malama I Na Kupuna O Hawai'i Nei) to provide for the return of such human remains nd (FOOTNOTE 1) funerary objects; and (FOOTNOTE 1) So in original. Probably should be 'and'. (3) to the greatest extent practicable, apply, with respect to such human remains and funerary objects, the principles and procedures set forth in sections 80q-9 and 80q-10 of this title with respect to the Indian human remains and Indian funerary objects in the possession of the Smithsonian Institution. (b) Definitions As used in this section - (1) the term 'Malama I Na Kupuna O Hawai'i Nei' means the nonprofit, Native Hawaiian organization, incorporated under the laws of the State of Hawaii by that name on April 17, 1989, the purpose of which is to provide guidance and expertise in decisions dealing with Native Hawaiian cultural issues, particularly burial issues; and (2) the term 'Office of Hawaiian Affairs' means the Office of Hawaiian Affairs established by the Constitution of the State of Hawaii. -SOURCE- (Pub. L. 101-185, Sec. 13, Nov. 28, 1989, 103 Stat. 1345.) ------DocID 26276 Document 562 of 646------ -CITE- 20 USC CHAPTER 11 -EXPCITE- TITLE 20 CHAPTER 11 -HEAD- CHAPTER 11 - NATIONAL ARBORETUM -MISC1- Sec. 191. Establishment; site; acquisition of land. 192. Omitted. 193. Administration of arboretum. 194. Advisory council. 195. Gifts, bequests, or devises for benefit of National Arboretum; separate fund in the Treasury. ------DocID 26312 Document 563 of 646------ -CITE- 20 USC Sec. 241d-11 -EXPCITE- TITLE 20 CHAPTER 13 SUBCHAPTER II Part C -HEAD- Sec. 241d-11. Repealed. Pub. L. 95-561, title I, Sec. 101(c), Nov. 1, 1978, 92 Stat. 2200 -MISC1- Section, act Sept. 30, 1950, ch. 1124, title II, Sec. 131, as added Aug. 21, 1974, Pub. L. 93-380, title I, Sec. 101(a)(4)(A), 88 Stat. 495, related to eligibility for and maximum amount of special grants. See section 2722 of this title. A prior section 241d-11, act Sept. 30, 1950, ch. 1124, title II, Sec. 131, as added Apr. 13, 1970, Pub. L. 91-230, title I, Sec. 113(b)(6), 84 Stat. 127, which also related to eligibility and maximum amount of special grants for urban and rural schools serving areas with the highest concentrations of children from low-income families, was repealed by Pub. L. 93-380, title I, Sec. 101(a)(4)(B), Aug. 21, 1974, 88 Stat. 496, effective July 1, 1975. EFFECTIVE DATE OF REPEAL Repeal effective Oct. 1, 1978, see section 1530(a) of Pub. L. 95-561, set out as an Effective Date note under section 1221-3 of this title. ------DocID 26534 Document 564 of 646------ -CITE- 20 USC Sec. 880b-10, 880b-11 -EXPCITE- TITLE 20 CHAPTER 24 SUBCHAPTER IV-A Part B -HEAD- Sec. 880b-10, 880b-11. Omitted -COD- CODIFICATION Sections were omitted in the general revision of title VII of the Elementary and Secondary Education Act of 1965, Pub. L. 89-10, title VII, as added Pub. L. 93-380, title I, Sec. 105(a)(1), Aug. 21, 1974, 88 Stat. 511, by Pub. L. 95-561, title VII, Sec. 701, Nov. 1, 1978, 92 Stat. 2268. Section 880b-10, Pub. L. 89-10, title VII, Sec. 731, as added Pub. L. 93-380, title I, Sec. 105(a)(1), Aug. 21, 1974, 88 Stat. 509, and amended Pub. L. 94-273, Sec. 3(7), Apr. 21, 1976, 90 Stat. 376; Pub. L. 94-482, title V, Sec. 501(d)(1), Oct. 12, 1976, 90 Stat. 2237, established the Office of Bilingual Education. See section 3241 of this title. Section 880b-11, Pub. L. 89-10, title VII, Sec. 732, as added Pub. L. 93-380, title I, Sec. 105(a)(1), Aug. 21, 1974, 88 Stat. 510, and amended Pub. L. 94-482, title V, Sec. 501(a)(21), (d)(2), Oct. 12, 1976, 90 Stat. 2236, 2237, provided for the establishment of the National Advisory Council on Bilingual Education. See section 3242 of this title. -MISC3- APPOINTMENT OF NATIONAL ADVISORY COUNCIL ON BILINGUAL EDUCATION Pub. L. 93-380, title I, Sec. 105(a)(2)(B), Aug. 21, 1974, 88 Stat. 512, provided for the appointment of the National Advisory Council on Bilingual Education, which Council was provided for by section 880b-11, within 90 days after Aug. 21, 1974. See Codification note above. ------DocID 28543 Document 565 of 646------ -CITE- 21 USC CHAPTER 11 -EXPCITE- TITLE 21 CHAPTER 11 -HEAD- CHAPTER 11 - MANUFACTURE OF NARCOTIC DRUGS ------DocID 28786 Document 566 of 646------ -CITE- 22 USC Sec. 11, 12 -EXPCITE- TITLE 22 CHAPTER 1 -HEAD- Sec. 11, 12. Repealed. Aug. 13, 1946, ch. 957, title XI, Sec. 1131(38), (39), 60 Stat. 1038 -MISC1- Section 11, R.S. Sec. 1697, 1698, as amended acts Dec. 21, 1898, ch. 36, Sec. 1, 2, 30 Stat. 770, 771; May 24, 1924, ch. 182, Sec. 16, formerly Sec. 9, 43 Stat. 142, renumbered and amended Feb. 23, 1931, ch. 276, Sec. 7, 46 Stat. 1208; May 3, 1945, ch. 105, Sec. 7, 59 Stat. 103, related to bonds of officers. Section 12, act May 24, 1924, ch. 182, Sec. 19, formerly Sec. 12, 43 Stat. 142, renumbered and amended Feb. 23, 1931, ch. 276, Sec. 7, 46 Stat. 1209; May 3, 1945, ch. 105, Sec. 8, 59 Stat. 104, related to living, representation, and post allowances. See section 1131 of this title, and sections 5923, 5924 of Title 5, Government Organization and Employees. EFFECTIVE DATE OF REPEAL Repeal effective three months after Aug. 13, 1946, see section 1141 of act Aug. 13, 1946. ------DocID 29007 Document 567 of 646------ -CITE- 22 USC Sec. 277d-11 -EXPCITE- TITLE 22 CHAPTER 7 SUBCHAPTER IV -HEAD- Sec. 277d-11. Authorization of appropriations; availability of prior appropriations; use of moneys received -STATUTE- There is authorized to be appropriated to the United States section, International Boundary and Water Commission, United States and Mexico, such sums as may be necessary to defray such costs as may accrue to the United States arising out of any such agreement for the operation and maintenance of such project: Provided, That funds heretofore appropriated to the Department of State under the heading 'International Boundary and Water Commission, United States and Mexico', shall be available for expenditure for the purposes of this section and section 277d-10 of this title: Provided further, That any moneys received from the United Mexican States under the terms of any such agreement shall be available for expenditure in connection with any appropriations which may be available or which may be made for the purposes of said sections: And provided further, That moneys received from the city of Nogales, Arizona, pursuant to the provisions of said sections shall be available for expenditure in connection with any appropriations which may be available or which may be made available for the purposes of said sections. -SOURCE- (July 27, 1953, ch. 242, Sec. 2, 67 Stat. 195.) -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 277d-10 of this title. ------DocID 29211 Document 568 of 646------ -CITE- 22 USC Sec. 286e-11 -EXPCITE- TITLE 22 CHAPTER 7 SUBCHAPTER XV -HEAD- Sec. 286e-11. Assistance by the Fund to any country harboring international terrorists -STATUTE- The Secretary of the Treasury shall instruct the Executive Director of the United States to the International Monetary Fund to work in opposition to any extension of financial or technical assistance by the Supplemental Financing Facility or by any other agency or facility of such Fund to any country the government of which - (1) permits entry into the territory of such country to any person who has committed an act of international terrorism, including any act of aircraft hijacking, or otherwise supports, encourages, or harbors such person; or (2) fails to take appropriate measures to prevent any such person from committing any such act outside the territory of such country. -SOURCE- (Pub. L. 95-435, Sec. 6, Oct. 10, 1978, 92 Stat. 1053.) -COD- CODIFICATION Section was not enacted as part of act July 31, 1945, ch. 339, 59 Stat. 512, known as the Bretton Woods Agreements Act, which comprises this subchapter. ------DocID 29314 Document 569 of 646------ -CITE- 22 USC Sec. 290g-11 -EXPCITE- TITLE 22 CHAPTER 7 SUBCHAPTER XXII -HEAD- Sec. 290g-11. Additional authorization for payment of United States contribution -STATUTE- (a) United States share The United States Governor of the Fund is authorized to contribute on behalf of the United States $125,000,000 to the Fund as the United States contribution to the second replenishment of the resources of the Fund, except that any commitment to make such contribution shall be made subject to obtaining the necessary appropriations. (b) Authorization of appropriations In order to pay for the United States contribution provided for in this section, there is authorized to be appropriated, without fiscal year limitation, $125,000,000 for payment by the Secretary of the Treasury. (c) Funding requirements For the purpose of keeping to a minimum the cost to the United States, the Secretary of the Treasury - (1) shall pay the United States contribution to the African Development Fund authorized by this section by letter of credit in three annual installments; and (2) shall take the steps necessary to obtain a certification from the Fund that any undisbursed balances resulting from draw-downs on such letter of credit will not exceed at any time the United States share of expected disbursement requirements for the following three-month period. -SOURCE- (Pub. L. 94-302, title II, Sec. 212, as added Pub. L. 96-259, title III, Sec. 301(2), June 3, 1980, 94 Stat. 430.) ------DocID 29356 Document 570 of 646------ -CITE- 22 USC Sec. 290k-11 -EXPCITE- TITLE 22 CHAPTER 7 SUBCHAPTER XXVI -HEAD- Sec. 290k-11. Arbitral awards; enforcement; full faith and credit; Federal Arbitration Act inapplicable; exclusiveness of district court jurisdiction -STATUTE- (a) An award of an arbitral tribunal resolving a dispute arising under Article 57 or Article 58 of the Convention shall create a right arising under a treaty of the United States. The pecuniary obligations imposed by such an award shall be enforced and shall be given the same full faith and credit as if the award were a final judgment of a court of general jurisdiction of one of the several States. The Federal Arbitration Act (9 U.S.C. 1, et seq.) shall not apply to enforcement of awards rendered pursuant to the Convention. (b) The district courts of the United States (including the courts enumerated in section 460 of title 28) shall have exclusive jurisdiction over actions and proceedings under subsection (a) of this section, regardless of the amount in controversy. -SOURCE- (Pub. L. 100-202, Sec. 101(e) (title I), Dec. 22, 1987, 101 Stat. 1329-131, 1329-134.) -REFTEXT- REFERENCES IN TEXT The Federal Arbitration Act, referred to in subsec. (a), is classified generally to Title 9, Arbitration. -COD- CODIFICATION Section is based on section 414 of title IV of H.R. 3750, One Hundredth Congress, as introduced Dec. 11, 1987, and enacted into law by Pub. L. 100-202. ------DocID 29435 Document 571 of 646------ -CITE- 22 USC CHAPTER 11 -EXPCITE- TITLE 22 CHAPTER 11 -HEAD- CHAPTER 11 - FOREIGN AGENTS AND PROPAGANDA -MISC1- SUBCHAPTER I - GENERALLY Sec. 601. Repealed. SUBCHAPTER II - REGISTRATION OF FOREIGN PROPAGANDISTS 611. Definitions. 612. Registration statement. (a) Filing; contents. (b) Supplements; filing period. (c) Execution of statement under oath. (d) Filing of statement not deemed full compliance nor as preclusion from prosecution. (e) Incorporation of previous statement by reference. (f) Exemption by Attorney General. 613. Exemptions. (a) Diplomatic or consular officers. (b) Officials of foreign government. (c) Staff members of diplomatic or consular officers. (d) Private and nonpolitical activities; solicitation of funds. (e) Religious, scholastic, or scientific pursuits. (f) Defense of foreign government vital to United States defense. (g) Persons qualified to practice law. 614. Filing and labeling of political propaganda. (a) Copies to Attorney General; statement as to places, times, and extent of transmission. (b) Identification statement. (c) Public inspection. (d) Library of Congress. (e) Information furnished to agency or official of United States Government. (f) Appearances before Congressional committees. 615. Books and records. 616. Public examination of official records; transmittal of records and information. (a) Permanent copy of statement; inspection; withdrawal. (b) Secretary of State. (c) Executive departments and agencies; Congressional committees. 617. Liability of officers. 618. Enforcement and penalties. (a) Violations; false statements and willful omissions. (b) Proof of identity of foreign principal. (c) Deportation. (d) Nonmailable matter. (e) Continuing offense. (f) Injunctive remedy; jurisdiction of district court. (g) Deficient registration statement. (h) Contingent fee arrangement. 619. Territorial applicability of subchapter. 620. Rules and regulations. 621. Reports to Congress. ------DocID 31679 Document 572 of 646------ -CITE- 25 USC Sec. 11 -EXPCITE- TITLE 25 CHAPTER 1 -HEAD- Sec. 11. Employee or employees to sign approval of tribal deeds -STATUTE- The Secretary of the Interior is authorized to designate an employee or employees of the Department of the Interior to sign, under the direction of the Secretary, in his name and for him, his approval of tribal deeds to allottees, to purchasers of town lots, to purchasers of unallotted lands, to persons, corporations, or organizations for lands reserved to them under the law for their use and benefit, and to any tribal deeds made and executed according to law for any of the Five Civilized Tribes of Indians in Oklahoma. -SOURCE- (Mar. 3, 1911, ch. 210, Sec. 17, 36 Stat. 1069.) -TRANS- TRANSFER OF FUNCTIONS For transfer of functions of other officers, employees, and agencies of Department of the Interior, with certain exceptions, to Secretary of the Interior, with power to delegate, see Reorg. Plan No. 3 of 1950, Sec. 1, 2, eff. May 24, 1950, 15 F.R. 3174, 64 Stat. 1262, set out in the Appendix to Title 5, Government Organization and Employees. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 86 of this title. ------DocID 32037 Document 573 of 646------ -CITE- 25 USC CHAPTER 11 -EXPCITE- TITLE 25 CHAPTER 11 -HEAD- CHAPTER 11 - IRRIGATION OF ALLOTTED LANDS -MISC1- Sec. 381. Irrigation lands; regulation of use of water. 382. Irrigation projects under Reclamation Act. 383. Repealed. 384. Employment of superintendents of irrigation. 385. Maintenance charges; reimbursement of construction costs; apportionment of cost. 385a. Irrigation projects; deposit of assessments as trust fund; disposition of fund. 385b. Amounts creditable to fund. 385c. Appropriation and disposition of power revenues. 386. Reimbursement of construction charges. 386a. Adjustment of reimbursable debts; construction charges. 387. Omitted. 388. Claims for damages; settlement by agreement. 389. Investigation and adjustment of irrigation charges on lands within projects on Indian reservations. 389a. Declaring lands to be temporarily nonirrigable. 389b. Elimination to permanently nonirrigable lands. 389c. Cancellation of charges in absence of lien or contract for payment. 389d. Rules and regulations. 389e. Actions taken to be included in report to Congress. 390. Concessions on reservoir sites and other lands in Indian irrigation projects; leases for agricultural, grazing, and other purposes. ------DocID 32411 Document 574 of 646------ -CITE- 25 USC Sec. 640d-11 -EXPCITE- TITLE 25 CHAPTER 14 SUBCHAPTER XXII -HEAD- Sec. 640d-11. Office of Navajo and Hopi Indian Relocation -STATUTE- (a) Establishment; Commissioner There is hereby established as an independent entity in the executive branch the Office of Navajo and Hopi Indian Relocation which shall be under the direction of the Commissioner on Navajo and Hopi Relocation (hereinafter in this subchapter referred to as the 'Commissioner'). (b) Appointment; term of office; compensation (1) The Commissioner shall be appointed by the President by and with the advice and consent of the Senate. (2) The term of office of the Commissioner shall be 2 years. An individual may be appointed Commissioner for more than one term. (3) The Commissioner shall be a full time employee of the United States and shall be paid at the rate of GS-18 of the General Schedule under section 5332 of title 5. (c) Transfer of powers, duties, and funds to Commissioner (1)(A) Except as otherwise provided by the Navajo and Hopi Indian Relocation Amendments of 1988, the Commissioner shall have all the powers and be responsible for all the duties that the Navajo and Hopi Indian Relocation Commission had before November 16, 1988. (B) All funds appropriated to the Navajo and Hopi Indian Relocation Commission before the date on which the first Commissioner on Navajo and Hopi Indian Relocation is confirmed by the Senate that have not been expended on such date shall become available to the Office of Navajo and Hopi Indian Relocation on such date and shall remain available without fiscal year limitation. (2) There are hereby transferred to the Commissioner, on January 31, 1989 - (A) all powers and duties of the Bureau of Indian Affairs derived from Public Law 99-190 (99 Stat. at 1236) that relate to the relocation of members of the Navajo Tribe from lands partitioned to the Hopi Tribe, and (B) all funds appropriated for activities relating to such relocation pursuant to Public Law 99-190 (99 Stat. at 1236): Provided, That such funds shall be used by the Commissioner for the purpose for which such funds were appropriated to the Bureau of Indian Affairs. (B) (FOOTNOTE 1) : Provided further, That for administrative purposes such funds shall be maintained in a separate account. (FOOTNOTE 1) So in original. The period followed by the designation '(B)' probably should not appear. (d) Powers of Commissioner; appointment and compensation of staff, personnel, etc.; temporary and intermittent services (1) The Commissioner shall have the power to - (A) appoint and fix the compensation of such staff and personnel as he deems necessary, without regard to the provisions of title 5 governing appointments in the competitive service, and without regard to chapter 51 and subchapter III of chapter 53 of such title relating to classification and General Schedule pay rates, but at rates not in excess of the maximum rate for GS-18 of the General Schedule under section 5332 of such title; and (B) procure temporary and intermittent services to the same extent as is authorized by section 3109 of title 5, but at rates not to exceed $200 a day for individuals. (2) The authority of the Commissioner to enter into contracts for the provision of legal services for the Commissioner or for the Office of Navajo and Hopi Indian Relocation shall be subject to the availability of funds provided for such purpose by appropriations Acts. (3) There are authorized to be appropriated for each fiscal year $100,000 to fund contracts described in paragraph (2). (e) Administrative, fiscal, and housekeeping services; implementation of relocation plan; reasonable assistance by Federal departments or agencies; report to Congress (1) The Commissioner is authorized to provide for the administrative, fiscal, and housekeeping services of the Office of Navajo and Hopi Indian Relocation and is authorized to call upon any department or agency of the United States to assist him in implementing the relocation plan, except that the control over and responsibility for completing relocation shall remain in the Commissioner. In any case in which the Office calls upon any such department or agency for assistance under this section, such department or agency shall provide reasonable assistance so requested. (2) On failure of any agency to provide reasonable assistance as required under paragraph (1) of this subsection, the Commissioner shall report such failure to the Congress. (f) Termination The Office of Navajo and Hopi Indian Relocation shall cease to exist when the President determines that its functions have been fully discharged. -SOURCE- (Pub. L. 93-531, Sec. 12, Dec. 22, 1974, 88 Stat. 1716; Pub. L. 96-305, Sec. 5, July 8, 1980, 94 Stat. 932; Pub. L. 100-666, Sec. 4(a), Nov. 16, 1988, 102 Stat. 3929; Pub. L. 100-696, title IV, Sec. 406, Nov. 18, 1988, 102 Stat. 4592.) -REFTEXT- REFERENCES IN TEXT The Navajo and Hopi Indian Relocation Amendments of 1988, referred to in subsec. (c)(1)(A), is Pub. L. 100-666, Nov. 16, 1988, 102 Stat. 3929, which enacted sections 640d-29 and 640d-30 of this title, amended sections 640d-7, 640d-9 to 640d-14, 640d-22, 640d-24, 640d-25, and 640d-28 of this title, and enacted provisions set out as a note under sections 640d and 640d-11 of this title. For complete classification of this Act to the Code, see Short Title of 1988 Amendment note set out under section 640d of this title and Tables. Public Law 99-190, referred to in subsec. (c)(2), is Pub. L. 99-190, Dec. 19, 1985, 99 Stat. 1185. The provisions of Pub. L. 99-190 (99 Stat. 1236) relating to the relocation of members of the Navajo Tribe are not classified to the Code. For complete classification of Pub. L. 99-190 to the Code, see Tables. The provisions of title 5 governing appointments in the competitive service, referred to in the subsec. (d)(1)(A), are classified to section 3301 et seq. of Title 5, Government Organization and Employees. -MISC2- AMENDMENTS 1988 - Pub. L. 100-666 amended section generally, substituting subsecs. (a) to (f) relating to the Office of Navajo and Hopi Indian Relocation, for former subsecs. (a) to (j) which related to the Navajo and Hopi Relocation Commission. 1980 - Subsec. (g)(1). Pub. L. 96-305, Sec. 5(1), inserted 'an independent legal counsel,' after 'an Executive Director,'. Subsec. (h). Pub. L. 96-305, Sec. 5(2), substituted provision authorizing Commission to provide for its own administrative, fiscal, and housekeeping services for provision authorizing Department of the Interior, on a nonreimbursable basis, to furnish necessary administrative and housekeeping services for Commission. Subsecs. (i), (j). Pub. L. 96-305, Sec. 5(3), added subsec. (i) and redesignated former subsec. (i) as (j). REFERENCES IN OTHER LAWS TO GS-16, 17, OR 18 PAY RATES References in laws to the rates of pay for GS-16, 17, or 18, or to maximum rates of pay under the General Schedule, to be considered references to rates payable under specified sections of Title 5, Government Organization and Employees, see section 529 (title I, Sec. 101(c)(1)) of Pub. L. 101-509, set out in a note under section 5376 of Title 5. CONTINUATION OF RELOCATION COMMISSION AND RETENTION OF EXISTING COMMISSIONERS PENDING CONFIRMATION OF COMMISSIONER; TRANSFER OF EXISTING PERSONNEL; CHANGE OF NAME Section 4(c) of Pub. L. 100-666 provided that: '(1) Notwithstanding any other provisions of law or any amendment made by this Act (see Short Title of 1988 Amendment note under section 640d of this title) - '(A) the Navajo and Hopi Indian Relocation Commission shall - '(i) continue to exist until the date on which the first Commissioner is confirmed by the Senate, '(ii) have the same structure, powers and responsibilities such Commission had before the enactment of this Act (Nov. 16, 1988), and '(iii) assume responsibility for the powers and duties transferred to such Commissioner under section 12(c)(2) of Public Law 93-531 (25 U.S.C. 640d-11(c)(2)), as amended by this Act, until the Commissioner is confirmed, '(B) the existing Commissioners shall serve until the new Commissioner is confirmed by the Senate, and '(C) the existing personnel of the Commission shall be transferred to the new Office of Navajo and Hopi Indian Relocation. '(2) The Navajo and Hopi Relocation Commission shall become known as the Office of Navajo and Hopi Indian Relocation on the date on which the first Commissioner is confirmed by the Senate.' ------DocID 32922 Document 575 of 646------ -CITE- 25 USC Sec. 1300b-11 -EXPCITE- TITLE 25 CHAPTER 14 SUBCHAPTER LXXIII-A -HEAD- Sec. 1300b-11. Congressional findings and declaration of policy -STATUTE- (a) Findings Congress finds that the Texas Band of Kickapoo Indians is a subgroup of the Kickapoo Tribe of Oklahoma; that many years ago, the Band was forced to migrate from its ancestral lands to what is now the State of Texas and the nation of Mexico; that, although many members of the band (FOOTNOTE 1) meet the requirements for United States citizenship, some of them cannot prove that they are United States citizens; that, although the Band resides in the State of Texas, it owns no land there; that, because the Band owns no land in Texas, members of the Band are considered ineligible for services which the United States provides to other Indians who are members of federally recognized tribes because of their status as Indians except when the members of the Band are on or near the reservation of the Kickapoo Tribe of Oklahoma; that members of the Band live under conditions that pose serious threats to their health; and that, because their culture is derived from three different cultures, they have unique needs including, especially, educational needs. (FOOTNOTE 1) So in original. Probably should be 'Band'. (b) Declarations Congress therefore declares that the Band should be recognized by the United States; that the right of the members of the Band to pass and repass the borders of the United States should be clarified; that services which the United States provides to Indians because of their status as Indians should be provided to members of the Band in Maverick County, Texas; and, that land in the State of Texas should be taken in trust by the United States for the benefit of the Band. -SOURCE- (Pub. L. 97-429, Sec. 2, Jan. 8, 1983, 96 Stat. 2269.) -MISC1- SHORT TITLE Section 1 of Pub. L. 97-429 provided: 'That this Act (enacting this subchapter) may be cited as the 'Texas Band of Kickapoo Act'.' ------DocID 32990 Document 576 of 646------ -CITE- 25 USC Sec. 1300i-11 -EXPCITE- TITLE 25 CHAPTER 14 SUBCHAPTER LXXX -HEAD- Sec. 1300i-11. Limitations of actions; waiver of claims -STATUTE- (a) Claims against partition of joint reservation Any claim challenging the partition of the joint reservation pursuant to section 1300i-1 of this title or any other provision of this subchapter as having effected a taking under the fifth amendment of the United States Constitution or as otherwise having provided inadequate compensation shall be brought, pursuant to section 1491 or 1505 of title 28, in the United States Claims Court. The Yurok Transition Team, or any individual thereon, shall not be named as a defendant or otherwise joined in any suit in which a claim is made arising out of this subsection. (b) Limitations on claims (1) Any such claim by any person or entity, other than the Hoopa Valley Tribe or the Yurok Tribe, shall be forever barred if not brought within the later of 210 days from the date of the partition of the joint reservation as provided in section 1300i-1 of this title or 120 days after the publication in the Federal Register of the option election date as required by section 1300i-5(a)(4) of this title. (2) Any such claim by the Hoopa Valley Tribe shall be barred 180 days after October 31, 1988, or such earlier date as may be established by the adoption of a resolution waiving such claims pursuant to section 1300i-1(a)(2) of this title. (3) Any such claim by the Yurok Tribe shall be barred 180 days after the general council meeting of the Yurok Tribe as provided in section 1300i-8 of this title or such earlier date as may be established by the adoption of a resolution waiving such claims as provided in section 1300i-8(d)(2) of this title. (c) Report to Congress (1) The Secretary shall prepare and submit to the Congress a report describing the final decision in any claim brought pursuant to subsection (b) of this section against the United States or its officers, agencies, or instrumentalities. (2) Such report shall be submitted no later than 180 days after the entry of final judgment in such litigation. The report shall include any recommendations of the Secretary for action by Congress, including, but not limited to, any supplemental funding proposals necessary to implement the terms of this subchapter and any modifications to the resource and management authorities established by this subchapter. Notwithstanding the provisions of section 2517 of title 28, any judgment entered against the United States shall not be paid for 180 days after the entry of judgment; and, if the Secretary of the Interior submits a report to Congress pursuant to this section, then payment shall be made no earlier than 120 days after submission of the report. -SOURCE- (Pub. L. 100-580, Sec. 14, Oct. 31, 1988, 102 Stat. 2936; Pub. L. 101-301, Sec. 9(4), May 24, 1990, 104 Stat. 211.) -MISC1- AMENDMENTS 1990 - Subsec. (a). Pub. L. 101-301 inserted at end 'The Yurok Transition Team, or any individual thereon, shall not be named as a defendant or otherwise joined in any suit in which a claim is made arising out of this subsection.' ------DocID 33526 Document 577 of 646------ -CITE- 26 USC Sec. 11 -EXPCITE- TITLE 26 Subtitle A CHAPTER 1 Subchapter A PART II -HEAD- Sec. 11. Tax imposed -STATUTE- (a) Corporations in general A tax is hereby imposed for each taxable year on the taxable income of every corporation. (b) Amount of tax (1) In general The amount of the tax imposed by subsection (a) shall be the sum of - (A) 15 percent of so much of the taxable income as does not exceed $50,000, (B) 25 percent of so much of the taxable income as exceeds $50,000 but does not exceed $75,000, and (C) 34 percent of so much of the taxable income as exceeds $75,000. In the case of a corporation which has taxable income in excess of $100,000 for any taxable year, the amount of tax determined under the preceding sentence for such taxable year shall be increased by the lesser of (i) 5 percent of such excess, or (ii) $11,750. (2) Certain personal service corporations not eligible for graduated rates Notwithstanding paragraph (1), the amount of the tax imposed by subsection (a) on the taxable income of a qualified personal service corporation (as defined in section 448(d)(2)) shall be equal to 34 percent of the taxable income. (c) Exceptions Subsection (a) shall not apply to a corporation subject to a tax imposed by - (1) section 594 (relating to mutual savings banks conducting life insurance business), (2) subchapter L (sec. 801 and following, relating to insurance companies), or (3) subchapter M (sec. 851 and following, relating to regulated investment companies and real estate investment trusts). (d) Foreign corporations In the case of a foreign corporation, the taxes imposed by subsection (a) and section 55 shall apply only as provided by section 882. -SOURCE- (Aug. 16, 1954, ch. 736, 68A Stat. 11; Mar. 30, 1955, ch. 18, Sec. 2, 69 Stat. 14; Mar. 29, 1956, ch. 115, Sec. 2, 70 Stat. 66; Mar. 29, 1957, Pub. L. 85-12, Sec. 2, 71 Stat. 9; June 30, 1958, Pub. L. 85-475, Sec. 2, 72 Stat. 259; June 30, 1959, Pub. L. 86-75, Sec. 2, 73 Stat. 157; June 30, 1960, Pub. L. 86-564, title II, Sec. 201, 74 Stat. 290; Sept. 14, 1960, Pub. L. 86-779, Sec. 10(d), 74 Stat. 1009; June 30, 1961, Pub. L. 87-72, Sec. 2, 75 Stat. 193; June 28, 1962, Pub. L. 87-508, Sec. 2, 76 Stat. 114; June 29, 1963, Pub. L. 88-52, Sec. 2, 77 Stat. 72; Feb. 26, 1964, Pub. L. 88-272, title I, Sec. 121, 78 Stat. 25; Nov. 13, 1966, Pub. L. 89-809, title I, Sec. 104(b)(2), 80 Stat. 1557; Dec. 30, 1969, Pub. L. 91-172, title IV, Sec. 401(b)(2)(B), 83 Stat. 602; Mar. 29, 1975, Pub. L. 94-12, title III, Sec. 303(a), (b), 89 Stat. 44; Dec. 23, 1975, Pub. L. 94-164, Sec. 4(a)-(c), 89 Stat. 973, 974; Oct. 4, 1976, Pub. L. 94-455, title IX, Sec. 901(a), 90 Stat. 1606; May 23, 1977, Pub. L. 95-30, title II, Sec. 201(1), (2), 91 Stat. 141; Nov. 6, 1978, Pub. L. 95-600, title III, Sec. 301(a), 92 Stat. 2820; Aug. 13, 1981, Pub. L. 97-34, title II, Sec. 231(a), 95 Stat. 249; July 18, 1984, Pub. L. 98-369, div. A, title I, Sec. 66(a), 98 Stat. 585; Oct. 22, 1986, Pub. L. 99-514, title VI, Sec. 601(a), 100 Stat. 2249; Dec. 22, 1987, Pub. L. 100-203, title X, Sec. 10224(a), 101 Stat. 1330-412; Nov. 10, 1988, Pub. L. 100-647, title I, Sec. 1007(g)(13)(B), 102 Stat. 3436.) -MISC1- AMENDMENTS 1988 - Subsec. (d). Pub. L. 100-647 substituted 'the taxes imposed by subsection (a) and section 55' for 'the tax imposed by subsection (a)'. 1987 - Subsec. (b). Pub. L. 100-203 amended subsec. (b) generally. Prior to amendment, subsec. (b) read as follows: 'The amount of the tax imposed by subsection (a) shall be the sum of - '(1) 15 percent of so much of the taxable income as does not exceed $50,000, '(2) 25 percent of so much of the taxable income as exceeds $50,000 but does not exceed $75,000, and '(3) 34 percent of so much of the taxable income as exceeds $75,000. In the case of a corporation which has taxable income in excess of $100,000 for any taxable year, the amount of tax determined under the preceding sentence for such taxable year shall be increased by the lesser of (A) 5 percent of such excess, or (B) $11,750.' 1986 - Subsec. (b). Pub. L. 99-514 amended subsec. (b) generally. Prior to amendment, subsec. (b) read as follows: 'The amount of the tax imposed by subsection (a) shall be the sum of - '(1) 15 percent (16 percent for taxable years beginning in 1982) of so much of the taxable income as does not exceed $25,000; '(2) 18 percent (19 percent for taxable years beginning in 1982) of so much of the taxable income as exceeds $25,000 but does not exceed $50,000; '(3) 30 percent of so much of the taxable income as exceeds $50,000 but does not exceed $75,000; '(4) 40 percent of so much of the taxable income as exceeds $75,000 but does not exceed $100,000; plus '(5) 46 percent of so much of the taxable income as exceeds $100,000. In the case of a corporation with taxable income in excess of $1,000,000 for any taxable year, the amount of tax determined under the preceding sentence for such taxable year shall be increased by the lesser of (A) 5 percent of such excess, or (B) $20,250.' 1984 - Subsec. (b). Pub. L. 98-369 inserted 'In the case of a corporation with taxable income in excess of $1,000,000 for any taxable year, the amount of tax determined under the preceding sentence for such taxable year shall be increased by the lesser of (A) 5 percent of such excess, or (B) $20,250.' 1981 - Subsec. (b)(1). Pub. L. 97-34, Sec. 231(a)(1), substituted '15 percent (16 percent for taxable years beginning in 1982)' for '17 percent'. Subsec. (b)(2). Pub. L. 97-34, Sec. 231(a)(2), substituted '18 percent (19 percent for taxable years beginning in 1982)' for '20 percent'. 1978 - Pub. L. 95-600 reduced corporate tax rates by substituting provisions imposing a five-step tax rate structure on corporate taxable income for provisions using a normal tax and surtax approach to the taxation of corporate taxable income. 1977 - Subsec. (b)(1). Pub. L. 95-30, Sec. 201(1), substituted 'December 31, 1978' for 'December 31, 1977'. Subsec. (b)(2). Pub. L. 95-30, Sec. 201(1), substituted 'January 1, 1979' for 'January 1, 1978' in provisions preceding subpar. (A). Subsec. (d)(1). Pub. L. 95-30, Sec. 201(2), substituted 'December 31, 1978' for 'December 31, 1977'. Subsec. (d)(2). Pub. L. 95-30, Sec. 201(2), substituted 'January 1, 1979' for 'January 1, 1978'. 1976 - Subsec. (a). Pub. L. 94-455 reenacted subsec. (a) without change. Subsec. (b). Pub. L. 94-455, among other changes, substituted 'December 31, 1977, 22 percent' for 'December 31, 1976, 22 percent' and 'after December 31, 1974 and before January 1, 1978' for 'after December 31, 1974 and before January 1, 1977' and struck out provisions relating to the six-month application of the general rule. Subsec. (c). Pub. L. 94-455 struck out provisions relating to the special rule for 1976 for calendar year taxpayers. Subsec. (d). Pub. L. 94-455, among other changes, substituted provisions relating to surtax exemption of $25,000 for a taxable year ending Dec. 31, 1977, or $50,000 for a taxable year ending after Dec. 31, 1974, and before Jan. 1, 1978, for provisions relating to surtax exemption of $50,000 for any taxable year and struck out provisions relating to six-month application of the general rule. 1975 - Subsec. (b). Pub. L. 94-164 redesignated existing pars. (1) and (2) as pars. (1)(A) and (1)(B), and in par. (1)(A) as so redesignated substituted 'after December 31, 1976' for 'before January 1, 1975 or after December 31, 1975', and in par. (1)(B) as so redesignated substituted 'January 1, 1977' for 'January 1, 1976', and added par. (2). Pub. L. 94-12, Sec. 303(a), reduced the normal tax for a taxable year ending after Dec. 31, 1974, and before Jan. 1, 1976, to 20 percent of so much of the taxable income as does not exceed $25,000 plus 22 percent of so much of the taxable income as exceeds $25,000. Subsec. (c). Pub. L. 94-164 designated existing provisions as par. (1), struck out special percentages for taxable years beginning before Jan. 1, 1964, and after Dec. 31, 1963 and before Jan. 1, 1965, and added par. (2). Subsec. (d). Pub. L. 94-164 designated existing provisions as par. (1), substituted '$50,000' for '$25,000', inserted reference to section 1564 of this title, and added par. (2). Pub. L. 94-12, Sec. 303(b), substituted '$50,000' for '$25,000'. 1969 - Subsec. (d). Pub. L. 91-172 substituted 'section 1561 or 1564' for 'section 1561'. 1966 - Subsec. (e)(4). Pub. L. 89-809, Sec. 104(b)(2)(A), struck out par. (4) which made reference to section 881(a) (relating to foreign corporations not engaged in business in United States). Subsec. (f). Pub. L. 89-809, Sec. 104(b)(2)(B), added subsec. (f). 1964 - Subsec. (b). Pub. L. 88-272 applied the 30 percent tax to years beginning before Jan. 1, 1964 instead of July 1, 1964 in par. (1), and in par. (2), reduced the rate from 25 percent to 22 percent, and applied it to years beginning after Dec. 31, 1963, instead of June 30, 1964. Subsec. (c). Pub. L. 88-272 increased the percentage from 22 to 28 for taxable years beginning after Dec. 31, 1963, and before Jan. 1, 1965, and to 26 percent for taxable years beginning after Dec. 31, 1964. The surtax exemption previously carried in subsec. (c), is now stated in subsec. (d). Subsecs. (d), (e). Pub. L. 88-272 added subsec. (d) and redesignated former subsec. (d) as (e). 1963 - Subsec. (b). Pub. L. 88-52 substituted 'July 1, 1964' for 'July 1, 1963' and 'June 30, 1964' for 'June 30, 1963' wherever appearing. 1962 - Subsec. (b). Pub. L. 87-508 substituted 'July 1, 1963' for 'July 1, 1962' and 'June 30, 1963' for 'June 30, 1962' wherever appearing. 1961 - Subsec. (b). Pub. L. 87-72 substituted 'July 1, 1962' for 'July 1, 1961' and 'June 30, 1962' for 'June 30, 1961' wherever appearing. 1960 - Subsec. (b). Pub. L. 86-564 substituted 'July 1, 1961' for 'July 1, 1960' and 'June 30, 1961' for 'June 30, 1960' wherever appearing. Subsec. (d)(3). Pub. L. 86-779 inserted 'and real estate investment trusts' after 'regulated investment companies'. 1959 - Subsec. (b). Pub. L. 86-75 substituted 'July 1, 1960' for 'July 1, 1959' and 'June 30, 1960' for 'June 30, 1959' wherever appearing. 1958 - Subsec. (b). Pub. L. 85-475 substituted 'July 1, 1959' for 'July 1, 1958' and 'June 30, 1959' for 'June 30, 1958' wherever appearing. 1957 - Subsec. (b). Pub. L. 85-12 substituted 'July 1, 1958' for 'April 1, 1957' and 'June 30, 1958' for 'March 31, 1957' wherever appearing. 1956 - Subsec. (b). Act Mar. 29, 1956, substituted 'April 1, 1957' for 'April 1, 1956' and 'March 31, 1957' for 'March 31, 1956' wherever appearing. 1955 - Subsec. (b). Act Mar. 30, 1955, substituted 'April 1, 1956' for 'April 1, 1955' and 'March 31, 1956' for 'March 31, 1955' wherever appearing. EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100-647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment relates, see section 1019(a) of Pub. L. 100-647, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1987 AMENDMENT Section 10224(b) of Pub. L. 100-203 provided that: 'The amendment made by subsection (a) (amending this section) shall apply to taxable years beginning after December 31, 1987.' EFFECTIVE DATE OF 1986 AMENDMENT Section 601(b) of Pub. L. 99-514 provided that: '(1) In general. - The amendment made by subsection (a) (amending this section) shall apply to taxable years beginning on or after July 1, 1987. '(2) Cross reference. - 'For treatment of taxable years which include July 1, 1987, see section 15 of the Internal Revenue Code of 1986.' EFFECTIVE DATE OF 1984 AMENDMENT Section 66(c) of Pub. L. 98-369, as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: '(1) In general. - The amendments made by this section (amending this section and section 1561 of this title) shall apply to taxable years beginning after December 31, 1983. '(2) Amendments not treated as changed in rate of tax. - The amendments made by this subsection (probably should be 'section') shall not be treated as a change in a rate of tax for purposes of section 21 of the Internal Revenue Code of 1986 (formerly I.R.C. 1954).' EFFECTIVE DATE OF 1981 AMENDMENT Section 231(c) of Pub. L. 97-34 provided that: 'The amendments made by subsection (a) (amending this section) shall apply to taxable years beginning after December 31, 1981.' EFFECTIVE DATE OF 1978 AMENDMENT Section 301(c) of Pub. L. 95-600 provided that: 'The amendments made by this section (amending this section and sections 12, 57, 244, 247, 511, 527, 528, 802, 821, 826, 852, 857, 882, 907, 922, 962, 1351, 1551, 1561, 6154, and 6655 of this title) shall apply to taxable years beginning after December 31, 1978.' EFFECTIVE DATE OF 1976 AMENDMENT Section 901(d) of Pub. L. 94-455 provided that: 'The amendment made by subsection (a) (amending this section) shall take effect on December 23, 1975. The amendments made by subsection (b) (amending section 821 of this title) shall apply to taxable years ending after December 31, 1974. The amendments made by subsection (c) (amending sections 21, 1561, and 6154 of this title) shall apply to taxable years ending after December 31, 1975.' EFFECTIVE AND TERMINATION DATES OF 1975 AMENDMENTS Section 4(e) of Pub. L. 94-164 provided that: 'The amendments made by subsections (b), (c), and (d) (amending this section and sections 21, 962, and 1561 of this title) apply to taxable years beginning after December 31, 1975. The amendment made by subsection (c) (amending this section) ceases to apply for taxable years beginning after December 31, 1976.' Section 305(b)(1) of Pub. L. 94-12 provided that: 'The amendments made by section 303 (amending this section and sections 12, 962, and 1561 of this title and enacting provisions set out as a note under this section) shall apply to taxable years ending after December 31, 1974. The amendments made by subsections (b) and (c) of such section (amending this section and sections 12, 962, and 1561 of this title and enacting provisions set out as a note under this section) shall cease to apply for taxable years ending after December 31, 1975.' EFFECTIVE DATE OF 1969 AMENDMENT Amendment by Pub. L. 91-172 applicable with respect to taxable years beginning after Dec. 31, 1969, see section 401(h)(2) of Pub. L. 91-172, set out as a note under section 1561 of this title. EFFECTIVE DATE OF 1966 AMENDMENT Section 104(n) of Pub. L. 89-809 provided that: 'The amendments made by this section (other than subsection (k)) (enacting section 6683 to this title and amending this section and sections 245, 301, 512, 542, 543, 545, 819, 821, 822, 831, 832, 841, 842, 881, 882, 884, 952, 953, 1249, 1442, and 6016 of this title) shall apply with respect to taxable years beginning after December 31, 1966. The amendment made by subsection (k) (amending section 1248(d)(4) of this title) shall apply with respect to sales or exchanges occurring after December 31, 1966.' EFFECTIVE DATE OF 1964 AMENDMENT Amendment by Pub. L. 88-272, except for purposes of section 21 of this title, effective with respect to taxable years beginning after Dec. 31, 1963, see section 131 of Pub. L. 88-272, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1960 AMENDMENT Amendment by Pub. L. 86-779 applicable with respect to taxable years of real estate investment trusts beginning after Dec. 31, 1960, see section 10(k) of Pub. L. 86-779, set out as an Effective Date note under section 856 of this title. ALLOCATION OF 1975 TAXABLE INCOME AMONG COMPONENT MEMBERS OF CONTROLLED GROUP OF CORPORATIONS Section 303(c)(1) of Pub. L. 94-12 provided in part that: 'In applying subsection (b)(2) of section 11 (subsec. (b)(2) of this section), the first $25,000 of taxable income and the second $25,000 of taxable income shall each be allocated among the component members of a controlled group of corporations in the same manner as the surtax exemption is allocated.' -CROSS- CROSS REFERENCES Computation of taxable income, see section 61 et seq. of this title. Corporate distributions and adjustments, see section 301 et seq. of this title. Deduction for dividends paid, see section 561 et seq. of this title. Definitions - Corporation, see section 7701 of this title. Taxable income, see section 63 of this title. Effect of change of rate of tax, see section 15 of this title. Exempt corporations, see section 501 of this title. Imposition of net income taxes by State on income derived from interstate commerce, see section 381 et seq. of Title 15, Commerce and Trade. Special deductions for corporations, see section 241 et seq. of this title. Tax on - Foreign corporations not engaged in business in United States, see section 881 of this title. Resident foreign corporations as provided in this section, see section 882 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 15, 59, 80, 244, 247, 280C, 453A, 460, 468A, 468B, 511, 527, 594, 801, 804, 831, 835, 847, 852, 857, 860E, 860G, 882, 891, 904, 907, 954, 962, 1201, 1291, 1293, 1351, 1374, 1375, 1381, 1446, 1551, 1561, 4942, 6425, 6655, 7518 of this title; title 46 App. section 1177. ------DocID 34496 Document 578 of 646------ -CITE- 26 USC CHAPTER 11 -EXPCITE- TITLE 26 Subtitle B CHAPTER 11 -HEAD- CHAPTER 11 - ESTATE TAX -MISC1- Subchapter Sec. (FOOTNOTE 1) A. Estates of citizens or residents 2001 B. Estates of nonresidents not citizens 2101 C. Miscellaneous 2201 -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in sections 667, 1014, 1040, 2519, 2612, 2624, 2642, 2652, 2661, 2663, 2701, 4980A, 6103, 6161, 6163, 6212, 6314, 6324, 6324A, 6501, 6601, 6662, 6871, 6901, 6905, 7269, 7404, 7463, 7481, 7517, 7851, 7872 of this title. ------DocID 35907 Document 579 of 646------ -CITE- 26 USC APPENDIX - RULES OF TAX COURT Rule 11 -EXPCITE- TITLE 26 APPENDIX TITLE II -HEAD- Rule 11. Payments to Court -STATUTE- All payments to the Court for fees or charges of the Court shall be made either in cash or by check, money order, or other draft made payable to the order of 'Clerk, United States Tax Court,' and shall be mailed or delivered to the Clerk of the Court at Washington, D.C. For the Court's address, see Rule 10(e). For particular payments, see Rules 12(c) (copies of Court records), 20(b) (filing of petition), 175(a)(2) (small tax cases), 200(e) (application to practice before Court), 200(i) (periodic registration fee), and 271(c) (filing of petition for administrative costs). For fees and charges payable to the Court, see Appendix III. ------DocID 36096 Document 580 of 646------ -CITE- 26 USC APPENDIX - RULES OF TAX COURT Form 11 -EXPCITE- TITLE 26 APPENDIX TITLE XXVI -HEAD- Form 11. Power of attorney and agreement by corporation *** ILLUSTRATIONS OR TABLE DATA OMITTED *** -STATUTE- SAVE PAGE FOR ILLUSTRATION ------DocID 36110 Document 581 of 646------ -CITE- 27 USC Sec. 11 to 40 -EXPCITE- TITLE 27 CHAPTER 2 -HEAD- Sec. 11 to 40. Repealed. Aug. 27, 1935, ch. 740, title I, Sec. 1, 49 Stat. 872 -MISC1- Section 11, act Oct. 28, 1919, ch. 85, title II, Sec. 2, 41 Stat. 308, authorized Commissioner of Internal Revenue, his assistants, agents, and inspectors to swear out warrants before United States commissioners or other officers or courts authorized to issue warrants, and to investigate and report violations of this title to United States attorney for district in which violations were committed. Section 12, act Oct. 28, 1919, ch. 85, title II, Sec. 3, 41 Stat. 308, provided that no person manufacture, sell, barter, transport, import, export, deliver, furnish or possess any intoxicating liquor except as otherwise provided by provisions of this title. Section 13, act Oct. 28, 1919, ch. 85, title II, Sec. 4, 41 Stat. 309, exempted specified articles, after having been manufactured and prepared for market, from provisions of this title, required manufacturers of such exempt articles to secure permits, give bonds, keep records, and make reports, and made unlawful the failure to comply with any of foregoing requirements. Section 14, act Oct. 28, 1919, ch. 85, title II, Sec. 5, 41 Stat. 309, authorized commissioner to analyze specified manufactured articles in order to determine whether said articles constituted intoxicating liquors. Section 15, act Nov. 23, 1921, ch. 134, Sec. 2, 42 Stat. 222, authorized commissioner to order a change of formula of preparations used as a beverage or for intoxicating liquor purposes where sale or use of such preparations was substantially increased in community by reason of its use as a beverage or for intoxicating beverage purposes. Section 16, act Oct. 28, 1919, ch. 85, title II, Sec. 6, 41 Stat. 310, required that any person manufacturing, selling, purchasing, transporting, or prescribing any liquor, except liquor purchased and used for medicinal purposes when prescribed by a physician, liquor purchased and used in a bona fide hospital or sanitarium for treatment of alcoholism, and wine manufactured, etc., for sacramental or religious purposes, first obtain a permit from commissioner. Section 17, act Oct. 28, 1919, ch. 85, title II, Sec. 7, 41 Stat. 311, authorized no one but a physician holding a permit to prescribe liquor to issue any prescription for liquor, required every such physician to keep a record of every prescription issued, and required pharmacist filling each prescription issued to indorse upon it over his own signature 'canceled'. Section 18, act Nov. 23, 1921, ch. 134, Sec. 2, 42 Stat. 222, specified kinds of liquor which could be prescribed for medicinal purposes, percentage of alcohol in such prescriptions, and quantity permitted to be prescribed. Section 19, act Oct. 28, 1919, ch. 85, title II, Sec. 8, 41 Stat. 311, authorized commissioner to issue prescription blanks, free of cost, to physicians holding permits to prescribe liquor for medicinal purposes. Section 20, act Nov. 23, 1921, ch. 134, Sec. 2, 42 Stat. 222, set forth number of prescription blanks that could be issued to a physician, and number of prescriptions that could be issued by a physician. Section 21, act Oct. 28, 1919, ch. 85, title II, Sec. 9, 41 Stat. 311, set forth procedure by which commissioner could cite permittees believed not to be conforming to provisions of this title, or who had violated laws of any State relating to intoxicating liquors. Section 22, act Oct. 28, 1919, ch. 85, title II, Sec. 10, 41 Stat. 312, required every person manufacturing, purchasing, selling, or transporting any liquor to make and keep a permanent record of all such transactions. Section 23, act Oct. 28, 1919, ch. 85, title II, Sec. 11, 41 Stat. 312, required all manufacturers and wholesale or retail druggists to keep a copy of all permits to purchase on which a sale of any liquor was made. Section 24, act Oct. 28, 1919, ch. 85, title II, Sec. 12, 41 Stat. 312, required all persons manufacturing liquor for sale to attach labels to every container, and specified the information to be placed on such labels. Section 25, act Oct. 28, 1919, ch. 85, title II, Sec. 13, 41 Stat. 312, required every carrier to make a record at place of shipment of receipt of any liquor transported, and to deliver liquor only to persons presenting to him a verified copy of a permit to purchase. Section 26, act Oct. 28, 1919, ch. 85, title II, Sec. 14, 41 Stat. 312, made it unlawful for any person to use or induce any carrier, or any agent or employee thereof, to carry or ship any package or receptacle containing liquor without notifying carrier of true nature and character of shipment, and required all packages carrying liquor to contain enumerated information. Section 27, act Oct. 28, 1919, ch. 85, title II, Sec. 15, 41 Stat. 313, made it unlawful for any consignee to accept any package containing liquor upon which appeared a statement known by him to be false, or for any carrier to consign, etc., any such package, knowing such statement to be false. Section 28, act Oct. 28, 1919, ch. 85, title II, Sec. 16, 41 Stat. 313, made it unlawful to order a carrier to deliver liquor to any person not a bona fide consignee. Section 29, act Oct. 28, 1919, ch. 85, title II, Sec. 17, 41 Stat. 313, made it unlawful to advertise liquor, or manufacture, sale, or keeping for sale of liquor, and exempted manufacturers and wholesale druggists holding permits to sell liquor from prohibition when furnishing price lists to persons permitted to purchase liquor or when advertising in business publications. Section 30, act Oct. 28, 1919, ch. 85, title II, Sec. 18, 41 Stat. 313, made it unlawful to advertise, manufacture, sell, or possess for sale any utensil, ingredient, or formula intended for use in unlawful manufacture of intoxicating liquor. Section 31, act Oct. 28, 1919, ch. 85, title II, Sec. 19, 41 Stat. 313, prohibited any person from soliciting or receiving orders for liquor or giving information as to how liquor could be obtained in violation of this title. Section 32, act Oct. 28, 1919, ch. 85, title II, Sec. 20, 41 Stat. 313, gave a right of action to any person injured in person, property, means of support, or otherwise by any intoxicated person against any person who unlawfully sold liquor to such intoxicated person, or caused or contributed to such intoxication. Section 33, act Oct. 28, 1919, ch. 85, title II, Sec. 21, 41 Stat. 314, declared any property used in connection with a violation of this title to be a common nuisance, set forth punishment for maintenance of a common nuisance, and made owner of such property liable. Section 34, act Oct. 28, 1919, ch. 85, title II, Sec. 22, 41 Stat. 314, set forth procedure which authorized an action in equity to enjoin any nuisance defined in this title. Section 35, act Oct. 28, 1919, ch. 85, title II, Sec. 23, 41 Stat. 314, declared any person keeping or carrying liquor with intent to sell, or soliciting orders for liquor guilty of a nuisance and restrainable by injunction. Section 36, act Oct. 29, 1919, ch. 85, title II, Sec. 23, 41 Stat. 314, set forth fees of officers removing and selling property in enforcement of these provisions. Section 37, act Oct. 28, 1919, ch. 85, title II, Sec. 23, 41 Stat. 314, provided that any violation upon any leased premises by the lessee or occupant thereof could, at the option of the lessor, work a forfeiture of lease. Section 38, act Oct. 28, 1919, ch. 85, title II, Sec. 24, 41 Stat. 315, set forth procedure and punishment for violation of any injunction granted pursuant to these provisions. Section 39, act Oct. 28, 1919, ch. 85, title II, Sec. 25, 41 Stat. 315, prohibited unlawful possession of liquor or property designed for manufacture thereof, and authorized issuance of search warrants and destruction of unlawfully possessed liquor and property seized pursuant to such search warrants. Section 40, act Oct. 28, 1919, ch. 85, title II, Sec. 26, 41 Stat. 315, set forth procedure for seizure and destruction of unlawfully transported liquor and sale of any vehicle found to be used for such transportation. ------DocID 36266 Document 582 of 646------ -CITE- 28 USC CHAPTER 11 -EXPCITE- TITLE 28 PART I CHAPTER 11 -HEAD- CHAPTER 11 - COURT OF INTERNATIONAL TRADE -MISC1- Sec. 251. Appointment and number of judges; offices. 252. Tenure and salaries of judges. 253. Duties of chief judge; precedence of judges. 254. Single-judge trial. 255. Three-judge trials. 256. Trials at ports other than New York. 257. Publication of decisions. HISTORICAL AND REVISION NOTES The 'Board of General Appraisers' was designated 'United States Customs Court' by act May 28, 1926, ch. 411, Sec. 1, 44 Stat. 669. General provisions concerning such court were incorporated in section 1518 of title 19, U.S.C., 1940 ed., Customs Duties, until amended by act October 10, 1940, ch. 843, Sec. 1, 54 Stat. 1101, adding a new section to the Judicial Code of 1911, when they were transferred to section 296 of title 28, U.S.C., 1940 ed. They are retained in title 28 by this revision. In this connection former Congressman Walter Chandler said, 'Among the major subjects needing study and revision are special courts, such as the Customs Court, which should be fitted into the judicial system.' (See U.S. Law Weekly, Nov. 7, 1939.) HISTORY OF COURT The United States Customs Court (now Court of International Trade) as 'constituted on June 17, 1930', consisted of nine members as provided by act Sept. 21, 1922, ch. 356, title IV, Sec. 518, 42 Stat. 972, which established the Board of General Appraisers, designated the 'United States Customs Court' by act May 28, 1926, ch. 411, Sec. 1, 44 Stat. 669. Provisions similar to these were contained in act Sept. 21, 1922, ch. 356, title IV, Sec. 518, 42 Stat. 972. That section was superseded by section 518 of the Tariff Act of 1930, and was repealed by section 651 (a)(1) of said 1930 act. The sentence in the former first paragraph as to sitting in a case previously participated in, is from act Aug. 5, 1909, ch. 6, Sec. 28, 36 Stat. 98, which combined and amended Customs Administrative Act June 10, 1890, ch. 407, Sec. 12, 26 Stat. 136, and section 31, as added by act May 27, 1908, ch. 205, 35 Stat. 406. Section 12 of the act of 1890 was expressly saved from repeal by act Sept. 21, 1922, ch. 356, title IV, Sec. 643, 42 Stat. 989, and prior acts, but its provisions, other than the sentence above mentioned, were omitted from the Code. Provisions for the review of decisions of Boards of General Appraisers by the Circuit Courts, made by section 15 of the Customs Administrative Act of June 10, 1890, ch. 407, were superseded by provisions for such review by the Court of Customs Appeals created by section 29 added to that act by the Payne-Aldrich Tariff Act of Aug. 5, 1909, ch. 6. The provisions of said new section 29 were incorporated in and superseded by chapter 8 of the Judicial Code of March 3, 1911, incorporated into the Code as former chapter 8 of Title 28, Judicial Code and Judiciary. R.S. Sec. 2608 provided for the appointment of four appraisers of merchandise, to be employed in visiting ports of entry under the direction of the Secretary of the Treasury, and to assist in the appraisement of merchandise as might be deemed necessary by the Secretary to protect and insure uniformity in the collection of the revenue from customs. It was repealed by act June 10, 1890, ch. 407, Sec. 29, 26 Stat. 141. R.S. Sec. 2609 provided for the appointment of merchant appraisers. R.S. Sec. 2610 made every merchant refusing to serve as such appraiser liable to a penalty. Both sections were superseded by the provisions relating to appraisers and appraisements of the Customs Administrative Act of June 10, 1890, ch. 407, 26 Stat. 131, and subsequent acts, and were repealed by act Sept. 21, 1922, ch. 356, title IV, Sec. 642, 42 Stat. 989. R.S. Sec. 2945, which contained a provision similar to that of R.S. Sec. 2610, was repealed, without mention of section 2610, by said Customs Administrative Act of June 10, 1890, ch. 407, Sec. 29, 26 Stat. 141, and was again repealed by section 642 of act Sept. 21, 1922. R.S. Sec. 2725, which prescribed the compensation of merchant appraisers, and section 2726, which prescribed the salary of the general appraiser at New York, were superseded by the provisions relating to general appraisers and appraisers made by the Customs Administrative Act of June 10, 1890, ch. 407, Sec. 12, 13, 26 Stat. 136, as amended by the Payne-Aldrich Act of Aug. 5, 1909, ch. 6, Sec. 28. R.S. Sec. 2727 fixed the salary of the four general appraisers at the sum of $2,500 a year each, and their actual traveling expenses. It was repealed by act Feb. 27, 1877, ch. 69, 19 Stat. 246. AMENDMENTS 1980 - Pub. L. 96-417, title V, Sec. 501(2), Oct. 10, 1980, 94 Stat. 1742, substituted 'COURT OF INTERNATIONAL TRADE' for 'CUSTOMS COURT' in chapter heading. 1970 - Pub. L. 91-271, title I, Sec. 123(a), June 2, 1970, 84 Stat. 282, substituted 'Single-judge trial' for 'Divisions; powers and assignments' in item 254, and 'Three-judge trials' for 'Publication of decisions' in item 255, and added items 256 and 257. -CROSS- RULES OF THE UNITED STATES COURT OF INTERNATIONAL TRADE See Appendix to this title. CROSS REFERENCES Jurisdiction of Court of International Trade, see section 1581 et seq. of this title. ------DocID 36986 Document 583 of 646------ -CITE- 28 USC APPENDIX - RULES OF APPELLATE PROCEDURE Rule 11 -EXPCITE- TITLE 28 APPENDIX FEDERAL RULES OF APPELLATE PROCEDURE TITLE II -HEAD- Rule 11. Transmission of the record -STATUTE- (a) Duty of appellant. - After filing the notice of appeal the appellant, or in the event that more than one appeal is taken, each appellant, shall comply with the provisions of Rule 10(b) and shall take any other action necessary to enable the clerk to assemble and transmit the record. A single record shall be transmitted. (b) Duty of reporter to prepare and file transcript; notice to court of appeals; duty of clerk to transmit the record. - Upon receipt of an order for a transcript, the reporter shall acknowledge at the foot of the order the fact that the reporter has received it and the date on which the reporter expects to have the transcript completed and shall transmit the order, so endorsed, to the clerk of the court of appeals. If the transcript cannot be completed within 30 days of receipt of the order the reporter shall request an extension of time from the clerk of the court of appeals and the action of the clerk of the court of appeals shall be entered on the docket and the parties notified. In the event of the failure of the reporter to file the transcript within the time allowed, the clerk of the court of appeals shall notify the district judge and take such other steps as may be directed by the court of appeals. Upon completion of the transcript the reporter shall file it with the clerk of the district court and shall notify the clerk of the court of appeals that the reporter has done so. When the record is complete for purposes of the appeal, the clerk of the district court shall transmit it forthwith to the clerk of the court of appeals. The clerk of the district court shall number the documents comprising the record and shall transmit with the record a list of documents correspondingly numbered and identified with reasonable definiteness. Documents of unusual bulk or weight, physical exhibits other than documents, and such other parts of the record as the court of appeals may designate by local rule, shall not be transmitted by the clerk unless the clerk is directed to do so by a party or by the clerk of the court of appeals. A party must make advance arrangements with the clerks for the transportation and receipt of exhibits of unusual bulk or weight. (c) Temporary retention of record in district court for use in preparing appellate papers. - Notwithstanding the provisions of (a) and (b) of this Rule 11, the parties may stipulate, or the district court on motion of any party may order, that the clerk of the district court shall temporarily retain the record for use by the parties in preparing appellate papers. In that event the clerk of the district court shall certify to the clerk of the court of appeals that the record, including the transcript or parts thereof designated for inclusion and all necessary exhibits, is complete for purposes of the appeal. Upon receipt of the brief of the appellee, or at such earlier time as the parties may agree or the court may order, the appellant shall request the clerk of the district court to transmit the record. (d) (Extension of time for transmission of the record; reduction of time) (Abrogated) (e) Retention of the record in the district court by order of court. - The court of appeals may provide by rule or order that a certified copy of the docket entries shall be transmitted in lieu of the entire record, subject to the right of any party to request at any time during the pendency of the appeal that designated parts of the record be transmitted. If the record or any part thereof is required in the district court for use there pending the appeal, the district court may make an order to that effect, and the clerk of the district court shall retain the record or parts thereof subject to the request of the court of appeals, and shall transmit a copy of the order and of the docket entries together with such parts of the original record as the district court shall allow and copies of such parts as the parties may designate. (f) Stipulation of parties that parts of the record be retained in the district court. - The parties may agree by written stipulation filed in the district court that designated parts of the record shall be retained in the district court unless thereafter the court of appeals shall order or any party shall request their transmittal. The parts thus designated shall nevertheless be a part of the record on appeal for all purposes. (g) Record for preliminary hearing in the court of appeals. - If prior to the time the record is transmitted a party desires to make in the court of appeals a motion for dismissal, for release, for a stay pending appeal, for additional security on the bond on appeal or on a supersedeas bond, or for any intermediate order, the clerk of the district court at the request of any party shall transmit to the court of appeals such parts of the original record as any party shall designate. -SOURCE- (As amended Apr. 30, 1979, eff. Aug. 1, 1979; Mar. 10, 1986, eff. July 1, 1986.) -MISC1- NOTES OF ADVISORY COMMITTEE ON APPELLATE RULES Subdivisions (a) and (b). These subdivisions are derived from FRCP 73(g) and FRCP 75(e). FRCP 75(e) presently directs the clerk of the district court to transmit the record within the time allowed or fixed for its filing, which, under the provisions of FRCP 73(g) is within 40 days from the date of filing the notice of appeal, unless an extension is obtained from the district court. The precise time at which the record must be transmitted thus depends upon the time required for delivery of the record from the district court to the court of appeals, since, to permit its timely filing, it must reach the court of appeals before expiration of the 40-day period of an extension thereof. Subdivision (a) of this rule provides that the record is to be transmitted within the 40-day period, or any extension thereof; subdivision (b) provides that transmission is effected when the clerk of the district court mails or otherwise forwards the record to the clerk of the court of appeals; Rule 12(b) directs the clerk of the court of appeals to file the record upon its receipt following timely docketing and transmittal. It can thus be determined with certainty precisely when the clerk of the district court must forward the record to the clerk of the court of appeals in order to effect timely filing: the final day of the 40-day period or of any extension thereof. Subdivision (c). This subdivision is derived from FRCP 75(e) without change of substance. Subdivision (d). This subdivision is derived from FRCP 73(g) and FRCrP 39(c). Under present rules the district court is empowered to extend the time for filing the record and docketing the appeal. Since under the proposed rule timely transmission now insures timely filing (see note to subdivisions (a) and (b) above) the power of the district court is expressed in terms of its power to extend the time for transmitting the record. Restriction of that power to a period of 90 days after the filing of the notice of appeal represents a change in the rule with respect to appeals in criminal cases. FRCrP 39(c) now permits the district court to extend the time for filing and docketing without restriction. No good reason appears for a difference between the civil and criminal rule in this regard, and subdivision (d) limits the power of the district court to extend the time for transmitting the record in all cases to 90 days from the date of filing the notice of appeal, just as its power is now limited with respect to docketing and filing in civil cases. Subdivision (d) makes explicit the power of the court of appeals to permit the record to be filed at any time. See Pyramid Motor Freight Corporation v. Ispass, 330, U.S. 695, 67 S.Ct. 954, 91 L.Ed. 1184 (1947). Subdivisions (e), (f) and (g). These subdivisions are derived from FRCP 75(f), (a) and (g), respectively, without change of substance. NOTES OF ADVISORY COMMITTEE ON APPELLATE RULES - 1979 AMENDMENT Under present Rule 11(a) it is provided that the record shall be transmitted to the court of appeals within 40 days after the filing of the notice of appeal. Under present Rule 11(d) the district court, on request made during the initial time or any extension thereof, and cause shown, may extend the time for the transmission of the record to a point not more than 90 days after the filing of the first notice of appeal. If the district court is without authority to grant a request to extend the time, or denies a request for extension, the appellant may make a motion for extension of time in the court of appeals. Thus the duty to see that the record is transmitted is placed on the appellant. Aside from ordering the transcript within the time prescribed the appellant has no control over the time at which the record is transmitted, since all steps beyond this point are in the hands of the reporter and the clerk. The proposed amendments recognize this fact and place the duty directly on the reporter and the clerk. After receiving the written order for the transcript (See Note to Rule 10(b) above), the reporter must acknowledge its receipt, indicate when he expects to have it completed, and mail the order so endorsed to the clerk of the court of appeals. Requests for extensions of time must be made by the reporter to the clerk of the court of appeals and action on such requests is entered on the docket. Thus from the point at which the transcript is ordered the clerk of the court of appeals is made aware of any delays. If the transcript is not filed on time, the clerk of the court of appeals will notify the district judge. Present Rule 11(b) provides that the record shall be transmitted when it is 'complete for the purposes of the appeal.' The proposed amended rule continues this requirement. The record is complete for the purposes of the appeal when it contains the original papers on file in the clerk's office, all necessary exhibits, and the transcript, if one is to be included. Cf. present Rule 11(c). The original papers will be in the custody of the clerk of the district court at the time the notice of appeal is filed. See Rule 5(e) of the F.R.C.P. The custody of exhibits is often the subject of local rules. Some of them require that documentary exhibits must be deposited with the clerk. See Local Rule 13 of the Eastern District of Virginia. Others leave exhibits with counsel, subject to order of the court. See Local Rule 33 of the Northern District of Illinois. If under local rules the custody of exhibits is left with counsel, the district court should make adequate provision for their preservation during the time during which an appeal may be taken, the prompt deposit with the clerk of such as under Rule 11(b) are to be transmitted to the court of appeals, and the availability of others in the event that the court of appeals should require their transmission. Cf. Local Rule 11 of the Second Circuit. Usually the record will be complete with the filing of the transcript. While the proposed amendment requires transmission 'forthwith' when the record is complete, it was not designed to preclude a local requirement by the court of appeals that the original papers and exhibits be transmitted when complete without awaiting the filing of the transcript. The proposed amendments continue the provision in the present rule that documents of unusual bulk or weight and physical exhibits other than documents shall not be transmitted without direction by the parties or by the court of appeals, and the requirement that the parties make special arrangements for transmission and receipt of exhibits of unusual bulk or weight. In addition, they give recognition to local rules that make transmission of other record items subject to order of the court of appeals. See Local Rule 4 of the Seventh Circuit. NOTES OF ADVISORY COMMITTEE ON APPELLATE RULES - 1986 AMENDMENT The amendments to Rule 11(b) are technical. No substantive change is intended. -CROSS- CROSS REFERENCES Records: obsolete papers, see section 457 of this title. Reporters' transcript of proceedings, see section 753 of this title. ------DocID 37051 Document 584 of 646------ -CITE- 28 USC APPENDIX - RULES OF CIVIL PROCEDURE Rule 11 -EXPCITE- TITLE 28 APPENDIX FEDERAL RULES OF CIVIL PROCEDURE III -HEAD- Rule 11. Signing of Pleadings, Motions, and Other Papers; Sanctions -STATUTE- Every pleading, motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record in the attorney's individual name, whose address shall be stated. A party who is not represented by an attorney shall sign the party's pleading, motion, or other paper and state the party's address. Except when otherwise specifically provided by rule or statute, pleadings need not be verified or accompanied by affidavit. The rule in equity that the averments of an answer under oath must be overcome by the testimony of two witnesses or of one witness sustained by corroborating circumstances is abolished. The signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; that to the best of the signer's knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. If a pleading, motion, or other paper is not signed, it shall be stricken unless it is signed promptly after the omission is called to the attention of the pleader or movant. If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee. -SOURCE- (As amended Apr. 28, 1983, eff. Aug. 1, 1983; Mar. 2, 1987, eff. Aug. 1, 1987.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES This is substantially the content of (former) Equity Rules 24 (Signature of Counsel) and 21 (Scandal and Impertinence) consolidated and unified. Compare (former) Equity Rule 36 (Officers Before Whom Pleadings Verified). Compare to similar purposes, English Rules Under the Judicature Act (The Annual Practice, 1937) O. 19, r. 4, and Great Australian Gold Mining Co. v. Martin, L. R., 5 Ch.Div. 1, 10 (1877). Subscription of pleadings is required in many codes. 2 Minn.Stat. (Mason, 1927) Sec. 9265; N.Y.R.C.P. (1937) Rule 91; 2 N.D.Comp.Laws Ann. (1913) Sec. 7455. This rule expressly continues any statute which requires a pleading to be verified or accompanied by an affidavit, such as: U.S.C., Title 28: Sec. 381 (former) (Preliminary injunctions and temporary restraining orders) Sec. 762 (now 1402) (Suit against the United States). U.S.C., Title 28, Sec. 829 (now 1927) (Costs; attorney liable for, when) is unaffected by this rule. For complaints which must be verified under these rules, see Rules 23(b) (Secondary Action by Shareholders) and 65 (Injunctions). For abolition of the rule in equity that the averments of an answer under oath must be overcome by the testimony of two witnesses or of one witness sustained by corroborating circumstances, see Pa.Stat.Ann. (Purdon, 1931) see 12 P.S.Pa., Sec. 1222; for the rule in equity itself, see Greenfield v. Blumenthal, 69 F.2d 294 (C.C.A. 3d, 1934). NOTES OF ADVISORY COMMITTEE ON RULES - 1983 AMENDMENT Since its original promulgation, Rule 11 has provided for the striking of pleadings and the imposition of disciplinary sanctions to check abuses in the signing of pleadings. Its provisions have always applied to motions and other papers by virtue of incorporation by reference in Rule 7(b)(2). The amendment and the addition of Rule 7(b)(3) expressly confirms this applicability. Experience shows that in practice Rule 11 has not been effective in deterring abuses. See 6 Wright & Miller, Federal Practice and Procedure: Civil Sec. 1334 (1971). There has been considerable confusion as to (1) the circumstances that should trigger striking a pleading or motion or taking disciplinary action, (2) the standard of conduct expected of attorneys who sign pleadings and motions, and (3) the range of available and appropriate sanctions. See Rodes, Ripple & Mooney, Sanctions Imposable for Violations of the Federal Rules of Civil Procedure 64-65, Federal Judicial Center (1981). The new language is intended to reduce the reluctance of courts to impose sanctions, see Moore, Federal Practice 7.05, at 1547, by emphasizing the responsibilities of the attorney and reenforcing those obligations by the imposition of sanctions. The amended rule attempts to deal with the problem by building upon and expanding the equitable doctrine permitting the court to award expenses, including attorney's fees, to a litigant whose opponent acts in bad faith in instituting or conducting litigation. See, e.g., Roadway Express, Inc. v. Piper, 447 U.S. 752, (1980); Hall v. Cole, 412 U.S. 1, 5 (1973). Greater attention by the district courts to pleading and motion abuses and the imposition of sanctions when appropriate, should discourage dilatory or abusive tactics and help to streamline the litigation process by lessening frivolous claims or defenses. The expanded nature of the lawyer's certification in the fifth sentence of amended Rule 11 recognizes that the litigation process may be abused for purposes other than delay. See, e.g., Browning Debenture Holders' Committee v. DASA Corp., 560 F.2d 1078 (2d Cir. 1977). The words 'good ground to support' the pleading in the original rule were interpreted to have both factual and legal elements. See, e.g., Heart Disease Research Foundation v. General Motors Corp., 15 Fed.R.Serv. 2d 1517, 1519 (S.D.N.Y. 1972). They have been replaced by a standard of conduct that is more focused. The new language stresses the need for some prefiling inquiry into both the facts and the law to satisfy the affirmative duty imposed by the rule. The standard is one of reasonableness under the circumstances. See Kinee v. Abraham Lincoln Fed. Sav. & Loan Ass'n, 365 F.Supp. 975 (E.D.Pa. 1973). This standard is more stringent than the original good-faith formula and thus it is expected that a greater range of circumstances will trigger its violation. See Nemeroff v. Abelson, 620 F.2d 339 (2d Cir. 1980). The rule is not intended to chill an attorney's enthusiasm or creativity in pursuing factual or legal theories. The court is expected to avoid using the wisdom of hindsight and should test the signer's conduct by inquiring what was reasonable to believe at the time the pleading, motion, or other paper was submitted. Thus, what constitutes a reasonable inquiry may depend on such factors as how much time for investigation was available to the signer; whether he had to rely on a client for information as to the facts underlying the pleading, motion, or other paper; whether the pleading, motion, or other paper was based on a plausible view of the law; or whether he depended on forwarding counsel or another member of the bar. The rule does not require a party or an attorney to disclose privileged communications or work product in order to show that the signing of the pleading, motion, or other paper is substantially justified. The provisions of Rule 26(c), including appropriate orders after in camera inspection by the court, remain available to protect a party claiming privilege or work product protection. Amended Rule 11 continues to apply to anyone who signs a pleading, motion, or other paper. Although the standard is the same for unrepresented parties, who are obliged themselves to sign the pleadings, the court has sufficient discretion to take account of the special circumstances that often arise in pro se situations. See Haines v. Kerner 404 U.S. 519 (1972). The provision in the orignal rule for striking pleadings and motions as sham and false has been deleted. The passage has rarely been utilized, and decisions thereunder have tended to confuse the issue of attorney honesty with the merits of the action. See generally Risinger, Honesty in Pleading and its Enforcement: Some 'Striking' Problems with Fed. R. Civ. P. 11, 61 Minn.L.Rev. 1 (1976). Motions under this provision generally present issues better dealt with under Rules 8, 12, or 56. See Murchison v. Kirby, 27 F.R.D. 14 (S.D.N.Y. 1961); 5 Wright & Miller, Federal Practice and Procedure: Civil Sec. 1334 (1969). The former reference to the inclusion of scandalous or indecent matter, which is itself strong indication that an improper purpose underlies the pleading, motion, or other paper, also has been deleted as unnecessary. Such matter may be stricken under Rule 12(f) as well as dealt with under the more general language of amended Rule 11. The text of the amended rule seeks to dispel apprehensions that efforts to obtain enforcement will be fruitless by insuring that the rule will be applied when properly invoked. The word 'sanctions' in the caption, for example, stresses a deterrent orientation in dealing with improper pleadings, motions or other papers. This corresponds to the approach in imposing sanctions for discovery abuses. See National Hockey League v. Metropolitan Hockey Club, 427 U.S. 639 (1976) (per curiam). And the words 'shall impose' in the last sentence focus the court's attention on the need to impose sanctions for pleading and motion abuses. The court, however, retains the necessary flexibility to deal appropriately with violations of the rule. It has discretion to tailor sanctions to the particular facts of the case, with which it should be well acquainted. The reference in the former text to wilfulness as a prerequisite to disciplinary action has been deleted. However, in considering the nature and severity of the sanctions to be imposed, the court should take account of the state of the attorney's or party's actual or presumed knowledge when the pleading or other paper was signed. Thus, for example, when a party is not represented by counsel, the absence of legal advice is an appropriate factor to be considered. Courts currently appear to believe they may impose sanctions on their own motion. See North American Trading Corp. v. Zale Corp., 73 F.R.D. 293 (S.D.N.Y. 1979). Authority to do so has been made explicit in order to overcome the traditional reluctance of courts to intervene unless requested by one of the parties. The detection and punishment of a violation of the signing requirement, encouraged by the amended rule, is part of the court's responsibility for securing the system's effective operation. If the duty imposed by the rule is violated, the court should have the discretion to impose sanctions on either the attorney, the party the signing attorney representes, or both, or on an unrepresented party who signed the pleading, and the new rule so provides. Although Rule 11 has been silent on the point, courts have claimed the power to impose sanctions on an attorney personally, either by imposing costs or employing the contempt technique. See 5 Wright & Miller, Federal Practice and Procedure: Civil Sec. 1334 (1969); 2A Moore, Federal Practice 11.02, at 2104 n.8. This power has been used infrequently. The amended rule should eliminate any doubt as to the propriety of assessing sanctions against the attorney. Even though it is the attorney whose signature violates the rule, it may be appropriate under the circumstances of the case to impose a sanction on the client. See Browning Debenture Holders' Committee v. DASA Corp., supra. This modification brings Rule 11 in line with practice under Rule 37, which allows sanctions for abuses during discovery to be imposed upon the party, the attorney, or both. A party seeking sanctions should give notice to the court and the offending party promptly upon discovering a basis for doing so. The time when sanctions are to be imposed rests in the discretion of the trial judge. However, it is anticipated that in the case of pleadings the sanctions issue under Rule 11 normally will be determined at the end of the litigation, and in the case of motions at the time when the motion is decided or shortly thereafter. The procedure obviously must comport with due process requirements. The particular format to be followed should depend on the circumstances of the situation and the severity of the sanction under consideration. In many situations the judge's participation in the proceedings provides him with full knowledge of the relevant facts and little further inquiry will be necessary. To assure that the efficiencies achieved through more effective operation of the pleading regimen will not be offset by the cost of satellite litigation over the imposition of sanctions, the court must to the extent possible limit the scope of sanction proceedings to the record. Thus, discovery should be conducted only by leave of the court, and then only in extraordinary circumstances. Although the encompassing reference to 'other papers' in new Rule 11 literally includes discovery papers, the certification requirement in that context is governed by proposed new Rule 26(g). Discovery motions, however, fall within the ambit of Rule 11. NOTES OF ADVISORY COMMITTEE ON RULES - 1987 AMENDMENT The amendments are technical. No substantive change is intended. -CROSS- CROSS REFERENCES Notary public and other persons authorized to administer oaths required by laws of the United States, see section 2903 of Title 5, Government Organization and Employees. Signing of motions and other papers, see rule 7. ------DocID 37151 Document 585 of 646------ -CITE- 28 USC APPENDIX - RULES OF CIVIL PROCEDURE Form 11 -EXPCITE- TITLE 28 APPENDIX FEDERAL RULES OF CIVIL PROCEDURE APPENDIX OF FORMS -HEAD- Form 11. Complaint for Conversion -STATUTE- 1. Allegation of jurisdiction. 2. On or about December 1, 1936, defendant converted to his own use ten bonds of the XXXX Company (here insert brief identification as by number and issue) of the value of XXX dollars, the property of plaintiff. Wherefore plaintiff demands judgment against defendant in the sum of XXX dollars, interest, and costs. -SOURCE- (As amended Jan. 21, 1963, eff. July 1, 1963.) -MISC1- NOTES OF ADVISORY COMMITTEE ON RULES - 1963 AMENDMENT This form was amended in 1963 by deleting the stated dollar amount and substituting a blank, to be properly filled in by the pleader. See Note of Advisory Committee under Form 3. ------DocID 37274 Document 586 of 646------ -CITE- 28 USC APPENDIX - RULES OF THE SUPREME COURT Rule 11 -EXPCITE- TITLE 28 APPENDIX RULES OF THE SUPREME COURT OF THE UNITED STATES PART III -HEAD- Rule 11. Certiorari to a United States Court of Appeals Before Judgment -STATUTE- A petition for a writ of certiorari to review a case pending in a United States court of appeals, before judgment is given in that court, will be granted only upon a showing that the case is of such imperative public importance as to justify deviation from normal appellate practice and to require immediate settlement in this Court. 28 U.S.C. Sec. 2101(e). ------DocID 37332 Document 587 of 646------ -CITE- 28 USC APPENDIX - RULES OF CLAIMS COURT Rule 11 -EXPCITE- TITLE 28 APPENDIX RULES OF THE UNITED STATES CLAIMS COURT TITLE III -HEAD- Rule 11. Signing of Pleadings, Motions, and Other Papers; Sanctions -STATUTE- Every pleading, motion, and other paper of a party represented by an attorney shall be signed by or for the attorney of record in the signing attorney's own individual name, whose address and telephone number shall be stated. See Rule 81(d)(2). A party who is not represented by an attorney shall sign the pleading, motion, or other paper and state the party's address. Any stipulation for a money judgment shall be signed by an authorized representative of the Attorney General. Except when otherwise specifically provided by rule or statute, pleadings need not be verified or accompanied by affidavit. The rule in equity that the averments of an answer under oath must be overcome by the testimony of two witnesses or of one witness sustained by corroborating circumstances is abolished. The signature of an attorney or party constitutes a certificate by the attorney or party that the attorney or party has read the pleading, motion, or other paper; that to the best of the attorney's or party's knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. If a pleading, motion, or other paper is not signed, it shall be stricken unless it is signed promptly after the omission is called to the attention of the pleader or movant. If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee. ------DocID 37437 Document 588 of 646------ -CITE- 28 USC APPENDIX - RULES OF THE COURT OF INTERNATIONAL TRADE Rule 11 -EXPCITE- TITLE 28 APPENDIX RULES OF THE UNITED STATES COURT OF INTERNATIONAL TRADE TITLE III -HEAD- Rule 11. Signing of Pleadings, Motions or Other Papers - Sanctions -STATUTE- Every pleading, motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record in the attorney's individual name, whose address and telephone number shall be stated. Every pleading, motion, and other paper of the United States shall be signed by an attorney authorized to do so on behalf of the Assistant Attorney General, Civil Division, Department of Justice. A pleading, motion, or other paper of an agency of the United States, authorized by statute to represent itself in judicial proceedings, may be signed by an attorney authorized to do so on behalf of the agency. A party who is not represented by an attorney shall sign the party's pleading, motion, or other paper and state the party's address and telephone number. Except when otherwise specifically prescribed by rule or statute, pleadings or other papers need not be verified or accompanied by affidavit. The signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; that to the best of the signer's knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. If a pleading, motion, or other paper is not signed, it shall be stricken unless it is signed promptly after the omission is called to the attention of the pleader or movant. If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee. -SOURCE- (As amended Oct. 3, 1984, eff. Jan. 1, 1985; July 28, 1988, eff. Nov. 1, 1988.) ------DocID 37554 Document 589 of 646------ -CITE- 28 USC APPENDIX - RULES OF THE COURT OF INTERNATIONAL TRADE Form 11 -EXPCITE- TITLE 28 APPENDIX RULES OF THE UNITED STATES COURT OF INTERNATIONAL TRADE APPENDIX OF FORMS -HEAD- Form 11 *** ILLUSTRATIONS OR TABLE DATA OMITTED *** -STATUTE- SAVE PAGE FOR ILLUSTRATION ------DocID 37581 Document 590 of 646------ -CITE- 29 USC Sec. 11 -EXPCITE- TITLE 29 CHAPTER 2 -HEAD- Sec. 11. Bureau established -STATUTE- There shall be established in the Department of Labor a bureau to be known as the Women's Bureau. -SOURCE- (June 5, 1920, ch. 248, Sec. 1, 41 Stat. 987.) -TRANS- TRANSFER OF FUNCTIONS For transfer of functions of other officers, employees, and agencies of Department of Labor, with certain exceptions, to Secretary of Labor, with power to delegate, see Reorg. Plan No. 6 of 1950, Sec. 1, 2, 15 F.R. 3174, 64 Stat. 1263, set out in the Appendix to Title 5, Government Organization and Employees. ------DocID 37731 Document 591 of 646------ -CITE- 29 USC CHAPTER 11 -EXPCITE- TITLE 29 CHAPTER 11 -HEAD- CHAPTER 11 - LABOR-MANAGEMENT REPORTING AND DISCLOSURE PROCEDURE -MISC1- SUBCHAPTER I - GENERAL PROVISIONS Sec. 401. Congressional declaration of findings, purposes, and policy. (a) Standards for labor-management relations. (b) Protection of rights of employees and the public. (c) Necessity to eliminate or prevent improper practices. 402. Definitions. SUBCHAPTER II - BILL OF RIGHTS OF MEMBERS OF LABOR ORGANIZATIONS 411. Bill of rights; constitution and bylaws of labor organizations. (a)(1) Equal rights. (2) Freedom of speech and assembly. (3) Dues, initiation fees, and assessments. (4) Protection of the right to sue. (5) Safeguards against improper disciplinary action. (b) Invalidity of constitution and bylaws. 412. Civil action for infringement of rights; jurisdiction. 413. Retention of existing rights of members. 414. Right to copies of collective bargaining agreements. 415. Information to members of provisions of chapter. SUBCHAPTER III - REPORTING BY LABOR ORGANIZATIONS, OFFICERS AND EMPLOYEES OF LABOR ORGANIZATIONS, AND EMPLOYERS 431. Report of labor organizations. (a) Adoption and filing of constitution and bylaws; contents of report. (b) Annual financial report; filing; contents. (c) Availability of information to members; examination of books, records, and accounts. 432. Report of officers and employees of labor organizations. (a) Filing; contents of report. (b) Report of certain bona fide investments. (c) Exemption from filing requirement. 433. Report of employers. (a) Filing and contents of report of payments, loans, promises, agreements, or arrangements. (b) Persuasive activities relating to the right to organize and bargain collectively; supplying information of activities in connection with labor disputes; filing and contents of report of agreement or arrangement. (c) Advisory or representative services exempt from filing requirements. (d) Exemption from filing requirements generally. (e) Services by and payments to regular officers, supervisors, and employees of employer. (f) Rights protected by section 158(c) of this title. (g) 'Interfere with, restrain, or coerce' defined. 434. Exemption of attorney-client communications. 435. Reports and documents as public information. (a) Publication; statistical and research purposes. (b) Inspection and examination of information and data. (c) Copies of reports or documents; availability to State agencies. 436. Retention of records. 437. Time for making reports. 438. Rules and regulations; simplified reports. 439. Violations and penalties. (a) Willful violations of provisions of subchapter. (b) False statements or representations of fact with knowledge of falsehood. (c) False entry in or willful concealment, etc., of books and records. (d) Personal responsibility of individuals required to sign reports. 440. Civil action for enforcement by Secretary; jurisdiction. 441. Surety company reports; contents; waiver or modification of requirements respecting contents of reports. SUBCHAPTER IV - TRUSTEESHIPS 461. Reports. (a) Filing and contents; annual financial report. (b) Applicability of other laws. (c) Penalty for violations. (d) False statements and entries; failure to disclose material facts; withholding, concealing or destroying documents, books, records, reports, or statements; penalty. (e) Personal liability. 462. Purposes for establishment of trusteeship. 463. Unlawful acts relating to labor organization under trusteeship. 464. Civil action for enforcement. (a) Complaint; investigation; commencement of action by Secretary, member or subordinate body of labor organization; jurisdiction. (b) Venue. (c) Presumptions of validity or invalidity of trusteeship. 465. Report to Congress. 466. Additional rights and remedies; exclusive jurisdiction of district court; res judicata. SUBCHAPTER V - ELECTIONS 481. Terms of office and election procedures. (a) Officers of national or international labor organizations; manner of election. (b) Officers of local labor organizations; manner of election. (c) Requests for distribution of campaign literature; civil action for enforcement; jurisdiction; inspection of membership lists; adequate safeguards to insure fair election. (d) Officers of intermediate bodies; manner of election. (e) Nomination of candidates; eligibility; notice of election; voting rights; counting and publication of results; preservation of ballots and records. (f) Election of officers by convention of delegates; manner of conducting convention; preservation of records. (g) Use of dues, assessments or similar levies, and funds of employer for promotion of candidacy of person. (h) Removal of officers guilty of serious misconduct. (i) Rules and regulations for determining adequacy of removal procedures. 482. Enforcement. (a) Filing of complaint; presumption of validity of challenged election. (b) Investigation of complaint; commencement of civil action by Secretary; jurisdiction; preservation of assets. (c) Declaration of void election; order for new election; certification of election to court; decree; certification of result of vote for removal of officers. (d) Review of orders; stay of order directing election. 483. Application of other laws; existing rights and remedies; exclusiveness of remedy for challenging election. SUBCHAPTER VI - SAFEGUARDS FOR LABOR ORGANIZATIONS 501. Fiduciary responsibility of officers of labor organizations. (a) Duties of officers; exculpatory provisions and resolutions void. (b) Violation of duties; action by member after refusal or failure by labor organization to commence proceedings; jurisdiction; leave of court; counsel fees and expenses. (c) Embezzlement of assets; penalty. 502. Bonding of officers and employees of labor organizations; amount, form, and placement of bonds; penalty for violation. 503. Financial transactions between labor organization and officers and employees. (a) Direct and indirect loans. (b) Direct or indirect payment of fines. (c) Penalty for violations. 504. Prohibition against certain persons holding office. (a) Membership in Communist Party; persons convicted of robbery, bribery, etc. (b) Penalty for violations. (c) Definitions. (d) Salary of person barred from labor organization office during appeal of conviction. SUBCHAPTER VII - MISCELLANEOUS PROVISIONS 521. Investigations by Secretary; applicability of other laws. 522. Extortionate picketing; penalty for violation. 523. Retention of rights under other Federal and State laws. 524. Effect on State laws. 524a. Elimination of racketeering activities threat; State legislation governing collective bargaining representative. 525. Service of process. 526. Applicability of administrative procedure provisions. 527. Cooperation with other agencies and departments. 528. Criminal contempt. 529. Prohibition on certain discipline by labor organization. 530. Deprivation of rights by violence; penalty. 531. Separability. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in sections 186, 1111 of this title; title 39 section 1209; title 42 section 2000e. ------DocID 38473 Document 592 of 646------ -CITE- 30 USC Sec. 11 -EXPCITE- TITLE 30 CHAPTER 1 -HEAD- Sec. 11. Omitted -COD- CODIFICATION Section, act May 9, 1938, ch. 187, Sec. 1, 52 Stat. 329, providing that purchase of supplies and equipment or procurement of services for Bureau of Mines might be made in open market without compliance with section 5 of Title 41, Public Contracts, where amount involved did not exceed $100, was a provision of Interior Department appropriation act and was discontinued in acts subsequent to 1938 appropriation act. ------DocID 38697 Document 593 of 646------ -CITE- 30 USC CHAPTER 11 -EXPCITE- TITLE 30 CHAPTER 11 -HEAD- CHAPTER 11 - MINING CLAIMS ON LANDS SUBJECT TO MINERAL LEASING LAWS -MISC1- Sec. 501. Mining claims located between July 31, 1939, and January 1, 1953. (a) Force and effect. (b) Labor and improvement. (c) Withdrawal or reservation. 502. Reservation of minerals to the United States; rights of entry, disposition and removal. 503. Reservations required by law; atomic energy materials. 504. Power to make arrangements respecting atomic energy materials as unaffected. 505. 'Mineral leasing laws' defined. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in section 521 of this title; title 42 section 2098. ------DocID 39236 Document 594 of 646------ -CITE- 31 USC CHAPTER 11 -EXPCITE- TITLE 31 SUBTITLE II CHAPTER 11 -HEAD- CHAPTER 11 - THE BUDGET AND FISCAL, BUDGET, AND PROGRAM INFORMATION -MISC1- Sec. 1101. Definitions. 1102. Fiscal year. 1103. Budget ceiling. 1104. Budget and appropriations authority of the President. 1105. Budget contents and submission to Congress. 1106. Supplemental budget estimates and changes. 1107. Deficiency and supplemental appropriations. 1108. Preparation and submission of appropriations requests to the President. 1109. Current programs and activities estimates. 1110. Year-ahead requests for authorizing legislation. 1111. Improving economy and efficiency. 1112. Fiscal, budget, and program information. 1113. Congressional information. 1114. Budget information on consulting services. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in sections 1512, 9109 of this title; title 2 section 907a; title 7 sections 934, 1932; title 19 section 2232; title 42 sections 1487, 1962b-6, 8107, 10156, 10222. ------DocID 39693 Document 595 of 646------ -CITE- 33 USC Sec. 11 -EXPCITE- TITLE 33 CHAPTER 1 SUBCHAPTER I -HEAD- Sec. 11. Authority for compact between Middle Northwest States as to jurisdiction of offenses committed on boundary waters -STATUTE- The consent of the Congress is given to the States of North Dakota, South Dakota, Minnesota, Wisconsin, Iowa, and Nebraska, or any two or more of them, by such agreement or compact as they may deem desirable or necessary, or as may be evidenced by legislative acts enacted by any two or more of said States, not in conflict with the Constitution of the United States or any law thereof, to determine and settle the jurisdiction to be exercised by said States, respectively, over offenses arising out of the violation of the laws of any of said States upon any of the waters forming the boundary lines between any two or more of said States, or waters through which such boundary line extends, and that the consent of the Congress be, and the same is, given to the concurrent jurisdiction agreed to by the States of Minnesota and South Dakota, as evidenced by the act of the Legislature of the State of Minnesota approved April 20, 1917, and the act of the Legislature of the State of South Dakota approved February 13, 1917. -SOURCE- (Mar. 4, 1921, ch. 176, 41 Stat. 1447.) -COD- CODIFICATION This section is from a resolution entitled a 'Joint Resolution giving consent of the Congress of the United States to the States of North Dakota, South Dakota, Minnesota, Wisconsin, Iowa, and Nebraska, or any two or more of said States, to agree upon the jurisdiction to be exercised by said States over boundary waters between any two or more of said States'. ------DocID 39957 Document 596 of 646------ -CITE- 33 USC CHAPTER 11 -EXPCITE- TITLE 33 CHAPTER 11 -HEAD- CHAPTER 11 - BRIDGES OVER NAVIGABLE WATERS -MISC1- SUBCHAPTER I - GENERAL PROVISIONS Sec. 491. Approval of and deviation from plans; exemptions. 492. Bridge as post route; limitation as to charges against Government; telegraph and telephone lines. 493. Use of railroad bridges by other railroad companies. 494. Obstruction of navigation; alterations and removals; lights and signals; draws. 495. Violations of orders respecting bridges and accessory works. (a) Criminal penalties for violation; misdemeanor; fine; new offenses; jurisdiction: suits for recovery of removal expenses, enforcement of removal, and obstruction-to-navigation causes or questions. (b) Civil penalties for violation; separate offenses; notice and hearing; assessment, collection, and remission; civil actions. 496. Time for commencement and completion of bridge. 497. 'Persons' defined. 498. Reservation of right to alter or repeal. 498a, 498b. Repealed. 499. Regulations for drawbridges. (a) Criminal penalties for violations; enforcement; rules and regulations. (b) Nonstructural vessel appurtenances; unreasonable delays. (c) Civil penalties for violation; notice and hearing; assessment, collection, and remission; civil actions. 500. Deflection of current; liability to riparian owners. 501. Omitted. 502. Alteration, removal, or repair of bridge or accessory obstructions to navigation. (a) Criminal penalties for violation; alteration or removal requirements; notice and hearing; specification of changes; time for compliance; notice to United States Attorney; misdemeanor; fine; new offenses. (b) Proper repair requirement. (c) Civil penalties for violation; separate offenses; notice and hearing; assessment, collection, and remission; civil actions. 503 to 507. Repealed. 508. Amount of tolls. SUBCHAPTER II - ALTERATION OF BRIDGES 511. Definitions. 512. Obstruction of navigation. 513. Notice, hearings, and findings. 514. Submission and approval of general plans and specifications. 515. Contracts for project; guaranty of cost. 516. Apportionment of cost. 517. Payment of share of United States. 518. Authorization of appropriations. 519. Noncompliance with orders; penalties; removal of bridge. 520. Review of findings and orders. 521. Regulations and orders. 522. Existing provisions of law. (a) Obstructing navigation; criminal penalties. (b) Construction, reconstruction, or alteration of bridges not completed on July 1, 1939; apportionment of costs. (c) Construction, reconstruction, or alteration of bridges not begun on July 1, 1939. 523. Relocation of bridges. 524. Applicability of administrative procedure provisions. SUBCHAPTER III - GENERAL BRIDGE AUTHORITY 525. Construction and operation of bridges. (a) Consent of Congress. (b) Approval of plans. (c) Private highway toll bridges. 526, 526a. Repealed. 527. Acquisition of interstate bridges by public agencies; amount of damages. 528. Statement of construction costs of privately owned interstate bridges; investigation of costs; conclusiveness of findings; review. 529. Repealed. 530. Bridges included and excluded. 531. International bridges. 532. Eminent domain. 533. Penalties for violations. (a) Criminal penalties for violation. (b) Civil penalties for violation; separate offenses; notice and hearing; assessment, collection, and remission; civil actions. 534. Conveyance of right, title, and interest of United States in bridges transferred to States or political subdivisions; terms and conditions. SUBCHAPTER IV - INTERNATIONAL BRIDGES 535. Congressional consent to construction, maintenance, and operation of international bridges; conditions of consent. 535a. Congressional consent to State agreements with Canada and Mexico; Secretary of State's approval of agreements. 535b. Presidential approval; recommendations of Federal officials. 535c. Secretary of Transportation's approval; commencement and completion requirements; extension of time limits. 535d. Repealed. 535e. Ownership. (a) Sale, assignment, or transfer; Secretary of Transportation's approval. (b) State status of original applicant upon acquisition of right, title, and interest after termination of private entity licenses, contracts, or orders. 535f. Applicability of provisions. 535g. Federal navigable waters and commerce jurisdiction unaffected. 535h. Report of Secretary of Transportation's approval during fiscal year. 535i. Reservation of right to alter or repeal. ------DocID 40182 Document 597 of 646------ -CITE- 33 USC Sec. 701b-11 -EXPCITE- TITLE 33 CHAPTER 15 -HEAD- Sec. 701b-11. Flood protection projects -STATUTE- (a) General considerations; nonstructural alternatives In the survey, planning, or design by any Federal agency of any project involving flood protection, consideration shall be given to nonstructural alternatives to prevent or reduce flood damages including, but not limited to, floodproofing of structures; flood plain regulation; acquisition of flood plain lands for recreational, fish and wildlife, and other public purposes; and relocation with a view toward formulating the most economically, socially, and environmentally acceptable means of reducing or preventing flood damages. (b) Non-Federal participation through nonstructural alternatives; limitation Where a nonstructural alternative is recommended, non-Federal participation shall be comparable to the value of lands, easements, and rights-of-way which would have been required of non-Federal interests under section 701c of this title, for structural protection measures, but in no event shall exceed 20 per centum of the project costs. -SOURCE- (Pub. L. 93-251, title I, Sec. 73, Mar. 7, 1974, 88 Stat. 32.) ------DocID 40225 Document 598 of 646------ -CITE- 33 USC Sec. 702a-11 -EXPCITE- TITLE 33 CHAPTER 15 -HEAD- Sec. 702a-11. Morganza Floodway; Eudora Floodway -STATUTE- The United States may, within the discretion of the Chief of Engineers, irrespective of other provisions of law, proceed to acquire all easements needed and of the character considered advisable in the Morganza floodway and to construct said Morganza floodway. Said Morganza floodway may, within the discretion of the Chief of Engineers, be modified as to its design and inflow. The said Morganza floodway may be initiated and constructed without delay; and the United States may, within the discretion of the Chief of Engineers, irrespective of other provisions of law, proceed to the acquisition of flowage rights and flowage easements in the Eudora floodway, and to its construction as authorized by existing law: Provided, That the intakes of such Eudora floodway shall include an automatic masonry weir with its sill at such an elevation that it will not be overtopped by stages other than those capable of producing a stage of fifty-one feet or over on the Vicksburg gage: Provided further, That a fuseplug levee loop may be constructed behind said sill to prevent flow into the floodway until the predicted flood exceeds the safe capacity of the main river leveed channel, with a free-board of at least three feet, but said fuseplug levee may be artificially breached when in the opinion of the Chief of Engineers such breaching is advisable to insure the safety of the main river controlling levee line: Provided further, That the authority to acquire lands, flowage rights, and easements for floodways shall be confined to the floodways proper and to the northward extension of Eudora: Provided further, That within the discretion of the Chief of Engineers, the guide line levees of the Eudora floodway may be extended south toward Old River: Provided further, That the Chief of Engineers is authorized to construct the said Eudora floodway at such location as he may determine, in the vicinity of Eudora. The United States may, within the discretion of the Chief of Engineers irrespective of other provisions of law, proceed to acquire flowage rights and flowage easements in the northward extension of the Eudora floodway, as authorized by existing law, provided that pending the completion of such northward extension all the Riverside fuseplug levee extending south from the vicinity of Yancopin to the vicinity of Vau Cluse, Arkansas, and so as to connect with the existing levee of 1928 grade and section, shall be reconstructed to the 1914 grade and 1928 section: Provided further, That if the back protection levee is constructed prior to the construction of Eudora floodway, it shall be connected with the main Mississippi River levee and subsequently connected with the Eudora floodway when constructed: Provided further, That the Chief of Engineers is authorized, in his discretion, to negotiate options, make agreements and offers with respect to lands, flowage rights, easements, and rights-of-way involved, as provided by law, at prices deemed reasonable by him. The United States, irrespective of other provisions of law, may, within the discretion of the Chief of Engineers, acquire flowage easements over all lands not subject to frequent overflow in the Atchafalaya Basin below the latitude of Krotz Springs. Said Morganza floodway shall not be operated until the Wax Lake outlet has been put into operative condition. The fuseplug levees at the head of the Atchafalaya Basin on the east side of the Atchafalaya River shall be reconstructed to the 1928 grade and section. The United States may, in the discretion of the Chief of Engineers, acquire all flowage rights, flowage easements, rights-of-way for levee foundations, and titles in fee simple as herein provided, either by voluntary acquisition or in accordance with the condemnation proceedings by the Secretary of the Army as provided for in section 702d of this title. In the event the United States acquires or owns title to any lands in fee simple under the provisions of sections 702a, 702b to 702d, 702e to 702g, 702h, 702i, 702j, 702k, 702l, 702m, and 704 of this title, as amended and supplemented, the United States may retain the ownership thereof, or any part thereof instead of turning over such lands to the ownership of States or local interests as provided in section 702d of this title, and may lease such lands: Provided, That 25 per centum of all moneys received and deposited in the Treasury of the United States during any fiscal year on account of such leases shall be paid, at the end of such year, by the Secretary of the Treasury to the State in which such property is situated, to be expended as the State legislature may prescribe for the benefit of the public schools and public roads of the county or counties in which such property is situated: Provided further, That when such property is situated in more than one State or county the distributive share to each from the proceeds of such property shall be proportional to its area therein: Provided further, That no part of the appropriations herein or heretofore authorized for said Morganza and Eudora floodways and extension shall be used for any other purpose. -SOURCE- (June 15, 1936, ch. 548 (pt.), as added June 28, 1938, ch. 795, Sec. 4, 52 Stat. 1220, and amended July 26, 1947, ch. 343, title II, Sec. 205(a), 61 Stat. 501.) -REFTEXT- REFERENCES IN TEXT Herein, referred to in text, means act June 15, 1936, ch. 548, 49 Stat. 1508, as amended, which enacted sections 642a, 702a-1, 702a-2 to 702a-12, 702g-1, 702j-1, 702j-2, 702k-1, and 702k-2 of this title. For complete classification of this Act to the Code, see Tables. -CHANGE- CHANGE OF NAME Department of War designated Department of the Army and title of Secretary of War changed to Secretary of the Army by section 205(a) of act July 26, 1947, ch. 343, title II, 61 Stat. 501. Section 205(a) of act July 26, 1947, was repealed by section 53 of act Aug. 10, 1956, ch. 1041, 70A Stat. 641. Section 1 of act Aug. 10, 1956, enacted 'Title 10, Armed Forces' which in sections 3010 to 3013 continued Department of the Army under administrative supervision of Secretary of the Army. -MISC4- EFFECT OF AMENDMENT Act June 28, 1938, provided that, except as amended therein, the act of May 15, 1928, ch. 569, 45 Stat. 534, as amended by the act of June 15, 1936, as amended, should remain in full force and effect. Act May 15, 1928, is classified to sections 702a, 702b to 702d, 702e to 702g, 702h, 702i, 702j, 702k, 702l, 702m, and 704 of this title. ABANDONMENT AND REPEAL OF PROJECTS For abandonment of Boeuf Floodway and Eudora Floodway as well as Northward Extension and back protection levee extending from head of Eudora Floodway north to Arkansas River and repeal of provisions relating to prosecution of work, see section 702a-12 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 701b-4, 701f-1, 701j, 702a-1, 702a-1 1/2, 702a-1 3/4, 702j-1, 702k-1, 702k-2 of this title. ------DocID 40966 Document 599 of 646------ -CITE- 35 USC Sec. 11 -EXPCITE- TITLE 35 PART I CHAPTER 1 -HEAD- Sec. 11. Publications -STATUTE- (a) The Commissioner may print, or cause to be printed, the following: 1. Patents, including specifications and drawings, together with copies of the same. The Patent and Trademark Office may print the headings of the drawings for patents for the purpose of photolithography. 2. Certificates of trade-mark registrations, including statements and drawings, together with copies of the same. 3. The Official Gazette of the United States Patent and Trademark Office. 4. Annual indexes of patents and patentees, and of trade-marks and registrants. 5. Annual volumes of decisions in patent and trade-mark cases. 6. Pamphlet copies of the patent laws and rules of practice, laws and rules relating to trade-marks, and circulars or other publications relating to the business of the Office. (b) The Commissioner may exchange any of the publications specified in items 3, 4, 5, and 6 of subsection (a) of this section for publications desirable for the use of the Patent and Trademark Office. -SOURCE- (July 19, 1952, ch. 950, 66 Stat. 794; Jan. 2, 1975, Pub. L. 93-596, Sec. 1, 88 Stat. 1949.) -MISC1- HISTORICAL AND REVISION NOTES Based on Title 35, U.S.C., 1946 ed., Sec. 13 and 16 (R.S. 489; July 9, 1947, ch. 211, Sec. 301 (part), 61 Stat. 299, repeated in prior and subsequent appropriation acts). Section is amplified to list the publications of the Patent Office, based on 44 U.S.C., 1946 ed., Sec. 283, 283a. The second sentence of item 1 of the revised section is a provision appearing annually in appropriation acts to enable the Patent Office to maintain a small printing press to place headings on drawings before the drawings are reproduced. Language is changed. AMENDMENTS 1975 - Pub. L. 93-596 substituted 'Patent and Trademark Office' for 'Patent Office', wherever appearing. EFFECTIVE DATE OF 1975 AMENDMENT Amendment by Pub. L. 93-596 effective Jan. 2, 1975, see section 4 of Pub. L. 93-596, set out as a note under section 1111 of Title 15, Commerce and Trade. -CROSS- CROSS REFERENCES Exchange of Official Gazette for scientific or useful publications, see section 481 of Title 40, Public Buildings, Property, and Works. Printing and publications for Patent and Trademark Office, see sections 1337, 1338 of Title 44, Public Printing and Documents. ------DocID 40992 Document 600 of 646------ -CITE- 35 USC CHAPTER 11 -EXPCITE- TITLE 35 PART II CHAPTER 11 -HEAD- CHAPTER 11 - APPLICATION FOR PATENT -MISC1- Sec. 111. Application for patent. 112. Specification. 113. Drawings. 114. Models, specimens. 115. Oath of applicant. 116. Joint inventors. (FOOTNOTE 1) (FOOTNOTE 1) Section catchline amended by Pub. L. 97-247 without corresponding amendment of chapter analysis. 117. Death or incapacity of inventor. 118. Filing by other than inventor. 119. Benefit of earlier filing date in foreign country; right of priority. 120. Benefit of earlier filing date in the United States. 121. Divisional applications. 122. Confidential status of applications. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in sections 371, 373, 375 of this title. ------DocID 41133 Document 601 of 646------ -CITE- 36 USC Sec. 10, 11 -EXPCITE- TITLE 36 CHAPTER 1 -HEAD- Sec. 10, 11. Repealed. July 17, 1953, ch. 222, Sec. 6, 67 Stat. 179 -MISC1- Section 10, acts Apr. 24, 1912, ch. 90, Sec. 1, 37 Stat. 90; June 29, 1943, ch. 176, Sec. 1, 57 Stat. 247, related to land and naval forces in time of war. See section 2602 of Title 10, Armed Forces. Section 11, acts Apr. 24, 1912, ch. 90, Sec. 2, 37 Stat. 91; June 29, 1943, ch. 176, Sec. 2, 57 Stat. 248, related to transportation, subsistence and passport fees. See section 2602 of Title 10. ------DocID 41413 Document 602 of 646------ -CITE- 36 USC CHAPTER 11 -EXPCITE- TITLE 36 CHAPTER 11 -HEAD- CHAPTER 11 - CIVIL AIR PATROL -MISC1- Sec. 201. Corporation created. 202. Objects and purposes of corporation. 203. Membership. 204. Prohibition against issuance of stock or business activities; completion of organization. 205. Powers of corporation. 206. Exclusive right to name, insignia, copyrights, emblems and badges. 207. Annual report. 208. Reservation of right to amend or repeal chapter. ------DocID 42636 Document 603 of 646------ -CITE- 37 USC CHAPTER 11 -EXPCITE- TITLE 37 CHAPTER 11 -HEAD- CHAPTER 11 - PAYMENTS TO MENTALLY INCOMPETENT PERSONS -MISC1- Sec. 601. Applicability. 602. Payments: designation of person to receive amounts due. 603. Regulations. 604. Determination of Secretary final. AMENDMENTS 1990 - Pub. L. 101-510, div. A, title XIV, Sec. 1484(f)(1), Nov. 5, 1990, 104 Stat. 1717, revised chapter heading so as to appear in all capital letters. ------DocID 42734 Document 604 of 646------ -CITE- 38 USC CHAPTER 11 -EXPCITE- TITLE 38 PART II CHAPTER 11 -HEAD- CHAPTER 11 - COMPENSATION FOR SERVICE-CONNECTED DISABILITY OR DEATH -MISC1- SUBCHAPTER I - GENERAL Sec. 301. Definitions. 302. Special provisions relating to surviving spouses. SUBCHAPTER II - WARTIME DISABILITY COMPENSATION 310. Basic entitlement. 311. Presumption of sound condition. 312. Presumptions relating to certain diseases and disabilities. 313. Presumptions rebuttable. 314. Rates of wartime disability compensation. 315. Additional compensation for dependents. SUBCHAPTER III - WARTIME DEATH COMPENSATION 321. Basic entitlement. 322. Rates of wartime death compensation. SUBCHAPTER IV - PEACETIME DISABILITY COMPENSATION 331. Basic entitlement. 332. Presumption of sound condition. 333. Presumptions relating to certain diseases. 334. Rates of peacetime disability compensation. 335. Additional compensation for dependents. (336. Repealed.) 337. Wartime presumptions for certain veterans. SUBCHAPTER V - PEACETIME DEATH COMPENSATION 341. Basic entitlement. 342. Rates of peacetime death compensation. (343. Repealed.) SUBCHAPTER VI - GENERAL COMPENSATION PROVISIONS 351. Benefits for persons disabled by treatment or vocational rehabilitation. 352. Persons heretofore having a compensable status. 353. Aggravation. 354. Consideration to be accorded time, place, and circumstances of service. (FOOTNOTE 1) (FOOTNOTE 1) So in original. Does not conform to section catchline. 355. Authority for schedule for rating disabilities. (356. Repealed.) 357. Combination of certain ratings. 358. Disappearance. 359. Protection of service connection. 360. Special consideration for certain cases of loss of paired organs or extremities. 361. Payment of disability compensation in disability severance cases. 362. Clothing allowance. 363. Temporary program for trial work periods and vocational rehabilitation for certain veterans with total disability ratings. AMENDMENTS 1986 - Pub. L. 99-576, title I, Sec. 109(a)(2), Oct. 28, 1986, 100 Stat. 3253, amended item 360 generally, substituting 'loss of paired organs or extremities' for 'blindness or bilateral kidney involvement or bilateral deafness'. 1984 - Pub. L. 98-543, title I, Sec. 111(a)(2), Oct. 24, 1984, 98 Stat. 2739, added item 363. 1982 - Pub. L. 97-295, Sec. 4(9), Oct. 12, 1982, 96 Stat. 1305, added item 361. 1976 - Pub. L. 94-433, title IV, Sec. 401(1), 404(5), Sept. 30, 1976, 90 Stat. 1377, 1378, substituted 'surviving spouses' for 'widows' in item 302 and struck out item 356 'Minimum rating for arrested tuberculosis'. 1974 - Pub. L. 93-295, title II, Sec. 206(c), May 31, 1974, 88 Stat. 183, struck out item 343 'Conditions under which wartime rates payable'. 1972 - Pub. L. 92-328, title I, Sec. 103(b), 108(d), June 30, 1972, 86 Stat. 394, 396, struck out item 336 'Conditions under which wartime rates payable' and added item 362. 1970 - Pub. L. 91-376, Sec. 3(c), Aug. 12, 1970, 84 Stat. 789, inserted reference to disabilities in item 312. 1966 - Pub. L. 89-358, Sec. 7(b), Mar. 3, 1966, 80 Stat. 27, added item 337. 1965 - Pub. L. 89-311, Sec. 3(c), Oct. 31, 1965, 79 Stat. 1155, inserted reference to bilateral deafness in item 360. 1962 - Pub. L. 87-610, Sec. 2, Aug. 28, 1962, 76 Stat. 406, added item 360. 1960 - Pub. L. 86-501, Sec. 2, June 10, 1960, 74 Stat. 195, added item 359. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in sections 106, 107, 410, 415, 612, 801, 1502, 1685, 1701, 1901, 2013, 3103A, 3110, 3117 of this title; title 10 sections 1086, 1437, 1446, 1450; title 26 section 6103; title 31 section 3803; title 42 section 6862. ------DocID 43564 Document 605 of 646------ -CITE- 38 USC APPENDIX - RULES OF COURT OF VETERANS APPEALS Rule 11 -EXPCITE- TITLE 38 APPENDIX -HEAD- Rule 11. Transmission of the Record on Appeal -STATUTE- (a) The Secretary shall retain the original claims file. Within 30 days after the appellant's counterdesignation or statement was due under Rule 10, the Secretary shall transmit to the Clerk, as the record on appeal, in this order, an original and three copies of: (1) a table of contents of the documents transmitted; (2) a certified copy of the Board's decision showing the date it was mailed to the appellant, and the docket entries prepared by the Board; and (3) a certified copy of the designated record, assembled in chronological order, with pages consecutively numbered (e.g., R-1, R-2, etc.). A copy of the record on appeal shall be served on all parties when the record is transmitted. (b) Correction or Modification of Transmitted Record. If a party believes any additional part of the claims file before the Secretary and the Board is relevant to an issue on appeal, the party, within 30 days after the record on appeal has been filed with the Clerk, may cause the record to be enlarged or supplemented by serving notice on all other parties of the additional parts of the record to be transmitted. The Secretary shall then supplement the record on appeal by transmitting to the Clerk a certified copy, and three additional copies, of such supplemental record, assembled in chronological order and consecutively numbered (e.g., SR-1, SR-2, etc.) and shall serve a copy on the appellant. A party who believes additional material sought by another party is clearly beyond the scope of matters relevant to the appeal may file a motion to limit the contents of the supplemental record. The motion shall describe the good faith efforts made to resolve the dispute. (c) Access of Parties or Representatives to Original Record. (1) Material not Subject to a Protective Order. After a Notice of Appeal has been filed, the Secretary shall permit a party or a representative of a party to inspect and to copy material in the record before the Board. Such inspection and copying shall be subject to reasonable regulation by the Secretary. (2) Confidential Information. On its own initiative or on motion of a party, the Court may take appropriate action to prevent disclosure of confidential information. See also Rule 48. ------DocID 44341 Document 606 of 646------ -CITE- 40 USC CHAPTER 11 -EXPCITE- TITLE 40 CHAPTER 11 -HEAD- CHAPTER 11 - REAL PROPERTY TRANSACTIONS BY MILITARY DEPARTMENTS ------DocID 44588 Document 607 of 646------ -CITE- 41 USC Sec. 11 -EXPCITE- TITLE 41 CHAPTER 1 -HEAD- Sec. 11. No contracts or purchases unless authorized or under adequate appropriation; report to the Congress -STATUTE- (a) No contract or purchase on behalf of the United States shall be made, unless the same is authorized by law or is under an appropriation adequate to its fulfillment, except in the Department of Defense and in the Department of Transportation with respect to the Coast Guard when it is not operating as a service in the Navy, for clothing, subsistence, forage, fuel, quarters,, (FOOTNOTE 1) transportation, or medical and hospital supplies, which, however, shall not exceed the necessities of the current year. (FOOTNOTE 1) So in original. (b) The Secretary of Defense and the Secretary of Transportation with respect to the Coast Guard when it is not operating as a service in the Navy shall immediately advise the Congress of the exercise of the authority granted in subsection (a) of this section, and shall report quarterly on the estimated obligations incurred pursuant to the authority granted in subsection (a) of this section. -SOURCE- (R.S. Sec. 3732; June 12, 1906, ch. 3078, 34 Stat. 255; Oct. 15, 1966, Pub. L. 89-687, title VI, Sec. 612(e), 80 Stat. 993; Oct. 30, 1984, Pub. L. 98-557, Sec. 17(e), 98 Stat. 2868.) -COD- CODIFICATION R.S. Sec. 3732 derived from act Mar. 2, 1861, ch. 84, Sec. 10, 12 Stat. 220. -MISC3- AMENDMENTS 1984 - Subsec. (a). Pub. L. 98-557, Sec. 17(e)(1)(A), substituted 'except in the Department of Defense and in the Department of Transportation with respect to the Coast Guard when it is not operating as a service in the Navy' for 'except in the War and Navy Departments'. Pub. L. 98-557, Sec. 17(e)(1)(B), substituted ', transportation, or medical and hospital supplies' for 'or transportation', such change having been made by Act June 12, 1906, thereby requiring no further change in text. See Repeals note below. Subsec. (b). Pub. L. 98-557, Sec. 17(e)(2), inserted provisions relating to the Secretary of Transportation with respect to the Coast Guard when it is not operating as a service in the Navy. 1966 - Pub. L. 89-687 designated existing provisions as subsec. (a) and added subsec (b). 1906 - Act June 12, 1906, inserted 'medical and hospital supplies'. REPEALS The first proviso under the heading 'medical department' in act June 12, 1906, ch. 3078, 34 Stat. 255, cited as a credit to this section, was repealed by Pub. L. 98-557, Sec. 17(e)(3), Oct. 30, 1984, 98 Stat. 2868. -CROSS- CROSS REFERENCES Contracts for Indian supplies in advance of appropriations, see section 99 of Title 25, Indians. Expenditure by any department in excess of appropriations prohibited, see section 1341 of Title 31, Money and Finance. Printing appropriations not to be exceeded, see section 1102 of Title 44, Public Printing and Documents. Projects under Mexican treaties, authority to enter into contracts beyond amount appropriated, notwithstanding this section, see section 277d-3 of Title 22, Foreign Relations and Intercourse. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in title 10 section 2201; title 19 section 2081; title 22 section 277d-3; title 26 section 7608; title 42 section 9619. ------DocID 45094 Document 608 of 646------ -CITE- 42 USC subpart 11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER III Part C subpart 11 -HEAD- subpart 11 - national institute of general medical sciences ------DocID 45168 Document 609 of 646------ -CITE- 42 USC Sec. 290aa-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER III-A Part A -HEAD- Sec. 290aa-11. Data collection -STATUTE- (a) Requirement of annual collection of data on mental illness and substance abuse The Secretary, acting through the Administrator, shall collect data each year on - (1) the national incidence and prevalence of the various forms of mental illness and substance abuse; and (2) the incidence and prevalence of such various forms in major metropolitan areas selected by the Administrator. (b) Requisite areas of data collection on mental health With respect to the activities of the Administrator under subsection (a) of this section relating to mental health, the Administrator shall ensure that such activities include, at a minimum, the collection of data on - (1) the number and variety of public and nonprofit private treatment programs; (2) the number and demographic characteristics of individuals receiving treatment through such programs; (3) the type of care received by such individuals; and (4) such other data as may be appropriate. (c) Requisite areas of data collection on substance abuse (1) With respect to the activities of the Administrator under subsection (a) of this section relating to substance abuse, the Administrator shall ensure that such activities include, at a minimum, the collection of data on - (A) the number of individuals admitted to the emergency rooms of hospitals as a result of the abuse of alcohol or other drugs; (B) the number of deaths occurring as a result of substance abuse, as indicated in reports by coroners; (C) the number and variety of public and private nonprofit treatment programs, including the number and type of patient slots available; (D) the number of individuals seeking treatment through such programs, the number and demographic characteristics of individuals receiving such treatment, the percentage of individuals who complete such programs, and, with respect to individuals receiving such treatment, the length of time between an individual's request for treatment and the commencement of treatment; (E) the number of such individuals who return for treatment after the completion of a prior treatment in such programs and the method of treatment utilized during the prior treatment; (F) the number of individuals receiving public assistance for such treatment programs; (G) the costs of the different types of treatment modalities for drug and alcohol abuse and the aggregate relative costs of each such treatment modality provided within a State in each fiscal year; (H) to the extent of available information, the number of individuals receiving treatment for alcohol or drug abuse who have private insurance coverage for the costs of such treatment; (I) the extent of alcohol and drug abuse among high school students and among the general population; and (J) the number of alcohol and drug abuse counselors and other substance abuse treatment personnel employed in public and private treatment facilities. (2) Annual surveys shall be carried out in the collection of data under this subsection. Summaries and analyses of the data collected shall be made available to the public. (d) Development of uniform criteria for data collection After consultation with the States and with appropriate national organizations, the Administrator shall develop uniform criteria for the collection of data, using the best available technology, pursuant to this section. -SOURCE- (July 1, 1944, ch. 373, title V, Sec. 509D, as added Nov. 18, 1988, Pub. L. 100-690, title II, Sec. 2052(a), 102 Stat. 4207, and amended Aug. 16, 1989, Pub. L. 101-93, Sec. 3(b), 103 Stat. 609.) -MISC1- AMENDMENTS 1989 - Subsec. (c)(1)(A). Pub. L. 101-93, Sec. 3(b)(1), substituted 'alcohol or' for 'alcohol and'. Subsec. (c)(2). Pub. L. 101-93, Sec. 3(b)(2), substituted 'this subsection' for 'this section'. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 300x, 300x-4 of this title. ------DocID 45183 Document 610 of 646------ -CITE- 42 USC Sec. 290cc-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER III-A Part B subpart 3 -HEAD- Sec. 290cc-11. Establishment of program for mental health research -STATUTE- The Secretary, acting through the Administrator, may make grants to, and enter into cooperative agreements and contracts with, public and nonprofit private entities for the conduct of, promotions of, coordination of, research, investigation, experiments, demonstrations, and studies relative to the cause, diagnosis, treatment, control, and prevention of mental illness. -SOURCE- (July 1, 1944, ch. 373, title V, Sec. 518, formerly Sec. 519, as added Nov. 18, 1988, Pub. L. 100-690, title II, Sec. 2057(3), 102 Stat. 4212, and renumbered Sec. 518, Aug. 16, 1989, Pub. L. 101-93, Sec. 3(e)(1)(A), 103 Stat. 610.) -MISC1- USE OF INVOLUNTARY COMMITMENT Section 2072 of Pub. L. 100-690 provided that: '(a) In General. - The Secretary of Health and Human Services shall enter into a contract with an independent body of demonstrated expertise in the field of health and mental health to conduct a study of the current use of involuntary commitment for inpatient or outpatient treatment of mental illness and make recommendations for changes, if any, that may be warranted in current rules and practices. '(b) Report. - Not later than 18 months after the date on which a contract is entered into pursuant to subsection (a), the Secretary of Health and Human Services shall complete the study required in subsection (a) and submit to the Congress the findings made as a result of the study. '(c) Authorization of Appropriations. - For the purpose of carrying out subsection (a), there are authorized to be appropriated $1,000,000 for fiscal year 1989.' ------DocID 45330 Document 611 of 646------ -CITE- 42 USC Sec. 295g-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER V Part F -HEAD- Sec. 295g-11. Special projects -STATUTE- (a) Grants The Secretary may make grants to, and enter into contracts with, schools of public health for the costs of planning, developing, demonstrating, operating, and evaluating projects - (1) for preventive medicine; (2) for health promotion and disease prevention; (3) for increasing the enrollment in such schools of individuals from disadvantaged backgrounds (as determined in accordance with criteria established by the Secretary under section 295g-7(a) of this title); and (4) to improve access and quality in health care. (b) Prohibitions The Secretary may not make a grant under subsection (a) of this section unless - (1) an application for the grant is submitted to the Secretary; (2) with respect to carrying out the purpose for which the grant is to be made, the application provides assurances of compliance satisfactory to the Secretary; and (3) the application otherwise is in such form, is made in such manner, and contains such agreements, assurances, and information as the Secretary determines to be necessary to carry out this section. (c) Limitations The Secretary may make a grant under this subsection only - (1) pursuant to the issuance of solicitations for such grants; and (2) if the application for such a grant has been recommended for approval by an appropriate peer review group. (d) Authorization of appropriations For the purpose of carrying out subsection (a) of this section, there are authorized to be appropriated $1,500,000 for fiscal year 1989, $3,500,000 for fiscal year 1990, and $5,000,000 for fiscal year 1991. -SOURCE- (July 1, 1944, ch. 373, title VII, Sec. 790A, as added Nov. 4, 1988, Pub. L. 100-607, title VI, Sec. 617, 102 Stat. 3140.) -MISC1- PRIOR PROVISIONS A prior section 295g-11, act July 1, 1944, ch. 373, title VII, Sec. 785, as added Nov. 18, 1971, Pub. L. 92-157, title I, Sec. 106(b)(6), 85 Stat. 453, and amended Oct. 12, 1976, Pub. L. 94-484, title I, Sec. 101(q), 90 Stat. 2245, which provided scholarship grants for study abroad, subsec. (a) relating to authority of Secretary, subsec. (b) to financial need of the student, domestic medical practice agreement, and maximum amount of scholarships, subsec. (c) to regulations issued, after consultation with the National Advisory Council on Health Professions Education, subsec. (d) to eligibility of scholarship recipients, and subsec. (e) authorizing appropriations in annual amounts of $150,000 for fiscal years ending June 30, 1972, through 1976, and for fiscal year ending Sept. 30, 1977, and next two fiscal years such amounts necessary to continue making grants to students who received grants from funds made available for fiscal years ending before July 1, 1976, was repealed by Pub. L. 94-484, title IV, Sec. 409(a), Oct. 12, 1976, 90 Stat. 2290, eff. Oct. 1, 1976. ------DocID 45449 Document 612 of 646------ -CITE- 42 USC Sec. 300c-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER IX Part B -HEAD- Sec. 300c-11. Repealed. Pub. L. 97-35, title XXI, Sec. 2193(b)(1), Aug. 13, 1981, 95 Stat. 827 -MISC1- Section, act July 1, 1944, ch. 373, title XI, Sec. 1121, as added Apr. 22, 1974, Pub. L. 93-270, Sec. 3(a), 88 Stat. 91, and amended Apr. 22, 1976, Pub. L. 94-278, title IV, Sec. 403(b)(1), 90 Stat. 409; S. Res. 4, Feb. 4, 1977; Aug. 1, 1977, Pub. L. 95-83, title III, Sec. 306(a), 91 Stat. 389; Dec. 19, 1977, Pub. L. 95-215, Sec. 8(a), 91 Stat. 1507; Nov. 8, 1978, Pub. L. 95-613, Sec. 2, 92 Stat. 3094; Dec. 12, 1979, Pub. L. 96-142, title II, Sec. 202, 93 Stat. 1070; H. Res. 549, Mar. 25, 1980; Aug. 13, 1981, Pub. L. 97-35, title XXI, Sec. 2193(a)(1)(C), 95 Stat. 827, related to sudden infant death syndrome counseling, information, educational, and statistical programs. EFFECTIVE DATE OF 1981 AMENDMENT AND REPEAL, SAVINGS, AND TRANSITIONAL PROVISIONS For effective date, savings, and transitional provisions relating to the amendment and repeal of this section by Pub. L. 97-35, see section 2194 of Pub. L. 97-35, set out as a note under section 701 of this title. ------DocID 45461 Document 613 of 646------ -CITE- 42 USC Sec. 300d-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER X Part B -HEAD- Sec. 300d-11. Establishment of program -STATUTE- (a) Requirement of allotments for States The Secretary shall for each fiscal year make an allotment for each State in an amount determined in accordance with section 300d-18 of this title. The Secretary shall make payments, as grants, each fiscal year to each State from the allotment for the State if the Secretary approves for the fiscal year involved an application submitted by the State pursuant to section 300d-17 of this title. (b) Purpose Except as provided in section 300d-33 of this title, the Secretary may not make payments under this part for a fiscal year unless the State involved agrees that, with respect to the trauma care component of the State plan for the provision of emergency medical services, the payments will be expended only for the purpose of developing, implementing, and monitoring the modifications to such component described in section 300d-13 of this title. -SOURCE- (July 1, 1944, ch. 373, title XII, Sec. 1211, as added Nov. 16, 1990, Pub. L. 101-590, Sec. 3, 104 Stat. 2919.) -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 300d-12, 300d-13, 300d-14, 300d-15, 300d-16, 300d-17, 300d-18, 300d-19, 300d-20, 300d-21, 300d-22, 300d-32, 300d-33 of this title. ------DocID 45489 Document 614 of 646------ -CITE- 42 USC Sec. 300e-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER XI -HEAD- Sec. 300e-11. Continued regulation of health maintenance organizations -STATUTE- (a) Determination of deficiency If the Secretary determines that an entity which received a grant, contract, loan, or loan guarantee under this subchapter as a health maintenance organization or which was included in a health benefits plan offered to employees pursuant to section 300e-9 of this title - (1) fails to provide basic and supplemental services to its members, (2) fails to provide such services in the manner prescribed by section 300e(b) of this title, or (3) is not organized or operated in the manner prescribed by section 300e(c) of this title, the Secretary may take the action authorized by subsection (b) of this section. (b) Action by Secretary upon determination (1) If the Secretary makes, with respect to any entity which provided assurances to the Secretary under section 300e-9(d)(1) of this title, a determination described in subsection (a) of this section, the Secretary shall notify the entity in writing of the determination. Such notice shall specify the manner in which the entity has not complied with such assurances and direct that the entity initiate (within 30 days of the date the notice is issued by the Secretary or within such longer period as the Secretary determines is reasonable) such action as may be necessary to bring (within such period as the Secretary shall prescribe) the entity into compliance with the assurances. If the entity fails to initiate corrective action within the period prescribed by the notice or fails to comply with the assurances within such period as the Secretary prescribes, then after the Secretary provides the entity a reasonable opportunity for reconsideration of his determination, including, at the entity's election, a fair hearing (A) the entity shall not be a qualified health maintenance organization for purposes of section 300e-9 of this title until such date as the Secretary determines that it is in compliance with the assurances, and (B) each employer which has offered membership in the entity in compliance with section 300e-9 of this title, each lawfully recognized collective bargaining representative or other employee representative which represents the employees of each such employer, and the members of such entity shall be notified by the entity that the entity is not a qualified health maintenance organization for purposes of such section. The notice required by clause (B) of the preceding sentence shall contain, in readily understandable language, the reasons for the determination that the entity is not a qualified health maintenance organization. The Secretary shall publish in the Federal Register each determination referred to in this paragraph. (2) If the Secretary makes, with respect to an entity which has received a grant, contract, loan, or loan guarantee under this subchapter, a determination described in subsection (a) of this section, the Secretary may, in addition to any other remedies available to him, bring a civil action in the United States district court for the district in which such entity is located to enforce its compliance with the assurances it furnished respecting the provision of basic and supplemental health services or its organization or operation, as the case may be, which assurances were made in connection with its application under this subchapter for the grant, contract, loan, or loan guarantee. -SOURCE- (July 1, 1944, ch. 373, title XIII, Sec. 1312, as added Dec. 29, 1973, Pub. L. 93-222, Sec. 2, 87 Stat. 931, and amended Oct. 8, 1976, Pub. L. 94-460, title I, Sec. 111, 90 Stat. 1952; Nov. 1, 1978, Pub. L. 95-559, Sec. 12(a)(2), 92 Stat. 2140; Aug. 13, 1981, Pub. L. 97-35, title IX, Sec. 949(a), 95 Stat. 578.) -MISC1- PRIOR PROVISIONS A prior section 1312 of act July 1, 1944, which was classified to section 212a of this title, was repealed by Pub. L. 93-222, Sec. 7(b), Dec. 29, 1973, 87 Stat. 936. AMENDMENTS 1981 - Subsec. (b)(1). Pub. L. 97-35 inserted provisions relating to opportunity for reconsideration of determination of Secretary. 1978 - Subsec. (c). Pub. L. 95-559 struck out subsec. (c) which provided that the Secretary, acting through the Assistant Secretary for Health, administer subsections (a) and (b) of this section in the Office of the Assistant Secretary for Health. 1976 - Subsec. (a). Pub. L. 94-460, Sec. 111(a), substituted 'the Secretary may take the action authorized by subsection (b) of this section' for 'the Secretary may, in addition to any other remedies available to him, bring a civil action in the United States district court for the district in which such entity is located to enforce its compliance with any assurances it furnished him respecting the provision of basic and supplemental health services or its organization or operation, as the case may be, which assurances were made under section 300e-9 of this title or when application was made under this subchapter for a grant, contract, loan, or loan guarantee'. Subsecs. (b), (c). Pub. L. 94-460, Sec. 111(b), (c), added subsec. (b), redesignated former subsec. (b) as (c), and substituted 'acting through the Assistant Secretary for Health, shall administer subsections (a) and (b) of this section' for 'through the Assistant Secretary for Health, shall administer subsection (a) of this section'. EFFECTIVE DATE OF 1976 AMENDMENT Amendment by Pub. L. 94-460 applicable with respect to determinations of the Secretary of Health, Education, and Welfare described in subsec. (a) of this section and made after Oct. 8, 1976, see section 118 of Pub. L. 94-460, set out as a note under section 300e of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1396b of this title. ------DocID 45534 Document 615 of 646------ -CITE- 42 USC Sec. 300j-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER XII Part E -HEAD- Sec. 300j-11. Indian Tribes -STATUTE- (a) In general Subject to the provisions of subsection (b) of this section, the Administrator - (1) is authorized to treat Indian Tribes as States under this subchapter, (2) may delegate to such Tribes primary enforcement responsibility for public water systems and for underground injection control, and (3) may provide such Tribes grant and contract assistance to carry out functions provided by this subchapter. (b) EPA regulations (1) Specific provisions The Administrator shall, within 18 months after June 19, 1986, promulgate final regulations specifying those provisions of this subchapter for which it is appropriate to treat Indian Tribes as States. Such treatment shall be authorized only if: (A) the Indian Tribe is recognized by the Secretary of the Interior and has a governing body carrying out substantial governmental duties and powers; (B) the functions to be exercised by the Indian Tribe are within the area of the Tribal Government's jurisdiction; and (C) the Indian Tribe is reasonably expected to be capable, in the Administrator's judgment, of carrying out the functions to be exercised in a manner consistent with the terms and purposes of this subchapter and of all applicable regulations. (2) Provisions where treatment as State inappropriate For any provision of this subchapter where treatment of Indian Tribes as identical to States is inappropriate, administratively infeasible or otherwise inconsistent with the purposes of this subchapter, the Administrator may include in the regulations promulgated under this section, other means for administering such provision in a manner that will achieve the purpose of the provision. Nothing in this section shall be construed to allow Indian Tribes to assume or maintain primary enforcement responsibility for public water systems or for underground injection control in a manner less protective of the health of persons than such responsibility may be assumed or maintained by a State. An Indian tribe (FOOTNOTE 1) shall not be required to exercise criminal enforcement jurisdiction for purposes of complying with the preceding sentence. (FOOTNOTE 1) So in original. Probably should be capitalized. -SOURCE- (July 1, 1944, ch. 373, title XIV, Sec. 1451, as added June 19, 1986, Pub. L. 99-339, title III, Sec. 302(a), 100 Stat. 665.) -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 300h-1 of this title. ------DocID 45573 Document 616 of 646------ -CITE- 42 USC Sec. 300t-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER XIV Part E -HEAD- Sec. 300t-11. Grants and assistance for establishment of program -STATUTE- The Secretary shall, by April 1, 1980, establish a program under which - (1) grants and technical assistance may be provided to hospitals in operation on October 4, 1979, (A) for the discontinuance of unneeded hospital services, and (B) for the conversion of unneeded hospital services to other health services needed by the community; and (2) grants may be provided to State Agencies designated under section 300m(b)(3) (FOOTNOTE 1) of this title for reducing excesses in resources and facilities of hospitals. (FOOTNOTE 1) See References in Text note below. -SOURCE- (July 1, 1944, ch. 373, title XVI, Sec. 1641, as added Oct. 4, 1979, Pub. L. 96-79, title III, Sec. 301(a), 93 Stat. 636.) -REFTEXT- REFERENCES IN TEXT Section 300m of this title, referred to in par. (2), was repealed effective Jan. 1, 1987, by Pub. L. 99-660, title VII, Sec. 701(a), Nov. 14, 1986, 100 Stat. 3799. -MISC2- UNNEEDED HOSPITAL SERVICES; STUDY AND REPORT OF EFFECT OF ELIMINATION Section 302 of Pub. L. 96-79, as amended by Pub. L. 96-88, title V, Sec. 509(b), Oct. 17, 1979, 93 Stat. 695, which provided that the Secretary of Health and Human Services conduct a study of the effect on the elimination of unneeded hospital services made during the two fiscal year period ending Sept. 30, 1981, by the program authorized by this part, and not later than Jan. 1, 1982, report the results of the study to Congress, was repealed by Pub. L. 97-414, Sec. 9(h), Jan. 4, 1983, 96 Stat. 2064. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 300t-12 of this title. ------DocID 45623 Document 617 of 646------ -CITE- 42 USC Sec. 300x-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER XVII Part B subpart 2 -HEAD- Sec. 300x-11. State comprehensive mental health services plan -STATUTE- (a) Annual submission of plan For each fiscal year, beginning with fiscal year 1988, each State shall submit a State comprehensive mental health services plan (hereafter referred to in this subpart as the 'State plan') to the Secretary. (b) State plan requirements A State plan shall, for the fiscal year for which the plan is submitted and each of the 2 succeeding fiscal years, meet the following requirements: (1) The State plan shall provide for the establishment and of implementation of an organized community-based system of care for individuals with serious mental illnesses and children with serious emotional and mental disorders. (2) The State plan shall contain quantitative targets to be achieved in the implementation of such system, including numbers of individuals with serious mental illnesses residing in the areas to be served under such system. (3) The State plan shall describe services, available treatment options, and available resources (including Federal, State and local public services and resources, and to the extent practicable, private services and resources) to be provided to individuals with serious mental illnesses to enable such individuals to gain access to mental health services, including access to treatment, prevention, and rehabilitation services. (4) The State plan shall describe health and mental health services, rehabilitation services, employment services, housing services, educational services, medical and dental care, and other support services to be provided to individuals and children with serious emotional and mental disorders with Federal, State and local public and private resources to enable such individuals to function outside of inpatient or residential institutions to the maximum extent of their capabilities, including services to be provided by local school systems under the Education of the Handicapped Act (20 U.S.C. 1400 et seq.). (5) The State plan shall describe the financial resources and staffing necessary to implement the requirements of such plan. (6) The State plan shall provide for activities to reduce the rate of hospitalization of individuals with serious mental illnesses. (7) Except as provided in paragraph (7), (FOOTNOTE 1) the State plan shall require the provision of case management services to each individual with a serious mental illness in the State who receives substantial amounts of public funds or services. For purposes of this paragraph, the term 'individual with a serious mental illness' means a (FOOTNOTE 2) individual with a serious mental illness as defined under State laws and regulations. (FOOTNOTE 1) So in original. Probably should be paragraph '(8),'. (FOOTNOTE 2) So in original. Probably should be 'an'. (8) The State plan may provide for the implementation of the requirements of paragraph (6) (FOOTNOTE 3) in a manner which - (FOOTNOTE 3) So in original. Probably should be paragraph '(7)'. (A) phases in, beginning in fiscal year 1989, the provision to all individuals with serious mental illnesses to which such paragraph applies the case management services required to be provided under such paragraph; and (B) provides for the substantial completion of the phasing in of the provision of such services by the end of fiscal year 1992. (9) The State plan shall provide for the establishment and implementation of a program of outreach to, and services for, individuals with serious mental illnesses who are homeless. (10) The State plan shall describe a system of integrated social services, educational services, juvenile services, substance abuse services which together with health and mental health services, should be provided in order for children and adolescents with serious emotional and mental disorders to receive care appropriate for their multiple needs, including services to be provided by local school systems under the Education of the Handicapped Act (20 U.S.C. 1400 et seq.). (c) Consultation with employee representatives in development of plan In developing each State plan required under this section, the State shall consult with representatives of employees of State institutions and public and private nursing homes who care for individuals with serious mental illnesses. (d) Technical assistance to States The Secretary shall provide technical assistance to States in the development and implementation of State plans which comply with this section. Such technical assistance shall include the development and publication by the Secretary of model elements for State plans and model data systems for the collection of data concerning the implementation of State plans. (e) Utilization of State mental health planning council or alternate council The State shall utilize the State mental health planning council described in section 300x-4(e) of this title, or establish a new council with comparable membership requirements, to advise, review, monitor and evaluate all aspects of the development and implementation of the State plan. The comments of such council shall be formally transmitted to the Governor of the State prior to the submission of such plan to the Secretary and such comments should be transmitted to the Secretary together with such plan. (f) Report to Congress Not later than March 30 of each year, the Secretary shall prepare and submit, to the appropriate Committees of Congress, a report concerning the development and implementation of the State plans. Such reports shall include - (1) the status of the implementation of such plans by the States; (2) a description of the extent of the participation of the councils described in subsection (e) of this section in such development and implementation; (3) a description of the coordinated services for children and adults conducted under such plans; (4) the extent to which State and local public, (FOOTNOTE 4) and private resources are utilized in the enhancement and delivery of designated services; and (FOOTNOTE 4) So in original. Comma probably should not appear. (5) a quantitative measurement of the improvement in services projected and achieved under the plan. -SOURCE- (July 1, 1944, ch. 373, title XIX, Sec. 1925, formerly Sec. 1920C, as added Nov. 14, 1986, Pub. L. 99-660, title V, Sec. 502(2), 100 Stat. 3795, renumbered Sec. 1925 and amended Nov. 18, 1988, Pub. L. 100-690, title II, Sec. 2038(3), 2041(a), 102 Stat. 4203, 4205; Aug. 16, 1989, Pub. L. 101-93, Sec. 2(o)(1), 103 Stat. 608; Nov. 28, 1990, Pub. L. 101-639, Sec. 3(b), 104 Stat. 4601.) -REFTEXT- REFERENCES IN TEXT The Education of the Handicapped Act, referred to in subsec. (b)(4), (10), is title VI of Pub. L. 91-230, Apr. 13, 1970, 84 Stat. 175, as amended, now known as the Individuals with Disabilities Education Act, which is classified generally to chapter 33 (Sec. 1400 et seq.) of Title 20, Education. For complete classification of this Act to the Code, see section 1400 of Title 20 and Tables. -MISC2- PRIOR PROVISIONS A prior section 1925 of act July 1, 1944, ch. 373, title XIX, as added Aug. 13, 1981, Pub. L. 97-35, title IX, Sec. 901, 95 Stat. 553, which was classified to section 300y-4 of this title, was repealed by Pub. L. 99-280, Sec. 5, Apr. 24, 1986, 100 Stat. 400. AMENDMENTS 1990 - Subsec. (b)(1). Pub. L. 101-639, Sec. 3(b)(2), (3)(A), substituted 'individuals with serious mental illnesses and children with serious emotional and mental disorders' for 'chronically mentally ill individuals'. Subsec. (b)(2). Pub. L. 101-639, Sec. 3(b)(2), substituted 'individuals with serious mental illnesses' for 'chronically mentally ill individuals'. Subsec. (b)(3). Pub. L. 101-639, Sec. 3(b)(2), (3)(B), substituted 'describe services, available treatment options, and available resources (including Federal, State and local public services and resources, and to the extent practicable, private services and resources) to be provided to individuals with serious mental illnesses' for 'describe services to be provided to chronically mentally ill individuals'. Subsec. (b)(4), (5). Pub. L. 101-639, Sec. 3(b)(3)(D), added pars. (4) and (5) and struck out former par. (4), which read as follows: 'The State plan shall describe rehabilitation services, employment services, housing services, medical and dental care, and other support services to be provided to chronically mentally ill individuals in order to enable such individuals to function outside of inpatient institutions to the maximum extent of their capabilities.'. Former par. (5) redesignated (6). Subsec. (b)(6). Pub. L. 101-639, Sec. 3(b)(2), (3)(C), redesignated par. (5) as (6) and substituted 'individuals with serious mental illnesses' for 'chronically mentally ill individuals'. Former par. (6) redesignated (7). Subsec. (b)(7). Pub. L. 101-639, Sec. 3(b)(1), (3)(C), redesignated par. (6) as (7) and substituted 'individual with a serious mental illness' for 'chronically mentally ill individual' in three places. Former par. (7) redesignated (8). Subsec. (b)(8), (9). Pub. L. 101-639, Sec. 3(b)(2), (3)(C), redesignated pars. (7) and (8) as (8) and (9), respectively, and substituted 'individuals with serious mental illnesses' for 'chronically mentally ill individuals'. Subsec. (b)(10). Pub. L. 101-639, Sec. 3(b)(3)(E), added par. (10). Subsec. (c). Pub. L. 101-639, Sec. 3(b)(2), substituted 'individuals with serious mental illnesses' for 'chronically mentally ill individuals'. Subsecs. (e), (f). Pub. L. 101-639, Sec. 3(b)(4), added subsecs. (e) and (f). 1989 - Subsec. (d). Pub. L. 101-93 amended subsec. (d) to read as if the amendment made by Pub. L. 100-690, Sec. 2041(a), had not been enacted, see 1988 Amendment note below. 1988 - Subsec. (d). Pub. L. 100-690, Sec. 2041(a), amended subsec. (d) generally, substituting provisions relating to administrative expenses for provisions relating to technical assistance to States. REPORT TO CONGRESS ON STATE COMPREHENSIVE MENTAL HEALTH SERVICE PLANS Section 2041(b) of title II of Pub. L. 100-690, as amended by Pub. L. 101-93, Sec. 2(o)(3), Aug. 16, 1989, 103 Stat. 609, provided that: 'Not later than September 30, 1990, the Comptroller General of the United States shall prepare and submit to the Committee on Energy and Commerce of the House of Representatives and the Committee on Labor and Human Resources of the Senate, a report that - '(1) evaluates the status of the implementation of section 1925 of the Public Health Service Act (this section) (as redesignated by section 2038) requiring State Mental Health Services Plans; and '(2) includes an assessment of - '(A) the number of States that have submitted such plans; '(B) the number of States that have implemented the plans submitted by such States; '(C) the efficacy of the plans that have been implemented in achieving effective, organized community-based systems of care for seriously mentally ill individuals; and '(D) recommendations on additional legislation that is necessary to facilitate the achievement of the goals of such section 1925.' -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 300x-3, 300x-10, 300x-12 of this title. ------DocID 45628 Document 618 of 646------ -CITE- 42 USC Sec. 300y-3 to 300y-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER XVII Part C -HEAD- Sec. 300y-3 to 300y-11. Repealed. Pub. L. 99-280, Sec. 5, Apr. 24, 1986, 100 Stat. 400 -MISC1- Section 300y-3, act July 1, 1944, ch. 373, title XIX, Sec. 1924, as added Aug. 13, 1981, Pub. L. 97-35, title IX, Sec. 901, 95 Stat. 553, provided that allotments be based upon prior year distributions and provided for direct distributions to Indian tribes. Section 300y-4, act July 1, 1944, ch. 373, title XIX, Sec. 1925, as added Aug. 13, 1981, Pub. L. 97-35, title IX, Sec. 901, 95 Stat. 553, related to payments under allotments to States. Section 300y-5, act July 1, 1944, ch. 373, title XIX, Sec. 1926, as added Aug. 13, 1981, Pub. L. 97-35, title IX, Sec. 901, 95 Stat. 554, related to State grants to community health centers from allotments. Section 300y-6, act July 1, 1944, ch. 373, title XIX, Sec. 1927, as added Aug. 13, 1981, Pub. L. 97-35, title IX, Sec. 901, 95 Stat. 556, related to application requirements and submittal, availability for public comment, and revision of a description of intended use of funds. Section 300y-7, act July 1, 1944, ch. 373, title XIX, Sec. 1928, as added Aug. 13, 1981, Pub. L. 97-35, title IX, Sec. 901, 95 Stat. 557, related to reporting and auditing requirements. Section 300y-8, act July 1, 1944, ch. 373, title XIX, Sec. 1929, as added Aug. 13, 1981, Pub. L. 97-35, title IX, Sec. 901, 95 Stat. 558, related to withholding of funds from a State not in compliance. Section 300y-9, act July 1, 1944, ch. 373, title XIX, Sec. 1930, as added Aug. 13, 1981, Pub. L. 97-35, title IX, Sec. 901, 95 Stat. 558, related to nondiscrimination requirements. Section 300y-10, act July 1, 1944, ch. 373, title XIX, Sec. 1931, as added Aug. 13, 1981, Pub. L. 97-35, title IX, Sec. 901, 95 Stat. 559, provided criminal penalty for false statements. Section 300y-11, act July 1, 1944, ch. 373, title XIX, Sec. 1932, as added Aug. 13, 1981, Pub. L. 97-35, title IX, Sec. 901, 95 Stat. 559, and amended Jan. 4, 1983, Pub. L. 97-414, Sec. 8(v), 96 Stat. 2063, related to applicability of other provisions and promulgation of regulations. ------DocID 45653 Document 619 of 646------ -CITE- 42 USC Sec. 300aa-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER XIX Part 2 subpart a -HEAD- Sec. 300aa-11. Petitions for compensation -STATUTE- (a) General rule (1) A proceeding for compensation under the Program for a vaccine-related injury or death shall be initiated by service upon the Secretary and the filing of a petition containing the matter prescribed by subsection (c) of this section with the United States Claims Court. The clerk of the United States Claims Court shall immediately forward the filed petition to the chief special master for assignment to a special master under section 300aa-12(d)(1) of this title. (2)(A) No person may bring a civil action for damages in an amount greater than $1,000 or in an unspecified amount against a vaccine administrator or manufacturer in a State or Federal court for damages arising from a vaccine-related injury or death associated with the administration of a vaccine after October 1, 1988, and no such court may award damages in an amount greater than $1,000 in a civil action for damages for such a vaccine-related injury or death, unless a petition has been filed, in accordance with section 300aa-16 of this title, for compensation under the Program for such injury or death and - (i)(I) the United States Claims Court has issued a judgment under section 300aa-12 of this title on such petition, and (II) such person elects under section 300aa-21(a) of this title to file such an action, or (ii) such person elects to withdraw such petition under section 300aa-21(b) of this title or such petition is considered withdrawn under such section. (B) If a civil action which is barred under subparagraph (A) is filed in a State or Federal court, the court shall dismiss the action. If a petition is filed under this section with respect to the injury or death for which such civil action was brought, the date such dismissed action was filed shall, for purposes of the limitations of actions prescribed by section 300aa-16 of this title, be considered the date the petition was filed if the petition was filed within one year of the date of the dismissal of the civil action. (3) No vaccine administrator or manufacturer may be made a party to a civil action (other than a civil action which may be brought under paragraph (2)) for damages for a vaccine-related injury or death associated with the administration of a vaccine after October 1, 1988. (4) If in a civil action brought against a vaccine administrator or manufacturer before October 1, 1988, damages were denied for a vaccine-related injury or death or if such civil action was dismissed with prejudice, the person who brought such action may file a petition under subsection (b) of this section for such injury or death. (5)(A) A plaintiff who on October 1, 1988, has pending a civil action for damages for a vaccine-related injury or death may, at any time within 2 years after October 1, 1988, or before judgment, whichever occurs first, petition to have such action dismissed without prejudice or costs and file a petition under subsection (b) of this section for such injury or death. (B) If a plaintiff has pending a civil action for damages for a vaccine-related injury or death, such person may not file a petition under subsection (b) of this section for such injury or death. (6) If a person brings a civil action after November 15, 1988 (FOOTNOTE 1) for damages for a vaccine-related injury or death associated with the administration of a vaccine before November 15, 1988, such person may not file a petition under subsection (b) of this section for such injury or death. (FOOTNOTE 1) So in original. Probably should be followed by a comma. (7) If in a civil action brought against a vaccine administrator or manufacturer for a vaccine-related injury or death damages are awarded under a judgment of a court or a settlement of such action, the person who brought such action may not file a petition under subsection (b) of this section for such injury or death. (8) If on October 1, 1988, there was pending an appeal or rehearing with respect to a civil action brought against a vaccine administrator or manufacturer and if the outcome of the last appellate review of such action or the last rehearing of such action is the denial of damages for a vaccine-related injury or death, the person who brought such action may file a petition under subsection (b) of this section for such injury or death. (9) This subsection applies only to a person who has sustained a vaccine-related injury or death and who is qualified to file a petition for compensation under the Program. (b) Petitioners (1)(A) Except as provided in subparagraph (B), any person who has sustained a vaccine-related injury, the legal representative of such person if such person is a minor or is disabled, or the legal representative of any person who died as the result of the administration of a vaccine set forth in the Vaccine Injury Table may, if the person meets the requirements of subsection (c)(1) of this section, file a petition for compensation under the Program. (B) No person may file a petition for a vaccine-related injury or death associated with a vaccine administered before October 1, 1988, if compensation has been paid under this part for 3500 petitions for such injuries or deaths. (2) Only one petition may be filed with respect to each administration of a vaccine. (c) Petition content A petition for compensation under the Program for a vaccine-related injury or death shall contain - (1) except as provided in paragraph (3), an affidavit, and supporting documentation, demonstrating that the person who suffered such injury or who died - (A) received a vaccine set forth in the Vaccine Injury Table or, if such person did not receive such a vaccine, contracted polio, directly or indirectly, from another person who received an oral polio vaccine, (B)(i) if such person received a vaccine set forth in the Vaccine Injury Table - (I) received the vaccine in the United States or in its trust territories, (II) received the vaccine outside the United States or a trust territory and at the time of the vaccination such person was a citizen of the United States serving abroad as a member of the Armed Forces or otherwise as an employee of the United States or a dependent of such a citizen, or (III) received the vaccine outside the United States or a trust territory and the vaccine was manufactured by a vaccine manufacturer located in the United States and such person returned to the United States not later than 6 months after the date of the vaccination, (ii) if such person did not receive such a vaccine but contracted polio from another person who received an oral polio vaccine, was a citizen of the United States or a dependent of such a citizen, (C)(i) sustained, or had significantly aggravated, any illness, disability, injury, or condition set forth in the Vaccine Injury Table in association with the vaccine referred to in subparagraph (A) or died from the administration of such vaccine, and the first symptom or manifestation of the onset or of the significant aggravation of any such illness, disability, injury, or condition or the death occurred within the time period after vaccine administration set forth in the Vaccine Injury Table, or (ii)(I) sustained, or had significantly aggravated, any illness, disability, injury, or condition not set forth in the Vaccine Injury Table but which was caused by a vaccine referred to in subparagraph (A), or (II) sustained, or had significantly aggravated, any illness, disability, injury, or condition set forth in the Vaccine Injury Table the first symptom or manifestation of the onset or significant aggravation of which did not occur within the time period set forth in the Table but which was caused by a vaccine referred to in subparagraph (A), (D)(i) suffered the residual effects or complications of such illness, disability, injury, or condition for more than 6 months after the administration of the vaccine and incurred unreimbursable expenses due in whole or in part to such illness, disability, injury, or condition in an amount greater than $1,000, or (ii) died from the administration of the vaccine, and (E) has not previously collected an award or settlement of a civil action for damages for such vaccine-related injury or death, (2) except as provided in paragraph (3), maternal prenatal and delivery records, newborn hospital records (including all physicians' and nurses' notes and test results), vaccination records associated with the vaccine allegedly causing the injury, pre- and post-injury physician or clinic records (including all relevant growth charts and test results), all post-injury inpatient and outpatient records (including all provider notes, test results, and medication records), if applicable, a death certificate, and if applicable, autopsy results, and (3) an identification of any records of the type described in paragraph (1) or (2) which are unavailable to the petitioner and the reasons for their unavailability. (d) Additional information A petition may also include other available relevant medical records relating to the person who suffered such injury or who died from the administration of the vaccine. (e) Schedule The petitioner shall submit in accordance with a schedule set by the special master assigned to the petition assessments, evaluations, and prognoses and such other records and documents as are reasonably necessary for the determination of the amount of compensation to be paid to, or on behalf of, the person who suffered such injury or who died from the administration of the vaccine. -SOURCE- (July 1, 1944, ch. 373, title XXI, Sec. 2111, as added Nov. 14, 1986, Pub. L. 99-660, title III, Sec. 311(a), 100 Stat. 3758, and amended Dec. 22, 1987, Pub. L. 100-203, title IV, Sec. 4302(b), 4304(a), (b), 4306, 4307(1), (2), 101 Stat. 1330-221, 1330-223, 1330-224; Dec. 19, 1989, Pub. L. 101-239, title VI, Sec. 6601(c)(1)-(7), 103 Stat. 2285, 2286; Nov. 3, 1990, Pub. L. 101-502, Sec. 5(a), 104 Stat. 1286.) -COD- CODIFICATION In subsecs. (a)(2)(A), (3), (4), (5)(A), (8), and (b)(1)(B), 'October 1, 1988' substituted for 'the effective date of this subpart' on authority of section 323 of Pub. L. 99-660, as amended, set out as an Effective Date note under section 300aa-1 of this title. -MISC3- PRIOR PROVISIONS A prior section 300aa-11, act July 1, 1944, Sec. 2112, was successively renumbered by subsequent acts and transferred, see section 300aaa-9 of this title. A prior section 2111 of act July 1, 1944, was successively renumbered by subsequent acts and transferred, see section 300aaa-8 of this title. AMENDMENTS 1990 - Subsec. (a)(2)(A). Pub. L. 101-502, Sec. 5(a)(1), substituted 'unless a petition has been filed, in accordance with section 300aa-16 of this title, for compensation under the Program for such injury or death and - ' and cls. (i) and (ii) for 'unless - '(i) a petition has been filed, in accordance with section 300aa-16 of this title, for compensation under the Program for such injury or death, '(ii) the United States Claims Court has issued a judgment under section 300aa-12 of this title on such petition, and '(iii) such person elects under section 300aa-21(a) of this title to file such an action.' Subsec. (a)(5)(A). Pub. L. 101-502, Sec. 5(a)(2), struck out 'without prejudice' after 'without prejudice or costs'. Subsec. (a)(5)(B). Pub. L. 101-502, Sec. 5(a)(3), substituted 'plaintiff' for 'plaintiff who'. Subsec. (d). Pub. L. 101-502, Sec. 5(a)(4), struck out '(d) except as provided in paragraph (3),' before '(d) Additional information'. Subsec. (e). Pub. L. 101-502, Sec. 5(a)(5), substituted '(e) Schedule' for '(e)(e) Schedule'. 1989 - Subsec. (a)(1). Pub. L. 101-239, Sec. 6601(c)(1), substituted 'filing of a petition containing the matter prescribed in subsection (c) of this section' for 'filing of a petition' and inserted at end 'The clerk of the United States Claims Court shall immediately forward the filed petition to the chief special master for assignment to a special master under section 300aa-12(d)(1) of this title.' Subsec. (a)(2)(A)(i). Pub. L. 101-239, Sec. 6601(c)(2), struck out 'under subsection (b) of this section' after 'section 300aa-16 of this title,'. Subsec. (a)(5)(A). Pub. L. 101-239, Sec. 6601(c)(3)(A), substituted 'petition to have such action dismissed without prejudice or costs' for 'elect to withdraw such action'. Subsec. (a)(5)(B). Pub. L. 101-239, Sec. 6601(c)(3)(B), substituted 'has pending' for 'on October 1, 1988, had pending' and struck out 'does not withdraw the action under subparagraph (A)' after 'vaccine-related injury or death'. Subsec. (a)(6). Pub. L. 101-239, Sec. 6601(c)(4), substituted 'November 15, 1988' for 'the effective date of this subpart' in two places. Subsec. (a)(8). Pub. L. 101-239, Sec. 6601(c)(5), added par. (8). Former par. (8) redesignated (9). Subsec. (a)(9). Pub. L. 101-239, Sec. 6601(c)(5), (7), redesignated par. (8) as (9) and realigned margin. Subsec. (c)(1). Pub. L. 101-239, Sec. 6601(c)(6)(A), inserted 'except as provided in paragraph (3),' after '(1)' in introductory provisions. Subsec. (c)(2). Pub. L. 101-239, Sec. 6601(c)(6)(B), (C), added par. (2) and redesignated former par. (2) as subsec. (d). Pub. L. 101-239, Sec. 6601(c)(6)(A), inserted 'except as provided in paragraph (3),' after '(2)'. Subsec. (c)(3). Pub. L. 101-239, Sec. 6601(c)(6)(C), (D), added par. (3). Former par. (3) redesignated subsec. (e). Subsec. (d). Pub. L. 101-239, Sec. 6601(c)(6)(B), redesignated former subsec. (c)(2) as subsec. (d), expanded margin to full measure, inserted subsec. designation and heading, substituted 'A petition may also include other available' for 'all available', struck out '(including autopsy reports, if any)' after 'relevant medical records', and substituted 'administration of the vaccine.' for 'administration of the vaccine and an identification of any unavailable records known to the petitioner and the reasons for their unavailability, and'. Subsec. (e). Pub. L. 101-239, Sec. 6601(c)(6)(D), redesignated former subsec. (c)(3) as subsec. (e), expanded margin to full measure, inserted subsec. designation and heading, and substituted 'The petitioner shall submit in accordance with a schedule set by the special master assigned to the petition' for 'appropriate'. 1987 - Subsec. (a)(1). Pub. L. 100-203, Sec. 4307(1), which directed that par. (1) be amended by substituting 'with the United States Claims Court' for 'with the United States district court for the district in which the petitioner resides or the injury or death occurred', was executed making the substitution for 'with the United States district court for the district in which the petitioner resides or in which the injury or death occurred', as the probable intent of Congress. Subsec. (a)(2)(A). Pub. L. 100-203, Sec. 4306, substituted 'vaccine administrator or manufacturer' for 'vaccine manufacturer'. Pub. L. 100-203, Sec. 4302(b)(1), substituted 'effective date of this subpart' for 'effective date of this part'. Subsec. (a)(2)(A)(ii). Pub. L. 100-203, Sec. 4307(2), substituted 'the United States Claims Court' for 'a district court of the United States'. Subsec. (a)(3). Pub. L. 100-203, Sec. 4306, substituted 'vaccine administrator or manufacturer' for 'vaccine manufacturer'. Pub. L. 100-203, Sec. 4302(b)(1), substituted 'effective date of this subpart' for 'effective date of this part'. Subsec. (a)(4). Pub. L. 100-203, Sec. 4306, substituted 'vaccine administrator or manufacturer' for 'vaccine manufacturer'. Pub. L. 100-203, Sec. 4302(b)(1), substituted 'effective date of this subpart' for 'effective date of this part'. Subsec. (a)(5)(A). Pub. L. 100-203, Sec. 4302(b)(2), substituted 'after the effective date of this subpart' for 'after the effective date of this subchapter'. Pub. L. 100-203, Sec. 4302(b)(1), substituted 'who on the effective date of this subpart' for 'who on the effective date of this part'. Subsec. (a)(5)(B). Pub. L. 100-203, Sec. 4302(b)(1), substituted 'effective date of this subpart' for 'effective date of this part'. Subsec. (a)(6). Pub. L. 100-203, Sec. 4302(b)(1), substituted 'effective date of this subpart' for 'effective date of this part' in two places. Subsec. (a)(7). Pub. L. 100-203, Sec. 4306, substituted 'vaccine administrator or manufacturer' for 'vaccine manufacturer'. Subsec. (a)(8). Pub. L. 100-203, Sec. 4304(a), added par. (8). Subsec. (b)(1)(A). Pub. L. 100-203, Sec. 4304(b)(1), substituted 'may, if the person meets the requirements of subsection (c)(1) of this section, file' for 'may file'. Subsec. (b)(1)(B). Pub. L. 100-203, Sec. 4302(b)(1), substituted 'effective date of this subpart' for 'effective date of this part'. Subsec. (c)(1)(D). Pub. L. 100-203, Sec. 4304(b)(2), substituted 'for more than 6 months' for 'for more than 1 year', 'and incurred' for ', (ii) incurred', and '(ii)' for '(iii)'. EFFECTIVE DATE OF 1990 AMENDMENT Section 5(h) of Pub. L. 101-502 provided that: 'The amendments made by subsections (f)(1) and (g) (amending section 300aa-21 of this title and provisions set out as a note under section 300aa-1 of this title and enacting provisions set out as a note under section 300aa-12 of this title) shall take effect as of November 14, 1986, and the amendments made by subsections (a) through (e) and subsection (f)(2) (amending this section and sections 300aa-12, 300aa-13, 300aa-15, 300aa-16, and 300aa-21 of this title) shall take effect as of September 30, 1990.' EFFECTIVE DATE OF 1989 AMENDMENT For applicability of amendments by Pub. L. 101-239 to petitions filed after Dec. 19, 1989, petitions currently pending in which the evidentiary record is closed, and petitions currently pending in which the evidentiary record is not closed, with provision for an immediate suspension for 30 days of all pending cases, see section 6601(s)(1) of Pub. L. 101-239, set out as a note under section 300aa-10 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 300aa-12, 300aa-13, 300aa-14, 300aa-15, 300aa-16, 300aa-21, 300aa-23, 300aa-34 of this title; title 26 section 4131. ------DocID 45692 Document 620 of 646------ -CITE- 42 USC Sec. 300cc-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER XXI Part B -HEAD- Sec. 300cc-11. Clinical evaluation units at National Institutes of Health -STATUTE- (a) In general The Secretary, acting through the Director of the National Cancer Institute and the Director of the National Institute of Allergy and Infectious Diseases, shall for each such Institute establish a clinical evaluation unit at the Clinical Center at the National Institutes of Health. Each of the clinical evaluation units - (1) shall conduct clinical evaluations of experimental treatments for acquired immune deficiency syndrome developed within the preclinical drug development program; and (2) may conduct clinical evaluations of experimental treatments for such syndrome that are developed by any other national research institute of the National Institutes of Health or by any other entity. (b) Personnel and administrative support (1) For the purposes described in subsection (a) of this section, the Secretary, acting through the Director of the National Institutes of Health, shall provide each of the clinical evaluation units required in such subsection - (A)(i) with not less than 50 beds; or (ii) with an outpatient clinical capacity equal to not less than twice the outpatient clinical capacity, with respect to acquired immune deficiency syndrome, possessed by the Clinical Center of the National Institutes of Health on June 1, 1988; and (B) with such personnel, such administrative support, and such other support services as may be necessary. (2) Facilities, personnel, administrative support, and other support services provided pursuant to paragraph (1) shall be in addition to the number or level of facilities, personnel, administrative support, and other support services that otherwise would be available at the Clinical Center at the National Institutes of Health for the provision of clinical care for individuals with diseases or disorders. (c) Authorization of appropriations For the purpose of carrying out this section, there are authorized to be appropriated such sums as may be necessary. -SOURCE- (July 1, 1944, ch. 373, title XXIII, Sec. 2311, as added Nov. 4, 1988, Pub. L. 100-607, title II, Sec. 201(4), 102 Stat. 3066.) -MISC1- PRIOR PROVISIONS A prior section 300cc-11, act July 1, 1944, Sec. 2312, was successively renumbered by subsequent acts and transferred, see section 300aaa-9 of this title. ------DocID 45729 Document 621 of 646------ -CITE- 42 USC Sec. 300ee-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER XXIII Part A -HEAD- Sec. 300ee-11. Establishment of program -STATUTE- (a) Allotments for States For the purpose described in subsection (b) of this section, the Secretary shall for each of the fiscal years 1989 through 1991 make an allotment for each State in an amount determined in accordance with section 300ee-17 of this title. The Secretary shall make payments each such fiscal year to each State from the allotment for the State if the Secretary approves for the fiscal year involved an application submitted by the State pursuant to section 300ee-13 of this title. (b) Purpose of grants The Secretary may not make payments under subsection (a) of this section for a fiscal year unless the State involved agrees to expend the payments only for the purpose of carrying out, in accordance with section 300ee-12 of this title, public information activities with respect to acquired immune deficiency syndrome. -SOURCE- (July 1, 1944, ch. 373, title XXV, formerly title XV, Sec. 2501, as added Nov. 4, 1988, Pub. L. 100-607, title II, Sec. 221, 102 Stat. 3093, and renumbered title XXV, Aug. 16, 1989, Pub. L. 101-93, Sec. 5(e)(1), 103 Stat. 612.) -MISC1- PRIOR PROVISIONS A prior section 2501 of act July 1, 1944, was successively renumbered by subsequent acts, see section 300aaa of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 300ee-12, 300ee-13, 300ee-14, 300ee-15, 300ee-16, 300ee-17, 300ee-18, 300ee-19, 300ee-20, 300ee-24 of this title. ------DocID 45752 Document 622 of 646------ -CITE- 42 USC Sec. 300ff-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER XXIV Part A -HEAD- Sec. 300ff-11. Establishment of program of grants -STATUTE- (a) Eligible areas The Secretary, acting through the Administrator of the Health Resources and Services Administration, shall, subject to subsection (b) of this section, make grants in accordance with section 300ff-13 of this title for the purpose of assisting in the provision of the services specified in (FOOTNOTE 1) 300ff-14 of this title in any metropolitan area for which, as of June 30, 1990, in the case of grants for fiscal year 1991, and as of March 31 of the most recent fiscal year for which such data is available in the case of a grant for any subsequent fiscal year - (FOOTNOTE 1) So in original. Probably should be followed by 'section'. (1) there has been reported to and confirmed by the Director of the Centers for Disease Control a cumulative total of more than 2,000 cases of acquired immune deficiency syndrome; or (2) the per capita incidence of cumulative cases of such syndrome (computed on the basis of the most recently available data on the population of the area) is not less than 0.0025. (b) Requirement regarding confirmation of cases The Secretary may not make a grant under subsection (a) of this section for a metropolitan area unless, before making any payments under the grant, the cases of acquired immune deficiency syndrome reported for purposes of such subsection have been confirmed by the Secretary, acting through the Director of the Centers for Disease Control. -SOURCE- (July 1, 1944, ch. 373, title XXVI, Sec. 2601, as added Aug. 18, 1990, Pub. L. 101-381, title I, Sec. 101(3), 104 Stat. 576.) -MISC1- PRIOR PROVISIONS A prior section 2601 of act July 1, 1944, was renumbered by subsequent act, see section 300aaa of this title. STUDY REGARDING HIV DISEASE IN RURAL AREAS Section 403 of Pub. L. 101-381 provided that: '(a) In General. - The Secretary of Health and Human Services, after consultation with the Director of the Office of Rural Health Policy, shall - '(1) conduct a study for the purpose of estimating the incidence and prevalence in rural areas of cases of acquired immune deficiency syndrome and cases of infection with the etiologic agent for such syndrome; and '(2) in carrying out such study, determine the adequacy in rural areas of services for diagnosing such cases and providing treatment for such cases that are in the early stages of infection. '(b) Report. - Not later than 1 year after the date of the enactment of this Act (Aug. 18, 1990), the Secretary of Health and Human Services shall complete the study required under subsection (a) and prepare and submit, to the appropriate committees of Congress a report describing the findings made as a result of such study. '(c) Authorization of Appropriations. - There are authorized to be appropriated to carry out this section, such sums as may be necessary for each of the fiscal years 1991 through 1995.' -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 300ff-12, 300ff-13, 300ff-14, 300ff-15, 300ff-17, 300ff-47 of this title. ------DocID 45831 Document 623 of 646------ -CITE- 42 USC Sec. 300aaa-11 -EXPCITE- TITLE 42 CHAPTER 6A SUBCHAPTER XXV -HEAD- Sec. 300aaa-11. Contract authority -STATUTE- The authority of the Secretary to enter into contracts under this chapter shall be effective for any fiscal year only to such extent or in such amounts as are provided in advance by appropriation Acts. -SOURCE- (July 1, 1944, ch. 373, title XXVII, Sec. 2712, formerly title V, Sec. 514, as added Nov. 9, 1978, Pub. L. 95-623, Sec. 11(e), 92 Stat. 3456, and renumbered title XXI, Sec. 2114, Apr. 26, 1983, Pub. L. 98-24, Sec. 2(a)(1), 97 Stat. 176; renumbered title XXIII, Sec. 2314, Nov. 14, 1986, Pub. L. 99-660, title III, Sec. 311(a), 100 Stat. 3755; renumbered title XXV, Sec. 2512, Nov. 4, 1988, Pub. L. 100-607, title II, Sec. 201(1), (3), 102 Stat. 3062, 3063; renumbered title XXVI, Sec. 2612, Nov. 18, 1988, Pub. L. 100-690, title II, Sec. 2620(a), 102 Stat. 4244; renumbered title XXVII, Sec. 2712, Aug. 18, 1990, Pub. L. 101-381, title I, Sec. 101(1), (2), 104 Stat. 576.) -COD- CODIFICATION Section was formerly classified to section 300cc-13 of this title prior to renumbering by Pub. L. 100-607, to section 300aa-13 of this title prior to renumbering by Pub. L. 99-660, and to section 229c of this title prior to renumbering by Pub. L. 98-24. ------DocID 46063 Document 624 of 646------ -CITE- 42 USC Sec. 1320b-11 -EXPCITE- TITLE 42 CHAPTER 7 SUBCHAPTER XI Part A -HEAD- Sec. 1320b-11. Blood donor locator service -STATUTE- (a) In general The Secretary shall establish and conduct a Blood Donor Locator Service, under the direction of the Commissioner of Social Security, which shall be used to obtain and transmit to any authorized person (as defined in subsection (h)(1) of this section) the most recent mailing address of any blood donor who, as indicated by the donated blood or products derived therefrom or by the history of the subsequent use of such blood or blood products, has or may have the virus for acquired immune deficiency syndrome, in order to inform such donor of the possible need for medical care and treatment. (b) Provision of address information Whenever the Secretary receives a request, filed by an authorized person (as defined in subsection (h)(1) of this section), for the mailing address of a donor described in subsection (a) of this section and the Secretary is reasonably satisfied that the requirements of this section have been met with respect to such request, the Secretary shall promptly undertake to provide the requested address information from - (1) the files and records maintained by the Social Security Administration, and (2) such files and records obtained pursuant to section 6103(m)(6) of the Internal Revenue Code of 1986 as the Secretary considers necessary to comply with such request. (c) Manner and form of requests A request for address information under this section shall be filed in such manner and form as the Secretary shall by regulation prescribe, shall include the blood donor's social security account number, and shall be accompanied or supported by such documents as the Secretary may determine to be necessary. (d) Procedures and safeguards Any authorized person shall, as a condition for receiving address information from the Blood Donor Locator Service - (1) establish and maintain, to the satisfaction of the Secretary, a system for standardizing records with respect to any request, the reason for such request, and the date of such request made by or of it and any disclosure of address information made by or to it, (2) establish and maintain, to the satisfaction of the Secretary, a secure area or place in which such address information and all related blood donor records shall be stored, (3) restrict, to the satisfaction of the Secretary, access to the address information and related blood donor records only to persons whose duties or responsibilities require access and to whom disclosure may be made under the provisions of this section, (4) provide such other safeguards which the Secretary determines (and which the Secretary prescribes in regulations) to be necessary or appropriate to protect the confidentiality of the address information and related blood donor records, (5) furnish a report to the Secretary, at such time and containing such information as the Secretary may prescribe, which describes the procedures established and utilized by the authorized person for ensuring the confidentiality of address information and related blood donor records required under this subsection, and (6) destroy such address information and related blood donor records, upon completion of their use in providing the notification for which the information was obtained, so as to make such information and records undisclosable. If the Secretary determines that any authorized person has failed to, or does not, meet the requirements of this subsection, the Secretary may, after any proceedings for review established under subsection (f) of this section, take such actions as are necessary to ensure such requirements are met, including refusing to disclose address information to such authorized person until the Secretary determines that such requirements have been or will be met. In the case of any authorized person who discloses any address information received pursuant to this section or any related blood donor records to any agent, this subsection shall apply to such authorized person and each such agent (except that, in the case of an agent, any report to the Secretary or other action with respect to the Secretary shall be made or taken through such authorized person). The Secretary shall destroy all related blood donor records in the possession of the Department of Health and Human Services upon completion of their use in transmitting mailing addresses as required under subsection (a) of this section, so as to make such records undisclosable. (e) Arrangements with State agencies and authorized persons The Secretary, in carrying out the Secretary's duties and functions under this section, shall enter into arrangements - (1) with State agencies to accept and to transmit to the Secretary requests for address information under this section and to accept and to transmit such information to authorized persons, and (2) with State agencies and authorized persons otherwise to cooperate with the Secretary in carrying out the purposes of this section. (f) Procedures for administrative review The Secretary shall by regulation prescribe procedures which provide for administrative review of any determination that any authorized person has failed to meet the requirements of this section. (g) Unauthorized disclosure of information Paragraphs (1), (2), and (3) of section 7213(a) of the Internal Revenue Code of 1986 shall apply with respect to the unauthorized willful disclosure to any person of address information or related blood donor records acquired or maintained by or under the Secretary, or pursuant to this section by any authorized person, or of information derived from any such address information or related blood donor records, in the same manner and to the same extent as such paragraphs apply with respect to unauthorized disclosures of return and return information described in such paragraphs. Paragraph (4) of section 7213(a) of such Code shall apply with respect to the willful offer of any item of material value in exchange for any such address information or related blood donor record in the same manner and to the same extent as such paragraph applies with respect to offers (in exchange for any return or return information) described in such paragraph. (h) Definitions For purposes of this section - (1) Authorized person The term 'authorized person' means - (A) any agency of a State (or of a political subdivision of a State) which has duties or authority under State law relating to the public health or otherwise has the duty or authority under State law to regulate blood donations, and (B) any entity engaged in the acceptance of blood donations which is licensed or registered by the Food and Drug Administration in connection with the acceptance of such blood donations, and which, in accordance with such regulations as may be prescribed by the Secretary, provides for - (i) the confidentiality of any address information received pursuant to this section and related blood donor records, (ii) blood donor notification procedures for individuals with respect to whom such information is requested and a finding has been made that they have or may have the virus for acquired immune deficiency syndrome, and (iii) counseling services for such individuals who have been found to have such virus. (2) Related blood donor record The term 'related blood donor record' means any record, list, or compilation which indicates, directly or indirectly, the identity of any individual with respect to whom a request for address information has been made pursuant to this section. (3) State The term 'State' includes the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Commonwealth of the Northern Marianas, and the Trust Territory of the Pacific Islands. -SOURCE- (Aug. 14, 1935, ch. 531, title XI, Sec. 1141, as added Nov. 10, 1988, Pub. L. 100-647, title VIII, Sec. 8008(b)(1), 102 Stat. 3784.) -REFTEXT- REFERENCES IN TEXT The Internal Revenue Code of 1986, referred to in subsecs. (b)(2) and (g), is classified generally to Title 26, Internal Revenue Code. -MISC2- TIME LIMIT FOR ESTABLISHMENT OF BLOOD DONOR LOCATOR SERVICE Section 8008(b)(2) of Pub. L. 100-647 provided that: 'The Secretary of Health and Human Services shall establish the Blood Donor Locator Service pursuant to section 1141 of the Social Security Act (this section) not later than 180 days after the date of the enactment of this Act (Nov. 10, 1988).' -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 405 of this title; title 26 section 6103. ------DocID 46078 Document 625 of 646------ -CITE- 42 USC Sec. 1320c-11 -EXPCITE- TITLE 42 CHAPTER 7 SUBCHAPTER XI Part B -HEAD- Sec. 1320c-11. Exemptions of Christian Science sanatoriums -STATUTE- The provisions of this part shall not apply with respect to a Christian Science sanatorium operated, or listed and certified, by the First Church of Christ, Scientist, Boston, Massachusetts. -SOURCE- (Aug. 14, 1935, ch. 531, title XI, Sec. 1162, as added Sept. 3, 1982, Pub. L. 97-248, title I, Sec. 143, 96 Stat. 393.) -MISC1- PRIOR PROVISIONS A prior section 1320c-11, act Aug. 14, 1935, ch. 531, title XI, Sec. 1162, as added Oct. 30, 1972, Pub. L. 92-603, title II, Sec. 249F(b), 86 Stat. 1440, and amended Dec. 5, 1980, Pub. L. 96-499, title IX, Sec. 922(a), 927(b), 94 Stat. 2628, 2630; Aug. 13, 1981, 97-35, title XXI, Sec. 2113(h), 95 Stat. 795, which related to Statewide Professional Standards Review Councils, was omitted in the general revision of this part by section 143 of Pub. L. 97-248. ------DocID 46486 Document 626 of 646------ -CITE- 42 USC CHAPTER 11 -EXPCITE- TITLE 42 CHAPTER 11 -HEAD- CHAPTER 11 - COMPENSATION FOR DISABILITY OR DEATH TO PERSONS EMPLOYED AT MILITARY, AIR, AND NAVAL BASES OUTSIDE UNITED STATES -MISC1- Sec. 1651. Compensation authorized. (a) Places of employment. (b) Definitions. (c) Liability as exclusive. (d) 'Contractor' defined. (e) Contracts within section; waiver of application of section. (f) Liability to prisoners of war and protected persons. 1652. Computation of benefits; application to aliens and nonnationals. 1653. Compensation districts; judicial proceedings. 1654. Persons excluded from benefits. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in sections 1701, 1704 of this title; title 33 section 941; title 50 App. section 2003. ------DocID 46717 Document 627 of 646------ -CITE- 42 USC Sec. 1962d-11 -EXPCITE- TITLE 42 CHAPTER 19B SUBCHAPTER IV -HEAD- Sec. 1962d-11. Authorization of appropriation for Delmarva Peninsula study -STATUTE- There is hereby authorized to be appropriated the sum of $500,000 to carry out the provisions of sections 1962d-7 to 1962d-11 of this title: Provided, That nothing in such sections shall prevent the expenditure of other funds appropriated to the Geological Survey for studies and activities performed under its general authority. -SOURCE- (Pub. L. 89-618, Sec. 5, Oct. 4, 1966, 80 Stat. 871.) -COD- CODIFICATION Section was not enacted as part of the Water Resources Planning Act which comprises this chapter. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1962d-8, 1962d-9, 1962d-10 of this title. ------DocID 46769 Document 628 of 646------ -CITE- 42 USC Sec. 1973cc-11 to 1973cc-15 -EXPCITE- TITLE 42 CHAPTER 20 SUBCHAPTER I-D Part II -HEAD- Sec. 1973cc-11 to 1973cc-15. Repealed. Pub. L. 99-410, title II, Sec. 203, Aug. 28, 1986, 100 Stat. 930 -MISC1- Section 1973cc-11, acts Aug. 9, 1955, ch. 656, title II, Sec. 201, 69 Stat. 585; Dec. 21, 1982, Pub. L. 97-375, title II, Sec. 203(b), 96 Stat. 1823, provided for designation of Presidential designee to coordinate and facilitate Federal responsibilities and to report to the President and Congress. See section 1973ff(a) and (b) of this title. Section 1973cc-12, acts Aug. 9, 1955, ch. 656, title II, Sec. 202, 69 Stat. 586; Nov. 4, 1978, Pub. L. 95-593, Sec. 8, 92 Stat. 2537, related to acquisition and distribution by Presidential designee of current absentee voting information from each State. Section 1973c-13, acts Aug. 9, 1955, ch. 656, title II, Sec. 203, 69 Stat. 586; June 18, 1968, Pub. L. 90-344, Sec. 1(3), 82 Stat. 181; Nov. 4, 1978, Pub. L. 95-593, Sec. 9, 92 Stat. 2538, related to cooperation of Government officials, drafts of State legislation, and printing and transmitting of post cards. See section 1973ff(c) of this title. Section 1973cc-14, acts Aug. 9, 1955, ch. 656, title II, Sec. 204, 69 Stat. 586; June 18, 1968, Pub. L. 90-343, Sec. 2, 82 Stat. 181; June 18, 1968, Pub. L. 90-344, Sec. 1(4)-(6), 82 Stat. 182; Nov. 4, 1978, Pub. L. 95-593, Sec. 10, 92 Stat. 2538, related to form and content of post card application. See section 1973ff(b)(2) of this title. Section 1973cc-15, act Aug. 9, 1955, ch. 656, title II, Sec. 205, 69 Stat. 588, related to use of prior post card form for election of Members of Congress. EFFECTIVE DATE OF REPEAL Repeal applicable with respect to elections taking place after Dec. 31, 1987, see section 204 of Pub. L. 99-410, set out as an Effective Date note under section 1973ff of this title. ------DocID 46881 Document 629 of 646------ -CITE- 42 USC Sec. 2000e-11 -EXPCITE- TITLE 42 CHAPTER 21 SUBCHAPTER VI -HEAD- Sec. 2000e-11. Veterans' special rights or preference -STATUTE- Nothing contained in this subchapter shall be construed to repeal or modify any Federal, State, territorial, or local law creating special rights or preference for veterans. -SOURCE- (Pub. L. 88-352, title VII, Sec. 712, July 2, 1964, 78 Stat. 265.) ------DocID 46912 Document 630 of 646------ -CITE- 42 USC Sec. 2000aa-11 -EXPCITE- TITLE 42 CHAPTER 21A SUBCHAPTER II -HEAD- Sec. 2000aa-11. Guidelines for Federal officers and employees -STATUTE- (a) Procedures to obtain documentary evidence; protection of certain privacy interests The Attorney General shall, within six months of October 13, 1980, issue guidelines for the procedures to be employed by any Federal officer or employee, in connection with the investigation or prosecution of an offense, to obtain documentary materials in the private possession of a person when the person is not reasonably believed to be a suspect in such offense or related by blood or marriage to such a suspect, and when the materials sought are not contraband or the fruits or instrumentalities of an offense. The Attorney General shall incorporate in such guidelines - (1) a recognition of the personal privacy interests of the person in possession of such documentary materials; (2) a requirement that the least intrusive method or means of obtaining such materials be used which do not substantially jeopardize the availability or usefulness of the materials sought to be obtained; (3) a recognition of special concern for privacy interests in cases in which a search or seizure for such documents would intrude upon a known confidential relationship such as that which may exist between clergyman and parishioner; lawyer and client; or doctor and patient; and (4) a requirement that an application for a warrant to conduct a search governed by this subchapter be approved by an attorney for the government, except that in an emergency situation the application may be approved by another appropriate supervisory official if within 24 hours of such emergency the appropriate United States Attorney is notified. (b) Use of search warrants; reports to Congress The Attorney General shall collect and compile information on, and report annually to the Committees on the Judiciary of the Senate and the House of Representatives on the use of search warrants by Federal officers and employees for documentary materials described in subsection (a)(3) of this section. -SOURCE- (Pub. L. 96-440, title II, Sec. 201, Oct. 13, 1980, 94 Stat. 1882.) ------DocID 50985 Document 631 of 646------ -CITE- 43 USC Sec. 11 -EXPCITE- TITLE 43 CHAPTER 1 -HEAD- Sec. 11. Restriction on officers, clerks, and employees -STATUTE- The officers, clerks, and employees in the Bureau of Land Management are prohibited from directly or indirectly purchasing or becoming interested in the purchase of any of the public land; and any person who violates this section shall forthwith be removed from his office. -SOURCE- (R.S. Sec. 452; 1946 Reorg. Plan No. 3, Sec. 403, eff. July 16, 1946, 11 F.R. 7876, 60 Stat. 1100.) -COD- CODIFICATION R.S. Sec. 452 derived from acts Apr. 25, 1812, ch. 68, Sec. 10, 2 Stat. 717; July 4, 1836, ch. 352, Sec. 14, 5 Stat. 112. -TRANS- TRANSFER OF FUNCTIONS For transfer of functions of other officers, employees, and agencies of Department of the Interior, with certain exceptions, to Secretary of the Interior, with power to delegate, see Reorg. Plan No. 3 of 1950, Sec. 1, 2, eff. May 24, 1950, 15 F.R. 3174, 64 Stat. 1262, set out under section 1451 of this title. 'Bureau of Land Management' substituted for 'General Land Office' on authority of section 403 of Reorg. Plan No. 3 of 1946. See note set out under section 1 of this title. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 1621 of this title. ------DocID 51133 Document 632 of 646------ -CITE- 43 USC Sec. 270-11 -EXPCITE- TITLE 43 CHAPTER 7 SUBCHAPTER VIII -HEAD- Sec. 270-11. Repealed. Pub. L. 94-579, title VII, Sec. 703(a), Oct. 21, 1976, 90 Stat. 2787 -MISC1- Section, acts Mar. 8, 1922, ch. 96, Sec. 1, 42 Stat. 415; Aug. 23, 1958, Pub. L. 85-725, Sec. 1, 72 Stat. 730, related to entry on land containing coal, oil, or gas. EFFECTIVE DATE OF REPEAL Section 703(a) of Pub. L. 94-579 provided that the repeal made by that section is effective on and after tenth anniversary of date of approval of this Act, Oct. 21, 1976. SAVINGS PROVISION Repeal by Pub. L. 94-579 not to be construed as terminating any valid lease, permit, patent, etc., existing on Oct. 21, 1976, see section 701 of Pub. L. 94-579, set out as a note under section 1701 of this title. ------DocID 51217 Document 633 of 646------ -CITE- 43 USC CHAPTER 11 -EXPCITE- TITLE 43 CHAPTER 11 -HEAD- CHAPTER 11 - DISCOVERY, DEVELOPMENT, AND MARKING OF WATER HOLES, ETC., BY GOVERNMENT -MISC1- Sec. 361. Authority to explore for, develop, and mark water holes, etc. 362. Injury to signposts and filling up or fouling water supply. 363. Rules and regulations by Secretary. ------DocID 52430 Document 634 of 646------ -CITE- 44 USC CHAPTER 11 -EXPCITE- TITLE 44 CHAPTER 11 -HEAD- CHAPTER 11 - EXECUTIVE AND JUDICIARY PRINTING AND BINDING -MISC1- Sec. 1101. Printing and binding for the President. 1102. Printing to be authorized by law and necessary to the public business, not in excess of appropriation, and on special requisition filed with the Public Printer. 1103. Certificate of necessity; estimate of cost. 1104. Restrictions on use of illustrations. 1105. Form and style of work for departments. 1106. Inserting 'compliments' forbidden. 1107. Appropriations chargeable for printing and binding of documents or reports. 1108. Presidential approval required for printing of periodicals; number printed; sale to public. 1109. Printing documents in two or more editions; full number and allotment of full quota. 1110. Daily examination of Congressional Record for immediate ordering of documents for official use; limit; bills and resolutions. 1111. Annual reports: time for furnishing manuscript and proofs to Public Printer. 1112. Annual reports: type for reports of executive officers. 1113. Annual reports: exclusion of irrelevant matter. 1114. Annual reports: number of copies for Congress. 1115. Annual reports: time of delivery by Public Printer to Congress. 1116. Annual reports: limitation on number of copies printed; reports of bureau chiefs. 1117. Annual reports: discontinuance of printing of annual or special reports to keep within appropriations. 1118. Documents beyond scope of ordinary departmental business. 1119. Government publications as public property. 1120. Blanks and letterheads for judges and officers of courts. 1121. Paper and envelopes for Government agencies in the District of Columbia. 1122. Supplies for Government establishments. 1123. Binding materials; bookbinding for libraries. AMENDMENTS 1984 - Pub. L. 98-216, Sec. 3(d)(1), Feb. 14, 1984, 98 Stat. 6, substituted 'Presidential' for 'Bureau of Budget' in item 1108. FEDERAL RECORDS MANAGEMENT PROVISIONS WITHOUT EFFECT ON CHAPTER Authority and responsibilities under chapter not limited or repealed by Federal Records Management Amendments of 1976, see section 5(b) of Pub. L. 94-575, set out as a note under section 2901 of this title. ------DocID 52686 Document 635 of 646------ -CITE- 45 USC Sec. 11 -EXPCITE- TITLE 45 CHAPTER 1 -HEAD- Sec. 11. Safety appliances required for each car; when hand brakes may be omitted -STATUTE- It shall be unlawful for any railroad subject to the provisions of sections 11 to 16 of this title to haul, or permit to be hauled or used on its line, any car subject to the provisions of said sections not equipped with appliances provided for in said sections, to wit: All cars must be equipped with secure sill steps and efficient hand brakes; all cars requiring secure ladders and secure running boards shall be equipped with such ladders and running boards, and all cars having ladders shall also be equipped with secure handholds or grab irons on their roofs at the tops of such ladders: Provided, That in the loading and hauling of long commodities, requiring more than one car, the hand brakes may be omitted on all save one of the cars while they are thus combined for such purpose. -SOURCE- (Apr. 14, 1910, ch. 160, Sec. 2, 36 Stat. 298; June 22, 1988, Pub. L. 100-342, Sec. 13(3)(A), 102 Stat. 631.) -MISC1- AMENDMENTS 1988 - Pub. L. 100-342 substituted 'railroad' for 'common carrier'. -TRANS- TRANSFER OF FUNCTIONS Powers, duties, and functions of Interstate Commerce Commission and of Chairman, members, offices, and officers thereof under this section relating to safety appliances and equipment on railroad engines and cars and protection of employees and travelers were transferred to and vested in Secretary of Transportation by Pub. L. 89-670, Oct. 15, 1966, 80 Stat. 931, which created Department of Transportation. See section 1655(e)(1)(C) of Title 49, Appendix, Transportation. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 12, 13, 14, 16, 1013 of this title; title 42 section 4916; title 49 App. section 1655. ------DocID 52830 Document 636 of 646------ -CITE- 45 USC CHAPTER 11 -EXPCITE- TITLE 45 CHAPTER 11 -HEAD- CHAPTER 11 - RAILROAD UNEMPLOYMENT INSURANCE -MISC1- Sec. 351. Definitions. 352. Benefits. (a) Days for which benefits payable; determination of amount. (b) Time of payments. (c) Maximum number of benefit days. (d) Overpayment of benefits; recovery; liability of officers. (e) Assignment, taxation, garnishment, attachment, etc., of benefits. (f) Effect of payment of benefits for remunerable period; payment of surplus remuneration to Board. (g) Payment of accrued benefits upon death. (h)(1) Extended benefit period. (2) Period of high unemployment. (3) Rate of railroad unemployment. (4) Determination of period of high unemployment; publication in Federal Register: notice of determination and formulas for mid-month and seasonal adjustments. 353. Qualifying condition. 354. Disqualifying conditions. (a-1) Day of unemployment or day of sickness. (a-2) Day of unemployment. (b) Participation, interest, or financial assistance in labor dispute. (c) Unsuitable work. (d) Factors in determination of suitable work. (e) Voluntarily leaving unsuitable work. 355. Claims for benefits. (a) Publication of Board's regulations. (b) Findings, hearings, investigations, etc., by Board. (c) Hearing and review of decisions on claims. (d) Decisions of reviewing bodies; review and finality. (e) Application of rules of evidence in law and equity; notice of findings. (f) Review of final decision of Board by Courts of Appeals; costs. (g) Finality of Board decisions. (h) Benefits payable prior to final decision of Board. (i) Fees for presenting claims; penalties. 355a. Acceptance of claims for benefits. 356. Returns of compensation; conclusiveness; failure to make. 357. Free transportation. 358. Contributions. (a) Employer contribution. (b) Employee representative contribution. (c) Board proclamation of balance. (d) Notifications by Board. (e) Information to verify accuracy to be made available. (f) Fractional parts of a cent. (g) Adjustments for improper payments. (h) Refunding overpayment; collecting underpayment. (i) Collection and deposit of contributions. (j) Time for payment; failure to pay promptly. (k) Application of other laws; authority of Board. 359. Penalties. (a) Failure to make report or furnish information; false or fraudulent statement or claim. (b) Agreement by employee to bear employer's contribution. (c) Punishments not specifically provided. (d) Payment and disposition of fines or penalties. 360. Railroad unemployment insurance account. (a) Funds constituting account; availability for benefits or refunds. (b) Payment of benefits or refunds. (c) Annual report to Congress. (d) Transfer and retransfer of funds; interest. 361. Railroad unemployment insurance administration fund. (a) Maintenance of account; amounts constituting fund. (b) Authorization of appropriations; advance of sums; repayment. (c) Availability for administrative expenses. (d) Transfer of excess to insurance account. 362. Duties and powers of Board. (a) Witnesses; subpenas, service, fees, etc. (b) Enforcement of subpenas by courts; contempts; service of orders, writs, or processes. (c) Repealed. (d) Information as confidential. (e) Certification of claims; authorization of employee to make payments; bond. (f) Cooperation with other agencies administering unemployment or sickness compensation laws; agreements. (g) Benefits also subject to a State law; mutual reimbursement. (h) Assistance from employers and labor organizations; compensation. (i) Free employment offices; registration of unemployed; statements of sickness; reemployment. (j) Advisory councils; members' remuneration. (k) Reduction of unemployment; training and reemployment of unemployed employees, etc. (l) Necessary and incidental powers; employees of Board, employment, remuneration, civil-service laws, registration of unemployed, and detail. (m) Delegation of powers. (n) Sickness benefits; examinations; information and reports; contracts and expenses for examinations. (o) Liability of third party for sickness; reimbursement of Board. (p) Disqualification to execute statements of sickness or receive fees. (q) Investigations and research with respect to accidents and disabilities. (r) Duty of Board to make certain computations. 363. Exclusiveness of provisions; transfers from State unemployment compensation accounts to railroad unemployment insurance account. (a) Omitted. (b) Effect on State unemployment compensation laws. (c) Determination of 'preliminary amount' for States. (d) Withholding amounts from certification to States; transfers to railroad unemployment compensation account. (e) Transfers and withdrawals, effect upon social security provisions. (f) Payments to railroad unemployment insurance account; transfers from unemployment trust fund of States. 363a. Refunds of State unemployment contributions by employees; amount; application period; definitions. 364. District of Columbia account, transfer of funds to railroad unemployment insurance account. 365. Omitted. 366. Separability. 366a. Effect of Internal Revenue Code. 367. Short title. 368. Supplemental benefits. (a) Entitlement. (b) Exhaustion of rights to unemployment benefits. (c) Amount of benefits. (d) Maximum days. (e) Period of coverage. (f) 'Period of eligibility' defined. (g) Terms and conditions. (h) Authorization of appropriations. 369. Annual report. -SECREF- CHAPTER REFERRED TO IN OTHER SECTIONS This chapter is referred to in sections 159a, 231f, 231g, 231i, 355a, 363a, 366a, 367, 401, 404, 590, 591, 797d, 909, 1207 of this title; title 19 section 2319; title 26 section 6334; title 42 section 10601. ------DocID 54066 Document 637 of 646------ -CITE- 47 USC Sec. 11 -EXPCITE- TITLE 47 CHAPTER 1 -HEAD- Sec. 11. Powers of Federal Communications Commission -STATUTE- If any railroad or telegraph company referred to in section 9 of this title, or company operating such railroad or telegraph line shall refuse or fail, in whole or in part, to maintain, and operate a telegraph line as provided herein, for the use of the Government or the public, for commercial and other purposes, without discrimination, or shall refuse or fail to make or continue such arrangements for the interchange of business with any connecting telegraph company, then any person, company, corporation, or connecting telegraph company may apply for relief to the Federal Communications Commission, whose duty it shall thereupon be, under such rules and regulations as said commission may prescribe, to ascertain the facts, and determine and order what arrangement is proper to be made in the particular case, and the railroad or telegraph company concerned shall abide by and perform such order; and it shall be the duty of the Federal Communications Commission, when such determination and order are made, to notify the parties concerned, and, if necessary, enforce the same by writ of mandamus in the courts of the United States, in the name of the United States, at the relation of either of said communication commissioners. The commissioners may institute any inquiry, upon their own motion, in the same manner and to the same effect as though complaint had been made. -SOURCE- (Aug. 7, 1888, ch. 772, Sec. 3, 25 Stat. 383; June 19, 1934, ch. 652, Sec. 601, 48 Stat. 1101.) -TRANS- TRANSFER OF FUNCTIONS Duties, powers, and functions under this section relating to operation of telegraph lines by railroad and telegraph lines granted Government aid in construction of their lines imposed on and vested in Federal Communications Commission by act June 19, 1934. See section 601 of this title. -CROSS- FEDERAL RULES OF CIVIL PROCEDURE Application, see rule 81, Title 28, Appendix, Judiciary and Judicial Procedure. Effect of rules on this section, see note by Advisory Committee under rule 81. Writ of mandamus abolished, see rule 81(b). -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 12, 15, 601 of this title. ------DocID 54753 Document 638 of 646------ -CITE- 48 USC CHAPTER 11 -EXPCITE- TITLE 48 CHAPTER 11 -HEAD- CHAPTER 11 - ALIEN OWNERS OF LAND -MISC1- Sec. 1501. Lands in Territories. 1502. Previously acquired lands; bona fide resident aliens; mining or incorporated village lands. 1503. Acquisition by inheritance, in collection of debts, etc. 1504. Conveyance of lands in Territories by aliens before escheat proceedings. 1505. Proceedings for escheat of improperly held lands. 1506. Condemnation and sale of lands in escheat proceedings. 1507. Public lands. 1508. Application to District of Columbia. 1509 to 1512. Omitted. ------DocID 55223 Document 639 of 646------ -CITE- 49 USC APPENDIX - TRANSPORTATION Sec. 11 -EXPCITE- TITLE 49, APPENDIX CHAPTER 1 -HEAD- Sec. 11. Repealed. Pub. L. 95-473, Sec. 4(b), (c), Oct. 17, 1978, 92 Stat. 1466, 1470 -MISC1- Section repealed subject to an exception related to transportation of oil by pipeline. For disposition of this section in revised Title 49, Transportation, see Table at beginning of Title 49. See, also, notes following Table. Prior to repeal, section read as follows: Sec. 11. Interstate Commerce Commission; appointment, term, and qualifications of Commissioners A commission is created and established to be known as the Interstate Commerce Commission, which shall be composed of eleven Commissioners, who shall be appointed by the President, by and with the advice and consent of the Senate. The Commissioners appointed under this chapter and their successors, shall continue in office for terms of seven years, except that any person chosen to fill a vacancy shall be appointed only for the unexpired term of the Commissioner whom he shall succeed. Of the Commissioners in office on January 1, 1926, the term of one shall expire December 31 in each of the years 1926, 1927, and 1932 and the terms of two shall expire December 31, in each of the years 1928, 1929, 1930, and 1931. Any Commissioner may be removed by the President for inefficiency, neglect of duty, or malfeasance in office. Not more than six of the Commissioners shall be appointed from the same political party. No person in the employ of or holding any official relation to any common carrier subject to the provisions of this chapter, or owning stock or bonds thereof, or who is in any manner pecuniarily interested therein, shall enter upon the duties of or hold such office. Said Commissioners shall not engage in any other business, vocation, or employment. No vacancy in the Commission shall impair the right of the remaining Commissioners to exercise all the powers of the Commission. Upon the expiration of his term of office a Commissioner shall continue to serve until his successor is appointed and shall have qualified. (Feb. 4, 1887, ch. 104, pt. I, Sec. 11, 24, 24 Stat. 383, 387; June 29, 1906, ch. 3591, Sec. 8, 34 Stat. 595; Aug. 9, 1917, ch. 50, Sec. 1, 40 Stat. 270; Feb. 28, 1920, ch. 91, Sec. 440, 41 Stat. 497; July 16, 1935, ch. 383, 49 Stat. 481; Aug. 9, 1935, ch. 498, Sec. 1, 49 Stat. 543.) ------DocID 55391 Document 640 of 646------ -CITE- 49 USC APPENDIX - TRANSPORTATION CHAPTER 11 -EXPCITE- TITLE 49, APPENDIX CHAPTER 11 -HEAD- CHAPTER 11 - SEIZURE AND FORFEITURE OF CARRIERS TRANSPORTING, ETC., CONTRABAND ARTICLES -MISC1- Sec. 781. Unlawful use of vessels, vehicles, and aircrafts; 'contraband article' defined. 782. Seizure and forfeiture. 783. Designation of officers by Secretary of the Treasury; duties of officers. 784. Application of related laws. 785. Availability of appropriations. 786. Construction with other laws. 787. Definitions. 788. Rules and regulations. 789. Guam; enforcement and administration of chapter. ------DocID 55948 Document 641 of 646------ -CITE- 50 USC Sec. 11 to 15 -EXPCITE- TITLE 50 CHAPTER 2 -HEAD- Sec. 11 to 15. Repealed. Dec. 16, 1930, ch. 14, Sec. 1, 46 Stat. 1029 -MISC1- Section 11, act Sept. 22, 1888, ch. 1028, Sec. 1, 25 Stat. 489, related to composition and duties of Board of Ordnance and Fortification. Section 12, act Feb. 24, 1891, ch. 283, 26 Stat. 769, provided for a civilian member of Board. Section 13, act Mar. 2, 1901, ch. 803, 31 Stat. 910, provided for additional members of Board. Section 14, act Feb. 18, 1893, ch. 136, 27 Stat. 461, related to qualifications of Board Members. Section 15, act Sept. 22, 1888, ch. 1028, Sec. 6, 25 Stat. 490, related to purchases and tests. ------DocID 56043 Document 642 of 646------ -CITE- 50 USC CHAPTER 11 -EXPCITE- TITLE 50 CHAPTER 11 -HEAD- CHAPTER 11 - ACQUISITION OF AND EXPENDITURES ON LAND FOR NATIONAL-DEFENSE PURPOSES ------DocID 56377 Document 643 of 646------ -CITE- 50 USC APPENDIX - WAR AND NATIONAL DEFENSE Sec. 11 -EXPCITE- TITLE 50 APPENDIX TRADING WITH THE ENEMY ACT OF 1917 ACT OCT -HEAD- Sec. 11. Importations prohibited -STATUTE- Whenever during the present war the President shall find that the public safety so requires and shall make proclamation thereof it shall be unlawful to import into the United States from any country named in such proclamation any article or articles mentioned in such proclamation except at such time or times, and under such regulations or orders, and subject to such limitations and exceptions as the President shall prescribe, until otherwise ordered by the President or by Congress: Provided, however, That no preference shall be given to the ports of one State over those of another. -SOURCE- (Oct. 6, 1917, ch. 106, Sec. 11, 40 Stat. 422.) -MISC1- EXTENSION OF IMPORT LIMITATIONS Joint Res. Nov. 19, 1919, ch. 121, 41 Stat. 361, continued provisions of section 1 et seq. of this Appendix and proclamations limiting imports to Jan. 15, 1920. -EXEC- PRESIDENT'S PROCLAMATIONS Proclamation of Nov. 28, 1917, 40 Stat. 1722, forbade importation of various articles except under license granted by War Trade Board. Proclamation of Feb. 14, 1918, 40 Stat. 1748, added other articles to list of articles upon which import limitations were placed. -CROSS- CROSS REFERENCES Power of Congress to regulate commerce, see Const. Art. 1, Sec. 8, cl. 3. -SECREF- SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in title 28 section 2680. ------DocID 56681 Document 644 of 646------ -CITE- 50 USC APPENDIX - WAR AND NATIONAL DEFENSE ACT JUNE 11, 1942, CH -EXPCITE- TITLE 50 APPENDIX SMALL BUSINESS MOBILIZATION ACT ACT JUNE 11, 1942, CH -HEAD- ACT JUNE 11, 1942, CH. 404, 56 STAT. 351 ------DocID 56694 Document 645 of 646------ -CITE- 50 USC APPENDIX - WAR AND NATIONAL DEFENSE ACT JULY 11, 1941, CH -EXPCITE- TITLE 50 APPENDIX WAR AND DEFENSE CONTRACT ACTS ACT JULY 11, 1941, CH -HEAD- ACT JULY 11, 1941, CH. 290, Sec. 3, 55 STAT. 585 ------DocID 56712 Document 646 of 646------ -CITE- 50 USC APPENDIX - WAR AND NATIONAL DEFENSE ACT JUNE 11, 1940, CH -EXPCITE- TITLE 50 APPENDIX NATIONAL EMERGENCY AND WAR SHIPPING ACTS ACT JUNE 11, 1940, CH -HEAD- ACT JUNE 11, 1940, CH. 327, 54 STAT. 306 ------End Document Listing------ Thank You For Using I-SEARCH.