TheWeekInCongress.com
Week Ending March 11, 2005
S 256 Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
BRIEF
The one week delay in passage of the bill due to numerous amendments was minor compared to the seven years and many variations the bill has taken on its’ way to final passage this week. Facing a filibuster and defeat of the bill without a vote, the majority did succeed in gathering enough minority votes to invoke cloture and pass the bill.
A lengthy bill, its’ primary aim appears to increase the requirements necessary for a bankruptcy petitioner to succeed in discharging all debts through Chapter 7 filing. Instead, the petitioner must first show that paying back some of the debt is not possible otherwise the case is likely to be converted to a Chapter 13 filing in which a schedule of payments is set up and governed by the court. The main provision governing a conversion is the right given to “…creditors, the trustee, or any party in interest to challenge a debtor’s eligibility to file under chapter 7.”
The bill fine tunes what is and is not a debt that can be discharged and what is exempt from creditors: Specific household goods and other assets that would be protected from creditors include: “…clothing, furniture, appliances, 1 radio, 1 television, 1 VCR, other electronic entertainment equipment with a market value of under $500, linens, china, crockery, kitchenware, educational materials used by minor dependent children, medical equipment and supplies, furniture used exclusively by minors and disabled or elderly dependents, personal effects, 1 personal computer and antiques and jewelry with a value less than $500.” In an effort to block the common practice of hiding all assets in a home in a State that protects 100 percent of the homestead value from creditors, equity in a home is protected only up to $125 thousand - no matter what the State law allows - if the home was purchased within 1215 days or less (3.3 years) prior to the filing. Educational loan debts can not be discharged. Election law fines can not be discharged. “Consumer debts owed to a single creditor for more than $550 for “luxury goods” incurred within 90 days of filing; and cash advances for more than $750 under an open end credit plan within 70 days of filing…” can not be discharged. Liability as a result of driving while intoxicated can not be discharged. Non-taxable retirement funds are only protected up to the first $1 million but more can be protected by the court “…if the interests of justice so require” the bill text says. Other protected assets include child support, Social Security benefits, payments to victims of international terrorism, and payments to victims of war crimes or crimes against humanity.
The bill takes into account some consumer issues as well: The filer must undergo credit counseling within 180 days of filing; a creditor who unreasonably refuses to negotiate a credit counselor’s 60% settlement offer might see a 20% reduction in the debt; the names of minor children can be protected from public record disclosure; landlords may continue eviction action towards a filer despite an automatic stay on such an effort; fees for filing could be waived for a petitioner whose income is 150% below the official poverty line and families with an income at or above the State median income would have five years of payments ahead. Those earning under the median would have three years of payments.
Much was made of the reportedly extensive lobbying effort from the credit card industry in support of the bill. Two amendments attempted to counter that influence. One to require notification on credit card bills of the time and cost of paying only minimum payments and another that would prohibit credit card companies from raising interest rates if they find that the card holder was late in a payment other than to the Credit card company. Both amendments were defeated.
Although the bill would include medical bills as acceptable debts to be discharged, reference was frequently made by minority opposition to a Harvard University study concluding that over fifty percent of those who filed bankruptcy did so because medical bills became so overwhelming they had no choice. Bill supporters, however, held that the study was not accurate because they understood it included gambling and drug abuse as evidence of medical problems leading to the overwhelming debts.
Sponsor: Senator Chuck Grassley (R-IA)
Vote: Passed Senate 74 to 25, 1 not voting (Mar. 10, 2005 (RV 44);
Cost to the taxpayers: “CBO estimates that implementing S. 256 would cost $392 million over the 2006-2010 period primarily to pay for increased responsibilities of the United States Trustees (U.S. Trustees).
“At the same time, the bill would slightly increase the fees charged for filing a bankruptcy case and would change how some of these fees are currently recorded in the budget. We estimate that implementing the bill would increase the amount of bankruptcy fees that are treated as an offset to appropriations by $246 million over the five-year period, resulting in a net increase in discretionary spending of $146 million over this period.
“In addition, CBO estimates that enacting this bill would decrease governmental receipts (revenues) by $226 million over the 2006-2010 period, and by $456 million over the 2006-2015 period because bankruptcy fees that are currently recorded as revenues would be reclassified as offsetting collections and offsetting receipts. Finally, enactment of S. 256would result in filling additional judgeships, and we estimate that their mandatory pay and benefits would cost $26 million over the next five years and $45 million over the 2006-2015 period.”
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SELECTED PROVISION IN THE BILL FROM THE CONGRESSIONAL RESEARCH SERVICE REPORT.
AMENDMENTS
2.
S.AMDT.15 to
require enhanced disclosure to consumers regarding the consequences of making
only minimum required payments in the repayment of credit card debt, and for
other purposes.
Sponsor: Sen. Daniel Akaka, Daniel K. [D-HI]
Failed by Yea-Nay Vote. 40 - 59. RV 15
3. S.AMDT.16 to protect service members and veterans
from means testing in bankruptcy, to disallow certain claims by lenders charging
usurious interest rates to service members, and to allow service members to
exempt property based on the law of the State of their pre-military residence.
Sponsor: Sen. Richard Durbin [D-IL]
Failed by Yea-Nay Vote. 38 - 58. RV 13
4. S.AMDT.17 to provide a homestead floor for the
elderly.
Sponsor: Sen. Russell D. Feingold [D-WI]
Failed by Yea-Nay Vote. 40 - 59. RV 14
10. S.AMDT.23 to clarify the safe harbor with
respect to debtors who have serious medical conditions or who have been called
or ordered to active duty in the Armed Forces and low income veterans.
Sponsor: Sen. Jeff Sessions [R-AL] (introduced 3/1/2005)
Passed by Yea-Nay Vote. 63 - 32. RV 12.
15. S.AMDT.28 to exempt debtors whose financial
problems were caused by serious medical problems from means testing.
Sponsor: Sen. Edward M. Kennedy [D-MA]
Failed by Yea-Nay Vote. 39 - 58. RV 16
16. S.AMDT.29 to provide protection for medical debt
homeowners.
Sponsor: Sen. Edward M. Kennedy [D-MA]
Failed by Yea-Nay Vote. 39 - 58. RV 17
19. S.AMDT.32 to preserve existing bankruptcy
protections for individuals experiencing economic distress as caregivers to ill
or disabled family members.
Sponsor: Sen. Jon S. Corzine [D-NJ]
Failed by Yea-Nay Vote. 37 - 60. RV 18
24. S.AMDT.37 to exempt debtors from means testing if their financial
problems were caused by identity theft.
Sponsor: Sen. Bill Nelson [D-FL]
Failed by Yea-Nay Vote. 37 - 61. RV 21
25. S.AMDT.38 to discourage predatory lending practices.
Sponsor: Sen. Richard Durbin [D-IL]
Failed by Yea-Nay Vote. 40 - 58. RV 22.
27. S.AMDT.40 to amend the Fair Credit Reporting Act to prohibit the use
of any information in any consumer report by any credit card issuer that is
unrelated to the transactions and experience of the card issuer with the
consumer to increase the annual percentage rate applicable to credit extended to
the consumer, and for other purposes.
Sponsor: Sen. Mark L. Pryor [D-AR]
Senate amendment proposed (on the floor)
29. S.AMDT.42 to limit the exemption for asset protection trusts.
Sponsor: Sen. Charles E. Schumer [D-NY]
Failed by Yea-Nay Vote. 39 - 56. RV 23
31. S.AMDT.44 to amend the Fair Labor Standards Act of 1938 to provide
for an increase in the Federal minimum wage.
Sponsor: Sen. Edward M. Kennedy [D-MA]
Senate amendment proposed (on the floor)
35. S.AMDT.48 to increase bankruptcy filing fees to pay for the
additional duties of United States trustees and the new bankruptcy judges added
by this Act.
Sponsor: Sen. Arlen Specter [R-PA]
Passed by Unanimous Consent.
36. S.AMDT.49 to protect employees and retirees from corporate practices
that deprive them of their earnings and retirement savings when a business files
for bankruptcy.
Sponsor: Sen. Richard Durbin [D-IL]
Failed by Yea-Nay Vote. 40 - 54. RV 25
11. S.AMDT.24 to amend the wage priority provision and to amend the
payment of insurance benefits to retirees.
Sponsor: Sen. John D. Rockefeller, IV [D-WV]
Failed in Senate by Yea-Nay Vote. 40 - 54. (RV 24)
13. S.AMDT.26 to restrict access to certain personal information in
bankruptcy documents.
Sponsor: Sen. Patrick J. Leahy, [D-VT]
Amendment SA 26 as modified agreed to in Senate by Unanimous Consent.
18. S.AMDT.31 to limit the amount of interest that can be charged on any
extension of credit to 30 percent.
Sponsor: Senator Mark Dayton, [D-MN]
Failed in Senate by Yea-Nay Vote. 24 - 74. (RV 20).
34. S.AMDT.47 to prohibit the discharge, in bankruptcy, of a debt
resulting from the debtor's unlawful interference with the provision of lawful
goods or services or damage to property used to provide lawful goods or
services.
Sponsor: Senator Charles E. Schumer, [D-NY]
Failed in Senate by Yea-Nay Vote. 46 - 53. (RV 28).
49. S.AMDT.62 to provide for the potential disallowance of certain
claims.
Sponsor: Senator Barbara Boxer, [D-CA]
Failed in Senate by Yea-Nay. 40 - 60. (RV 33).
53. S.AMDT.66 to increase the accrual period for the employee wage
priority in bankruptcy.
Sponsor: Senator Tom Harkin, [D-IA]
Failed in Senate by Yea-Nay Vote. 48 - 52. (RV 32)
54. S.AMDT.67 to modify the bill to protect families, and for other
purposes.
Sponsor: Senator Christopher J. Dodd, [D-CT]
Failed in Senate by Yea-Nay. 42 - 58. RV34.
55. S.AMDT.68 to provide a maximum amount for a homestead exemption under
State law.
Sponsor: Senator Edward M. Kennedy, [D-MA]
Failed in Senate by Yea-Nay. 47 - 53. RV 35.
56. S.AMDT.69 to amend the definition of current monthly income.
Sponsor: Senator Edward M. Kennedy, [D-MA]
Failed in Senate by Yea-Nay Vote. 41 - 58. RV 37.
57. S.AMDT.70 to exempt debtors whose financial problems were caused by
failure to receive alimony or child support, or both, from means testing.
Sponsor: Senator Edward M. Kennedy, [D-MA]
Failed in Senate by Yea-Nay Vote. 41 - 58. RV 36.
70. S.AMDT.83 to modify the definition of disinterested person in the
Bankruptcy Code.
Sponsor: Senator Patrick Leahy, [D-VT]
Failed in Senate by Yea-Nay Vote. 44 - 55. RV 39.
74. S.AMDT.87 to amend section 104 of title 11, United States Code, to
include certain provisions in the triennial inflation adjustment of dollar
amounts.
Sponsor: Senator Russell D. Feingold, [D-WI]
Amendment SA 87, previously agreed to, was modified by Unanimous Consent.
76. S.AMDT.89 to strike certain small business related bankruptcy
provisions in the bill.
Sponsor: Senator Russell D. Feingold, [D-WI]
Failed in Senate by Yea-Nay Vote. 41 - 59. RV 30.
78. S.AMDT.91 to amend section 303 of title 11, United States Code, with
respect to the sealing and expungement of court records relating to fraudulent
involuntary bankruptcy petitions.
Sponsor: Senator Russell D. Feingold, [D-WI]
Agreed to in Senate by Unanimous Consent.
79. S.AMDT.92 to amend the credit counseling provision.
Sponsor: Senator Russell D. Feingold, [D-WI]
Agreed to in Senate by Unanimous Consent.
92. S.AMDT.105 to limit claims in bankruptcy by certain unsecured
creditors.
Sponsor: Senator Daniel K. Akaka, Daniel K. [D-HI]
Failed in Senate by Yea-Nay. 38 - 61. RV 38
97. S.AMDT.110 to clarify that the means test does not apply to debtors
below median income.
Sponsor: Senator Richard Durbin, [D-IL]
Failed in Senate by Yea-Nay Vote. 42 - 58. RV 31
99. S.AMDT.112 to protect disabled veterans from means testing in
bankruptcy under certain circumstances.
Sponsor: Senator Richard Durbin, [D-IL]
Passed Senate by Yea-Nay. 99 - 0. RV 40.
108. S.AMDT.121 to deter corporate fraud and prevent the abuse of State
self-settled trust law.
Sponsor: Senator Jim Talent,[R-MO]
Passed Senate by Yea-Nay. 73 - 26. RV42.
115. S.AMDT.128 to promote job creation, family time, and small business
preservation in the adjustment of the Federal minimum wage.
Sponsor: Senator Rick Santorum, [R-PA]
Amendment SA 128 withdrawn in Senate.
116. S.AMDT.129 to limit the exemption for asset protection trusts.
Sponsor: Senator Charles E. Schumer, [D-NY]
Failed in Senate by Yea-Nay. 43 - 56. RV 41
DATA FROM THE CONGRESSIONAL RESEARCH SERVICE COVERING SEVERAL PROVISIONS
Selected Provisions S. 256, the Bankruptcy Abuse Prevention and Consumer protection Act of 2005, 109th Congress, 1st Session.
MEANS TESTING
Means test, 11 U.S.C. § § 704, 707:
Implementation Would amend 11 U.S.C. § 707 to permit creditors, the trustee, or any party in interest to challenge a debtor’s eligibility to file under chapter 7. If indicated, the
U.S. trustee must file a statement that the debtor’s case is a presumed abuse of chapter 7. § 102.
Definition of “current monthly income”
Excludes Social Security benefits; payments to victims of war crimes or crimes against humanity; and payments to victims of international terrorism. § 102.
Presumed abuse Debtor presumed to be abusing chapter 7 if current monthly income, excluding allowed deductions, secured debt payments, and priority unsecured debt payments, multiplied by 60, would permit a debtor to pay not less than the lesser of (a) 25% of non-priority unsecured debt or $6,000 (or $100 a month), whichever is greater, or (b) $10,000.
In addition to the means test, the court may find that the debtor’s filing was in bad faith or that the totality of the circumstances demonstrates abuse. § 102.
CRS-3
3 Charitable contributions are permissible under current law, 11 U.S.C. § 707(b), and would not be altered by the bill.
Calculation of permissible monthly living expenses
Expenses to be calculated as specified under the National Standards and Local Standards, and the debtor’s actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides. A debtor may also subtract, if reasonably necessary, an allowance of up to 5% of the IRS food and clothing categories.
Individualized expenses may include debts incurred to protect the debtor’s family from domestic violence; actual expenses for the care and support of nondependent, elderly, ill or disabled household or family members; private or public school tuition of up to $1,500 per year; administrative expenses for chapter 13 candidates; average monthly expenses for secured and priority debts; actual expenses for housing and utilities, if reasonably necessary; and, charitable contributions of up to 15% of gross income.3 Dollar amounts will be adjusted at three-year intervals in accordance with the Consumer Price Index. § 102.
To rebut the presumption of abuse A debtor must demonstrate and justify “special circumstances” in order to adjust current monthly income determination. § 102.
CRS-4.
Safe harbor exemption from the means test
Only the judge, U.S. trustee or bankruptcy administrator may bring a substantial abuse motion if the debtor’s current monthly income is less than the highest national or the applicable State median family income.
No party may make a motion to convert the debtor to chapter 13 if the debtor (and spouse combined) have a monthly income equal to or less than the state median household income reported by the Bureau of the Census.
The U.S. trustee may also decline to file a motion to convert if the debtor’s monthly income is between 100% and 150% of the national or applicable State median income, and would permit a debtor to pay the lesser of (a) 25% of non-priority unsecured debt or $6,000, whichever is greater, or (b) $10,000. § 102.
IRS Living Standards applicable to chapter 13 reorganization plan
A chapter 13 debtor’s “disposable income” which may be directed to the repayment plan will be calculated in accordance with IRS Living Standards if the debtor meets the applicable means test for state median family income. A chapter 13 debtor may deduct from plan payments the costs of health insurance; domestic support obligations; charitable contributions of up to 15% of gross income; and expenses necessary to operate a business. § 102.
CRS-5
Attorney sanctions for improper motion
If a panel trustee brings a successful motion for dismissal or conversion, counsel for the debtor may be liable to reimburse the trustee for costs, attorneys’ fees, and payment of a civil penalty if the court finds a violation of Bankruptcy Rule 9011. An attorney’s signature on the bankruptcy petition certifies that the attorney has performed an investigation into the circumstances that gave rise to the petition; that the attorney has determined that the petition is well grounded in fact and is warranted by existing law; and that the attorney has no knowledge after an inquiry that the information in accompanying
schedules is incorrect. § 102.
Creditor sanctions for an improper motion
The court may award the debtor costs for contesting an unsuccessful motion to convert if the court finds that the motion violated Rule 9011, or was intended to coerce the debtor into waiving rights under the Bankruptcy Code. A small business creditor whose claim is less than $1000 is not liable for sanctions. § 102.
Dismissal of filings by persons convicted of violent crimes or drug trafficking
A crime victim or party in interest may request dismissal of the voluntary bankruptcy case of the convicted debtor. The court must grant the dismissal unless the filing is necessary to satisfy a domestic support obligation. § 102.
Mandatory credit counseling
Debtor must undergo credit counseling within 180 days of filing, and may not obtain a discharge until completion of a personal financial management instructional course.
The jurisdictional filing requirement may be waived for 30 to 45 days if the debtor certifies exigent circumstances or was denied service from an approved counseling agency.
The U.S. trustee or bankruptcy administrator for the judicial district is directed to oversee and approve nonprofit budget and credit counseling agencies. § 106.
CRS-6
Promotion of alternative dispute resolution
A creditor’s allowable claim may be reduced by 20% if a court finds that the creditor “unreasonably refused to negotiate a reasonable alternative repayment schedule proposed by an approved credit counseling agency that provides repayment of at least 60% of the
debt, and the debtor can prove by “clear and convincing” evidence that a creditor unreasonably refused to consider the offer.” § 201.
Reaffirmation agreements
Imposes enhanced requirements for approval of a reaffirmation agreement when the debtor is not represented by counsel but exempts credit unions from creditor disclosure requirements; requires U.S. Attorney and FBI to investigate abusive reaffirmation
practices. § 203.
Preserving defenses against predatory lenders
Amends 11 U.S.C. § 363 to add a new subsection preserving defenses that a party to a consumer credit transaction may have if the contract is sold by a debtor in bankruptcy. § 204.
GAO reaffirmation study Requires a study of reaffirmation practices and a report to Congress. § 205.
Domestic support owed to individuals and government units made first priority
Would move domestic support obligations to first priority, which is currently allocated to administrative expenses of the bankruptcy estate. Administrative expenses would become second priority. However, if a trustee is appointed under chapter 7, 11, 12, or 13, the trustee’s expenses may be paid before domestic support. § 212.
Trustee notification of child support claim holders
Would direct the trustee to notify a priority child support recipient of the existence of a state child support enforcement agency, and, upon discharge, the existence of non-dischargeable and reaffirmed debt. § 219.
Priority assigned to claims for liability incurred by the debtor
DUI
A new § 507 tenth priority is created for unsecured claims for liability incurred by a debtor from operating a vessel while under the influence of alcohol or drugs. Claims of this nature are also non-dischargeable. § 223.
CRS-7
Retirement savings exemption broadened
Would clarify and expand the law to provide that retirement accounts that are tax exempt under the Internal Revenue Code are exempted from the debtor’s estate up to a $1,000,000 cap, which may be increased if “the interests of justice so require.” § 224.
Exemption for saving for postsecondary education
Subject to certain IRS requirements, excludes funds up to $5000 per specified beneficiary made within a year of filing in an education individual retirement account and/or any funds used to purchase a tuition credit or certificate under a qualified state tuition
program. §225.
Protection of nonpublic personal information and consumer privacy ombudsman
Prohibits the transfer by the debtor of personal customer information unless approved by the court. Provides for the appointment of a consumer privacy ombudsman if a debtor wishes to sell or lease such information. §§ 231,232.
Prohibition on disclosure of identify of minor children
Debtor may not be required to disclose the name of a minor child in public records. U.S. trustee or auditor may have access to nonpublic records maintained by the court. § 233.
Lien stripping on security interests in consumer goods (cramdown)
Chapter 13 debtors would not be permitted to bifurcate security interests in an automobile purchased within 910 days (2˝ years) before the filing; or in other consumer goods purchased within 1 year of the filing. § 306.
CRS-8
Homestead exemption Definition of “debtor’s residence” includes mobile homes or trailers. § 306.
Imposes lengthened residency requirements to qualify for state exemption. § 307.
Reduces the value of the exemption if the value is attributable to property that the debtor disposed of within 10 years of bankruptcy with the intent to hinder, delay or defraud a creditor. § 308.
Debtors’ electing a state homestead exemption may not exempt any interest acquired within 1215 days (3.3 years) of filing which exceeds in the aggregate $125,000, unless the value in excess of that amount occurs from a transfer of residences within the same state.
Exempts family farmers from the limit. Limitations may not apply to amounts reasonably necessary to support the debtor and any dependents. Imposes a firm $125,000 cap on an individual who is convicted of specified felonies (including violations of federal securities laws) or who commits criminal acts, intentional torts, or willful or reckless misconduct that caused serious physical injury or death within 5 years preceding the bankruptcy filing. § 322.
Residential lease excepted from the automatic stay
Adds new provisions permitting a landlord/ lessor to bypass the automatic stay to continue with a residential eviction of a tenant/lessee. § 311.
Restrictions on chapter7 and chapter 13 filings.
Extends time within which a debtor who has received a chapter 7 discharge may not receive another from 6 to 8 years.
Amends chapter 13 to disallow discharge if the debtor filed under chapters 7, 11, or 12 within 4 years prior to the 13 filing, or under chapter 13, within 2 years of the subsequent filing. § 312.
CRS-9
Definition of “household goods”
Defines household goods to include clothing, furniture, appliances, 1 radio, 1 television, 1 VCR, other electronic entertainment equipment with a market value of under $500, linens, china, crockery, kitchenware, educational materials used by minor dependent children, medical equipment and supplies, furniture used exclusively by minors and disabled or elderly dependents, personal effects, 1 personal computer and antiques and jewelry with a value less than $500. § 313.
Debtor’s duty to disclose tax filings.
Modifies debtor filing requirements under 11 U.S.C. § 521 to include federal tax returns. § 315.
Plan duration Chapter 13 plans to have 5 year duration for families whose monthly income is not less than the highest state median family income. Families below the highest state median income would have 3 year plans. § 318.
Wages withheld by an employer for contributions to employee benefit plans
Withheld wages for contributions to employee benefit plans would be excluded from the debtor (employer’s) estate. § 323.
Valuation of collateral
A secured creditor’s allowable claim would be the retail cost to replace the item without deduction for costs of sale or marketing. Personal property’s replacement value would be the price a retail merchant would charge for like items. § 327.
Wages and benefits awarded as back pay
Makes specified pre-petition and post-petition wages and benefits awarded as back pay in a judicial proceeding a high-priority administrative expense. § 329.
Audits The Attorney General is directed to establish a procedure to ensure random audits of no less than 1 out of every 250 individual filings; the U.S. trustee is authorized to enter into contracts with auditors, and to take action when misstatements in the debtor’s
petition and schedules are identified. § 603.
CRS-10
Debts to government units for domestic support
Defines “domestic support obligation” to include debts owed to or recoverable by a governmental unit. §§ 211, 215.
Expanded definition of student loan
Adds qualified educational loans as defined under § 221 of the IRC to those educational loans that are currently non-dischargeable. § 220.
Loan repayments to debtor’s retirement savings or thrift plan
Makes non-dischargeable, i.e., allows an employer to continue to withhold, loan repayments to debtor’s savings/retirement plan from debtor’s wages. § 224(c).
Consumer debts presumed fraudulent
Consumer debts owed to a single creditor for more than $550 for “luxury goods” incurred within 90 days of filing; and cash advances for more than $750 under an open end credit plan within 70 days of filing are presumed to be non-dischargeable. § 310.
Debts incurred to pay non-dischargeable debts are non-dischargeable
Debts incurred to a third party to pay a tax to a state or local government unit become non-dischargeable. § 314.
Expanded definition of non-dischargeable condominium and homeowners association
fees
Expands the types of post-petition condo and homeowners association fees that are
Non-dischargeable by omitting requirement that in order to be non-dischargeable the debtor must reside in the residence post-petition. § 412.
FEC penalties non-dischargeable
Fines and penalties under federal election law are made non-dischargeable. § 1235.
CRS-11
Amendments to the Truth in Lending Act (TILA)
TILA amended to require enhanced minimum payment disclosures under an open end credit plan; enhanced disclosures regarding the tax deductibility of credit extensions which exceed the fair market value of a dwelling for credit transactions secured by the consumer’s dwelling; disclosures related to introductory “teaser” rates; disclosures related to Internet-based open end credit solicitations; and disclosures related to late payment deadlines and penalties. TILA would be amended to prohibit termination of a credit account because the consumer has not incurred finance charges. §§ 1301-1306.
Study of bankruptcy impact of credit extended to dependent students
The Board of Governors of the Federal Reserve is directed to study bankruptcy impact of credit extensions to students in postsecondary school. § 1308.
Consumer credit studies The Board of Governors of the Federal Reserve is directed to study existing protections for consumers for unauthorized use of a dual use debit card. § 1307.
Business bankruptcy
Increased employee wage and benefit priority
Increases the high-priority categories for employee wages and benefits from $4925 earned within 90 days of filing to $10,000 earned within 180 days of filing. § 1401.
Trustee to appoint retiree committees
Amends 11 U.S.C. § 1114 to provide that in the event that a retiree committee is appointed, the appointment of members will be made by the U.S. Trustee, not thecourt. § 447.
Retiree insurance benefits
Amends 11 U.S.C. § 1114 to allow the court to reinstate retiree benefits that are modified by a debtor within 180 days prior to the bankruptcy filing unless the court finds that the balance of equities supports such modifications. § 1404.
Avoidable preferences Amends 11 U.S.C. § 547 to liberalize the rules for defending against an avoidable transfer in the ordinary course of business; creates a new preference exception to aggregate transfers of less than $5,000. § 409.
CRS-12
Fraudulent transfers Amends 11 U.S.C. § 548 to increase the time period for setting aside certain fraudulent transactions from one year to two and expressly includes certain
transfers made pursuant to an employment contract. § 1402.
Small business bankruptcy
Subtitle B of Title IV has provisions defining a “small business” for chapter 11 purposes as one with debts under $2,000,000. The debtor’s period of exclusivity to file a reorganization plan is 180 days. A plan and disclosure statement must be filed within 300 days of the initial filing. A plan must be confirmed within 45 days of filing in
bankruptcy. § 438.
Provisions require establishment of uniform accounting and reporting standards for small businesses. Grounds for appointment of a trustee and the trustee’s general supervisory duties are expanded, as are grounds for dismissal or conversion of the case. §§ 431-442.
Health care business bankruptcy
Defines a broad variety of service-providing health care business, including skilled nursing facilities, assisted-living facilities and homes for the aged. Provides for the disposition and disposal of patient records and for the costs of closing the facility, including the transfer of patients. Permits the court to appoint a patient care ombudsman to monitor patient care and represent the interest of patients. Excludes participation in medicare from the automatic stay. §§ 1101- 1106.
Trustee to appoint retiree committees
Amends 11 U.S.C. § 1114 to provide that in the event that a retiree committee is appointed, the appointment of members will be made by the U.S. Trustee, not the court. § 447.
CRS-13
Chapter 11 corporate non-dischargeability
Confirmation of a plan under chapter 11 would not discharge a corporate debtor from debts under 11 U.S.C. § 523(a)(2) that are owed to a domestic governmental unit for property obtained by false pretenses or representations; or owed to an individual under subchapter III of chapter 37 of Title 31, U.S.C.; or any debt for taxes for which the debtor willfully attempted to evade or made a fraudulent return. § 708.
Title X dealing with chapter 12 family farmers
Makes chapter 12 permanent. Measure to be effective upon enactment; includes jurisdictional debt limit in amount subject to readjustment in accordance with CPI; subordinates certain high priority unsecured claims owed to the government to non-priority claims. Measure to take effect upon enactment, but will not apply to pending cases. §§ 1001-1003.
Raises jurisdictional debt limit of family farmers to $3,237,000 and lowers percentage requirement of income derived from farming and expands the time frame for measuring farm income from one to three years. §§ 1004, 1005.
Prohibits retroactive assessment of disposable income.§ 1006
Amends chapter 12 to include “family fishermen.” § 1007.
CRS-14
In forma pauperis filings Directs the Judicial Conference to prescribe procedures for waiving bankruptcy fees for an individual debtor under chapter 7 whose income is less than 150% of the official poverty line and who is unable to pay the fee in installments. § 418.
Bankruptcy judgeships Creates new temporary bankruptcy judgeships for designated districts. § 1223.
Procedure to certify appeals from a bankruptcy court to a court of appeals
Establishes procedures to permit direct appeals from a bankruptcy court to a court of appeals if the decision involves a substantial question of law for which there is no controlling decision; a question requiring resolution of conflicting decisions; or, a matter of public importance. §1233.
Involuntary Bankruptcy Makes technical corrections made to 11 U.S.C. § 303 dealing with involuntary bankruptcy. Measure applies upon enactment, but not to pending cases. § 1234.
General effective date Subject to express provisions otherwise in specified titles, the new law will take effect 180 days after enactment and will not apply to cases commenced
before the effective date. § 1501.
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No reproduction or distribution without written permission from TheWeekInCongress.com.