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small business reforms. Third, S. 256 amends the automatic stay provisions by permitting a single asset real estate debtor to make requisite interest payments out of rents or other proceeds generated by the real property. 

Financial Contracts. S. 256 contains a series of provisions pertaining to the treatment of certain financial transactions under the Bankruptcy Code and relevant banking laws. 77  These provisions are intended to reduce "systemic risk" in the banking system and financial marketplace. 78  To minimize the risk of disruption when parties to these transactions become bankrupt or insolvent, the bill amends provisions of the banking and investment laws, as well as the Bankruptcy Code, to allow the expeditious termination or netting of certain types of financial transactions. Many of these provisions are derived from recommendations issued by the President's Working Group on Financial Markets 79 and revisions espoused by the financial industry.

Family Farmers and Family Fishermen. S. 256 helps small family farmers facing financial distress. While current bankruptcy law has a specialized form of bankruptcy relief—chapter 12—that is specifically designed for family farmers, its benefits for farmers are limited because of its restrictive eligibility requirements. S. 256 responds to this problem in several key respects: it more than doubles the debt eligibility limit and requires it to be periodically adjusted for inflation; it lowers the requisite percentage of a farmer's income that must be derived from farming operations; and it gives farmers more flexibility with respect to how certain creditors can be repaid. As a result, many more deserving family farmers facing financial hard times will be able to avail themselves of chapter 12. In addition, S. 256 makes chapter 12 a permanent component of the bankruptcy laws and extends the benefits of this form of bankruptcy relief to family fishermen.

Transnational Insolvencies. In response to the increasing globalization of business enterprises and operations, S. 256 establishes a separate chapter under the Bankruptcy Code devoted to transnational insolvencies. These provisions are intended to provide greater legal certainty for trade and investment as well as to provide for the fair and efficient administration of these cases. They reflect consensus recommendations of the National Bankruptcy Review Commission. 80

77. In addition to the Bankruptcy Code, the bill amends the Federal Deposit Insurance Act, the Financial Institutions Reform, Recovery and Enforcement Act of 1989, the Federal Deposit Insurance Corporation Improvement Act of 1991, the Federal Reserve Act, and the Securities Investor Protection Act of 1971.

78. The report on H.R. 4393, a bill substantially similar to title IX of S. 256 that was introduced in the 105th Congress, explained as follows:

Systemic risk is the risk that the failure of a firm or disruption of a market or settlement system will cause widespread difficulties at other firms, in other market segments or in the financial system as a whole. If participants in certain financial activities are unable to enforce their rights to terminate financial contracts with an insolvent entity in a timely manner, or to offset or net their various contractual obligations, the resulting uncertainty and potential lack of liquidity could increase the risk of an inter-market disruption.

H.R. REP. NO. 105-688, pt. 1, at 2 (1998).

79. The Working Group's members included representatives from the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, the Securities and Exchange Commission, and the Department of the Treasury, including the Office of the Comptroller of the Currency. Id. at 1.

80. REPORT OF THE NATIONAL BANKRUPTCY REVIEW COMMISSION, at 351-70 (Oct. 20, 1997).

Protections for Small Business Owners. Under current bankruptcy law, a business can be sued by a bankruptcy trustee and forced to pay back—as a preferential transfer—monies previously paid to it by a firm that later files for bankruptcy protection. S. 256 contains provisions making it easier—particularly for small businesses—to defend against these suits. These provisions largely reflect recommendations of the National Bankruptcy Review Commission. 81 \

Health Care Providers. S. 256 adds a provision to the Bankruptcy Code intended to give patients of bankrupt health care providers various protections. These include provisions specifying requirements for the disposal of patient records so that a patient's privacy and the confidentiality of such records when they are in the custody of a health care business in bankruptcy are protected. In addition, the bill includes a provision according administrative expense priority to the actual, necessary costs and expenses of closing a health care business (including the disposal of patient records or transferral of patients) incurred by a trustee, Federal agency, or a department or state agency. If warranted, it also authorizes the court to order the appointment of an ombudsman to monitor the quality of patient care and to represent the interests of the patients. Other provisions include the requirement that a bankruptcy trustee use all reasonable and best efforts to transfer patients from a health care business that is being closed to an appropriate alternative facility that meets certain specified criteria.

Privacy Protections. Under current law, nearly every item of information filed in a bankruptcy case is made available to the public. S. 256 restricts public access to certain personal information pertaining to an individual contained a bankruptcy case file to the extent the court finds that disclosure of such information would create undue risk of identity theft or other unlawful injury to the individual or the individual's property. In addition, the bill prohibits the disclosure of the names of the debtor's minor children and requires such information to be kept in a nonpublic record, which can be made available for inspection only by the court and certain other designated entities. Further, S. 256 prohibits the sale of customers' personally identifiable information by a business debtor unless certain conditions are satisfied.

Additional Bankruptcy Judgeships. S. 256 authorizes 28 additional bankruptcy judgeships on a temporary basis and extends three currently existing temporary judgeships. 82  This provision responds to the 59 percent increase in the caseload of bankruptcy

81. Id. at 793-803.

82. Districts authorized additional bankruptcy judgeships under S. 256 include the following: Eastern District of California (one), Central District of California (three), Delaware (four), Southern District of Florida (two), Southern District of Georgia (one), Maryland (three), Eastern District of Michigan (one), Southern District of Mississippi (one), New Jersey (one), Nevada (one), Eastern District of New York (one), Northern District of New York (one), Southern District of New York (one), Eastern District of North Carolina (one), Eastern District of Pennsylvania (one), Middle District of Pennsylvania (one), Puerto Rico (one), South Carolina (one), Western District of Tennessee (one), Eastern District of Virginia (one).

 judges since 1992, reported by the Administrative Office of the United States Courts. 83

Miscellaneous Provisions. Under current law, an appeal from a bankruptcy court decision must be heard by a Federal district court or bankruptcy appellate panel before it may be heard by a Federal court of appeals. S. 256 authorizes a direct appeal from a bankruptcy court decision to the court of appeals, under certain circumstances. Other general provisions include allowing attorneys to share compensation with bona fide public service attorney referral programs, and mandating that a bankruptcy court conduct scheduling conferences in a bankruptcy case if necessary to further its expeditious and economical resolution. In addition, the bill requires the United States Trustee Program to compile various statistics regarding chapter 7,11 and 13 cases and to make these data available to the public. S. 256 also permits a court to seal all public records pertaining to a fraudulent involuntary bankruptcy petition, under certain circumstances, and to prohibit a consumer reporting agency from issuing a consumer report containing any reference to such petition.

HEARINGS

The Committee on the Judiciary held no hearings on S. 256.

COMMITTEE CONSIDERATION

On March 16, 2005, the Committee met in open session and ordered favorably reported the bill S. 256 without an amendment by a recorded vote of 22 to 13, a quorum being present.

VOTES OF THE COMMITTEE

In compliance with clause 3(b) of rule XIII of the Rules of the House of Representatives, the Committee notes that the following roll call votes occurred during the Committee's consideration of S. 256.

1. An amendment by Mr. Conyers disallowing: (a) claims resulting from an assignment of a debtor's right to receive military pay, or military pension or disability benefits; (b) certain claims owed by a servicemember or a dependent of a servicemember that are either secured or conditioned upon a personal check held for future deposit or electronic access to a bank account; or (3) claims owed by a servicemember or dependent of a servicemember requiring the payment of interest and other charges in excess of 36 percent. The amendment also allows the discharge of certain debts based on the debtor's right to receive military pay, or military pension or disability benefits. Defeated 15 to 20.

83. Press Release, Administrative Office of the U.S. Courts, Record Breaking Bankruptcy Filings Reported in Calendar Year 2002 (Feb. 14, 2003) (noting that "no new bankruptcy judgeships have been created since 1992").

2. An amendment by Mr. Watt and Mr. Delahunt disallowing a claim for a debt based on an extension of credit on which the annual rate of interest in excess of 50 percent was imposed or in excess of a limit on allowable interest under applicable nonbankruptcy law. Defeated 9 to 15. 

3. An amendment by Mr. Watt amending section 102 of the bill to permit a debtor to claim as an expense, in addition to elementary and secondary school educational expenses, the actual tuition costs per each child (exclusive of room and board) to attend a postsecondary education institution, and certain other educational programs. Defeated 10 to 17.

4. An amendment by Mr. Nadler amending sections 404, 411, 417, 436, 437, and 438 of the bill to permit the court, under specified circumstances, to extend certain time periods specified therein. Defeated 13 to 18.

5. An amendment by Mr. Schiff amending section 102 of the bill to prohibit a judge, United States trustee, trustee, or other party in interest from dismissing a chapter 7 case on the basis of the debtor's ability to repay if the debtor is an identity theft victim, under certain circumstances. Defeated 13 to 15.

6. An amendment by Mr. Delahunt amending Bankruptcy Code section 548 to authorize a trustee to avoid a transfer of an interest of a debtor made within the ten-year period preceding the bankruptcy filing to an asset protection trust if the amount of the transfer or aggregate amount of all transfers during such period exceeds $125,000, with certain exceptions. Defeated 10 to 15.

7. An amendment by Mr. Berman and Mr. Meehan amending Bankruptcy Code section 522 to create a uniform Federal homestead exemption floor in the amount of $150,000 for a medically distressed debtor. Defeated 13 to 18.