BAPCPA & LEGISLATIVE REPORT LINKS (CH. 3 — CONTENTS)

BAPCPA § 232(c)    •    House Report 109-31    •   

BAPCPA § 434(a)(2)    •    House Report 109-31    •   

BAPCPA § 719(a)(2)    •    House Report 109-31    •   

BAPCPA § 802(d)(4)    •    House Report 109-31    •   

BAPCPA § 1102(b)    •    House Report 109-31    •   

BAPCPA § 1104(a)(2)    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 301)


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. 

LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

1978 Acts (Pub. L. 95-598).

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. 

Amendments

2005 — Will be supplemented. 

EFFECTIVE DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 

SECTION REFERRED TO IN OTHER SECTIONS

 This section is referred to in sections 101, 362, 365, 522, 541, 901, 921 of this title. 

 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 301)

BAPCPA § 501(b)(1)    •    House Report 109-31    •   

BAPCPA § 501(b)(2)    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 302)


LEGISLATIVE REPORTS

1978 Acts (Pub. L. 95-598).

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. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 101, 362, 365, 522, 541 of this title. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 303)


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. 

LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31.

1994 Acts (Pub. L. 103-394). House Report No. 103-835. 

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958.

1978 Acts (Pub. L. 95-598).

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 farmers 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 [former chapter 10 of former Title 11 (former section 501 et seq. 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 and alternative to commencing a case ancillary to a foreign proceeding under section 304

Amendments

2005 — Will be supplemented. 

1994.

 Subsec. (b)(1). Pub. L. 103-394, § 108(b)(1), substituted "if such claims aggregate at least $10,000 more than the value of any lien" for "if such claims aggregate at least $5,000 more than the value of any lien". 

Subsec. (b)(2). Pub. L. 103-394, § 108(b)(2), substituted "hold in the aggregate at least $10,000 of such claims" for "hold in the aggregate at least $5,000 of such claims". 

1986.

Subsec. (a). Pub. L. 99-554, § 254, added reference to family farmer.

Subsec. (b). Pub. L. 99-554, § 283(b)(1), substituted "subject of" for "subject on". 

Subsec. (g). Pub. L. 99-554, § 204(1), substituted "may order the United States trustee to appoint" for "may appoint".

Subsec. (h)(1). Pub. L. 99-554, § 283(b)(2), substituted "are the" for "that are the".

Subsec. (i)(1)(A). Pub. L. 99-554, § 204(2), substituted "costs; or" for "costs;". 

Subsec. (i)(1)(C). Pub. L. 99-554, § 204(2), struck out "(C) 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, § 426(a), added "against a person" after "involuntary case". 

Subsec. (b)(1). Pub. L. 98-353, § 426(b)(1), added "or the subject of a bona fide dispute," after "liability".

Subsec. (h)(1). Pub. L. 98-353, § 426(b)(2), added "unless such debts that are the subject of a bona fide dispute" after "due".

Subsec. (j)(2). Pub. L. 98-353, § 427, substituted "debtor" for "debtors". 

EFFECTIVE DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 

The amendments to subsection (b)(1) relating to the debt requirements for filing an involuntary petition were enacted by Pub. L. 109-8, Title XII, § 1234(a).   Pub. L. 109-8, Title XII, § 1234(b) provides that the amendments made by this section (Pub. L. 109-8, Title XII, § 1234) shall take effect on the date of the enactment of this Act (April 20, 2005) and shall apply with respect to cases commenced under title 11 of the United States Code before, on, and after such date. 

1994 Acts. Amendment by Pub. L. 103-394 effective on Oct. 22, 1994, and not to apply with respect to cases commenced under Title 11 of the United States Code before Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a note under section 101 of this title. 

1986 Acts.  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.

1984 Acts. 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. 

Separability

If any provision of or amendment made by Pub. L. 103-394 or the application of such provision or amendment to any person or circumstance is held to be unconstitutional, the remaining provisions of and amendments made by Pub. L. 103-394 and the application of such provisions and amendments to any person or circumstance shall not be affected thereby, see section 701 of Pub. L. 103- 394, set out as a note under section 101 of this title. 

Adjustment of Dollar Amounts

For adjustment of dollar amounts specified in subsec. (b)(1), (2) of this section by the Judicial Conference of the United States, effective Apr. 1, 2004, see note set out under 11 U.S.C. § 104

By notice dated Feb. 18, 2004, 69 F.R. 8482, the Judicial Conference of the United States adjusted the dollar amounts in provisions specified in subsec. (b)(1), (2) of this section, effective Apr. 1, 2004, as follows: 

In subsec. (b)(1) adjusted $11,625 to $12,300. 

In subsec. (b)(2) adjusted $11,625 to $12,300. 

By notice dated Feb. 20, 2001, 66 F.R. 10910, the Judicial Conference of the United States adjusted the dollar amounts in provisions specified in subsec. (b)(1), (2) of this section, effective Apr. 1, 2001, as follows: 

In subsec. (b)(1) adjusted $10,775 to $11,625. 

In subsec. (b)(2) adjusted $10,775 to $11,625. 

By notice dated Feb. 3, 1998, 63 F.R. 7179, the Judicial Conference of the United States adjusted the dollar amounts in provisions specified in subsec. (b)(1), (2) of this section, effective Apr. 1, 1998, as follows: 

In subsec. (b)(1) adjusted $10,000 to $10,775. 

In subsec. (b)(2) adjusted $10,000 to $10,775. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 101, 104, 106, 306, 362, 503, 504, 522, 541, 549 of this title; title 28 sections 1411, 1480. 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 303)

BAPCPA § 332(b)    •    House Report 109-31    •   

BAPCPA § 802(d)(2)    •    House Report 109-31    •   

BAPCPA § 1234(a)(1)(A)    •    House Report 109-31    •   

BAPCPA § 1234(a)(1)(B)    •    House Report 109-31    •   

BAPCPA § 1234(a)(2)    •    House Report 109-31;  BAPCPA § 1234(b) contains the following uncodifed provision:

(b) Effective Date; Application of Amendments—This section and the amendments made by this section shall take effect on the date of the enactment of this Act and shall apply with respect to cases commenced under title 11 of the United States Code before, on, and after such date.    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 304)


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. 

LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

1978 Acts (Pub. L. 95-598).

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. 

EFFECTIVE DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 101, 305, 306 of this title; title 28 section 1410


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 304)

BAPCPA § 802(d)(3)    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 305)


LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31.

1991 Acts (Pub. L. 102-198). House Report No. 102-322. 

1990 Acts (Pub. L. 101-650). Senate Report No. 101-416.

1978 Acts (Pub. L. 95-598). 

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

2005 — Will be supplemented. 

1991 — Subsec. (c). Pub. L. 102-198 substituted "title 28" for "this title", wherever appearing. 

1990 — Subsec. (c). Pub. L. 101-650 declared abstention determinations in bankruptcy cases nonreviewable by the court of appeals or by the Supreme Court. 

EFFECTIVE DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 306 of this title. 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 305)

BAPCPA § 802(d)(6)    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 306)


LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

1978 Acts (Pub. L. 95-598).

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

Amendments

2005 — Will be supplemented. 

EFFECTIVE DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 306)

§ 802(d)(5)    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 307)


LEGISLATIVE REPORTS

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958. 

EFFECTIVE DATES

1986 Acts. 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, § 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." 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 308)


LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

EFFECTIVE DATES

2005 Acts. Pub. L. 109-8, Title IV, § 434(b), Apr. 20, 2005, 119 Stat. 111, provided that: "The amendments made by subsection (a) [enacting this section] shall take effect 60 days after the date on which rules are prescribed under section 2075 of title 28, United States Code, to establish forms to be used to comply with section 308 of title 11, United States Code, as added by subsection (a) [enacting this section]. 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 308)

BAPCPA § 434(a)(1)    •    House Report 109-31    •    BAPCPA § 434(b) contains the following uncodifed provision:

(b) Effective Date.—The amendments made by subsection (a) shall take effect 60 days after the date on which rules are prescribed under section 2075 of title 28, United States Code, to establish forms to be used to comply with section 308 of title 11, United States Code, as added by subsection (a).    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 321)


Legislative Statements

Section 321 indicates that an examiner may not serve as a trustee in the case. 

LEGISLATIVE REPORTS

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958. 

1978 Acts (Pub. L. 95-598).

Senate Report No. 95-989. Section 321 is adapted from current Bankruptcy Act section 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, § 257(c), added references to chapter 12 in two places. 

Subsec. (c). Pub. L. 99-554, § 206, added subsec. (c)

1984 — Subsec. (b).  Pub. L. 98-353 substituted "the case" for "a case" after "an examiner in".

EFFECTIVE DATES

1986 Acts. 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. 

1984 Acts. Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a), formerly 553(a), of Pub. L. 98-353, set out as a note under section 101 of this title. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 322)


Legislative Statements

Section 322(a) is modified to include a trustee serving in a railroad reorganization under subchapter IV of chapter 11

LEGISLATIVE REPORTS

1994 Acts (Pub. L. 103-394). House Report No. 103-835. 

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958.

1978 Acts (Pub. L. 95-598). 

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

1994 — Subsec. (a). Pub. L. 103-394, § 501(d)(3), substituted "1202, or 1302" for "1302, or 1202". 

1986

Subsec. (a). Pub. L. 99-554, § 207(1), substituted "Except as provided in subsection (b)(1), a person" for "A person". 

Pub. L. 99-554, § 257(d), added reference to section 1202 of this title. 

Subsec. (b). Pub. L. 99-554, § 207(2), added par. (1), designated existing provisions as par. (2), and, as so designated, substituted "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 added "required to be" after "bond". 

EFFECTIVE DATES

1994 Acts. Amendment by Pub. L. 103-394 effective on Oct. 22, 1994, and not to apply with respect to cases commenced under Title 11 of the United States Code before Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a note under section 101 of this title. 

1986 Acts. 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. 

1984 Acts. Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a), formerly 553(a), of Pub. L. 98-353, set out as a note under section 101 of this title. 

Separability

If any provision of or amendment made by Pub. L. 103-394 or the application of such provision or amendment to any person or circumstance is held to be unconstitutional, the remaining provisions of and amendments made by Pub. L. 103-394 and the application of such provisions and amendments to any person or circumstance shall not be affected thereby, see section 701 of Pub. L. 103- 394, set out as a note under section 101 of this title. 

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. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 323)


LEGISLATIVE REPORTS

1978 Acts (Pub. L. 95-598).

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. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 324)


LEGISLATIVE REPORTS

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958. 

1978 Acts (Pub. L. 95-598).

Senate Report No. 95-989. This section permits the court, after notice and a hearing, to remove a trustee for cause. 

Amendments

1986 Amendments. Pub. L. 99-554, § 208, designated existing provisions as subsec. (a), and, as so designated, substituted "a trustee, other than the United States trustee, or an examiner" for "a trustee or an examiner", and added subsec. (b)

EFFECTIVE DATES

1986 Acts. 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. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 703, 1104 of this title. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 325)


LEGISLATIVE REPORTS

1978 Acts (Pub. L. 95-598).

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. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 326)


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

LEGISLATIVE REPORTS

1994 Acts (Pub. L. 103-394). House Report No. 103-835. 

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958.

1978 Acts (Pub. L. 95-598). 

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. section 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 section 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 section 48c(2) [section 76(c)(2) of former Title 11]. 

Subsection (c) 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) 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) 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

1994 — Subsec. (a). Pub. L. 103-394, § 107, substituted "25 percent on the first $5,000 or less, 10 percent on any amount in excess of $5,000 but not in excess of $50,000, 5 percent on any amount in excess of $50,000 but not in excess of $1,000,000, and reasonable compensation not to exceed 3 percent of such moneys in excess of $1,000,000" for "fifteen percent of 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". 

1986 — Subsec. (b). Pub. L. 99-554, § 209, substituted "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, § 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, § 430(b), substituted "(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." for "(d) 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 DATES

1994 Acts. Amendment by Pub. L. 103-394 effective on Oct. 22, 1994, and not to apply with respect to cases commenced under Title 11 of the United States Code before Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a note under section 101 of this title. 

1986 Acts. 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. 

1984 Acts. Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a), formerly 553(a), of Pub. L. 98-353, set out as a note under section 101 of this title. 

Separability

If any provision of or amendment made by Pub. L. 103-394 or the application of such provision or amendment to any person or circumstance is held to be unconstitutional, the remaining provisions of and amendments made by Pub. L. 103-394 and the application of such provisions and amendments to any person or circumstance shall not be affected thereby, see section 701 of Pub. L. 103- 394, set out as a note under section 101 of this title. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 330, 557 of this title. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 327)


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. 

LEGISLATIVE REPORTS

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958. 

1978 Acts (Pub. L. 95-598).

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. 

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. House Report No. 95-595. 

Codifications

Amendment by Pub. L. 99-554, § 257(e)(1), has been executed to text following "section 721" as the probable intent of Congress, notwithstanding directory language which required amendment to be executed following "section 721,". 

Amendment by Pub. L. 99-554, § 257(e)(2), has been executed to text following "chapter 7" as the probable intent of Congress, notwithstanding directory language which required amendment to be executed following "section 7". 

Amendments

1986.

 Subsec. (b). Pub. L. 99-554, § 257(e)(1), added reference to section 1202 of this title. See, also Codifications note under this section. 

Subsec. (c). Pub. L. 99-554, § 210, substituted "another creditor or the United States trustee, in which case" for "another creditor, in which case". 

Pub. L. 99-554, § 257(e)(2), added reference to chapter 12. See Codifications note under this section. 

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 DATES

1986 Acts. 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. 

1984 Acts. Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a), formerly 553(a), of Pub. L. 98-353, set out as a note under section 101 of this title. 

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


HISTORICAL AND REVISION NOTES (11 U.S.C. § 328)


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. 

LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

1978 Acts (Pub. L. 95-598).

Senate Report No. 95-989. This section, which is parallel to § 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

2005 — Will be supplemented. 

1984 — Subsec. (a). Pub. L. 98-353 substituted "not capable of being anticipated" for "unanticipatable".

EFFECTIVE DATES

2005 Acts. Pub. L. 109-8, Title IV, § 434(b), Apr. 20, 2005, 119 Stat. 111, provided that: "The amendments made by subsection (a) [enacting this section] shall take effect 60 days after the date on which rules are prescribed under section 2075 of title 28, United States Code, to establish forms to be used to comply with section 308 of title 11, United States Code, as added by subsection (a) [enacting this section].. 

1984 Acts. Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a), formerly 553 of Pub. L. 98- 353, set out as a note under section 101 of this title. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 326, 330 of this title. 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 328)

§ 1206    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 329)


LEGISLATIVE REPORTS

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958. 

1978 Acts (Pub. L. 95-598).

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, § 257(c), added reference to chapter 12

1984

Subsec. (a). Pub. L. 98-353, § 432(a), substituted "or" for "and" after "in contemplation of". 

Subsec. (b)(1). Pub. L. 98-353, § 432(b), substituted "estate" for "trustee". 

EFFECTIVE DATES

1986 Acts. 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. 

1984 Acts. Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a), formerly 553(a), of Pub. L. 98-353, set out as a note under section 101 of this title. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 330, 541 of this title. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 330)


Legislative Statements

Section 330(a) contains the standard of compensation adopted in H.R. 8200 aspassed 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) 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]. 

LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

1994 Acts (Pub. L. 103-394). House Report No. 103-835.

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958. 

1978 Acts (Pub. L. 95-598).

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 cases 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) [89 S.Ct. 1748, 23 L.Ed.2d 220]. 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) [64 S.Ct. 487, 88 L.Ed. 659]; Leiman v. Guttman, 336 U.S. 1, 4-9, (1949) [69 S.Ct. 371, 93 L.Ed. 453]. 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) [60 S.Ct. 595, 84 L.Ed. 819, rehearing denied 60 S.Ct. 806, 309 U.S. 698, 84 L.Ed. 1037]. 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 paraprofessional 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) [83 S.Ct. 969, 10 L.Ed.2d 33, rehearing denied 83 S.Ct. 1522, 373 U.S. 928, 10 L.Ed.2d 427]. 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 attorney, 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) 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 attorney 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

2005 — Will be supplemented. 

1994

Subsec. (a). Pub. L. 103-394, § 224(b), completely revised subsec. (a). Prior to revision, subsec. (a) read as follows: 

"(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." 

Subsec. (b)(1). Pub. L. 103-394, § 117(1), designated existing provisions as par. (1)

Subsec. (b)(2). Pub. L. 103-394, § 117(2), added par. (2)

1986

 Subsec. (a). Pub. L. 99-554, § 211(1), substituted "notice to any parties in interest and to the United States trustee and a hearing" for "notice and a hearing". 

Subsec. (c). Pub. L. 99-554, § 257(f), added reference to chapter 12. 

Subsec. (d). Pub. L. 99-554, § 211(2), added subsec. (d)

1984

Subsec. (a). Pub. L. 98-353, § 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, § 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, § 434(a), substituted "$45" for "$20". 

Subsec. (c). Pub. L. 98-353, § 434(b), added subsec. (c)

EFFECTIVE DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 

1994 Acts. Amendment by section 117 of Pub. L. 103-394 effective on Oct. 22, 1994, and applicable with respect to cases commenced under Title 11 of the United States Code before, on, and after Oct. 22, 1994, see section 702(a), (b)(2)(B) of Pub. L. 103-394, set out as a note under section 101 of this title. 

Amendment by section 224(b) of Pub. L. 103-394 effective Oct. 22, 1994, and shall not apply with respect to cases commenced under this title before Oct. 22, 1994, see section 702(a), (b)(1) of Pub. L. 103-394, set out as a note under section 101 of this title. 

1986 Acts. 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. 

1984 Acts. Amendment by Pub. L. 98-353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a), formerly 553(a), of Pub. L. 98-353, set out as a note under section 101 of this title. 

Separability

If any provision of or amendment made by Pub. L. 103-394 or the application of such provision or amendment to any person or circumstance is held to be unconstitutional, the remaining provisions of and amendments made by Pub. L. 103-394 and the application of such provisions and amendments to any person or circumstance shall not be affected thereby, see section 701 of Pub. L. 103-394, set out as a note under section 101 of this title. 

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


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 330)

BAPCPA § 232(b)    •    House Report 109-31    •   

BAPCPA § 407(1)(A)    •    House Report 109-31    •   

BAPCPA § 407(1)(B)    •    House Report 109-31    •   

BAPCPA § 407(2)    •    House Report 109-31    •   

BAPCPA § 415(1)    •    House Report 109-31    •   

BAPCPA § 415(2)    •    House Report 109-31    •   

BAPCPA § 415(3)    •    House Report 109-31    •   

BAPCPA § 1104(b)(1)    •    House Report 109-31    •   

BAPCPA § 1104(b)(2)    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 331)


Legislative Statements

1978 Acts (Pub. L. 95-598).

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. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 330 of this title. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 332)


LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

EFFECTIVE DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 332)

BAPCPA § 232(a)    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 333)


LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

EFFECTIVE DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 333)

BAPCPA § 1104(a)(1)    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 341)


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. 

LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

1994 Acts (Pub. L. 103-394). House Report No. 103-835.

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958. 

1978 Acts (Pub. L. 95-598).

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

2005 — Will be supplemented. 

1994 — Subsec. (d). Pub. L. 103-394 added subsec. (d)

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 DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 

1994 Acts. Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a note under section 101 of this title. 

1986 Acts. 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. 

PARTICIPATION BY BANKRUPTCY ADMINISTRATOR AT

 MEETINGS OF CREDITORS AND EQUITY SECURITY HOLDERS

Section 105 of Pub. L. 103-394 provided that: 

"(a) Presiding Officer.—A bankruptcy administrator appointed under section 302(d)(3)(I) of the Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986 (28 U.S.C. 581 note; Public Law 99-554; 100 Stat. 3123), as amended by section 317(a) of the Federal Courts Study Committee Implementation Act of 1990 (Public Law 101-650; 104 Stat. 5115), or the bankruptcy administrator's designee may preside at the meeting of creditors convened under section 341(a) of title 11, United States Code. The bankruptcy administrator or the bankruptcy administrator's designee may preside at any meeting of equity security holders convened under section 341(b) of title 11, United States Code. 

"(b) Examination of the Debtor.—The bankruptcy administrator or the bankruptcy administrator's designee may examine the debtor at the meeting of creditors and may administer the oath required under section 343 of title 11, United States Code." 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 343, 702, 705, 1161 of this title. 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 341)

BAPCPA § 402    •    House Report 109-31    •   

BAPCPA § 413    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 342)


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. 

LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

1994 Acts (Pub. L. 103-394). House Report No. 103-835.

1978 Acts (Pub. L. 95-598). 

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) (enacted as 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

2005 — Will be supplemented.

1994 — Subsec. (c). Pub. L. 103-394 added subsec. (c)

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 DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 

1994 Acts.  Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a note under section 101 of this title. 

1984 Acts. 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. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 348, 741, 743, 762, 765 of this title. 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 342)

BAPCPA § 102(d)    •    House Report 109-31    •   

BAPCPA § 104    •    House Report 109-31    •   

BAPCPA § 234(b)(1)    •    House Report 109-31    •   

BAPCPA § 234(b)(2)    •    House Report 109-31    •   

BAPCPA § 315(a)(1)(A)    •    House Report 109-31    •   

BAPCPA § 315(a)(1)(B)    •    House Report 109-31    •   

BAPCPA § 315(a)(1)(C)    •    House Report 109-31    •   

BAPCPA § 315(a)(2)    •    House Report 109-31    •      -  342(e)  -  342(f)  -  342(g)


HISTORICAL AND REVISION NOTES (11 U.S.C. § 343)


LEGISLATIVE REPORTS

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958. 

1978 Acts (Pub. L. 95-598).

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 DATES

1986. 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. 

1984. 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. 

PARTICIPATION BY BANKRUPTCY ADMINISTRATOR AT

 MEETINGS OF CREDITORS AND EQUITY SECURITY HOLDERS

A bankruptcy administrator or the bankruptcy administrator's designee may examine debtor at meeting of creditors and may administer oath required by this section, see section 105 of Pub. L. 103-394, set out as a note under section 341 of this title. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 1161 of this title. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 344)


LEGISLATIVE STATEMENTS

1978 Acts (Pub. L. 95-598).

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). 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 521, 901 of this title. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 345)


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. 

LEGISLATIVE REPORTS

1994 Acts (Pub. L. 103-394). House Report No. 103-835. 

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958.

1982 Acts (Pub. L. 97-258). House Report No. 97-651.

1978 Acts (Pub. L. 95-598). 

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

1994 — Subsec. (b). Pub. L. 103-394 substituted semicolon for period at end of par. (2) and inserted concluding provisions after par. (2)

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 DATES

1994 Amendments. Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a note under section 101 of this title. 

1986 Amendments. 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. 

1984 Amendments. 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. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in title 28 section 586


HISTORICAL AND REVISION NOTES (11 U.S.C. § 346)


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. 

LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

1994 Acts (Pub. L. 103-394). House Report No. 103-835.

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958. 

1978 Acts (Pub. L. 95-598).

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. 

AMENDMENTS

2005 — Will be supplemented. 

1994

Subsec. (a). Pub. L. 103-394, Sec. 504(d)(4)(A), substituted "Internal Revenue Code of 1986" for "Internal Revenue Code of 1954 (26 U.S.C. 1 et seq.)". 

Subsec. (g)(1)(C). Pub. L. 103-394, Sec. 501(d)(4)(B), substituted "Internal Revenue Code of 1986" for "Internal Revenue Code of 1954 (26 U.S.C. 371)". 

1986

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. 

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 DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 

1994 Amendments.  Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a note under section 101 of this title. 

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. 

1984 Amendments. 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 TEXT

The Internal Revenue Code of 1986, referred to in subsec. (a), is classified generally to Title 26, Internal Revenue Code. Section 371 of the Internal Revenue Code of 1986, 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. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 106, 1146, 1231 of this title. 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 346)

BAPCPA § 719(a)(1)    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 347)


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. 

LEGISLATIVE REPORTS

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958. 

1978 Acts (Pub. L. 95-598).

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 DATES

1986 Acts. 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. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 901 of this title. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 348)


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 

LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

1994 Acts (Pub. L. 103-394). House Report No. 103-835.

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958. 

1978 Acts (Pub. L. 95-598).

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

2005 — Will be supplemented. 

1994

Subsec. (b). Pub. L. 103-394, Sec. 501(d)(5), substituted "1201(a), 1221, 1228(a), 1301(a), and 1305(a)" for "1301(a), 1305(a), 1201(a), 1221, and 1228(a)" and "1208, or 1307" for "1307, or 1208". 

Subsecs. (c) to (e). Pub. L. 103-394, Sec. 501(d)(5)(B), substituted "1208, or 1307" for "1307, or 1208". 

Subsec. (f). Pub. L. 103-394, Sec. 311, added subsec. (f)

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 DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 

1994 Amendments. Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a note under section 101 of this title. 

1986 Amendments. 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. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 101 of this title. 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 348)

BAPCPA § 309(a)(1)    •    House Report 109-31    •   

BAPCPA § 309(a)(2)(A)    •    House Report 109-31    •   

BAPCPA § 309(a)(2)(B)    •    House Report 109-31    •   

BAPCPA § 309(a)(3)    •    House Report 109-31    •   

BAPCPA § 1207    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 349)


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. 

LEGISLATIVE REPORTS

1994 Acts (Pub. L. 103-394). House Report No. 103-835. 

1978 Acts (Pub. L. 95-598).

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. 

AMENDMENTS

1994 — Subsec. (a). Pub. L. 103-394 substituted "109(g)" for "109(f)". 

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 DATES

1994 Acts.  Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a note under section 101 of this title. 

1984 Acts.  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. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 901 of this title. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 350)


LEGISLATIVE REPORTS

1978 Acts (Pub. L. 95-598).

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 DATES

1984 Amendments. 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. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 554, 703, 901 of this title. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 351)


LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

EFFECTIVE DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 351)

BAPCPA § 1102(a)    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 361)


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 securities clearing agency, 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. 

LEGISLATIVE REPORTS

1978 Acts (Pub. L. 95-598).

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 (enacted as 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 DATES

1984 Acts. 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. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 901, 1205 of this title. 


HISTORICAL AND REVISION NOTES (11 U.S.C. § 362)


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). 

LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

1994 Acts (Pub. L. 103-394). House Report No. 103-835.

1990 Acts.

June 25, 1990 (Pub. L. 101-311). House Report No. 101-484. 

Nov. 5, 1990 (Pub. L. 101-508). House Report No. 101-881 and  House Conference Report No. 101-964.

1986 Acts.

Oct. 21, 1986 — Pub. L. 99-509: House Report No. 99-727 and House Conference Report No. 99-1012. 

Oct. 27, 1986 — Pub. L. 99-554: House Report No. 99-764 and House Conference Report No. 99-958.

1982 Acts (Pub. L. 97-222). House Report No. 97-420. 

1978 Acts (Pub. L. 95-598).

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. 

AMENDMENTS

2005 — Will be supplemented. 

1998 — Subsec. (b)(4), (5). Pub. L. 105-277 added par. (4) and struck out former pars. (4) and (5) which read as follows: "(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;". 

1994

Subsecs. (a), (b). Pub. L. 103-394, Sec. 501(d)(7)(A), (B)(i), struck out "(15 U.S.C. 78eee(a)(3))" after "Act of 1970" in introductory provisions. 

Subsec. (b)(2). Pub. L. 103-394, Sec. 304(b), amended par. (2) generally. Prior to amendment, par. (2) read as follows: "under subsection (a) of this section, of the collection of alimony, maintenance, or support from property that is not property of the estate;". Subsec. (b)(3). Pub. L. 103-394, Sec. 204(a), inserted ", or to maintain or continue the perfection of," after "to perfect". Subsec. (b)(6). Pub. L. 103-394, Sec. 501(b)(2)(A), substituted "section 761" for "section 761(4)", "section 741" for "section 741(7)", "section 101, 741, or 761" for "section 101(34), 741(5), or 761(15)", and "section 101 or 741" for "section 101(35) or 741(8)". 

Subsec. (b)(7). Pub. L. 103-394, Sec. 501(b)(2)(B), substituted "section 741 or 761" for "section 741(5) or 761(15)" and "section 741" for "section 741(8)". 

Subsec. (b)(9). Pub. L. 103-394, Sec. 116, amended par. (9) generally. Prior to amendment, par. (9) read as follows: "under subsection (a) of this section, of the issuance to the debtor by a governmental unit of a notice of tax deficiency;". 

Subsec. (b)(10). Pub. L. 103-394, Sec. 501(d)(7)(B)(ii), struck out "or" at end. 

Subsec. (b)(12). Pub. L. 103-394, Sec. 501(d)(7)(B)(iii), substituted "section 31325 of title 46" for "the Ship Mortgage Act, 1920 (46 App. U.S.C. 911 et seq.)" and struck out "(46 App. U.S.C. 1117 and 1271 et seq., respectively)" after "Act, 1936". Subsec. (b)(13). Pub. L. 103-394, Sec. 501(d)(7)(B)(iv), substituted "section 31325 of title 46" for "the Ship Mortgage Act, 1920 (46 App. U.S.C. 911 et seq.)" and struck out "(46 App. U.S.C. 1117 and 1271 et seq., respectively)" after "Act, 1936" and "or" at end. 

Subsec. (b)(14). Pub. L. 103-394, Sec. 501(d)(7)(B)(vii), amended par. (14) relating to the setoff by a swap participant of any mutual debt and claim under or in connection with a swap agreement by substituting "; or" for period at end, redesignating par. (14) as (17), and inserting it after par. (16). 

Subsec. (b)(15). Pub. L. 103-394, Sec. 501(d)(7)(B)(v), struck out "or" at end. 

Subsec. (b)(16). Pub. L. 103-394, Sec. 501(d)(7)(B)(vi), struck out "(20 U.S.C. 1001 et seq.)" after "Act of 1965" and substituted semicolon for period at end. 

Subsec. (b)(17). Pub. L. 103-394, Sec. 501(d)(7)(B)(vii)(II), (III), redesignated par. (14) relating to the setoff by a swap participant of any mutual debt and claim under or in connection with a swap agreement as (b)(17) and inserted it after par. (16). 

Subsec. (b)(18). Pub. L. 103-394, Sec. 401, added par. (b)(18)

Subsec. (d)(3). Pub. L. 103-394, Sec. 218(b), added par. (3)

Subsec. (e). Pub. L. 103-394, Sec. 101, in last sentence substituted "concluded" for "commenced" and inserted before period at end ", unless the 30-day period is extended with the consent of the parties in interest or for a specific time which the court finds is required by compelling circumstances". . 

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), which directed the striking of "or" after "State law;", could not be executed because of a prior amendment by Pub. L. 101-311. See 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), which directed the substitution of a semicolon for period at end, could not be executed because of a prior amendment by Pub. L. 101-311. See 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), 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. 

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 DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 

1994 Amendments. Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a note under section 101 of this title. 

1990 Amendments. 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 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, were to cease to be effective Oct. 1, 1996, prior to repeal by Pub. L. 102-325, title XV, Sec. 1558, July 23, 1992, 106 Stat. 841. 

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(a) of title 11, United States Code, which are made after August 1, 1986." 

1984 Amendments. 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 directed Secretary of Transportation and Secretary of Commerce, before July 1, 1989, to submit reports to Congress on the effects of amendments to 11 U.S.C. 362 by this subsection. 

REFERENCES IN TEXT

Section 5(a)(3) of the Securities Investor Protection Act of 1970, referred to in subsecs. (a) and (b), is classified to section 78eee(a)(3) of Title 15, Commerce and Trade. 

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 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 Act is classified generally to subchapter XI (Sec. 1271 et seq.) of chapter 27 of Title 46, Appendix, Shipping. Section 207 of the Act is classified to section 1117 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. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 106, 108, 109, 361, 363, 365, 505, 507, 542, 553, 557, 742, 901, 922, 1110, 1168, 1205 of this title; title 26 section 7433; title 28 section 1334; title 46 section 31308. 


FOOTNOTES (11 U.S.C. § 362)

42 U.S.C. 666(a)(16)    •   

42 U.S.C. 666(a)(7)    •   

42 U.S.C. 664 and 666(a)(3)    •   

42 U.S.C. 601 et seq.)    •   

46 App. U.S.C. § 1117    •      -  362(b)(12)  -  362(b)(13)

20 U.S.C. § 1085    •   

15 U.S.C. § 78eee    •      -  362(a)    -  362(b)

29 U.S.C. § 1108(b)(1)    •   

42 U.S.C. § 1320a-7b(f)    •   

[SIC] So in the original. Probably should read “a debtor”.    •   


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 362)

BAPCPA § 106(f)    •    House Report 109-31    •      -  362(i)  -  362(j)

BAPCPA § 214    •    House Report 109-31    •   

BAPCPA § 224(b)(1) (struck the "or" at the end)    •    House Report 109-31    •   

BAPCPA § 224(b)(2) (struck the period and added the semi colon at the end)    •    House Report 109-31    •   

BAPCPA § 224(b)(3)    •    House Report 109-31    •   

BAPCPA § 302(1)    •    House Report 109-31    •   

BAPCPA § 302(2) (struck the period and added the semi colon at the end)    •    House Report 109-31    •   

BAPCPA § 302(3)    •    House Report 109-31    •      -  362(c)(3)  -  362(c)(4)

BAPCPA § 303(a)(1)    •    House Report 109-31    •   

BAPCPA § 303(a)(2) deleted the "." and inserted "; or" at the end of BC § 362(d)(3)(B)(ii).  BAPCPA § 444(2) also amended BC § 362(d)(3)(B)(ii) and retained the "; or" at the end.    •    House Report 109-31    •   

BAPCPA § 303(a)(3)    •    House Report 109-31    •   

BAPCPA § 303(b)    •    House Report 109-31    •      -  362(b)(20)  -  362(b)(21)

BAPCPA § 305(1)(A)    •    House Report 109-31    •   

BAPCPA § 305(1)(B)    •    House Report 109-31    •   

BAPCPA § 305(1)(C)    •    House Report 109-31    •   

BAPCPA § 311(a)    •    House Report 109-31    •      -  362(b)(22)  -  362(b)(23)  -  362(b)(24)

BAPCPA § 311(b)    •    House Report 109-31    •      -  362(l)  -  362(m)

BAPCPA § 320(1)    •    House Report 109-31    •   

BAPCPA § 320(2)    •    House Report 109-31    •   

BAPCPA § 401(b)    •    House Report 109-31    •   

BAPCPA § 441(1)(A)    •    House Report 109-31    •   

BAPCPA § 441(1)(B)    •    House Report 109-31    •   

BAPCPA § 441(2)    •    House Report 109-31    •   

BAPCPA § 444(1)    •    House Report 109-31    •   

BAPCPA § 444(2)    •    House Report 109-31    •   

BAPCPA § 709    •    House Report 109-31    •   

BAPCPA § 718    •    House Report 109-31    •   

BAPCPA § 907(d)(1)(A)    •    House Report 109-31    •   

BAPCPA § 907(d)(1)(B)    •    House Report 109-31    •   

BAPCPA § 907(d)(1)(C)    •    House Report 109-31    •   

BAPCPA § 907(d)(1)(D)    •    House Report 109-31    •   

BAPCPA § 907(d)(2)    •    House Report 109-31    •   

BAPCPA § 907(o)(1)    •    House Report 109-31    •   

BAPCPA § 907(o)(2)    •    House Report 109-31    •   

BAPCPA § 1106    •    House Report 109-31    •   

BAPCPA § 1225    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 363)


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. 

Legislative REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

1994 Acts (Pub. L. 103-394). House Report No. 103-835.

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958. 

1978 Acts (Pub. L. 95-598).

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) (enacted as (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) (enacted as (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) (enacted as (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

2005 — Will be supplemented. 

1994

Subsec. (a). Pub. L. 103-394, Sec. 214(b), inserted "and the fees, charges, accounts or other payments for the use or occupancy of rooms and other public facilities in hotels, motels, or other lodging properties" after "property". 

Subsec. (b)(2). Pub. L. 103-394, Sec. 109, 501(d)(8)(A), struck out "(15 U.S.C. 18a)" after "Clayton Act" and amended subpars. (A) and (B) generally. Prior to amendment, subpars. (A) and (B) read as follows: 

"(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."

Subsec. (c)(1). Pub. L. 103-394, Sec. 501(d)(8)(B), substituted "1203, 1204, or 1304" for "1304, 1203, or 1204". 

Subsec. (e). Pub. L. 103-394, Sec. 219(c), inserted at end "This subsection also applies to property that is subject to any unexpired lease of personal property (to the exclusion of such property being subject to an order to grant relief from the stay under section 362)." 

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 DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 

Pub. L. 109-8, Title XII, § 1221(a), Apr. 20, 2005, 119 Stat. 111, amended section 363(d) provided that: a trustee may use, sell, or lease property certain property in accordance with applicable nonbankruptcy law. Pub. L. 109-8, Title XII, § 1221(d), Apr. 20, 2005, 119 Stat. 111, provided that "The amendments made by this section shall apply to a case pending under title 11, United States Code, on the date of enactment of this Act, or filed under that title on or after that date of enactment, except that the court shall not confirm a plan under chapter 11 of title 11, United States Code, without considering whether this section would substantially affect the rights of a party in interest who first acquired rights with respect to the debtor after the date of the filing of the petition. The parties who may appear and be heard in a proceeding under this section include the attorney general of the State in which the debtor is incorporated, was formed, or does business." 

1994 Amendments. Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a note under section 101 of this title. 

1986 Amendments. 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. 

1984 Amendments. 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 TEXT

Section 7A of the Clayton Act, referred to in subsec. (b)(2), is classified to section 18a of Title 15, Commerce and Trade. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 106, 303, 361, 507, 541, 542, 552, 553, 557, 1111, 1129, 1205, 1206, 1303, 1304 of this title. 


FOOTNOTES (11 U.S.C. § 363)

15 U.S.C. 1601 et seq.    •   

15 U.S.C. § 18a    •   


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 363)

BAPCPA § 204(1)    •    House Report 109-31    •   

BAPCPA § 204(2)    •    House Report 109-31    •   

BAPCPA § 231(a)    •    House Report 109-31    •   

BAPCPA § 1221(a)    •    House Report 109-31    •    BAPCPA § 1221(d) contains  the following uncodifed provision:

(d) Applicability.—The amendments made by this section shall apply to a case pending under title 11, United States Code, on the date of enactment of this Act, or filed under that title on or after that date of enactment, except that the court shall not confirm a plan under chapter 11 of title 11, United States Code, without considering whether this section would substantially affect the rights of a party in interest who first acquired rights with respect to the debtor after the date of the filing of the petition. The parties who may appear and be heard in a proceeding under this section include the attorney general of the State in which the debtor is incorporated, was formed, or does business.    •   

(e) Rule of Construction.—Nothing in this section shall be construed to require the court in which a case under chapter 11 of title 11, United States Code, is pending to remand or refer any proceeding, issue, or controversy to any other court or to require the approval of any other court for the transfer of property.    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 364)


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). 

LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

1994 Acts (Pub. L. 103-394). House Report No. 103-835.

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958. 

1978 Acts (Pub. L. 95-598).

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. 

AMENDMENTS

2005 — Will be supplemented. 

1994 — Subsec. (a). Pub. L. 103-394, Sec. 501(d)(9)(A), substituted "1203, 1204, or 1304" for "1304, 1203, or 1204". Subsec. (f). Pub. L. 103-394, Sec. 501(d)(9)(B), struck out "(15 U.S.C. 77e)" after "Act of 1933" and "(15 U.S.C. 77aaa et seq.)" after "Act of 1939". 

1986 — Subsec. (a). Pub. L. 99-554 inserted reference to sections 1203 and 1204 of this title. 

EFFECTIVE DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 

1994 Amendments. Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a note under section 101 of this title. 

1986 Amendments. 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. 

REFERENCES IN TEXT

Section 5 of the Securities Act of 1933, referred to in subsec. (f), is classified to section 77e of Title 15, Commerce and Trade. 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. For complete classification of this Act to the Code, see section 77aaa of Title 15 and Tables. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 106, 361, 507, 901, 921, 922, 1205, 1304 of this title. 


FOOTNOTES (11 U.S.C. § 364)

15 U.S.C. § 77e    •   

15 U.S.C. § 77aaa    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 365)


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)(3) 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. 

LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

1994 Acts.

Oct. 22, 1994 (Pub. L. 103-394). House Report No. 103-835.

Oct. 31, 1994 (Pub. L. 103-429). House Report No. 103-831.

1992 Acts (Pub. L. 102-365). House Report No. 102-205. 

1990 Acts (Pub. L. 101-647). House Report No. 101-681(I).

1988 Acts (Pub. L. 100-506). Senate Report No. 100-505.

1986 Acts (Pub. L. 99-554). House Report No. 99-764 and House Conference Report No. 99-958. 

1978 Acts (Pub. L. 95-598).

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) (enacted as (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 (sic) 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

2005 — Will be supplemented. 

1994

Subsec. (b)(2)(D). Pub. L. 103-394, Sec. 219(a), added subpar. (D). 

Subsec. (d)(6)(C). Pub. L. 103-429, Sec. 1(1), substituted "section 40102(a) of title 49" for "section 101 of the Federal Aviation Act of 1958 (49 App. U.S.C. 1301)". 

Pub. L. 103-394, Sec. 501(d)(10)(A), which directed the substitution of "section 40102 of title 49" for "the Federal Aviation Act of 1958 (49 U.S.C. 1301)", could not be executed because the phrase "(49 U.S.C. 1301)" did not appear in text. Subsec. (d)(10). Pub. L. 103-394, Sec. 219(b), added par. (10). Subsec. (g)(2)(A), (B). Pub. L. 103-394, Sec. 501(d)(10)(B), substituted "1208, or 1307" for "1307, or 1208". 

Subsec. (h). Pub. L. 103-394, Sec. 205(a), amended subsec. (h) generally. Prior to amendment, subsec. (h) read as follows: 

"(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." 

Subsec. (n)(1)(B). Pub. L. 103-394, Sec. 501(d)(10)(C), substituted "a right to" for "a right to to". 

Subsec. (o). Pub. L. 103-394, Sec. 501(d)(10)(D), substituted "a Federal depository institutions regulatory agency (or predecessor to such agency)" for "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,". 

Subsec. (p). Pub. L. 103-429, Sec. 1(2), which directed the amendment of subsec. (p) by substituting "section 40102(a) of title 49" for "section 101(3) of the Federal Aviation Act of 1958", could not be executed because subsec. (p) was repealed by Pub. L. 103-394, Sec. 501(d)(10)(E). See below. 

Pub. L. 103-394, Sec. 501(d)(10)(E), struck out subsec. (p), which read as follows: "In this section, 'affected air carrier' means an air carrier, as defined in section 101(3) of the Federal Aviation Act of 1958, that holds 65 percent or more in number of the aircraft gates at an airport—

"(1) which is a Large Air Traffic Hub as defined by the Federal Aviation Administration in Report FAA-AP 92-1, February 1992; and 

"(2) all of whose remaining aircraft gates are leased or under contract on the date of enactment of this subsection."

1992

Subsec. (c)(4). Pub. L. 102-365, Sec. 19(c), added par. (4). 

Subsec. (d)(5) to (9). Pub. L. 102-365, Sec. 19(b), added pars. (5) to (9). 

Subsec. (f)(1). Pub. L. 102-365, Sec. 19(d), substituted for period at end "; except that the trustee may not assign an unexpired lease of nonresidential real property under which the debtor is an affected air carrier that is the lessee of an aircraft terminal or aircraft gate if there has occurred a termination event." 

Subsec. (p). Pub. L. 102-365, Sec. 19(e), added subsec. (p).

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 DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 

1994 Amendments. Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a note under section 101 of this title. 

1992 Amendments.  Section 19(f) of Pub. L. 102-365 provided that: "The amendments made by this section (amending this section) shall be in effect for the 12-month period that begins on the date of enactment of this Act (Sept. 3, 1992) and shall apply in all proceedings involving an affected air carrier (as defined in section 365(p) of title 11, United States Code, as amended by this section) that are pending during such 12-month period. Not later than 9 months after the date of enactment, the Administrator of the Federal Aviation Administration shall report to the Committee on Commerce, Science, and Transportation and Committee on the Judiciary of the Senate and the Committee on the Judiciary and Committee on Public Works and Transportation of the House of Representatives on whether this section shall apply to proceedings that are commenced after such 12-month period." 

1988 Amendments. 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. 

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. 

1984 Amendments. 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. 

AIRPORT LEASES

Section 19(a) of Pub. L. 102-365 provided that: "Congress finds that — 

"(1) there are major airports served by an air carrier that has leased a substantial majority of the airport's gates;

"(2) the commerce in the region served by such a major airport can be disrupted if the air carrier that leases most of its gates enters bankruptcy and either discontinues or materially reduces service; and 

"(3) it is important that such airports be empowered to continue service in the event of such a disruption."

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 106, 348, 363, 502, 541, 553, 555, 556, 557, 559, 560, 744, 901, 929, 1110, 1123, 1124, 1167, 1168, 1169, 1222, 1322 of this title. 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 365)

BAPCPA § 309(b)    •    House Report 109-31    •   

BAPCPA § 328(a)(1)(A)    •    House Report 109-31    •   

BAPCPA § 328(a)(1)(B)    •    House Report 109-31    •   

BAPCPA § 328(a)(2)(A)    •    House Report 109-31    •   

BAPCPA § 328(a)(2)(B)    •    House Report 109-31    •   

BAPCPA § 328(a)(2)(C)    •    House Report 109-31    •   

BAPCPA § 328(a)(3)(A)    •    House Report 109-31    •      -  365(d)(5)(old)  -  365(d)(6)(old)  -  365(d)(7)(old)  -  365(d)(8)(old)  -  365(d)(9)(old)

BAPCPA § 328(a)(3)(B)    •    House Report 109-31    •   

BAPCPA § 328(a)(4)    •    House Report 109-31    •   

BAPCPA § 404(a)    •    House Report 109-31    •   

BAPCPA § 404(b)    •    House Report 109-31    •   


HISTORICAL AND REVISION NOTES (11 U.S.C. § 366)


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. 

LEGISLATIVE REPORTS

2005 Acts (Pub. L. 109-8). House Report No. 109-31

1978 Acts (Pub. L. 95-598).

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

2005 — Will be supplemented. 

1984 — Subsec. (a). Pub. L. 98-353 inserted "of the commencement of a case under this title or" after "basis". 

EFFECTIVE DATES

2005 Acts. Pub. L. 109-8, Title XV, § 1501, Apr. 20, 2005, provided that, except as otherwise specifically provided, all amendments, except for amendments provided in Pub. L. 109-8, Title III, §§ 308, 322, and 330, are effective 180 days after enactment of the Act on April 20, 2005 (which occurs on October 17, 2005), and are inapplicable with respect to cases commenced under Title 11 before the effective date. 

1984 Amendments. 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. 

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 106, 901 of this title. 


BAPCPA & LEGISLATIVE REPORT LINKS (11 U.S.C. § 366)

BAPCPA § 417(1)    •    House Report 109-31    •   

BAPCPA § 417(2)    •    House Report 109-31    •   


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Page Last Updated:  October 19, 2005