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debtor who is an individual from any debt excepted from discharge under Bankruptcy Code section 523. Section 321(d)(2) of the Act provides that in a chapter 11 individual debtor is not discharged until all plan payments have been made. The court may grant a hardship discharge if the value of property actually distributed under the plan—as of the plan's effective date—is not less than the amount that would have been available for distribution if the case was liquidated under chapter 7 on such date, and modification of the plan is not practicable.

Section 321(e) of the Act amends section 1127 to permit a plan in a chapter 11case of an individual debtor to be modified postconfirmation for the purpose of increasing or reducing the amount of payments, extending or reducing the time period for such payments, or altering the amount of distribution to a creditor whose claim is provided for by the plan. Such modification may be made at any time on request of the debtor, trustee, United States trustee, or holder of an allowed unsecured claim. The provision specifies that sections 1121 through 1129 apply to such modification. In addition, it provides that the modified plan shall become the confirmed plan only if: (1) there has been disclosure pursuant to section 1125 (as the court directs); (2) notice and a hearing; and (3) such modification is approved.

 

 

 

 

Sec. 322. Limitations on Homestead Exemption. Section 322(a) amends section 522 of the Bankruptcy Code to impose an aggregate monetary limitation of $125,000, subject to Bankruptcy Code sections 544 and 548, on the value of property that the debtor may claim as exempt under State or local law pursuant to section 522(b)(3)(A) under certain circumstances. The monetary cap applies if the debtor acquired such property within the 1,215-day period preceding the filing of the petition and the property consists of any of the following: (1) real or personal property of the debtor or that a dependent of the debtor uses as a residence; (2) an interest in a cooperative that owns property, which the debtor or the debtor's dependent uses as a residence; (3) a burial plot for the debtor or the debtor's dependent; or (4) real or personal property that the debtor or dependent of the debtor claims as a homestead. This limitation does not apply to a principal residence claimed as exempt by a family farmer. In addition, the limitation does not apply to any interest transferred from a debtor's principal residence (which was acquired prior to the beginning of the specified time period) to the debtor's current principal residence, if both the previous and current residences are located in the same State.

Section 322(a) further amends section 522 to add a provision that does not allow a debtor to exempt any amount of an interest in property described in the preceding paragraph in excess of $125,000 if any of the following applies:

1. The court determines, after notice and a hearing, that the debtor has been convicted of a felony (as defined in section 3156 of title 18), which under the circumstance demonstrates that the filing of the case was an abuse of the provisions of the Bankruptcy Code; or

2. debtor owes a debt arising from:

a. any violation of the Federal securities laws defined in section 3(a)(47) of the Securities and Exchange Act of

 

 

 

 


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1934, any state securities laws, or any regulation or order issued under Federal securities laws or state securities laws;

b. fraud, deceit, or manipulation in a fiduciary capacity or in connection with the purchase or sale of any security registered under section 12 or 15(d) of the Securities Exchange Act of 1934, or under section 6 of the Securities Act of 1933;

c.  any civil remedy under section 1964 of title 18 of the United States Code; or

d. any criminal act, intentional tort, or willful or reckless misconduct that caused serious physical injury or death to another individual in the preceding five years.

An exception to the monetary limit applies to the extent the value of the homestead property is reasonably necessary for the support of the debtor and any dependent of the debtor. The monetary limitation set forth in section 322(a) is subject to automatic adjustment pursuant to section 104 of the Bankruptcy Code.

Sec. 323. Excluding Employee Benefit Plan Participant Contributions and Other Property from the Estate. Section 323 of the Act amends section 541(b) of the Bankruptcy Code to exclude as property of the estate funds withheld or received by an employer from its employees' wages for payment as contributions to specified employee retirement plans, deferred compensation plans, and tax-deferred annuities. Such contributions do not constitute disposable income as defined in section 1325(b)(2) of the Bankruptcy Code. Section 323 also excludes as property of the estate funds withheld by an employer from the wages of its employees for payment as contributions to health insurance plans regulated by State law.

Sec. 324. Exclusive Jurisdiction in Matters Involving Bankruptcy Professionals. Section 324 of the Act amends section 1334 of title 28 of the United State Code to give a district court exclusive jurisdiction of all claims or causes of action involving the construction of section 327 of the Bankruptcy Code or rules relating to disclosure requirements under such provision.

Sec. 325. United States Trustee Program Filing Fee Increase. Section 325(a) of the Act amends section 1930(a) of title 28 of the United States Code to increase the chapter 7 filing fee from $155 to $200 and decrease the chapter 13 filing fee from $155 to $150. It also increases the chapter 11 filing fee from $800 to $1,000. Subsection 325(b) amends section 589a of title 28 of the United States Code to reallocate the percentage of certain filing fees collected for the United States Trustee Fund. Subsection 325(c) amends section 406(b) of the Judiciary Appropriations Act of 1990 to reallocate the percentage of certain filing fees collected under section 1930 of title 28 of the United States Code to fund the operation and maintenance of the Federal court system. Section 325(d) provides that the amendments made by subsections (b) and (c) are effective for the two-year period beginning on the Act's date of enactment. Section 325(e)(1) mandates that the amount of fees collected under 28 U.S.C. Sec. 1930(a)(1) (chapter 7 filing fees) and 28 U.S.C. 1930(a)(3) (chapter 11 filing fees) that is greater than the amount that would have been collected if these provisions were not amended by section 


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325 be allocated to the extent necessary to pay for the salaries and benefits of judges appointed pursuant to section 1223 of this Act. Section 325(e)(2) provides that any amount of fees in excess of that used to pay the salaries and benefits of judges appointed pursuant to section 1223 be deposited in the Treasury to the extent necessary to offset the decrease in governmental receipts resulting from the amendments made by section 325(b) (United States Trustee Fund) and section 325(c) (federal court system fund).

Sec. 326. Sharing of Compensation. Section 326 amends Bankruptcy Code section 504 to create a limited exception to the prohibition against fee sharing. The provision allows the sharing of compensation with bona fide public service attorney referral programs that operate in accordance with non-federal law regulating attorney referral services and with rules of professional responsibility applicable to attorney acceptance of referrals.

Sec. 327. Fair Valuation of Collateral. Section 327 of the Act amends section 506(a) of the Bankruptcy Code to provide that the value of an allowed claim secured by personal property that is an asset in an individual debtor's chapter 7 or 13 case is determined based on the replacement value of such property as of the filing date of the bankruptcy case without deduction for selling or marketing costs. With respect to property acquired for personal, family, or household purposes, replacement value is the price a retail merchant would charge for property of that kind considering the age and condition of the property at the time its value is determined.

Sec. 328. Defaults Based on Nonmonetary Obligations. Subsection (a)(1) of section 328 of the Act amends section 365(b) to provide that a trustee does not have to cure a default that is a breach of a provision (other than a penalty rate or penalty provision) relating to a default arising from any failure to perform a nonmonetary obligation under an unexpired lease of real property, if it is impossible for the trustee to cure the default by performing such nonmonetary act at and after the time of assumption. If the default arises from a failure to operate in accordance with a nonresidential real property lease, the default must be cured by performance at and after the time of assumption in accordance with the lease. Pecuniary losses resulting from such default must be compensated pursuant to section 365(b)(1). In addition, section 328(a)(1) amends section 365(b)(2)(D) to clarify that it applies to penalty provisions. Section 328(a)(2) through (4) make technical revisions to section 365(c), (d) and (f) by deleting language that is no longer effective pursuant to the Rail Safety Enforcement and Review Act. 87

Section 328(b) amends section 1124(2)(A) of the Bankruptcy Code to clarify that a claim is not impaired if section 365(b)(2) (as amended by this Act) expressly does not require a default with respect to such claim to be cured. In addition, it provides that any claim or interest that arises from the failure to perform a nonmonetary obligation (other than a default arising from the failure to operate a nonresidential real property lease subject to section 365(b)(1)(A)), is impaired unless the holder of such claim or interest (other than the debtor or an insider) is compensated for any actual pecuniary loss incurred by the holder as a result of such failure.

 

 

 

 


87. Pub. L. No. 102-365, 106 Stat. 972 (1992).


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Sec. 329. Clarification of Postpetition Wages and Benefits. Section 329 amends Bankruptcy Code section 503(b)(1)(A) to accord administrative expense status to certain back pay awards. This provision applies to a back pay award attributable to any period of time occurring postpetition as a result of a violation of Federal or state law by the debtor pursuant to an action brought in a court or before the National Labor Relations Board, providing the bankruptcy court determines that the award will not substantially increase the probability of layoff or termination of current employees or of nonpayment of domestic support obligations.

Sec. 330. Delay of Discharge During Pendency of Certain Proceedings. Section 330(a) of the Act amends section 727(a) of the Bankruptcy Code to require the court to withhold the entry of a debtor's discharge order if the court, after notice and a hearing, finds that there is reasonable cause to believe that there is a pending proceeding in which the debtor may be found guilty of a felony of the kind described in Bankruptcy Code section 522(q)(1) or liable for a debt of the kind described in Bankruptcy Code section 522(q)(2). Subsections (b), (c), and (d) make comparable revisions to the discharge provisions under chapter 11, 12, and 13, respectively.

Sec. 331. Limitation on Retention Bonuses, Severance Pay, and Certain Other Payments. Section 331 amends Bankruptcy Code section 503 to prohibit the allowance or payment of certain transfers or obligations, unless otherwise authorized by the court. It applies to transfers made to or obligations incurred for the benefit of an insider of the debtor for the purpose of inducing such person to remain with the debtor's business, unless the court makes certain specified findings. In addition, it prohibits a severance payment to an insider of a debtor, unless it satisfies certain criteria. Further, it prohibits the payment of other transfers or obligations that are outside the ordinary course of business and not justified by the facts and circumstances of the case, including transfers made to, or obligations incurred for the benefit of, officers, mangers, or consultants hired after the date of the filing of the petition.

Sec. 332. Fraudulent Involuntary Bankruptcy. Bankruptcy Code section 303 permits a creditor to force an individual or business into bankruptcy by filing an involuntary bankruptcy petition against such entity. Before an order for relief is entered in the case, the court must make certain findings that support granting such relief (e.g., the debtor is generally not paying debts as they become due; or a custodian was appointed within the 120-day period preceding the filing of the petition). If such findings are not made, the court may dismiss the case. As with most documents filed in connection with a bankruptcy case, the filing of an involuntary bankruptcy petition is a matter of public record and is open for examination by any entity. 88  In addition, the Fair Credit Reporting Act  89 permits credit reporting agencies to note the involuntary bankruptcy filing on a person's credit report for up to ten years. 90 Although the Fair Credit Reporting Act permits a consumer to have his or her credit report revised to reflect the fact, for instance, that the involuntary bankruptcy case was dismissed 


88. 11 U.S.C. Sec. 107(a).

89. 15 U.S.C. Sec. 1681.

90. 15 U.S.C. Sec. 1681c(a)(1).


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prior to the entry of an order for relief, the report may, nevertheless, still refer to the filing of the case. 91

Unfortunately, tax protesters and other extremists, in addition to other forms of obstreperous litigation (such as filing false liens), are now resorting to filing fraudulent involuntary bankruptcy petitions against public officials and other innocent parties. In 2002, for example, one tax protester filed fraudulent involuntary bankruptcy petitions against 36 local public officials in Wisconsin,  92 some of whom did not find out about the petitions until "they attempted to use a credit card or execute some other financial transaction." 93  These fraudulent involuntary petition filings were subsequently dismissed by the bankruptcy court, which found that they were filed in bad faith without legal basis and were commenced "for the sole purpose of harassment of the named public officials." 94  Nevertheless, "[d]espite the fact that the [fraudulent involuntary bankruptcy] petitions are often dismissed," as one State assistant attorney general observed, "the filings continue to cause financial problems for the victims." 95 The devastating effect of a fraudulent involuntary bankruptcy filing on an innocent person's credit rating is illustrated by what occurred in Wisconsin and its aftermath. Although the bankruptcy court in dismissing these cases also directed all credit reporting agencies to expunge any record of these filings from the officials' credit reports, 96 the bankruptcy petition filings nevertheless "caused some officials' credit cards to be canceled, almost caused the sale of one supervisor's house to be stopped, and caused continuing credit problems for other officials."  97

Section 332 responds to these concerns by permitting the court to seal and subsequently expunge all records pertaining to a fraudulent involuntary petition. Section 332(a) sets forth the short title of the section as the "Involuntary Bankruptcy Improvement Act of 2005." Section 332(b) amends Bankruptcy Code section 303 to permit the court, upon motion of the debtor, to seal all court records pertaining to an involuntary bankruptcy petition if: (1) the petition is false or contains any materially false, fictitious, or fraudulent statement; (2) the debtor is an individual; and (3) the court dismisses the petition. The provision further permits the court, if the debtor is an individual, to prohibit any consumer reporting agency from making any consumer report that contains any information relating to such petition or to the case commenced by the filing of such petition. It further provides that upon the expiration of the statute of limitations described in 18 U.S.C. Sec. 3282 for a violation

 

 

 

 

 

 


91. See, e.g., 15 U.S.C. Sec. 1681i (2000); Letter from Ronald G. Isaac, Attorney, Federal Trade Commission—Division of Financial Practices/Bureau of Consumer Protection, to Anonymous (Nov. 5, 1999), available at http://www.ftc.gov/os/statutes/frca/anon.htm.

92. See In re Kenealy, No. 02-26100-MDM (Bankr. E.D. Wis. May 21, 2002). Involuntary petitions "were filed against all but one of the County Board supervisors," the county corporation counsel, county sheriff, clerk of courts, and county circuit judge. Jeff Cole, Paperwork Used for Revenge; Protester's Bogus Bankruptcy Petitions Temporarily Disrupt Officials' Credit, MILWAUKEE J. SENTINEL, June 6, 2002, at 1B. The protester also filed numerous liens in the amount of $15 million against these individuals as well. Jeff Cole, Man Charged with Filing False Documents; Town of Fredonia Protester's Case is 5th Brought by State, MILWAUKEE J. SENTINEL, May 21, 2002, at 1B.

93. Jeff Cole, Paperwork Used for Revenge; Protester's Bogus Bankruptcy Petitions Temporarily Disrupt Officials' Credit, MILWAUKEE J. SENTINEL, June 6, 2002, at 1B.

94. In re Kenealy, No. 02-26100-MDM (Bankr. E.D. Wis. May 21, 2002).

95. Roy Korte, Terrorism: A Law Enforcement Perspective, Anti-Defamation League (2002), available at http://www.adl.org/learn/columns/roy5%5korte.asp.

96. In re Kenealy, No. 02-26100-MDM (Bankr. E.D. Wis. May 21, 2002).

97. Jeff Cole, "Paper Terrorist" Gets Five Years in Prison, MILWAUKEE J. SENTINEL, Jan. 18, 2003, at 1B.


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 of 18 U.S.C. 152 (concerning crimes for concealment of assets, false oaths and claims, and bribery) and 18 U.S.C. 157 (bankruptcy fraud), the court may, upon motion of the debtor and for good cause, expunge any records pertaining to such petition. Section 332(c) amends section 157 of title 18 to make it a criminal offense to file a fraudulent involuntary bankruptcy petition. Section 332 is similar to legislation considered by the House in the 108th Congress.  98

TITLE IV. GENERAL AND SMALL BUSINESS BANKRUPTCY PROVISIONS

Subtitle A. General Business Bankruptcy Provisions

Sec. 401. Adequate Protection for Investors. Subsection (a) of section 401 of the Act amends section 101 of the Bankruptcy Code to define "securities self regulatory organization" as a securities association or national securities exchange registered with the Securities and Exchange Commission. Section 401(b) amends section 362 of the Bankruptcy Code to except from the automatic stay certain enforcement actions by a securities self regulatory organization.

Sec. 402. Meetings of Creditors and Equity Security Holders. Section 402 amends section 341 of the Bankruptcy Code to permit a court, on request of a party in interest and after notice and a hearing, to order the United States trustee not to convene a meeting of creditors or equity security holders if a debtor has filed a plan for which the debtor solicited acceptances prior to the commencement of the case.

Sec. 403. Protection of Refinance of Security Interest. Section 403 amends section 547(e)(2) of the Bankruptcy Code to increase the perfection period from ten to 30 days for the purpose of determining whether a transfer is an avoidable preference.

Sec. 404. Executory Contracts and Unexpired Leases. Subsection (a) of section 404 of the Act amends section 365(d)(4) of the Bankruptcy Code to establish a firm, bright line deadline by which an unexpired lease of nonresidential real property must be assumed or rejected. If such lease is not assumed or rejected by such deadline, then such lease shall be deemed rejected, and the trustee shall immediately surrender such property to the lessor. Section 404(a) permits a bankruptcy trustee to assume or reject a lease on a date which is the earlier of the date of confirmation of a plan or the date which is 120 days after the date of the order for relief. An extension of time may be granted, within the 120 day period, for an additional 90 days, for cause, upon motion of the trustee or lessor. Any subsequent extension can only be granted by the judge upon the prior written consent of the lessor either by the lessor's motion for an extension or on motion of the trustee, provided that the trustee has the prior written approval of the lessor. This provision is designed to remove the bankruptcy judge's discretion to grant extensions of the time for the retail debtor to decide whether to assume or reject a lease after a maximum possible period of 210 days from the time of entry of the order of relief. Beyond that maximum


98. H.R. 1529, 108th Cong. (2003). The bill was ordered favorably reported without amendment by the House Judiciary Committee, H.R. REP. NO. 108-110 (2003), and passed by voice vote by the House. 149 CONG. REC. H5104 (daily ed. June 10, 2003). The principal difference between this legislation and section 332 of the Act is that the bill would have permitted the court to expunge the case upon dismissal of the fraudulent involuntary petition.


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period, the judge has no authority to grant further time unless the lessor has agreed in writing to the extension.

Section 404(b) amends section 365(f)(1) to assure that section 365(f) does not override any part of section 365(b). Thus, section 404(b) makes a trustee's authority to assign an executory contract or unexpired lease subject not only to section 365(c), but also to section 365(b), which is given full effect. Therefore, for example, assumption or assignment of a lease of real property in a shopping center must be subject to the provisions of the lease, such as use clauses.

Sec. 405. Creditors and Equity Security Holders Committees. Subsection (a) of section 405 of the Act amends section 1102(a)(2) of the Bankruptcy Code to permit, after notice and a hearing, a court, on request of a party in interest, to order a change in a committee's membership if necessary to ensure adequate representation of creditors or equity security holders in a chapter 11 case. It specifies that the court may direct the United States trustee to increase the membership of a committee for the purpose of including a small business concern if the court determines that such creditor's claim is of the kind represented by the committee and that, in the aggregate, is disproportionately large when compared to the creditor's annual gross revenue.

Section 405(b) requires the committee to give creditors having claims of the kind represented by the committee access to information. In addition, the committee must solicit and receive comments from these creditors and, pursuant to court order, make additional reports or disclosures available to them.

Sec. 406. Amendment to Section 546 of Title 11, United States Code. Section 406 of the Act corrects an erroneous subsection designation in section 546 of the Bankruptcy Code. It redesignates the second subsection (g) as subsection (i). In addition, section 406 amends section 546(i) (as redesignated) to subject that provision to the prior rights of security interest holders. Further, section 406 adds a new provision to section 546 that prohibits a trustee from avoiding a warehouse statutory lien for storage, transportation, or other costs incidental to the storage and handling of goods. It specifies that this prohibition must be applied in a manner consistent with any applicable state statute that is similar to section 7-209 of the Uniform Commercial Code.

Sec. 407. Amendments to Section 330(a) of Title 11, United States Code. Section 407 amends section 330(a)(3) of the Bankruptcy Code to clarify that this provision applies to examiners, chapter 11 trustees, and professional persons. This section also amends section 330(a) to add a provision that requires a court, in determining the amount of reasonable compensation to award to a trustee, to treat such compensation as a commission pursuant to section 326 of the Bankruptcy Code.

Sec. 408. Postpetition Disclosure and Solicitation. Section 408 amends section 1125 of the Bankruptcy Code to permit an acceptance or rejection of a chapter 11 plan to be solicited from the holder of a claim or interest if the holder was solicited before the commencement of the case in a manner that complied with applicable nonbankruptcy law.


[SIC]  So in the original.  The amendment made by 405 of the Act amended § 1102(a)(4)  of the Bankruptcy Code, not §  1102(a)(2).

[SIC]  So in the original.  The amendment made by § 406(1) of the Act redesignated BC § 546(g) as 546(h).  It did not redesignate § 546(g) as 546(i), as indicated in the House Report. BC § 546(i) was added by § 406(3) of the Act.

[SIC]  So in the original.  The reference should be to BC § 546(h), not 546(i).


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Sec. 409. Preferences. Section 409 amends section 547(c)(2) of the Bankruptcy Code to provide that a trustee may not avoid a transfer to the extent such transfer was in payment of a debt incurred by the debtor in the ordinary course of the business or financial affairs of the debtor and the transferee and such transfer was made either: (1) in the ordinary course of the debtor's and the transferee's business or financial affairs; or (2) in accordance with ordinary business terms. Present law requires the recipient of a preferential transfer to establish both of these grounds in order to sustain a defense to a preferential transfer proceeding. In a case in which the debts are not primarily consumer debts, section 409 provides that a transfer may not be avoided if the aggregate amount of all property constituting or affected by the transfer is less than $5,000.

Sec. 410. Venue of Certain Proceedings. Section 1409(b) of title 28 of the United States Code provides that a proceeding to recover a money judgment of, or property worth less than, certain specified amounts must be commenced in the district where the defendant resides. Section 410 amends section 1409(b) to provide that a proceeding to recover a debt (excluding a consumer debt) against a noninsider of the debtor that is less than $10,000 must be commenced in the district where the defendant resides. In addition, section 410 increases the $5,000 threshold for a consumer debt  99  to $15,000.

Sec. 411. Period for Filing Plan under Chapter 11. Section 411 amends section 1121(d) of the Bankruptcy Code to mandate that a debtor's exclusive period for filing a plan may not be extended beyond a date that is 18 months after the order for relief in the chapter 11 case. In addition, it provides that the debtor's exclusive period for obtaining acceptances of the plan may not be extended beyond 20 months after the order for relief.

Sec. 412. Fees Arising from Certain Ownership Interests. Section 412 amends section 523(a)(16) of the Bankruptcy Code to broaden the protections accorded to community associations with respect to fees or assessments arising from the debtor's interest in a condominium, cooperative, or homeowners' association. Irrespective of whether or not the debtor physically occupies such property, fees or assessments that accrue during the period the debtor or the trustee has a legal, equitable, or possessory ownership interest in such property are nondischargeable.

Sec. 413. Creditor Representation at First Meeting of Creditors. Section 413 amends section 341(c) of the Bankruptcy Code to permit a creditor holding a consumer debt or any representative of such creditor, notwithstanding any local court rule, provision of a state constitution, or any otherwise applicable nonbankruptcy law, or any other requirement that such creditor must be represented by counsel, to appear at and participate in a section 341 meeting of creditors in chapter 7 and chapter 13 cases either alone or in conjunction with an attorney. In addition, the provision clarifies that it cannot be construed to require a creditor to be represented by counsel at any meeting of creditors.


99. A consumer debt is defined as a "debt incurred by an individual primarily for a personal, family, or household purpose." 11 U.S.C. Sec. 101(8).


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Sec. 414. Definition of Disinterested Person. Section 414 amends section 101(14) of the Bankruptcy Code to eliminate the requirement that an investment banker be a disinterested person.

Sec. 415. Factors for Compensation of Professional Persons. Section 415 amends section 330(a)(3) of the Bankruptcy Code to permit the court to consider, in awarding compensation to a professional person, whether such person is board certified or otherwise has demonstrated skill and experience in the practice of bankruptcy law.

Sec. 416. Appointment of Elected Trustee. Section 416 of the Act amends section 1104(b) of the Bankruptcy Code to clarify the procedure for the election of a trustee in a chapter 11 case. Section 1104(b) permits creditors to elect an eligible, disinterested person to serve as the trustee in the case, provided certain conditions are met. Section 416 amends this provision to require the United States trustee to file a report certifying the election of a chapter 11 trustee. Upon the filing of the report, the elected trustee is deemed to be selected and appointed for purposes of section 1104 and the service of any prior trustee appointed in the case is terminated. Section 416 also clarifies that the court shall resolve any dispute arising out of a chapter 11 trustee election.

Sec. 417. Utility Service. Section 417 amends section 366 of the Bankruptcy Code to provide that assurance of payment, for purposes of this provision, includes a cash deposit, letter of credit, certificate of deposit, surety bond, prepayment of utility consumption, or other form of security that is mutually agreed upon by the debtor or trustee and the utility. It also specifies that an administrative expense priority does not constitute an assurance of payment. With respect to chapter 11 cases, section 417 permits a utility to alter, refuse or discontinue service if it does not receive adequate assurance of payment that is satisfactory to the utility within 30 days of the filing of the petition. The court, upon request of a party in interest, may modify the amount of this payment after notice and a hearing. In determining the adequacy of such payment, a court may not consider: (1) the absence of security before the case was filed; (2) the debtor's timely payment of utility service charges before the case was filed; or (3) the availability of an administrative expense priority. Notwithstanding any other provision of law, section 417 permits a utility to recover or set off against a security deposit provided prepetition by the debtor to the utility without notice or court order.

Sec. 418. Bankruptcy Fees. Section 418 of the Act amends section 1930 of title 28 of the United States Code to permit a district court or a bankruptcy court, pursuant to procedures prescribed by the Judicial Conference of the United States, to waive the chapter 7 filing fee for an individual and certain other fees under subsections (b) and (c) of section 1930 if such individual's income is less than 150 percent of the official poverty level (as defined by the Office of Management and Budget) and the individual is unable to pay such fee in installments. Section 418 also clarifies that section 1930, as amended, does not prevent a district or bankruptcy court from waiving other fees for creditors and debtors, if in accordance with Judicial Conference policy.


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Sec. 419. More Complete Information Regarding Assets of the Estate. Section 419 of the Act directs the Judicial Conference of the United States, after consideration of the views of the Director of the Executive Office for United States Trustees, to propose official rules and forms directing chapter 11 debtors to disclose information concerning the value, operations, and profitability of any closely held corporation, partnership, or other entity in which the debtor holds a substantial or controlling interest. Section 419 is intended to ensure that the debtor's interest in any of these entities is used for the payment of allowed claims against debtor.

Subtitle B. Small Business Bankruptcy Provisions

Sec. 431. Flexible Rules for Disclosure Statement and Plan. Section 431 of the Act amends section 1125 of the Bankruptcy Code to streamline the disclosure statement process and to provide for more flexibility. Section 431(1) amends section 1125(a)(1) of the Bankruptcy Code to require a bankruptcy court, in determining whether a disclosure statement supplies adequate information, to consider the complexity of the case, the benefit of additional information to creditors and other parties in interest, and the cost of providing such additional information. With regard to a small business case, section 431(2) amends section 1125(f) to permit the court to dispense with a disclosure statement if the plan itself supplies adequate information. In addition, it provides that the court may approve a disclosure statement submitted on standard forms approved by the court or adopted under section 2075 of title 28 of the United States Code. Further, section 431(2) provides that the court may conditionally approve a disclosure statement, subject to final approval after notice and a hearing, and allow the debtor to solicit acceptances of the plan based on such disclosure statement. The hearing on the disclosure statement may be combined with the confirmation hearing.

Sec. 432. Definitions. Section 432 of the Act amends section 101 of the Bankruptcy Code to define a "small business case" as a chapter 11 case in which the debtor is a small business debtor. Section 432, in turn, defines a "small business debtor" as a person engaged in commercial or business activities (including an affiliate of such person that is also a debtor, but excluding a person whose primary activity is the business of owning or operating real property or activities incidental thereto) having aggregate noncontingent, liquidated secured and unsecured debts of not more than $2 million (excluding debts owed to affiliates or insiders of the debtor) as of the date of the petition or the order for relief. This monetary definition applies only in a case where the United States trustee has not appointed a creditors' committee or where the court has determined that the creditors' committee is not sufficiently active and representative to provide effective oversight of the debtor. It does not apply to any member of a group of affiliated debtors that has aggregate noncontingent, liquidated secured and unsecured debts in excess of $2 million (excluding debts owed to one or more affiliates or insiders). This provision also requires this monetary figure to be periodically adjusted for inflation pursuant to section 104 of the Bankruptcy Code.


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