Bankruptcy Reform Legislation in the 107th Congress: A Comparison of H.R. 333 As Passed by the House and the Senate

Order Code RL30865

Report for Congress

Received through the CRS Web

Bankruptcy Reform Legislation

in the 107 Congress: A Comparison of H.R. 333

As Passed by the House and the Senate

th

Updated July 10, 2002

Robin Jeweler

Legislative Attorney

American Law Division

Congressional Research Service ˜ The Library of Congress

Bankruptcy Reform Legislation in the 107th Congress:

A Comparison of H.R. 333 As Passed by the House

and the Senate

Summary

H.R. 333, 107th Congress, 1st Sess. (2001), the “Bankruptcy Abuse Prevention

and Consumer Protection Act of 2001” and its counterpart in the Senate, S. 220,

107th Congress, 1st Sess. (2001), the “Bankruptcy Reform Act of 2001” were

introduced on January 31, 2001.

As introduced, the bills were essentially identical both to each other and to H.R.

2415, 106th Congress, 2d Sess. (2000), which passed both chambers but was pocket

vetoed by former President Clinton. On March 1, 2001, the House passed a slightly

amended version of H.R. 333 by a vote of 306-108, after having first rejected a

Democratic-sponsored substitute on a 160-258 vote.

The Senate Judiciary Committee completed a two-day mark up of S. 220 by

reporting out a clean bill, S. 420, on a 10-8 vote. S. 420 was similar to S. 220. It was

brought to the floor on March 7. After several days of debate, cloture was invoked.

Amendments were agreed to and the bill was passed on March 15, 2001 by a vote of

85-15. On July 17, 2001 the Senate passed H.R. 333 with an amendment in the

nature of a substitute. It struck the language of the House version and replaced it

with the language of S. 420. H.R. 333, as amended, passed the Senate by a vote of

82-16.

The bills, which were identical when introduced, retain their core features. But,

because H.R. 333 passed the House and the Senate in different forms, it required a

conference. Both the House and the Senate appointed conferees in July, 2001. The

conference met on May 22, 2002, but has not yet released its report.

So far, the 107th Congress has demonstrated widespread support for the bills

evidenced by the votes. Although President Bush is expected to sign bankruptcy

reform into law, the White House has indicated that a bankruptcy bill that contains

a federal homestead cap may be unacceptable.

This report surveys the bills and the major amendments that have been adopted.

It provides a sectional analysis comparing selected provisions, with an emphasis on

consumer bankruptcy.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Background in the 106th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

The 107th Congress: H.R. 333 as Passed by the House . . . . . . . . . . . . . . . . . 3

S. 420 as Reported and Passed by the Senate . . . . . . . . . . . . . . . . . . . . . . . . 3

Senate Passage of H.R. 333 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Structural Overview of the Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Summary and Comparison of Selected Provisions . . . . . . . . . . . . . . . . . . . . 8

Bankruptcy Reform Legislation in the 107th

Congress: A Comparison of H.R. 333 As

Passed by the House and the Senate

Introduction

H.R. 333, 107th Congress, 1st Sess. (2001), the “Bankruptcy Abuse Prevention

and Consumer Protection Act of 2001” and its counterpart in the Senate, S. 220,

107th Congress, 1st Sess. (2001), the “Bankruptcy Reform Act of 2001” were

introduced on January 31, 2001.

As introduced, the bills were essentially identical both to each other and to H.R.

2415, 106th Congress, 2d Sess. (2000), which passed both chambers but was pocket

vetoed by former President Clinton. On March 1, 2001, the House passed a slightly

amended version of H.R. 333 by a vote of 306-108,1 after having first rejected a

Democratic-sponsored substitute on a 160-258 vote.

The Senate Judiciary Committee completed a two-day mark up of S. 220 by

reporting out a clean bill, S. 420, on a 10-8 vote. S. 420, as introduced, was similar

to S. 220. S. 420 was brought to the floor on March 7. After several days of debate,

cloture was invoked. Amendments were agreed to and the bill passed on March 15,

2001 by a vote of 85-15.2 Several of the amendments adopted represent the

reintroduction of provisions which were passed by the Senate during the 106th

Congress in H.R. 833 but were omitted from the conference version of the bill, H.R.

2415. These include, e.g., adding a new category of “family fisherman” to chapter

12 governing family farmer reorganization,3 making fines and penalties of the Federal

Election Commission nondischargeable,4 and prohibiting political committees from

filing in bankruptcy.5

On July 17, 2001 the Senate passed H.R. 333 with an amendment in the nature

of a substitute. It struck the language of the House version and replaced it with the

language of S. 420. H.R. 333, as amended, passed the Senate by a vote of 82-16.6

1

147 CONG. REC. H601 (daily ed. March 1, 2001).

2

147 CONG. REC. S2379 (daily ed. March 15, 2001).

3

S. Amdt.16, 107th Congress, 1st Sess. (2001).

4

S. Amdt. 49

5

S. Amdt. 50

6

147 CONG. REC. S7742 (daily ed. July 17, 2001).

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The bills, which were identical when introduced, retain their core features.

Because H.R. 333 passed the House and the Senate in different forms, it required a

conference.

Both the House and the Senate appointed conferees in July, 2001. Members of

the conference include Senators Leahy, Kennedy, Biden, Kohl, Feingold, Schumer,

Durbin, Hatch, Grassley, Kyl, DeWine, Sessions, McConnell, and Representatives

Sensenbrenner, Hyde, Gekas, Smith of Texas, Chabot, Barr, Boucher, Nadler, Watt,

Oxley, Bachus, LaFalce, Tauzin, Barton, Dingell, Boehner, Castle, and Kildee. The

conference met on May 22, 2002. Unofficial accounts suggest the conference was

able to agree on all outstanding issues, including a compromise version of homestead

exemption language. The sole outstanding issue is reported to be a compromise on

language governing dischargeability of liability incurred in connection with violence

against abortion clinics. Sen. Schumer and Rep. Hyde have been the lead negotiators

on this issue.

So far, the 107th Congress has demonstrated widespread support for the bills

evidenced by the votes. Although President Bush is expected to sign bankruptcy

reform into law, the White House has indicated that a bankruptcy bill that contains

a federal homestead cap may be unacceptable.

Background in the 106th Congress

Bankruptcy reform legislation to amend the U.S. Bankruptcy Code, 11 U.S.C.

§ 101 et seq, was introduced shortly before the close of the first session of the 105th

Congress. Supporters of bankruptcy reform hope to stem the historically high

volume of consumer filings and to increase the recovery creditors realize on their

claims by channeling more debtors in chapter 13. With respect to consumer filings,

the thrust of the reform proposal is to increase the complexity of filing requirements

by adding new jurisdictional requirements, e.g., pre-bankruptcy financial counseling,

imposing a means test on filers to determine whether they may file under chapter 7

or 13, and to impose uniform standards on debtor expense allowances in bankruptcy.

The proposed changes to business bankruptcy are less dramatic, although small

businesses will be subject to more rigid, hence stricter procedural requirements.

In the 106th Congress, the House passed H.R. 833 by a vote of 313-108. The

Senate brought S. 625 to the floor on November 4, 1999. After considerable debate

and the adoption of many germane and nongermane amendments, the Senate struck

the language of the House version, substituted its language, and passed H.R. 833 by

a vote of 83-14.

H.R.833 was informally negotiated by House and Senate Republican leadership.

As the 106th Congress headed towards adjournment sine die, a final push toward

enactment took place. The product of the negotiations was substituted as H.R. 2415,

106th Cong., 1st Sess. (1999), previously entitled “the American Embassy Security

Act of 1999.” On Oct. 12, 2000, the House passed the conference report to H.R.

2415. It was passed by the Senate on December 7, 2000. Because the bill retained

features which the White House objected to, it was pocket vetoed by former

President Clinton.

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The 107th Congress: H.R. 333 as Passed by the House

The House Judiciary Committee, by a vote of 19 to 8, reported H.R. 333

favorably.7 The bill passed the House with few amendments by a vote of 306 to 108.

In addition to a manager’s amendment to make technical and conforming changes,8

the House adopted a floor amendment to add public school – in addition to already

existing private school – tuition costs to the debtor’s permissible monthly expenses;9

an amendment to prevent the names of children from being disclosed in bankruptcy

filings;10 and, an amendment to reflect changes made by enactment of the Commodity

Futures Modernization Act and current market practices.11

S. 420 as Reported and Passed by the Senate

The Senate Judiciary Committee reported a clean bill, S. 420, favorably on

March 1, 2001. Among the amendments adopted in committee was a compromise

provision sponsored by Senators Hatch and Schumer to make nondischargeable

liability for violence at reproductive health clinics. The compromise language is

broader than the provision adopted by the Senate during the 106th Congress. It does

not refer specifically to reproductive health clinics but would make nondischargeable

debts incurred through violations of laws relating to the provision of lawful goods

and services.12 Another amendment would create a “consumer privacy ombudsman”

to prevent companies in bankruptcy from selling personal information about

consumer customers.13 The Committee also adopted an amendment which narrows

the grounds upon which a lessor may evict a residential tenant in bankruptcy.14

Several amendments were made to Title X of the bill dealing with chapter 12 of the

Bankruptcy Code governing family farmer reorganization.15 The bill changes the

jurisdictional filing requirements by raising the permissible debt limit for farmers

from $1,500,000 to $3,000,000 and broadens the requirement that over 50 percent of

income in the year prior to filing under chapter 12 be derived from farming.

The Senate bill, like the house bill, provides that the automatic stay, 11 U.S.C.

§ 362, would no longer prevent the continuation or commencement of eviction

proceedings against a residential tenant. The amendment to S. 420 conditions relief

from the stay upon the debtor’s making rent payments and the landlord certifying that

certain conditions exist.

7

H.Rept. 107-3, Part 1, 107th Congress, 1st Sess. (2001).

8

Id. at H575.

9

Id. at H577. H.R. 333 at § 102.

10

Id. at H578. H.R. 333 at § 231.

11

Id. at H579.

12

S. 420, 107th Congress, 1st Sess. § 328 (2001).

13

Id. at §§ 231, 232.

14

Id. at § 311.

15

Id. at §§ 1004 - 1006.

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The Senate began debate on S. 420 the week of March 5 and passed it on March

15, 2001. On March 14, a motion for cloture to limit debate was passed by a vote of

80 to 19. Approximately fifty amendments were submitted. Several were provisions

passed by the Senate during the 106th Congress. These include, e.g., adding a new

category of “family fisherman” to chapter 12,16 making fines and penalties of the

Federal Election Commission nondischargeable,17 and prohibiting political

committees from filing in bankruptcy.18

In addition to those listed below, nongermane amendments added new titles

XIV and XVI to the bill. Title XIV, entitled “Emergency Energy Assistance and

Conservation Measures,”19 raises the amount authorized to be appropriated for

weatherization programs under the Low-Income Home Energy Assistance Act of

1981. New Title XVI entitled “Miscellaneous Provisions” adds § 1601 directing the

Federal Crop Insurance Corporation to promulgate specified regulations under 7

U.S.C. § 522(b).20

The amendments to S. 420 included:

! A provision adding a new § 1235 entitled “Involuntary cases.”21

! A provision, discussed above, to add a new category of “family fisherman” to

chapter 12.22

! A provision that if a lender who makes predatory loans sells or transfers the

loan to a third party, any claims or defenses that a customer may have against

the lender will be preserved despite the lender’s filing in bankruptcy.23

! A provision adding a new § 329 making specified prepetition wages and

benefits an administrative expense.24

! A provision adding a new § 420 permitting a debtor to continue as a plan

administrator of an employee benefit plan.25

16

S. Amdt.16, 107th Congress, 1st Sess. (2001).

17

S. Amdt.49

18

S. Amdt.50

19

S. Amdt.28

20

S. Amdt.109

21

S. Amdt. 15

22

S. Amdt. 16

23

S. Amdt. 25

24

S. Amdt. 30

25

S. Amdt. 35

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! A provision permitting the debtor’s reasonable and necessary medical

expenses to be deducted from the “disposable income” which must be paid to

creditors under a chapter 13 plan.26

! A provision permitting a debtor to include in calculating monthly expenses

reasonable and necessary actual expenses (that is costs in excess of the IRS

Local Standards) for home energy costs.27

! A provision, similar to one adopted by the House, preventing the names of

children from being disclosed in bankruptcy filings.28

! A provision which raises the threshold from $250 to $750 for amounts

incurred within 90 days of bankruptcy which will be presumed to be

nondischargeable. In other words, consumer debts owed to a single creditor

for more than $750 for luxury goods or services incurred within 90 days of

filing will be presumed nondischargeable.29

! A provision which restores the status quo by permitting corporate debtors in

chapter 11 to discharge debt. Prior to adoption of this amendment, the House

and Senate bills would have made debts which are nondischargeable to

individuals nondischargeable to chapter 11 corporate debtors as well. The

amendment also limits nondischargeability of fraudulent debts incurred by a

corporation to those owed to governmental units.30

! A provision requiring that small business reorganization plans be confirmed

within 45 days after the plan is filed with possible extensions of time (rather

than within 175 days of filing in bankruptcy). 31

! A provision deleting § 1310 of the bill, popularly referred to as the “Lloyds of

London” provision. This section of the S. 420 was intended to assist a small

group of investors in Lloyds insurance company who have outstanding

liability as a result of contracts and legal judgments entered in England.32

! A provision that would prohibit a chapter 13 discharge if the debtor received

a discharge under chapters 7, 11, or 12 within the three preceding years, or a

26

S. Amdt. 38

27

S. Amdt. 40

28

S. Amdt. 41

29

S. Amdt. 42

30

S. Amdt. 43

31

S. Amdt. 45

32

S. Amdt. 51

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chapter 13 discharge within two preceding years (unless the debtor can

demonstrate “extreme hardship.”)33

! A provision that would alter § 1235 governing expedited bankruptcy appeals.

It omits the deadlines for presuming “final” action by a U.S. district court.34

! A provision that lays out the procedure for a landlord to lift the automatic stay

in order to evict or continue eviction proceedings against a residential tenant

who files in bankruptcy.35

! A provision addressing the filing of tax returns by individual debtors with the

expressed purpose of saving storage costs.36

! A provision imposing a federal cap of $125,000 on state homestead

exemptions available in bankruptcy.37

! A provision adding a new § 205 to the bill directing the General Accounting

Office to study the reaffirmation process and report to Congress.38

! A provision to reduce the prohibition on cramdown – that is, lien stripping

– on automobiles in chapter 13 from 5 years to 3 years.39

! A provision adding a new bankruptcy judgeship for the district of Nevada.40

! A provision amending the means test to allow a debtor to include in monthly

expenses up to $1,500 per year per child for tuition at public school. This

amendment is comparable, but not identical, to the provision in H.R. 333

which added public school in addition to private school tuition.41

Additional amendments effected technical and conforming corrections.42

Among the amendments that did not pass were provisions limiting the extension of

33

S. Amdt. 54

34

S. Amdt. 58

35

S. Amdt. 59

36

S. Amdt. 66

37

S. Amdt. 68

38

S. Amdt. 81

39

S. Amdt.105

40

S. Amdt.107

41

S. Amdt.108

42

See, e.g., S. Amdts. 19, 20, 24, 60 and 106.

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credit to minors,43 an amendment discouraging “payday loans”,44and, an amendment

removing the $1,000,000 cap on exempt retirement funds.45

Senate Passage of H.R. 333

As stated earlier, the Senate passed H.R. 333 on July 17, 2001 by striking the

language of the House bill and substituting the language of S. 420. The Senate

adopted one floor amendment sponsored by Sen. Wellstone which would require the

General Accounting Office (GAO) to study the impact of bankruptcy reform on

chapter 7 and 13 filings; on the number of confirmed and successful chapter 13 plans;

on the costs of filing under chapters 7 and 13; on the availability and price of

consumer credit; and, on low income debtors’ ability to obtain bankruptcy relief.46

The GAO would report to Congress within two years of the law’s effective date.

Structural Overview of the Bills

Like their predecessors, the bills in the 107th Congress are comprehensive.

Selected provisions are examined below. Titles I through III of each bill deals with

consumer bankruptcy reform. Title IV deals with business bankruptcy, including

small business bankruptcies.

Municipal bankruptcy. Amendments to chapter 9 of the Code dealing with

municipal reorganization are set forth in Title V. Provisions clarify that special rules

govern the commencement of a voluntary case of an unincorporated tax or special

assessment district, and that certain financial transactions are excepted from the

automatic stay.

Improved bankruptcy statistics and data. Title VI establishes rules for enhanced

collection and analysis of bankruptcy statistics. It is designed, in part, to create a

standardized and centralized method for collecting relevant bankruptcy statistics, e.g.,

how much debt is discharged, for cases involving consumer debts filed under

chapters 7, 11, and 13.

Bankruptcy tax provisions. Title VII contains extensive provisions governing

taxation of the bankruptcy estate. For example, it provides greater protection for

holders (which are often school boards) of ad valorem tax liens. It simplifies the

calculation of interest on tax claims in bankruptcy. It repeals the “superdischarge”

for individuals under chapter 13 and prohibits discharge for corporations under

chapter 11 for fraudulent or non-filed taxes. It addresses, inter alia, tax liens,

priorities, timing of payments, and the dischargeability of tax obligations

Ancillary and cross-border cases. Title VIII would add a new chapter 15 to the

Code to address issues arising from international insolvencies.

43

S. Amdt. 27

44

S. Amdt. 36

45

S. Amdt. 39

46

S. Amdt. 977.

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Financial contract provisions. Title IX deals with commercial banking and

financial issues such as forward contracts, netting, swap and repurchase agreements,

and asset-backed securitization.

Protection of Family Farmers. Title X would enact chapter 12 governing family

farmer reorganization permanently, retroactive to its expiration date, July 1, 2000.

It adjusts the jurisdictional debt limit so it may be adjusted periodically pursuant to

the Consumer Price Index and provides different treatment for certain tax claims

arising from the disposition of a family farm.

Health care and employee benefits. Title XI of the bills have provisions

providing for the disposal of patient records and/or transfer of patients of a specified

“health care facility” in the event of a bankruptcy necessitating closure. It designates

the costs incurred by a trustee or federal agency in closing the business, disposing of

records, and transferring patients as administrative expenses. The trustee is expressly

directed to “use all reasonable and best efforts” in the transfer of patients to

appropriate facilities. A patient ombudsman must be appointed by the court to

monitor patient care and report to the court during the bankruptcy.

Technical amendments. Title XII is entitled “Technical Amendments.” It

embodies a wide range of provisions, several of which are arguably substantive, for

example:

! lifting the $4,000,000 cap on single-asset real estate bankruptcy (§ 1201(5));

! adding “the Bankruptcy Judgeship Act of 2001” which creates 23 temporary

judgeships;

! requiring debtors to provide requested tax documents in order to obtain a

discharge or confirmation of a reorganization plan; and

! allowing parties to take expedited appeals to a court of appeals by imposing

specified deadlines for district court actions (§ 1234 of the House’s version of

H.R. 333).

Consumer credit disclosure. Title XIII would amend the Truth in Lending Act

to require specified disclosures by credit lenders.

The Senate bill includes a new Title XIV entitled “Emergency Energy

Assistance and Conservation Measures” and a new Title XVI which adds § 1601

directing specified rulemaking by the Federal Crop Insurance Corp. There are not

comparable titles in the House version of H.R. 333.

Summary and Comparison of Selected Provisions

The chart below provides a brief summary of and reference to selected

provisions in the House and Senate bills as passed by their respective chamber.

However, if and when the bankruptcy conference on H.R. 333 releases its report,

Members are likely to be voting on a version of the bankruptcy reform bill that

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contains additional amendments and substitute language governing the provisions

reviewed below.

Selected Provisions

H.R. 333, 107th Cong.,

1st Sess. (2001) As

Passed by the House

H.R. 333 (S. 420),107th

Cong.,1st Sess. (2001)

As Passed by the

Senate

Means test, 11 U.S.C. § § 704, 707:

Implementation

Would amend 11 U.S.C. § 707 to permit creditors, the

trustee, or any party in interest to challenge a debtor’s

eligibility to file under chapter 7. If indicated, the U.S.

trustee must file a statement that the debtor’s case is a

presumed abuse of chapter 7. § 102.

Definition of “current

monthly income”

Excludes Social Security benefits and payments to victims

of war crimes or crimes against humanity. § 102.

Presumed abuse

Debtor presumed to be abusing chapter 7 if current

monthly income, excluding allowed deductions, secured

debt payments, and priority unsecured debt payments,

multiplied by 60, would permit a debtor to pay not less

than the lesser of (a) 25% of nonpriority unsecured debt or

$6,000 (or $100 a month), whichever is greater, or (b)

$10,000. § 102.

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Selected Provisions

H.R. 333, 107th Cong.,

1st Sess. (2001) As

Passed by the House

H.R. 333 (S. 420),107th

Cong.,1st Sess. (2001)

As Passed by the

Senate

Calculation of permissible

monthly living expenses

Expenses to be calculated

as specified under the

National Standards and

Local Standards, and the

debtor’s actual monthly

expenses for the categories

specified as Other

Necessary Expenses issued

by the Internal Revenue

Service for the area in

which the debtor resides. A

debtor may also subtract an

allowance of up to 5% of

the IRS food and clothing

categories.

Comparable provisions at §

102.

Individualized expenses

may include debts incurred

to protect the debtor’s

family from domestic

violence; actual expenses

for the care and support of

nondependent, elderly, ill

or disabled household or

family members; private or

public school tuition of up

to $1,500 per year;

administrative expenses for

chapter 13 candidates; and

average monthly expenses

for secured and priority

debts. § 102.

To rebut the presumption

of abuse

Amendments

to

individualized expenses

added public (as well as

private) school tuition, and

reasonable and necessary

costs for home energy

costs.

A debtor must demonstrate “special circumstances.”§ 102.

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Selected Provisions

H.R. 333, 107th Cong.,

1st Sess. (2001) As

Passed by the House

H.R. 333 (S. 420),107th

Cong.,1st Sess. (2001)

As Passed by the

Senate

Safe harbor exemption

from the means test

Only the judge, U.S. trustee or bankruptcy administrator

may bring a substantial abuse motion if the debtor’s

current monthly income is less than the highest national or

the applicable State median family income.

No party may make a motion to convert the debtor to

chapter 13 if the debtor (and spouse combined) have a

monthly income equal to or less than the state median

household income reported by the Bureau of the Census.

The U.S. trustee may also decline to file a motion to

convert if the debtor’s monthly income is between 100%

and 150% of the national or applicable State median

income, and would permit a debtor to pay the lesser of (a)

25% of nonpriority unsecured debt or $6,000, whichever

is greater, or (b) $10,000. § 102.

IRS Living Standards

applicable to chapter 13

reorganization plan

A chapter 13 debtor’s

“disposable income” which

may be directed to the

repayment plan will be

calculated in accordance

with IRS Living Standards

if the debtor meets the

applicable means test for

state median family

income. § 102.

Attorney sanctions for

improper motion

If a panel trustee brings a successful motion for dismissal

or conversion, counsel for the debtor will be liable to

reimburse the trustee for costs, attorneys’ fees, and

payment of a civil penalty if the court finds a violation of

Bankruptcy Rule 9011. § 102.

Creditor sanctions for an

improper motion

The court may award the debtor costs for contesting an

unsuccessful motion to convert if the court finds that the

motion violated Rule 9011, or was intended to coerce the

debtor into waiving rights under the Bankruptcy Code. A

creditor whose claim is less than $1000 is not liable for

sanctions. § 102

Dismissal of filings by

persons convicted of

violent crimes or drug

trafficking

A crime victim or party in interest may request dismissal

of the voluntary bankruptcy case of the convicted

debtor. The court must grant the dismissal unless the

filing is necessary to satisfy a domestic support

obligation. § 102

Additional consumer provisions

Comparable but adds a new

11 U.S.C. § § 1329(a)(4)

permitting a chapter 13

debtor to deduct the costs

of health insurance from

plan payments.

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Selected Provisions

H.R. 333, 107th Cong.,

1st Sess. (2001) As

Passed by the House

H.R. 333 (S. 420),107th

Cong.,1st Sess. (2001)

As Passed by the

Senate

Mandatory credit

counseling

Debtor must undergo credit counseling within 180 days of

filing, and may not obtain a discharge until completion of

a personal financial management instructional course.

The jurisdictional filing requirement may be waived for 30

to 45 days if the debtor certifies exigent circumstances or

was denied service from an approved counseling agency.

The U.S. trustee or bankruptcy administrator for the

judicial district is directed to oversee and approve

nonprofit budget and credit counseling agencies. § 106

Promotion of alternative

dispute resolution

A creditor’s allowable claim may be reduced by 20% if a

court finds that the creditor “unreasonably refused to

negotiate a reasonable alternative repayment schedule

proposed by an approved credit counseling agency that

provides repayment of at least 60% of the debt, and the

debtor can prove by “clear and convincing” evidence that

a creditor unreasonably refused to consider the offer.”

§ 201.

Reaffirmation agreements

Imposes enhanced requirements for approval of a

reaffirmation agreement when the debtor is not

represented by counsel but exempts credit unions from

creditor disclosure requirements; requires U.S. Attorney

and FBI to investigate abusive reaffirmation practices. §

203.

Preserving defenses

against predatory lenders

No comparable provision

Amends 11 U.S.C. § 363 to

add a new subsection

preserving defenses that a

party to a consumer credit

transaction may have if the

contract is sold by a debtor

in bankruptcy. § 204.

GAO reaffirmation study

No comparable provision.

Requires a study of

reaffirmation practices and

a report to Congress. § 205

Domestic support owed to

individuals and

government units made

first priority

Would move domestic support obligations to first priority,

which is currently allocated to administrative expenses of

the bankruptcy estate. Administrative expenses would

become second priority. § 212.

Trustee notification of

child support claim

holders

Would direct the trustee to notify a priority child support

recipient of the existence of a state child support

enforcement agency, and, upon discharge, the existence of

nondischargeable and reaffirmed debt. § 219.

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Selected Provisions

H.R. 333, 107th Cong.,

1st Sess. (2001) As

Passed by the House

H.R. 333 (S. 420),107th

Cong.,1st Sess. (2001)

As Passed by the

Senate

Priority assigned to claims

for liability incurred by

the debtor DUI

A new § 507 tenth priority is created for unsecured claims

for liability incurred by a debtor from operating a vessel

while under the influence of alcohol or drugs. Claims of

this nature are also nondischargeable. § 223.

Retirement savings

exemption broadened

Would clarify and expand the law to provide that

retirement accounts that are tax exempt under the Internal

Revenue Code are exempted from the debtor’s estate up to

a $1,000,000 cap. § 224

Exemption for saving for

postsecondary education

Subject to certain IRS requirements, excludes funds up to

$5000 per specified beneficiary made within a year of

filing in an education individual retirement account and/or

any funds used to purchase a tuition credit or certificate

under a qualified state tuition program. §225

Protection of nonpublic

personal information and

consumer privacy

ombudsman

No comparable provisions.

Prohibits the transfer by the

debtor of personal customer

information unless

approved by the court.

Provides for the

appointment of a consumer

privacy ombudsman if a

debtor wishes to sell or

lease such information. §§

231,232.

Prohibition on disclosure

of identify of minor

children

Debtor may not be required

to disclose the name of a

minor child in public

records. § 231.

Comparable provision, but

gives access to nonpublic

records to U.S. trustee or

auditor. § 233.

Lien stripping on security

interests in consumer

goods (cramdown)

Chapter 13 debtors would

not be permitted to

bifurcate security interests

in an automobile purchased

within 5 years of the filing;

or in other consumer goods

purchased within 1 year of

the filing. § 306.

Chapter 13 debtors would

not be permitted to

bifurcate security interests

in an automobile purchased

within 3 years of the filing;

or in other consumer goods

purchased within 1 year of

the filing. § 306.

CRS-14

Selected Provisions

H.R. 333, 107th Cong.,

1st Sess. (2001) As

Passed by the House

H.R. 333 (S. 420),107th

Cong.,1st Sess. (2001)

As Passed by the

Senate

Homestead exemption

Imposes lengthened

residency requirements to

qualify for state exemption.

§ 307

Comparable provision. §

307.

Reduces the value of the

exemption if the value is

attributable to property that

the debtor disposed of

within 7 years of

bankruptcy with the intent

to hinder, delay or defraud

a creditor. § 308.

Adds a federal cap to state

homestead exemptions of

$125,000. § 308.

Omitted.

Debtors’ electing a state

homestead exemption may

not exempt any interest

acquired within 2 years of

filing which exceeds in the

aggregate $100,000, unless

the value in excess of that

amount occurs from a

transfer of residences

within the same state.

Exempts family farmers

from the limit. § 322.

Residential lease excepted

from the automatic stay

The automatic stay will not

operate to stop the

continuation of, or in some

cases, the commencement

of eviction actions by a

lessor against a debtor

involving rental property in

which the debtor resides. §

311.

Adds detailed requirements

for lifting the automatic

stay to continue with a

residential eviction of a

lessor and certification

requirements for the

assertions of both the

landlord and the

debtor/tenant with respect

to actions under the

automatic stay. § 311

Restrictions on chapter 13

filings.

Amends chapter 13 to

disallow discharge if the

debtor has received a

discharge in any case filed

within 5 years. § 312.

Amends chapter 13 to

disallow discharge if the

debtor filed under chapters

7, 11, or 12 within 3 years,

or under chapter 13 within

2 years. § 312.

CRS-15

Selected Provisions

H.R. 333, 107th Cong.,

1st Sess. (2001) As

Passed by the House

H.R. 333 (S. 420),107th

Cong.,1st Sess. (2001)

As Passed by the

Senate

Definition of “household

goods”

Defines household goods to include clothing, furniture,

appliances, 1 radio, 1 television, 1 VCR, linens, china,

crockery, kitchenware, educational materials used by

minor dependent children (including 1 personal computer)

, medical equipment and supplies, furniture used

exclusively by minors and disabled or elderly dependents,

and personal effects. § 313.

Debtor’s duty to disclose

tax filings.

Comparable provision

requiring a debtor to file,

upon request, “all tax

returns required under

applicable law.” § 315.

Plan duration

Chapter 13 plans to have 5 year duration for families

whose monthly income is not less than the highest state

median family income. Families below the highest state

median income would have 3 year plans. § 318

Withheld wages for

contributions to employee

benefit plans

Withheld wages for contributions to employee benefit

plans would be excluded from the debtor (employer’s )

estate. This would override the current unsecured priority

at § 507(a)(3) which caps priority benefit claims at $4,650.

H.R. 333,§ 323; S. 420, §322.

Valuation of collateral

A secured creditor’s allowable claim would be the retail

cost to replace the item without deduction for costs of sale

or marketing. Personal property’s replacement value

would be the price a retail merchant would charge for like

items. H.R. 333, § 327; S. 420, §326.

Clarification of

postpetition wages and

benefits

No comparable provision.

Makes specified

prepetition and postpetition

wages and benefits an

administrative expense. §

329.

Duties of a debtor who is

also an employee benefit

plan administrator

No comparable provision.

Permits a debtor to

continue as a plan

a d mi n i s t r at o r o f a n

employee benefit plan.§

420.

Audits

The Attorney General is directed to establish a procedure

to ensure random audits of no less than 1 out of every 250

individual filings; the U.S. trustee is authorized to enter

into contracts with auditors, and to take action when

misstatements in the debtor’s petition and schedules are

identified.

§ 603.

Modifies

debtor

requirement under 11

U.S.C. § 521(f) to file tax

returns with the court by

limiting required filings to

federal tax returns. § 315.

CRS-16

Selected Provisions

H.R. 333, 107th Cong.,

1st Sess. (2001) As

Passed by the House

H.R. 333 (S. 420),107th

Cong.,1st Sess. (2001)

As Passed by the

Senate

Nondischargeable consumer debts

Debts to government units

for domestic support

Defines “domestic support obligation” to include debts

owed to or recoverable by a governmental unit. §§ 211,

215.

Expanded definition of

student loan

Adds qualified educational loans as defined under § 221 of

the IRC to those educational loans that are currently

nondischargeable. § 220.

Loan repayments to

debtor’s retirement

savings or thrift plan

Makes nondischargeable, i.e., allows an employer to

continue to withhold loan repayments to debtor’s

savings/retirement plan from debtor’s wages. § 224(c).

Consumer debts presumed

fraudulent

Consumer debts owed to a

single creditor for more

than $250 for “luxury

goods” incurred within 90

days of filing; and cash

advances for more than

$750 under an open end

credit plan within 70 days

of filing are presumed to be

nondischargeable. § 310

Debts incurred to pay

nondischargeable debts

are nondischargeable

Debts incurred to a third party to pay a tax to a state or

local government unit become nondischargeable. § 314.

Violence against providers

or users of lawful services

(formerly reproductive

health services)

No comparable provision.

Expanded definition of

nondischargeable

condominium and

homeowners association

fees

Expands the types of post-petition condo and homeowners

association fees that are nondischargeable by omitting

requirement that in order to be nondischargeable the

debtor must reside in the residence postpetition. § 412.

FEC penalties

nondischargeable

No comparable provision.

Consumer debts owed to a

single creditor for more

than $750 for “luxury

goods” incurred within 90

days of filing; and cash

advances for more than

$750 under an open end

credit plan within 70 days

of filing are presumed to be

nondischargeable. § 310

Makes nondischargeable

liability incurred from

violations of law

prohibiting harassment or

violence to persons who

provide or consume lawful

services; or damage or

destruction of property that

provides lawful goods or

services. § 328

Fines and penalties under

federal election law are

made nondischargeable. §

1236.

CRS-17

Selected Provisions

H.R. 333, 107th Cong.,

1st Sess. (2001) As

Passed by the House

H.R. 333 (S. 420),107th

Cong.,1st Sess. (2001)

As Passed by the

Senate

Consumer credit disclosure

Amendments to the Truth

in Lending Act

TILA amended to require enhanced minimum payment

disclosures under an open end credit plan; enhanced

disclosures regarding the tax deductibility of credit

extensions which exceed the fair market value of a

dwelling for credit transactions secured by the consumer’s

dwelling; disclosures related to introductory “teaser” rates;

disclosures related to Internet-based open end credit

solicitations; and disclosures related to late payment

deadlines and penalties. TILA would be amended to

prohibit termination of a credit account because the

consumer has not incurred finance charges. §§ 1301-1306.

Study of bankruptcy

impact of credit extended

to dependent students

Comptroller General directed to study bankruptcy impact

of credit extensions to students in postsecondary school.

§ 1308

Consumer credit studies

The Board of Governors of the Federal Reserve would be

directed to study existing protections for consumers for

unauthorized use of a dual use debit card. § 1907

Business bankruptcy

Avoidable preferences

Amends 11 U.S.C. § 547 to liberalize the rules for

defending against an avoidable transfer in the ordinary

course of business; creates a new preference exception to

aggregate transfers of less than $5,000. § 409.

CRS-18

Selected Provisions

H.R. 333, 107th Cong.,

1st Sess. (2001) As

Passed by the House

Small business bankruptcy

Subtitle B of Title IV has

provisions defining a

“small business” for

chapter 11 purposes as one

with debts under

$3,000,000. The debtor’s

period of exclusivity to file

a reorganization plan is 180

days.

A plan must be confirmed

within 175 days of filing in

bankruptcy. § 438

Provisions require

establishment of uniform

accounting and reporting

s t an d ar d s f o r smal l

businesses. Grounds for

appointment of a trustee

and the trustee’s general

supervisory duties are

expanded, as are grounds

for dismissal or conversion

of the case. §§ 431-442.

H.R. 333 (S. 420),107th

Cong.,1st Sess. (2001)

As Passed by the

Senate

A plan must be confirmed

within 45 days after the

plan is filed. § 438.

CRS-19

Selected Provisions

H.R. 333, 107th Cong.,

1st Sess. (2001) As

Passed by the House

H.R. 333 (S. 420),107th

Cong.,1st Sess. (2001)

As Passed by the

Senate

Chapter 11 corporate

nondischargeability

Confirmation of a plan

under chapter 11 would not

discharge a corporate

debtor from debts under 11

U.S.C. § 523(a)(2) for

property obtained by false

p r e t e n s e s

o r

representations; or any

debt for taxes for which the

debtor willfully attempted

to evade or made a

fraudulent return. § 708.

Confirmation of a plan

under chapter 11 would not

discharge a corporate

debtor from debts under 11

U.S.C. § 523(a)(2) that are

owed to a domestic

governmental unit for

property obtained by false

p r e t e n s e s

o r

representations; or owed to

an individual under

subchapter III of chapter 37

of Title 31, U.S.C.; or any

debt for taxes for which the

debtor willfully attempted

to evade or made a

fraudulent return. § 708.

Also, a provision in § 321

dealing with chapter 11

cases filed by individuals

would amend 11 U.S.C. §

1141(d) to make all debts

which are nondischargeable

by individuals applicable to

corporate debtors.

§

321(d).

This provision is omitted.

CRS-20

Selected Provisions

H.R. 333, 107th Cong.,

1st Sess. (2001) As

Passed by the House

H.R. 333 (S. 420),107th

Cong.,1st Sess. (2001)

As Passed by the

Senate

Title X dealing with

chapter 12 family farmers

Makes chapter 12

p e r ma n e n t ; i n c l u d e s

jurisdictional debt limit in

amount subject to

readjustment in accordance

with CPI; subordinates

certain high priority

unsecured claims owed to

the government to

nonpriority claims.

§§

1001-1003.

In c l u d e s c o mpa r a b l e

provisions.

No comparable provision.

Raises jurisdictional debt

limit of family farmers to

$3,000,000 and lowers

percentage requirement of

income derived from

farming and expands the

time frame for measuring

farm income from one to

three years. §§ 1004, 1005.

No comparable provision.

Pr o h i b i t s r e t r o a c t i ve

assessment of disposable

income. § 1006

No comparable provision.

Amends chapter 12 to

include “family fishermen.”

§ 1007.

General provisions

In forma pauperis filings

Directs the Judicial Conference to prescribe procedures for

waiving bankruptcy fees for an individual debtor under

chapter 7 whose income is less than 125% of the income

official poverty line and who is unable to pay the fee in

installments. § 418.

Bankruptcy judgeships

Creates new temporary

bankruptcy judgeships for

designated districts. § 1224.

By floor amendment, adds

an additional bankruptcy

judgeship for the district of

Nevada. §1223

Discharge under chapter

12

Makes a technical

correction to 11 U.S.C. §

1228. § 1219

No comparable provision.

CRS-21

Selected Provisions

H.R. 333, 107th Cong.,

1st Sess. (2001) As

Passed by the House

H.R. 333 (S. 420),107th

Cong.,1st Sess. (2001)

As Passed by the

Senate

Expedited bankruptcy

appeals to a court of

appeals

U.S. district court decisions

shall be deemed “final” for

appeals purposes 31 days

after filed if the district

court does not file a

decision within 30 days. §

1234.

Allows immediate appeals

from lower courts if

d ecisio n involves a

substantial question of law;

a question requiring

resolution of conflicting

decision; or, a matter of

public importance. §1233.

Involuntary Bankruptcy

No comparable provision.

Technical corrections made

to 11 U.S.C. § 303 dealing

with involuntary

bankruptcy. § 1235.

Insolvent political

committees prohibited

from filing in bankruptcy

No comparable provision.

Political committees

subject to jurisdiction of

the Federal Election

Commission may not file in

bankruptcy. § 1237

“Lloyds of London”

provision barring

enforcement of certain

foreign judgments

Prohibits U.S. courts from

enforcing foreign

judgments derived from

fraudulent omissions that

occur in the U.S. during

January 1, 1975 through

December 31, 1993. §

1310.

Omitted.

Title XIV. Emergency

Energy Assistance and

Conservation Measures

No comparable provision.

To provide assistance to

consumers affected by high

energy prices and to

promote conservation

investments in private and

federal facilities. §§ 14011408.

Title XVI. Miscellaneous

Provisions

No comparable provision.

Directs the Fed. Crop Ins.

Corp. to promulgate

regulations under 7 U.S.C.

§ 522(b). § 1601.

No comparable provision

Directs the GAO to study

the impact of enactment of

bankruptcy reform on filing

under chapters 7 and 13 and

on consumer credit. §

1602.

CRS-22

Selected Provisions

H.R. 333, 107th Cong.,

1st Sess. (2001) As

Passed by the House

H.R. 333 (S. 420),107th

Cong.,1st Sess. (2001)

As Passed by the

Senate

General effective date

Subject to express

provisions otherwise, the

new law will take effect

180 days after enactment

and will not apply to cases

commenced before the

effective date. § 1401.

Identical provision. § 1501.