Legislative Update

Journal Issue

Nov 1998

Column Name

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This month's update provides excerpts of the text of the major bankruptcy public laws enacted during the 105th

Congress, as of October 21. The full text of all bankruptcy legislation can be found <a href="/legis/newlegfront.html" target="window2">here</a>.

<h3>Religious Liberty and Charitable Donation Protection Act (P.L. 105-183)</h3>

Sec. 2. Definitions.

Section 548(d) of title 11, United States Code, is amended by adding at the end the following:

"(3) In this section, the term "charitable contribution" means a charitable contribution, as that term is defined in

§170(c) of the Internal Revenue Code of 1986, if that contribution—

"(A) is made by a natural person; and

"(B) consists of—

"(i) a financial instrument (as that term is defined in §731(c)(2)(C) of the Internal Revenue Code of 1986); or

"(ii) cash.

"(4) In this section, the term "qualified religious or charitable entity or organization" means—

"(A) an entity described in §170(c)(1) of the Internal Revenue Code of 1986; or

"(B) an entity or organization described in §170(c)(2) of the Internal Revenue Code of 1986.".

Sec. 3. Treatment of Pre-petition Qualified Charitable Contributions.

(a) IN GENERAL- Section 548(a) of title 11, United States Code, is amended—

(1) by inserting "(1)" after "(a)";

(2) by striking "(1) made" and inserting "(A) made";

(3) by striking "(2)(A)" and inserting "(B)(i)";

(4) by striking "(B)(i)" and inserting "(ii)(I)";

(5) by striking "(ii) was" and inserting "(II) was";

(6) by striking "(iii)" and inserting "(III)"; and

(7) by adding at the end the following:

"(2) A transfer of a charitable contribution to a qualified religious or charitable entity or organization shall not be

considered to be a transfer covered under paragraph (1)(B) in any case in which—

"(A) the amount of that contribution does not exceed 15 percent of the gross annual income of the debtor for the year

in which the transfer of the contribution is made; or

"(B) the contribution made by a debtor exceeded the percentage amount of gross annual income specified in

subparagraph (A), if the transfer was consistent with the practices of the debtor in making charitable contributions.".

(b) TRUSTEE AS LIEN CREDITOR AND AS SUCCESSOR TO CERTAIN CREDITORS AND

PURCHASERS- Section 544(b) of title 11, United States Code, is amended—

(1) by striking "(b) The trustee" and inserting "(b)(1) Except as provided in paragraph (2), the trustee"; and

(2) by adding at the end the following:

"(2) Paragraph (1) shall not apply to a transfer of a charitable contribution (as that term is defined in §548(d)(3)) that

is not covered under §548(a)(1)(B), by reason of §548(a)(2). Any claim by any person to recover a transferred

contribution described in the preceding sentence under Federal or State law in a Federal or State court shall be

preempted by the commencement of the case.".

(1) in subsection (e)—

(A) by striking "548(a)(2)" and inserting "548(a)(1)(B)"; and

(B) by striking "548(a)(1)" and inserting "548(a)(1)(A)";

(2) in subsection (f)—

(A) by striking "548(a)(2)" and inserting "548(a)(1)(B)"; and

(B) by striking "548(a)(1)" and inserting "548(a)(1)(A)"; and

(3) in subsection (g)—

(A) by striking "§548(a)(1)" each place it appears and inserting "§548(a)(1)(A)"; and

(B) by striking "548(a)(2)" and inserting "548(a)(1)(B)".

Sec. 4. Treatment of Post-petition Charitable Contributions.

(a) CONFIRMATION OF PLAN- Section 1325(b)(2)(A) of title 11, United States Code, is amended by inserting

before the semicolon the following: ", including charitable contributions (that meet the definition of "charitable

contribution" under §548(d)(3)) to a qualified religious or charitable entity or organization (as that term is defined in

§548(d)(4)) in an amount not to exceed 15 percent of the gross income of the debtor for the year in which the

contributions are made".

(b) DISMISSAL- Section 707(b) of title 11, United States Code, is amended by adding at the end the following:

"In making a determination whether to dismiss a case under this section, the court may not take into consideration

whether a debtor has made, or continues to make, charitable contributions (that meet the definition of "charitable

contribution" under §548(d)(3)) to any qualified religious or charitable entity or organization (as that term is defined

in §548(d)(4)).".

Sec. 5. Applicability.

This Act and the amendments made by this Act shall apply to any case brought under an applicable provision of

title 11, United States Code, that is pending or commenced on or after the date of enactment of this Act.

Sec. 6. Rule of Construction.

Nothing in the amendments made by this Act is intended to limit the applicability of the Religious Freedom

Restoration Act of 1993 (42 U.S.C. 2002bb et seq.).

<h3>Student Loan Non-dischargeability Amendments (Higher Education Amendments of

1998) (P.L. 105-244).</h3>

Sec. 971. Non-dischargeability of Certain Claims for Educational Benefits Provided to Obtain Higher

Education.

(a) AMENDMENT- Section 523(a)(8) of title 11, United States Code, is amended by striking "unless—" and all

that follows through "(B) excepting such debt" and inserting "unless excepting such debt".

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply only with respect to cases commenced

under title 11, United States Code, after the date of enactment of this Act. [October 7, 1998]

<h3>Chapter 12 (in Omnibus Government Spending Bill)

Sec. 149. (a) Chapter 12 of title 11 of the United States Code, as in effect on September 30, 1998, is hereby

reenacted for the period beginning on October 1, 1998, and ending on April 1, 1999.

(b) All cases commenced or pending under chapter 12 of title 11, United States Code, as reenacted under subsection

(a), and all matters and proceeding in or relating to such cases, shall be conducted and determined under such

chapter as if such chapter were continued in effect after April 1, 1999. The substantive rights of parties in connection

with such cases, matters, and proceedings shall continue to be governed under the law applicable to such cases,

matters, and proceedings as if such chapter were continued in effect after April 1, 1999.

</h3><h3>Chemical Weapons Convention</h3>

Sec. 603. Bankruptcy Actions.

Section 362(b) of title 11, United States Code, is amended—

(1) by striking paragraphs (4) and (5); and

(2) by inserting after paragraph (3) the following:

"(4) under paragraph (1), (2), (3), or (6) of subsection (a) of this section, of the commencement or continuation of an

action or proceeding by a governmental unit or any organization exercising authority under the Convention on the

Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Destruction,

opened for signature on January 13, 1993, to enforce such governmental unit's or organization's police and

regulatory power, including the enforcement of a judgment other than a money judgment, obtained in an action or

proceeding by the governmental unit to enforce such governmental unit's or organization's police or regulatory

power;".

<h3>Farm Loans</h3>

TITLE VIII — AGRICULTURAL CREDIT

Sec. 801. Section 373 of the Consolidated Farm and Rural Development Act (7 U.S.C. 2008h) is amended by

striking subsection (b) and inserting the following:

"(b) PROHIBITION OF LOANS FOR BORROWERS THAT HAVE RECEIVED DEBT FORGIVENESS. —

"(1) PROHIBITIONS.—Except as provided in paragraph (2)—

"(A) the Secretary may not make a loan under this title to a borrower that has received debt forgiveness on a loan

made or guaranteed under this title; and

"(B) the Secretary may not guarantee a loan under this title to a borrower that has received—

"(i) debt forgiveness after April 4, 1996, on a loan made or guaranteed under this title; or

"(ii) received debt forgiveness on more than 3 occasions on or before April 4, 1996.

"(2) EXCEPTIONS.—

"(A) IN GENERAL.—The Secretary may make a direct or guaranteed farm operating loan for paying annual farm or

ranch operating expenses of a borrower who—

(i) was restructured with a write-down under §353; or

(ii) is current on payments under a confirmed reorganization plan under chapters 11, 12, or 13 of Title 11 of the

United States Code.

"(B) Emergency Loans.—The Secretary may make an emergency loan under §321 to a borrower that—

(i) on or before April 4, 1996, received not more than 1 debt forgiveness on a loan made or guaranteed under this

title; and

(ii) after April 4, 1996, has not received debt forgiveness on a loan made or guaranteed under this title.".

Sec. 802. Section 324(d) of the Consolidated Farm and Rural Development Act (7 U.S.C. 1964(d)) is amended—

(1) by striking "(d) All loans" and inserting the following:

"(d) REPAYMENT.—

"(1) IN GENERAL.—All loans"; and

(2) by adding at the end the following:

"(2) NO BASIS FOR DENIAL OF LOAN.—

"(A) IN GENERAL.—Subject to subparagraph (B), the Secretary shall not deny a loan under this subtitle to a

borrower by reason of the fact that the borrower lacks a particular amount of collateral for the loan if the Secretary is

reasonably certain that the borrower will be able to repay the loan.

"(B) REFUSAL TO PLEDGE AVAILABLE COLLATERAL.—The Secretary may deny or cancel a loan under

this subtitle if a borrower refuses to pledge available collateral on request by the Secretary.".

Journal Date

Sunday, November 1, 1998 - 12:00