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To amend title 11 of the United States Code to make debts to governmental units for the care and maintenance of minor children nondischargeable.
Parental Responsibility and Taxpayer Protection Amendment of 1998
(Introduced in House)

HR 3711 IH

To amend title 11 of the United States Code to make debts to
governmental units for the care and maintenance of minor children
nondischargeable.

April 22, 1998

Mr. SMITH of Michigan introduced the following bill; which was
referred to the Committee on the Judiciary

To amend title 11 of the United States Code to make debts to
governmental units for the care and maintenance of minor children
nondischargeable.

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Parental Responsibility and
Taxpayer Protection Amendment of 1998'.

SEC. 2. AMENDMENT.

Section 523(a) of title 11, United States Code, is
amended--

(1) in paragraph (17) by striking `or' at the
end,

(2) in paragraph (18) by striking the period at the end and
inserting `; or', and

(3) by adding at the end the following:

`(19) to a governmental unit for a cost incurred for the
care or maintenance of a minor child of the debtor.'.

SEC. 3. APPLICABILITY OF AMENDMENT.

The amendment made by section 2 shall not apply with respect to
cases commenced under title 11 of the United States Code before the date
of the enactment of this Act.

To amend title 11, United States Code, to limit the value of certain real and personal property that a debtor may elect to exempt under State or local law, and for other purposes.

To make improvements in the operation and administration of the Federal courts, and for other purposes.

To amend title 11 of the United States Code relating to bankruptcy.
Consumer Lenders and Borrowers Bankruptcy Accountability Act of 1998
(Introduced in House)

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Consumer Lenders
and Borrowers Bankruptcy Accountability Act of 1998'.

(b) TABLE OF CONTENTS- The table of contents is as
follows:

Sec. 1. Short title; table of contents.

Sec. 2. Discouraging reckless lending practices.

Sec. 3. Discouraging wage seizures which push people into
bankruptcy.

Sec. 4. Stop creditors' abuses of the bankruptcy
system.

Sec. 5. Improve debtors' understanding of bankruptcy options
and alternatives.

Sec. 6. Increase incentives for voluntary repayment
plans.

Sec. 7. Provide fair property exemptions and prevent
high-rollers from abusing the system.

Sec. 8. Prevent abuse of bankruptcy system by debtors who can
afford to pay their debts.

Sec. 9. Prevent abusive bankruptcy filings.

Sec. 10. Improve accuracy of debtors' bankruptcy
schedules.

Sec. 11. Ensure proportionate and fair recoveries for
creditors.

Sec. 12. Prevent windfalls for undersecured
creditors.

Sec. 13. Reinforce the fresh start.

Sec. 14. Clarifying amendments.

Sec. 15. Applicability of amendments.

SEC. 2. DISCOURAGING RECKLESS LENDING PRACTICES.

(a) LIMITING CLAIMS ARISING FROM IRRESPONSIBLE LEADERSHIP
PRACTICES- Section 502(b) of title 11, United States Code, is
amended--

(1) in paragraph (8) by striking `or' at the end,

(2) in paragraph (9) by striking the period at the end and
inserting a semicolon, and

(3) by adding at the end the following:

`(10) the claim is--

`(A) based upon an extension to an individual of
unsecured credit which caused, and which the claimant knew or should
have known would cause, the debtor's aggregate unsecured debts to exceed
40 percent of the debtor's annual gross income; or

`(B) based on a secured debt if the creditor has
violated section 129(h) of the Truth in Lending Act;

`(11) the claim arises from a debt on which the creditor
failed or refused to waive interest in an unsuccessful consumer credit
counseling plan attempted by the debtor before filing bankruptcy (and
the creditor shall bear the burden of proving its waiver of interest in
such a plan);

`(12) the claim arises from a debt incurred in or adjacent
to a gambling facility, or a debt which the creditor knew or should have
known was intended to be used by the debtor for gambling
purposes;

`(13) the claim arises from a consumer debt on which the
annual percentage rate for the debt as defined by section 107 of the
Truth in Lending Act increased by more than 5 percent in the 12-month
period ending before the order for relief;

`(14) the claim is not secured and arises from a consumer
debt on which a billing statement provided by the creditor in the 1-year
period ending on the date of the order for relief included an offer to
accept a periodic payment which, if made on the due date for that
periodic payment and each subsequent due date, would not amortize the
principal amount due to the creditor at the then current rate of
interest in a period of less than 15 years from the due date of the
periodic payment; or

`(15) the claim is made by a creditor, its agents, or
assignees based on a debt with respect to which the creditor, its agents
or assignees engaged in conduct which violated section 805, 806, 807, or
808 of the Fair Credit Reporting Act whether or not such creditor is a
debt collector as defined by section 803(6) of such Act. Civil liability
against such creditor, agent or assignee under section 813 of such Act
shall also be available whether or not such creditor is a debt collector
as defined by section 803(6) of such Act.'.

(b) CLARIFY THE DISCHARGEABILITY OF CREDIT CARD DEBT IN A WAY
THAT PLACES SOME RESPONSIBILITY ON CREDITORS FOR IRRESPONSIBLE LENDING
PRACTICES-

(1) REQUIREMENTS- Section 523(a)(2) of title 11, United
States Code, is amended--

(A) in subparagraph (B) by striking `or' at the
end,

(B) in subparagraph (C) by striking the period at the
end and inserting `; or', and

(C) by adding at the end the following:

`(D) except as provided in subparagraph (C), consumer
debts under an open end credit plan (as defined section 103 of the Truth
in Lending Act) are dischargeable unless--

`(i) the creditor establishes the requirements of
subparagraph (B) with respect to the consumer's credit application;
or

`(ii) the creditor establishes actual and
reasonable reliance on an express fraudulent statement made by the
debtor in connection with an extension of credit in excess of the amount
available under the open end credit plan.'.

(2) PROOF- Section 523 of title 11, United States Code, is
amended by adding at the end the following:

`(h) Proof of fraud under this section shall be made by clear
and convincing evidence.'.

SEC. 3. DISCOURAGING WAGE SEIZURES WHICH PUSH PEOPLE INTO
BANKRUPTCY.

Section 547 of title 11, United States Code, is amended--

(1) in subsection (e)(3) by adding at the end the
following:

`In the case of wages or other income of an individual debtor, a
transfer of the right to receive such income is not effective until the
time that the income is to be paid to the debtor.'; and

(2) by amending subsection (c)(8) to read as
follows:

`(8) that is a voluntary transfer of property that has an
aggregate amount less than $600.'.

SEC. 4. STOP CREDITORS' ABUSES OF THE BANKRUPTCY SYSTEM.

(a) SANCTIONS FOR CREDITOR ABUSES OF THE BANKRUPTCY
SYSTEM-

(1) ALLOWANCE OF CLAIMS OR INTERESTS- Section 502 of title
11, United States Code, is amended by adding at the end the
following:

`(k)(1) If, in a case of an individual debtor, following an
objection filed by the debtor, a claim (other than a claim for a debt
for alimony or child support) is disallowed or reduced by an amount
representing more than 5 percent of the original filed claim or $500,
whichever is less, the court shall award the debtor reasonable
attorneys' fees and costs.

`(2) If, in a case of an individual debtor, the court finds
that the position of any claimant with respect to whom an objection is
timely filed under this section is not substantially justified, the
court shall also award damages in the amount of $5,000 and may, in
appropriate circumstances, award punitive damages.'.

(2) EXCEPTIONS TO DISCHARGE- Section 523(d) of title 11,
United States Code, is amended to read as follows:

`(d) If a creditor requests a determination of dischargeability
of a consumer debt under this section (other than under paragraph (5) or
(15) of subsection (a)), and such debt is discharged, the court shall
award to the debtor reasonable attorneys' fees and costs. If the court
finds that the position of any creditor proceeding under this section is
not substantially justified, the court shall also award three times
actual damages (but not less than $5,000) and, may, in appropriate
circumstances, award punitive damages.'.

(3) EFFECT OF DISCHARGE- Section 524 of title 11, United
States Code, is amended by adding at the end the following:

`(i) A creditor's failure to credit payments received under a
plan confirmed under this title in the manner and amounts required by
the plan shall be considered to be an act described in subsection (a)(2)
or, if such failure occurs before the discharge, an act in violation of
section 362(a) of this title.

`(j)(1) A creditor may not charge a debtor or a debtor's
account for attorney's fees or costs related to work performed in
connection with a case under this title except to the extent that such
fees are reasonable under the standards of section 330(a) of this title
for actual, necessary services rendered, approved by the court, and
consistent with applicable contracts and nonbankruptcy law.

`(2) A charge made in violation of paragraph (1) shall be
considered to be an act described in subsection (a)(2) or, if such
charge occurs before the discharge, of section 362(a) of this
title.

`(k) An individual injured by any willful violation of
discharge in a case under this title shall recover 3 times actual
damages but not less than $5,000, plus costs and attorneys' fees, and,
in appropriate circumstances, may recover punitive damages.'.

(4) AUTOMATIC STAY- Section 362(h) of title 11, United
States Code, is amended--

(A) by striking `actual damages, including' and
inserting `3 times actual damages (but not less than
$5,000)',

(B) by inserting `(1)' after `(h)', and

(C) by adding at the end the following:

`(2) If the court finds that the position of any creditor
filing a motion for relief from a stay under this section is not
substantially justified, the court shall award damages in the amount of
3 times the debtor's actual damages (but not less than $5,000) plus
costs and attorneys' fees.'.

(5) ELIGIBILITY FOR RELIEF- Section 109 of title 11, United
States Code, is amended by adding at the end the following:

`(h) If a creditor files a motion to dismiss a case on the
grounds that the debtor may not be a debtor under the chapter under
which the case is pending and if such motion is denied or withdrawn, the
court shall award the debtor a reasonable attorney's fee and costs. If
the court finds that the position of any party filing a motion under
this section is not substantially justified, the court shall award to
the debtor damages in the amount of 3 times the debtor's actual damages
incurred in opposing such motion (but not less than $5,000) and, in
appropriate circumstances, may award punitive damages.'.

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

`(c) If a creditor files a motion to dismiss a case under this
section and such motion is denied or withdrawn, the court shall award
the debtor a reasonable attorney's fee and costs. If the court finds
that the position of any party filing a motion under this section is not
substantially justified, the court shall award to the debtor damages in
the amount of 3 times the debtor's actual damages (but not less than
$5,000) and may, in appropriate circumstances, award punitive
damages.'.

(c) PROHIBIT REAFFIRMATIONS AND THREATS OF REPOSESSION AGAINST
DEBTORS WHO ARE CURRENT IN THEIR PAYMENTS-

(1) EFFECT OF DISCHARGE- Section 524 of title 11, United
States Code, is amended--

(A) in subsection (a)--

(i) in paragraph (2) by striking `and' at the
end,

(ii) in paragraph (3) by striking the period at the
end and inserting `; and', and

(iii) by adding at the end the
following:

`(4) operates as an injunction against any act to enforce
against property of the debtor any lien to the extent that lien secures
any such debt, or to accelerate any such debt, based solely upon the
commencement of a case under this title, the insolvency or financial
condition of the debtor, or on appointment of or taking possession by a
trustee in a case under this title, notwithstanding any provision in an
agreement, transfer instrument, or applicable law, whether or not
discharge of such debt is waived.',

(B) in subsection (c) by striking `is enforceable' the
first place it appears and all that follows through the period at the
end, and inserting `is not enforceable, whether or not discharge of such
debt is waived.', and

(C) by striking subsection (d).

(2) REDEMPTION- Section 722 of title 11, United States
Code, is amended--

(A) by--

(i) striking `tangible' and all that follows
through `use', and inserting `property, other than real property subject
to a security interest', and

(ii) by striking `dischargeable
consumer',

(B) by inserting `(a)' after `Sec. 722',
and

(C) by adding at the end the following:

`(b) The debtor may pay the amount necessary to redeem the
property under subsection (a) of this section in installments over such
period, and on such terms, as the court may order.'.

SEC. 5. IMPROVE DEBTORS' UNDERSTANDING OF BANKRUPTCY OPTIONS AND
ALTERNATIVES.

Section 521 of title 11, United States Code, is amended by
adding at the end the following:

`(6) With the petition for relief, an individual or joint
debtor filing for relief under chapter 7 or chapter 13 shall file a
statement acknowledging receipt of an explanation on an Official Form
promulgated by the Judicial Conference of the United States of the
relief available under both chapters, and of the relief which is
provided by private credit counseling agencies. Such an explanation
shall also include detailed information regarding the sources of funding
for private credit counseling agencies.'.

SEC. 6. INCREASE INCENTIVES FOR VOLUNTARY REPAYMENT PLANS.

(a) AMENDMENT TO FAIR CREDIT REPORTING ACT- Section 605(a)(1)
of the Fair Credit Reporting Act (15 U.S.C. 1681c(a)(1)) is amended to
read as follows:

`(1) Cases under--

`(A) chapter 7 or 11 of title 11 of the United States Code
that, from the date of entry of the order for relief antedate the report
by more than 10 years;

`(B) chapter 12 or 13 of title 11 of the United States Code
in which a discharge has been entered, that, from the date of entry of
the order for relief antedate the report by more than 5 years;

`(C) chapter 12 or 13 of title 11 of the United States Code
in which a discharge has not been entered, that, from the date of entry
of the order for relief antedate the report by more than 10 years;
and

`(D) when information can no longer be reported based on
subparagraph (B), no consumer reporting agency may make any consumer
report containing any of the information provided for under paragraphs
(1) through (6) which antedates the order for relief in the case covered
by subparagraph (B).'.

(b) EFFECTIVE IMPLEMENTATION OF CHAPTER 13 PLANS- Section 1325
of title 11, United States Code, is amended by adding at the end the
following:

`(d) A court may not require as a condition of confirmation
under subsection (a)(3), payments to holders of allowed unsecured claims
that exceed the greater of the amount required under subsection (a)(4)
or the amount required under subsection (b).'.

(c) CLASSIFICATION OF CLAIMS IN CHAPTER 13- Section 1322(b)(1)
of title 11, United States Code, is amended to read as follows:

`(1) designate a class or classes of unsecured claims, as
provided in section 1122 of this title, but may not discriminate
unfairly against any class so designated; however, such plan may
designate different treatment for claims for a debt of the debtor
if--

`(A) an individual is liable on such debt with the
debtor; or

`(B) such debt is of a kind excepted from discharge
under section 1328(a) of this title;'.

(d) 5-YEAR CHAPTER 13 PLANS- Section 1322(d) is amended to read
as follows:

`(d) The plan may not provide for payments over a period that
is longer than 3 years, unless the debtor proposes a longer period, but
the court may not approve a period that is longer than 5 years.'.

(e) VALUATION OF SECURED CLAIM AT CONFIRMATION- Section 1327(a)
of title 11, United States Code, is amended by adding at the end the
following:

`If a plan proposes to value property to determine a creditor's
secured claim pursuant to section 506(a), and the creditor receives
notice of proposed valuation and confirmation hearing, such value shall
be established by the confirmed plan, whether or not the holder of the
claim has filed a proof of claim. If the plan does not so provide, any
party may obtain a determination of the amount of an allowed secured
claim, either before or after the confirmation, whether or not the
holder of the claim has filed a proof of claim.'.

(f) PROTECTING CHAPTER 13 DEBTOR'S PROPERTY DURING CASE-
Section 1306(c) of title 11, United States Code, is amended by adding at
the end the following:

`(c) During the pendency of a chapter 13 case, section 362
shall protect property of the estate which has revested in the debtor to
the same extent as it protects other property of the estate.'.

(g) INCENTIVES FOR CONSENSUAL MODIFICATION OF MORTGAGES-
Section 1322 of title 11, United States Code, is amended by adding at
the end the following:

`(f) Notwithstanding subsection (b)(2) and applicable
nonbankruptcy law, the rights of a holder of a secured claim may be
modified with the consent of the holder of the claim by capitalizing the
amount of any default, and amortizing any balance over an agreed term
not less than the existing term of the loan, at an interest rate
equivalent to or below the interest rate in effect on that claim at the
time of modification. If a modification agreement is filed with the
court at the time it is made, relief from the automatic stay shall
thereafter be granted pursuant to section 362(d)(1) of this title upon
motion, if the debtor is more than 60 days delinquent pursuant to the
agreement at the time of the hearing on the motion.'.

SEC. 7. PROVIDE FAIR PROPERTY EXEMPTIONS AND PREVENT HIGH-ROLLERS
FROM ABUSING THE SYSTEM.

(a) PERMIT EFFECTIVE USE OF EXEMPTIONS- Section 522 of title
11, United States Code, is amended by adding at the end the
following:

`(n) If, in the 1-year period ending on the date of the filing
of the petition and while the debtor was insolvent, the debtor makes
property exempt under subsection (b) by converting property to a form of
property that is exempt in an unlimited amount, such property shall not
be exempt under this section to the extent that the value of the
debtor's interest in the property that is converted exceeds $100,000.
Such conversion shall not otherwise be a basis for denying an exemption
and shall not be the basis for denying the debtor other relief under
this title.'.

(b) ESTABLISH A MODEST FLOOR FOR EXEMPTIONS- Section 522(b)(1)
of title 11, United States Code, is amended by striking `unless the
State law that is applicable to the debtor under paragraph (2)(A)
specifically does not so authorize'.

SEC. 8. PREVENT ABUSE OF BANKRUPTCY SYSTEM BY DEBTORS WHO CAN
AFFORD TO PAY THEIR DEBTS.

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                Contents Display 

To make technical corrections to title 11, United States Code, and for other purposes.
Web posted
and Copyright © June 25, 1997, American
Bankruptcy Institute.

Technical Corrections Bill Advances in House

Editor's Note:

The electronic version of the bill at Thomas will not
reflect the changes described below for 2-3 days.

On June 25, 1997, the House Subcommittee on Commercial and
Administrative Law unanimously approved an amendment in the
nature of a substitute bill to H.R. 764 by Rep. George Gekas (R-PA), the
Chairman of the Subcommittee.

While much of the bill's provisions are of a technical nature,
there are several substantive law changes. Questions were raised
about several provisions in H.R. 764 as introduced, and the new
version seeks to address these concerns.

The new bill would raise the cap on the special treatment for
single asset real estate bankruptcies from the current $4 million
to $15 million. The version of H.R. 764 as introduced removed
the cap entirely.

The new bill also seeks to clarify the provision on curing
non-monetary defaults of leases of real property, or defaults of
non-monetary provisions in executory contracts, in the wake of
the 9th Circuit's Claremont opinion. The bill would
strike current §365(b)(1)(D) and replace it with three
subsections, (D), (E) and (F), as follows:

"(D) the satisfaction of any penalty rate or penalty
provision relating to a default arising from a failure to
perform nonmonetary obligations under an executory contract
or under an unexpired lease of real or personal property;

"(E) the satisfaction of any provision (other than a
penalty rate or penalty provision) relating to a default
arising from any failure to perform nonmonetary obligations
under an unexpired lease of real property, if it is
impossible for the trustee to cure such default by
performing nonmonetary acts at and after the time of
assumption; or

"(F) the satisfaction of any provision (other than a
penalty rate or penalty provision) relating to a default
arising from any failure to perform nonmonetary obligations
under an executory contract, if it is impossible for the
trustee to cure such default by performing nonmonetary acts
at and after the time of assumption and if the court
determines, based on the equities of the case, that
paragraph (1) should not apply with respect to such
default."

Among its other provisions, the substitute seeks to address
the so-called McConville problem by making clear that
post-petition transfers immune from attack under sections 544 and
549 of the Code would not be void or voidable as made in
violation of the automatic stay, and makes a further
clarification to the "Deprizio" amendment in the 1994 Reform Act.

The bill adds "watercraft" and "aircraft" to the motor
vehicles in §523, making losses arising from the operation
of these while intoxicated nondischargeable.

The changes made by the bill would apply only to cases
commenced on or after the date of enactment of the Act.

To make technical corrections to title 11, United States Code, and for other purposes.
COMPARISON

Bankruptcy Law Technical Corrections Acts of 1997 (H.R. 120 and
H.R. 764)

Written by:

Roger M. Whelan

and Virginia Maxwell Waller

Shaw, Pittman, Potts & Trowbridge

Web posted and Copyright ©
January 28, 1997, American Bankruptcy Institute and Shaw, Pittman, Potts &
Trowbridge.

To make technical corrections to title 11, United States Code, and for other purposes.
Comparison of H.R. 764

with the Technical Amendments Title of S.1301

Written by:

Richard F. Weiner

Attorney-at-Law





Prepared for the American Bankruptcy Institute


Web posted and Copyright ©
February 3, 1998, American Bankruptcy Institute.

H.R. 764 passed the House on November 12 and is pending in the Senate Judiciary Committee. S. 1301, introduced October 21 by Sens. Grassley (R-IA) and Durbin (D-IL), is also pending in the committee. This analysis compares the provisions in H.R. 764 to the "technical" provisions proposed in S. 1301, contained in Title IV.

Section 401 of S. 1301, which amends the definitions section under §101, incorporates everything from §2 of H.R. 764 except under H.R. 764, §2 at (5)(B), the secured debt limit for "single asset real estate" is increased from the current $4,000,000 to $15,000,000 (as of the date of the filing of the petition). Section 401 of S. 1301, however, eliminates the current secured debt limit altogether (at Sec 401 (5)(B)). There is however a grammatical error in §401 at (5)(B) of the Senate version; it should read "by striking ‘having aggregate’ and all that follows…" rather than "by striking ‘thereto having aggregate’ and all that follows…." as it reads now.

Section 402 of S. 1301 is identical to §3 of H.R. 764 (dealing with §104, "adjustment of dollar amounts"). Section 403 of S. 1301 is identical to Sec 4 of H.R. 764 (dealing with §108, "extension of time"). Section 404 of S. 1301 does not have a matching provision in the H.R. 764 ; it deletes, in §109, a reference to certain subsections in describing the types of small business investment companies that may be a debtor.

Section 405 of S. 1301 is identical to Section 5 of H.R. 764 (dealing with §110, "petition preparer penalties"); §406 of S. 1301 matches §6 of H.R. 764 (dealing with §328, professional compensation).

Section 7 of H.R. 764 (dealing with §330, "compensation of officers") contains an amendment not set out in S. 1301. S. 1301 should, I believe, contain this provision from H.R. 764 . Besides deleting an ‘(A)’ inadvertently placed next to ‘(3)’ at §330(a), §7 of H.R. 764 places the debtor’s attorney back into the position of being able to seek and obtain fees payable from the estate for his services that benefit the estate, after the clause which allowed this was taken out (maybe by error) of §330(a)(1) under the 1994 Reform Act. There are instances in Chapter 7 cases where the debtor’s attorney can be most helpful to the trustee in the administration of the estate. He or she should, in such instances, be entitled to payment of fees from the estate, in compensation for work in this regard.

Section 407 of S. 1301 matches §8 of H.R. 764 (dealing with §346); §408 of S. 1301 matches §9 of H.R. 764(dealing with §348).

Section 409 of S. 1301 matches §10 of H.R. 764 (dealing with §362); however provision (3) of both these sections, which set forth that the automatic stay is not applicable as to transfers that are not avoidable under §§544 and 549, by way of a proposed addition §362 at (b)(19), may be ill advised. A bona fide purchaser (BFP) of a post petition transfer of real property not avoidable under §549(c) (bankruptcy petition not recorded prior to the transfer) would not be hurt by the automatic stay (i.e. subject to penalty/damages/contempt thereunder) anyway since as a BFP, he was not aware of the pending bankruptcy. Some courts, I believe, take a position that a transfer prohibited under §362 is void but I do not think this position is correct (and certainly §362 could or should not be used to negate the effect of §549(c)). It is §549 that gives the power to the trustee (and the debtor vis-a-vis §522(h)) to avoid post petition transfers, rather than §362. If there is a post petition transfer of real property to a BFP after the petition is recorded the transfer would be avoidable by the trustee under §549 (the provision (3) would not apply) but the transferee should not be liable under §362 (as was not aware of the bankruptcy). As to §544, the only problem as to post petition transfers not avoidable under that provision relates to limitations of avoidance thereunder by way of post petition perfection under §546(b). There is however already in §362 at (b)(3) a provision that the automatic stay does not apply to transfers subject to such perfection under §546(b). This provision (3) needs further discussion and analysis.

Section 410 of S. 1301 basically incorporates the language of §11(a) of H.R. 764 (dealing with §365) but with differences in layout and, importantly, meaning. Under Sec 11(a) of H.R. 764 the trustee has to, as a prerequisite to assumption under a lease/executory contract, compensate or provide adequate assurance of prompt compensation under §365(b)(1)(B) for a failure to perform a non-monetary obligation even though such failure may not be required to be cured as a pre-requisite for such assumption. Under §410 of S. 1301 however, because of the placement of the language (three paragraphs that are identical in both the Senate and House versions), if a non-monetary default need not be cured for such assumption, no compensation or adequate assurance thereof need be given to so assume. Section 11(b) of H.R. 764 (which is not contained in S. 1301) amends and is necessary to keep §1124(2) (impairment exceptions) consistent with the changes under §11(a) but not needed for consistency with the changes proposed under Sec 410 of S. 1301.

Section 411 (dealing with §556), §412 (dealing with §503), §413(dealing with §507), §414 (dealing with §522) of S. 1301 are respectively in sequence identical to §§12 through 15 of H.R. 764 .

Section 415 of S. 1301 is the same as Sec 16 of H.R. 764. These sections add language to §523(a)(15) to make sure it is understood that not only are debts to debtor’s spouse subject to being declared non-dischargeable thereunder but also debts to debtor’s children. There are a number of substantive problems and uncertainties with provision 523(a)(15) of the Bankruptcy Code that need to be addressed at some point but are too complex and time consuming to be dealt with here.

Sec 416 of S. 1301 is the same as §17 of H.R. 764 . The provisions attempt to substitute wording in §524(a)(3) but effect no difference to the wording therein. I would, however, suggest a technical correction to §524(a)(3) by inserting ‘against debtor’s spouse after ‘allowable community claim.’ That subsection of §524 is only concerned with the community claims against the debtor’s spouse and a permanent injunction (subject to exceptions) against collection thereon from community property. The §524 injunction as to claims against the debtor is set out at §524(a)(1) and (2).

Section 417 (dealing with §525), §418 (dealing with §541), §419 (dealing with §546) of S. 1301 are respectively in sequence identical to §§18 through 20 of H.R. 764 .

Section 420 of S. 1301 is the same as §21 of H.R. 764 (dealing with §547) except §420 of the Senate Bill calls for an insertion of a proposed new (i) provision while §21 of the House Bill calls for an insertion of the same provision but designated (h) instead of (i). There would be no (h) under the Senate version; thus the (i) designation in the Senate version should be changed to (h).

As to the merits of the proposed changes to §547 under §§420 and 21 of S. 1301 and H.R. 764 respectively: §550 of the Bankruptcy Code was amended in 1994 (by way of 550(c)) for the purpose of overruling the Deprizio decision by limiting preferential transfer ‘recovery,’ in such a setting, to be effective as against the insider guarantor only. There was however no matching amendment to §547 where ‘avoidance’ is the issue (rather than recovery thereafter). In the usual Deprizio-type situation, only the return of money was being sought and this might be thought of more in terms of recovery than by way of avoidance. These current bills seek (but only with respect to a security interest) to clarify that avoidance in a Deprizio setting by way of §547 of the Bankruptcy Code can only be as to the insider guarantor. Although the interplay between §§547 and 550 is not perfect, most in the bench and bar understand what is really meant under these Code sections taken together in a pertinent situation without implementation of the changes sought.

The proposed changes to §547 mentioned above only address avoidance of a security interest in a Deprizio setting. This is most likely because a security interest might represent a typical occurrence of a debtor giving a lending institution a pre petition transfer of security (i.e. a mortgage) in lieu of money on account of a pre-existing debt, and 550(c) of the Bankruptcy Code might not be looked at by analogy in disallowing avoidance of the security interest as against the lender which is not now specifically set out in §547 thereof. Section 550(c) would prevent recovery of the security instrument itself from the lender so surely avoidance thereof under §547 against the lender would not be proper (at least that’s the argument- one has to look at both §§547 and 550 taken together to get the correct picture). A transfer of real property by deed deals with an intangible like a security interest (e.g. a mortgage) and the avoidability of same against a lender in a Deprizio setting (where a deed is conveyed to the lender rather than a security interest) is subject to the same problem (addressed above) as with the security interest transfer, except that situation is not addressed by the proposed changes to §547 of the Bankruptcy Code. Perhaps the correct way to proceed is for the wording ‘security interest given’ and ‘security interest,’ in the proposed §547(h) or (i), to be replaced at both places with the word ‘transfer.’ In such instance §550(c) is made redundant and should be deleted.

Section 421 of S. 1301 is the same as §22 of H.R. 764 (deals with §549). Section 422 of S. 1301 has no counterpart in H.R. 764 . Section 423 (dealing with §553), §424 (dealing with §726), §425 (dealing with §901), §426 (dealing with §1104), §427 (dealing with §1170), §428 (dealing with §1172), §429 (dealing with §1228), §430 (dealing with §1322), and §431 (dealing with §1328) of S. 1301 are respectively in sequence identical to §§23 through 31 of H.R. 764 .

Section 432 of S. 1301 is not contained in H.R. 764 and deals with a ten-year time extension relative to §302(d)(3) of the Bankruptcy, Judges, U.S. Trustees and Family Farmer Bankruptcy Act of 1986.

Section 433 of S. 1301 is the same as §32 of H.R. 764 (dealing with §1334), §434 of S. 1301 is the same as §33 of H.R. 764 (dealing with §156(a) of Title 18), and §435 of S. 1301 is the same as §34 of H.R. 764 (dealing with effective dates of the Amendments).

To make technical corrections to title 11, United States Code, and for other purposes.

To amend title 11, United States Code, to declare that donations to a religious group or entity, made by a debtor from a sense of religious obligation, such as tithes, shall be considered to have been made in exchange for a reasonably equivalent value.

To amend title 11, United States Code, to protect certain charitable contributions, and for other purposes.
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S 1244 ES

To amend title 11, United States Code, to protect certain charitable contributions, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Religious Liberty and Charitable Donation Protection Act of 1998'.

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 section 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 section 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 section 170(c)(1) of the Internal Revenue Code of 1986; or

`(B) an entity or organization described in section 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 section 548(d)(3)) that is not covered under section 548(a)(1)(B), by reason of section 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.'.

(c) CONFORMING AMENDMENTS- Section 546 of title 11, United States Code, is amended--

(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 `section 548(a)(1)' each place it appears and inserting `section 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 section 548(d)(3)) to a qualified religious or charitable entity or organization (as that term is defined in section 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 section 548(d)(3)) to any qualified religious or charitable entity or organization (as that term is defined in section 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.).

Passed the Senate May 13, 1998.

Attest:

Secretary.

To amend title 11, United States Code, to protect certain charitable contributions, and for other purposes.

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