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Sec.
433. Standard Form Disclosure
Statement and Plan. Section
433 of the Act directs the Judicial
Conference of the United States to propose for adoption standard form disclosure
statements and reorganization plans for
small business debtors.
The provision requires the forms to achieve a practical balance between
the needs of the court, case administrators, and other parties in interest
to have reasonably complete information as well as the
debtor's need for economy
and simplicity.
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Sec.
434. Uniform National Reporting
Requirements. Subsection
(a) of section
434 of the Act adds a provision
to the Bankruptcy Code mandating additional reporting requirements for
small business debtors.
It requires a small business
debtor to file periodic financial reports and other documents containing
the following information with respect to the
debtor's business operations:
(1) profitability; (2) reasonable approximations of projected
cash receipts and disbursements; (3) comparisons of actual cash receipts
and disbursements with projections in prior reports; (4) whether
the debtor is complying
with postpetition requirements pursuant to the Bankruptcy Code and Federal
Rules of Bankruptcy Procedure; (5) whether the
debtor is timely filing
tax returns and other government filings; and (6) whether the
debtor is paying taxes
and other administrative expenses when due. In addition, the
debtor must report on such
other matters that are in the best interests of the
debtor and the
creditors and in the public
interest. If the debtor
is not in compliance with any postpetition requirements pursuant to the
Bankruptcy Code and Federal Rules of Bankruptcy Procedure, or is not filing
tax returns or other required governmental filings, paying taxes and other
administrative expenses when due, the
debtor must report:
(1) what the failures are, (2) how they will be cured; (3)
the cost of their cure; and (4) when they will be cured. Section
434(b) specifies that the effective
date of this provision is 60 days after the date on which the rules required
under this provision are promulgated.
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Sec.
435. Uniform Reporting Rules
and Forms for Small Business Cases. Subsection
(a) of section
435 of the Act directs the Judicial
Conference of the United States to propose official rules and forms with
respect to the periodic financial reports and other information that a
small business debtor
must file concerning its profitability, cash receipts and disbursements,
filing of its tax returns, and payment of its taxes and other administrative
expenses.
Section 435(b) requires the
rules and forms to achieve a practical balance between the need for reasonably
complete information by the bankruptcy court, United States trustee,
creditors and other parties
in interest, and the small
business debtor's interest in having such forms be easy and inexpensive
to complete. The forms should also be designed to help the
small business debtor
better understand its financial condition and plan its future.
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Sec.
436. Duties in Small Business
Cases. Section 436 of
the Act is intended to implement greater administrative oversight and controls
over small business chapter 11.
The provision requires a chapter
11 trustee or
debtor to:
1. file with a voluntary
petition (or in an involuntary
case, within seven days from the date of the
order for relief) the
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debtor's most recent financial
statements (including a balance sheet, statement of operations, cash flow
statement, and Federal income tax return) or a statement explaining why
such information is not available;
2. attend, through
its senior management personnel and counsel, meet-ings scheduled by the bankruptcy
court or the United States trustee (including the initial
debtor interview and meeting
of creditors pursuant to
section 341 of the
Bankruptcy
Code), unless the court waives this requirement
after notice and a hearing
upon a finding of extraordinary and compelling circumstances;
3. timely file all
requisite schedules and the statement of financial affairs, unless the court,
after notice and a hearing,
grants an exten-sion of up to 30 days from the order of relief, absent extraordinary
and compelling circumstances;
4. file all postpetition
financial and other reports required by the Federal Rules of
Bankruptcy
Procedure or by local rule of the district court;
5. maintain insurance
that is customary and appropriate for the industry, subject to section
363(c)(2);
6. timely file
tax returns and other required government filings;
7. timely pay all
administrative expense taxes (except for certain contested
claims), subject to section
363(c)(2); and
8. permit the United
States trustee to inspect the
debtor's business premises,
books, and records at reasonable hours after appropriate prior written notice,
unless notice is waived by the
debtor.
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Sec.
437. Plan Filing and Confirmation
Deadlines. Section 437
of the Act amends section 1121(e)
of the Bankruptcy Code with respect to the period of time within which a
small business debtor
must file and confirm a plan of reorganization. This provision provides
that a small business debtor's
exclusive period to file a plan is 180 days from the date of the
order for relief, unless
the period is extended after
notice and a hearing, or the court, for cause, orders otherwise. It
further provides that a small
business debtor must file a plan and any disclosure statement not later
than 300 days after the order
for relief. These time periods and the time fixed in section
1129(e) may be extended
only if: (1) the debtor,
after providing notice to parties in interest, demonstrates by a preponderance
of the evidence that it is more likely than not that the court will confirm
a plan within a reasonable period of time; (2) a new deadline is
imposed at the time the extension is granted; and (3) the order granting
such extension is signed before the expiration of the existing deadline.
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Sec.
438. Plan Confirmation Deadline.
Section 438 of the Act amends
Bankruptcy Code section 1129
to require the court to confirm a plan not later than 45 days after it is
filed if the plan complies with the applicable provisions of the
Bankruptcy
Code, unless this period is extended pursuant to section
1121(e)(3).
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Sec.
439. Duties of the United States
Trustee. Section 439
of the Act amends section 586(a) of title 28 of
the United States Code to
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require the
United States trustee to perform the following additional duties with respect
to small business debtors:
1. conduct an initial
debtor inter-view before
the meeting of creditors
for the purpose of (a) investigating the
debtor's viability,
(b) inquiring about the
debtor's business plan, (c) ex-plaining the
debtor's obligation to
file monthly operating reports, (d) attempting to obtain an agreed
scheduling order setting various time frames (such as the date for filing
a plan and effecting confirmation), and (e) informing the
debtor of other obligations;
2. if determined to be appropriate and advisable, inspect the
debtor's business premises
for the purpose of reviewing the
debtor's books and records
and verifying that the debtor
has filed its tax returns; 3. review and monitor diligently the
debtor's activities to
determine as promptly as possible whether the
debtor will be unable to
confirm a plan; and 4. promptly apply to the court for relief in
any case in which the United States trustee finds material grounds for dismissal
or conversion of the case.
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Sec.
440. Scheduling Conferences.
Section 440 amends section
105(d) of the
Bankruptcy
Code to mandate that a bankruptcy court hold status conferences as are necessary
to further the expeditious and economical resolution of a bankruptcy case.
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Sec.
441. Serial Filer Provisions.
Paragraph (1) of section
441 of the Act amends section
362 of the
Bankruptcy Code
to provide that a court may award only actual damages for a violation of
the automatic stay committed by an
entity in the good faith
belief that subsection (h)
of section 362 (as amended )
applies to the debtor.
Section 441(2) adds a new subsection
to section 362 of the
Bankruptcy
Code specifying that the automatic stay does not apply where the chapter
11
debtor:
(1) is a
debtor in a
small business case pending
at the time the subsequent case is filed;
(2) was a
debtor in a
small business case dismissed
for any reason pursuant to an order that became final in the two-year period
ending on the date of the order
for relief entered in the pending case;
(3) was a
debtor in
small business case in
which a plan was confirmed in the two-year period ending on the date of
the order for relief entered
in the pending case; or
(4) is an
entity that has acquired
substantially all of the assets or business of a
small business debtor
described in the preceding paragraphs, unless such
entity establishes by a
preponderance of the evidence that it acquired the assets or business in
good faith and not for the purpose of evading this provision.
An exception to this provision applies to a chapter
11 case that is commenced involuntarily
and involves no collusion between the
debtor and the petitioning
creditors. Also, it does
not apply if the debtor
proves by a preponderance of the evidence that: (1) the filing of
the subsequent case resulted from circumstances beyond the
debtor's control and which
were not foreseeable at the time the prior case was filed; and (2)
it is more likely than not that the court will confirm a feasible plan of
reorganization (but not a liquidating plan) within a reasonable time.
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Sec.
442. Expanded Grounds for Dismissal
or Conversion and Appointment of Trustee. Subsection
(a) of section
442 of the Act amends section
1112(b) of the
Bankruptcy
Code to mandate that the court convert or dismiss a chapter
11 case, whichever is in the
best interests of creditors
and the estate, if the movant establishes cause, absent unusual circumstances.
In this regard, the court must specify the circumstances that support the
court's finding that conversion or dismissal is not in the best interests
of creditors and the estate.
In addition, the provision specifies an exception to the provision's mandatory
requirement applies if: (1) the
debtor or a party in interest
objects and establishes that there is a reasonable likelihood that a plan
will be confirmed within the time periods set forth in sections
1121(e) and
1129(e), or if these provisions
are inapplicable, within a reasonable period of time; (2) the grounds
for granting such relief include an act or omission of the
debtor for which there
exists a reasonable justification for such act or omission; and (3)
such act or omission will be cured within a reasonable period of time.
The court must commence the hearing on a section
1112(b) motion within 30
days of its filing and decide the motion not later than 15 days after commencement
of the hearing unless the movant expressly consents to a continuance for
a specified period of time or compelling circumstances prevent the court
from meeting these time limits. Section
442 provides that the term "cause"
under section 1112(b),
as amended by this provision,
includes the following:
1. substantial
or continuing loss to or diminution of the estate and the absence of a reasonable
likelihood of rehabilitation;
2. gross mismanagement
of the estate;
3. failure to maintain
appropriate insurance that poses a material risk to the estate or the public;
4. unauthorized
use of cash collateral that is harmful to one or more
creditors;
5. failure to comply
with a court order;
6. unexcused failure
to timely satisfy any filing or reporting requirement under the
Bankruptcy
Code or applicable rule;
7. failure to attend
the section 341 meeting of
creditors or an examination
pursuant to rule 2004 of the Federal Rules of Bankruptcy Procedure, without
good cause shown by the debtor;
8. failure to timely
provide information or to attend meetings reasonably requested by the United
States trustee or bankruptcy administrator;
9. failure to timely
pay taxes owed after the order
for relief or to file tax returns due postpetition;
10. failure to
file a disclosure statement or to confirm a plan within the time fixed by
the Bankruptcy Code or pursuant to court order;
11. failure to
pay any requisite fees or charges under chapter 123 of title
28 of the United States
Code;
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12. revocation
of a confirmation order;
13. inability to
effectuate substantial consummation of a confirmed plan;
14. material default
by the debtor with respect
to a confirmed plan;
15. termination
of a plan by reason of the occurrence of a condition specified in the plan;
and
16. the
debtor's failure to pay
any domestic support obligation
that first becomes payable postpetition
Section 442(b) creates an
additional ground for the appointment of a chapter
11 trustee or examiner under
section 1104(a). It provides
that should the bankruptcy court determine cause exists to convert or dismiss
a chapter 11 case, it may appoint
a trustee or examiner if it is in the best interests of
creditors and the bankruptcy
estate.
Section 442(b) is designed
to benefit creditors when
a chapter 11 case would otherwise
be dismissed or converted to a chapter
7 case pursuant to section
1112 of the
Bankruptcy Code.
Section 442(b) allows the
court to appoint a chapter 11
trustee or examiner, as an alternative to dismissing or converting the case
to chapter 7, if in the best
interest of creditors and
the bankruptcy estate. Section
442(b) is not intended to
ease the standards for appointing chapter
11 trustees. Practice under
Chapter X of the Bankruptcy Act of 1898 demonstrated that routine appointment
of trustees deters the use of reorganization statutes and increases the
likelihood that by the time a company resorts to bankruptcy relief, it must
liquidate. It is therefore important for section
442(b) to be used only for
cases that would otherwise be dismissed or converted to chapter
7, and not as an alternative
method for attaining the appointment of a chapter
11 trustee.
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Sec.
443. Study of Operation of Title
11, United States Code, with Respect to Small Businesses. Section
443 of the Act directs the Administrator
of the Small Business Administration, in consultation with the Attorney
General, the Director of the Executive Office for United States Trustees,
and the Director of the Administrative Office of the United States Courts,
to conduct a study to determine: (1) the internal and external factors
that cause small businesses (particularly sole proprietorships) to seek
bankruptcy relief and the factors that cause small businesses to successfully
complete their chapter 11 cases;
and (2) how the bankruptcy laws may be made more effective and efficient
in assisting small business to remain viable.
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[SIC]
So in the original. Should have a period at the end.
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est in the
real estate. It allows a debtor
in its sole discretion to make the requisite interest payments out of rents
or other proceeds generated by the real property, notwithstanding section
363(c)(2).
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Sec.
445. Priority for Administrative
Expenses. Section 445
of the Act amends section 503(b)
of the Bankruptcy Code to add a new admini-strative expense priority for
a nonresidential real property lease that is assumed under section
365 and then subsequently
rejected. The amount of the priority is the sum of all monetary obligations
due under the lease (excluding penalties and obligations arising from or
relating to a failure to operate) for the two-year period following the
rejection date or actual turnover of the premises (whichever is later),
without reduction or setoff for any reason, except for sums actually received
or to be received from a nondebtor. Any remaining sums due for the balance
of the term of the lease are treated as a
claim under section
502(b)(6) of the
Bankruptcy
Code.
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Sec.
446. Duties with Respect to a
Debtor Who Is a Plan Admini-strator of an Employee Benefit Plan.
Subsection (a) of section
446 of the Act amends
Bankruptcy
Code section 521(a) to
require a debtor, unless
a trustee is serving in the case, to serve as the administrator (as defined
in the Employee Retirement Income Security Act of 1974) of an employee benefit
plan if the debtor served
in such capacity at the time the case was filed. Section
446(b) amends
Bankruptcy Code
section 704 to require
the chapter 7 trustee to perform
the obligations of such admini-strator in a case where the
debtor or an
entity designated by the
debtor was required to
perform such obligations. Section
446(c) amends Bank-ruptcy Code
section 1106(a) to require
a chapter 11 trustee to perform
these obligations.
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Sec.
447. Appointment of Committee
of Retired Employees. This provision amends section
1114(d) of the
Bankruptcy
Code to clarify that it is the responsibility of the United States trustee
to appoint members to a committee of retired employees.
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TITLE V. MUNICIPAL
BANKRUPTCY PROVISIONS
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Sec.
501. Petition and Proceedings
Related to Petition. Section
501 amends sections 921(d) and
301 of the
Bankruptcy Code
to clarify that the court must enter the
order for relief in a chapter
9 case.
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Sec.
502. Applicability of Other Sections
to Chapter 9. Section 502
of the of the Act amends section 901 of the Bankruptcy Code to make the
following sections applicable to chapter 9 cases:
1. section 555 (contractual
right to liquidate, terminate or accelerate a securities contract);
2. section 556 (contractual
right to liquidate, terminate or accelerate a commodities or
forward contract);
3. section 559 (contractual
right to liquidate, terminate or accelerate a repurchase agreement);
4. section 560 (contractual
right to liquidate, terminate or accelerate a
swap agreement);
5. section 561 (contractual
right to liquidate, terminate, accelerate, or offset under a
master netting agreement
and across contracts); and
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TITLE VI. BANKRUPTCY
DATA
Sec.
601. Improved
Bankruptcy Statistics.
This provision amends chapter 6 of title
28 of the United States
Code to require the clerk for each district (or the bankruptcy court clerk
if one has been certified pursuant to section
156(b) of title
28 of the United States
Code) to collect certain statistics for chapter
7,
11, and
13 cases in a standardized
format prescribed by the Director of the Administrative Office of the United
States Courts and to make this information available to the public. Not
later than July 1, 2008, the Director must submit a report to Congress concerning
the statistical information collected and then must report annually thereafter.
The statistics must be itemized by chapter of the Bankruptcy Code and be
presented in the aggregate for each district. The specific categories of
information that must be gathered include the following:
1. scheduled total assets and liabilities of debtors who are individuals
with primarily consumer debts
under chapters 7,
11 and
13 by category;
2. such debtors' current
monthly income, average income, and aver-age expenses;
3. the aggregate amount of debts discharged during the reporting
period based on the difference between the total amount of scheduled debts
and by categories that are predominantly nondis-chargeable;
4. the average time between the filing of the bankruptcy case and
the closing of the case;
5. the number of cases in which reaffirmation agreements were filed,
the total number of reaffirmation agreements filed, the number of cases
in which the debtor was
pro se and a reaffirmation agreement was filed, and the number of cases
in which the reaffirmation agreement was approved by the court;
6. for chapter 13 cases,
information on the number of:
(a) final orders determining the value of secured property in an
amount less than the amount of the secured
claim,
(b) final orders that determined the value of property securing a
claim,
(c) cases dismissed,
(d) cases dismissed for failure to make payments under the plan,
(e) cases refiled after dismissal,
(f) cases in which the plan was completed (separately itemized with
respect to the number of modifications made before completion of the plan,
and
(g) cases in which the
debtor had previously sought
bankruptcy relief within the six years preceding the filing of the present
case;
7. the number of cases in which
creditors were fined for
misconduct and the amount of any punitive damages awarded for
creditor mis-conduct; and
8. the number of cases in which sanctions under rule
9011 of
the Federal Rules of Bankruptcy Procedure were imposed
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against a debtor’s counsel and the damages awarded under this rule.
Section 601 provides that the
amendments in this provision take effect 18 months after the date of enactment
of this Act.
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Sec.
602. Uniform Rules for the Collection
of Bankruptcy Data. Section
602 of the Act amends chapter
39 of title 28 of the United
States Code to require the Attorney General to promulgate rules mandating
the establishment of uniform forms for final reports in chapter
7,
12 and
13 cases and periodic reports
in chapter 11 cases. This provision
also specifies that these reports be designed to facilitate compilation
of data and to provide maximum public access by physical inspection at one
or more central filing locations and by electronic access through the Internet
or other appropriate media. The information should enable an evaluation
of the efficiency and practicality of the bankruptcy system. In issuing
rules, the Attorney General must consider:
(1) the reasonable
needs of the public for information about the Federal bankruptcy system;
(2) the economy,
simplicity, and lack of undue burden on persons obligated to file the reports;
and (3) appropriate
privacy concerns and safeguards.
Section 602 provides that final
reports by trustees in chapter 7,
12, and
13 cases include the following
information: (1)
the length of time the case was pending;
(2) assets abandoned;
(3) assets exempted;
(4) receipts
and disbursements of the estate;
(5) administrative
expenses, including those associated with section
707(b) of the
Bankruptcy
Code, and the actual costs of administering chapter
13 cases;
(6)
claims asserted;
(7)
claims allowed; and
(8) distributions
to claimants and claims
discharged without payment. With regard to chapter
11 cases, section
602 provides that periodic reports
include the following information regarding:
1. the industry
classification for businesses conducted by the
debtor, as published by
the Department of Commerce;
2. the length
of time that the case was pending;
3. the number
of full-time employees as of the date of the
order for relief and at
the end of each reporting period;
4. cash receipts,
cash disbursements, and profitability of the
debtor for the most recent
period and cumulatively from the date of the
order for relief;
5. the
debtor's compliance with
the Bankruptcy Code, including whether tax returns have been filed and taxes
have been paid;
6. professional
fees approved by the court for the most recent period and cumulatively from
the date of the order for relief;
and
7. plans filed
and confirmed, including the aggregate recoveries of holders by class and
as a percentage of total claims
of an allowed class.
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Sec.
603. Audit Procedures.
Subsection (a)(1) of section
603 of the Act requires the Attorney
General (for judicial districts served by United States trustees) and the
Judicial Conference of the United States (for judicial districts served
by bankruptcy administrators) to establish procedures to determine the accuracy,
veracity, and
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complete ness of
petitions, schedules and
other information filed by debtors pursuant to sections
111,
521 and
1322 of the
Bankruptcy Code.
Section 603(a)(1) requires
the audits to be conducted in accordance with generally accepted auditing
standards and performed by independent certified public
accountants or independent
licensed public accountants.
It permits the Attorney General and the Judicial Conference to develop alternative
auditing standards not later than two years after the date of enactment
of this Act. Section 603(a)(2)
requires these procedures to:
(1)
establish a method of selecting appropriate qualified contractors to perform
these audits; (2)
establish a method of randomly selecting cases for audit, and that a minimum
of at least one case out of every 250 cases be selected for audit;
(3)
require audits in cases where the schedules of income and expenses reflect
greater than average variances from the statistical norm for the district
if they occur by reason of higher income or higher expenses than the statistical
norm in which the schedules were filed; and
(4) require the aggregate
results of such audits, including the percentage of cases by district in
which a material misstatement of income or expenditures is reported, to
be made available to the public on an annual basis.
Section 603(b) amends section
586 of title
28 of the United States
Code to require the United States trustee to submit reports as directed
by the Attorney General, including the results of audits performed under
section 603(a). In addition,
it authorizes the United States trustee to contract with auditors to perform
the audits specified in this provision. Further, it requires the report
of each audit to be filed with the court and transmitted to the United States
trustee. The report must specify material misstatements of income, expenditures
or assets. In a case where a material misstatement has been reported, the
clerk must provide notice of such misstatement to
creditors and the United
States trustee must report it to the United States Attorney, if appropriate,
for possible criminal prosecution. If advisable, the United States trustee
must also take appropriate action, such as revoking the
debtor's discharge.
Section 603(c) amends section
521 of the
Bankruptcy
Code to make it a duty of the
debtor to cooperate with
an auditor. Section 603(d)
amends section 727 of the
Bankruptcy Code to add, as a ground for revocation of a chapter
7 discharge the
debtor's failure to:
(a) satisfactorily
explain a material misstatement discovered as the result of an audit pursuant
to this provision; or (b)
make available for inspection all necessary documents or property belonging
to the debtor that are
requested in connection with such audit. Section
603(e) provides that the amendments
made by this provision take effect 18 months after the Act's date of enactment.
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Sec. 604. Sense of Congress
Regarding Availability of Bankruptcy Data. Section
604 expresses a sense of the
Congress that it is a national policy of the United States that all data
collected by bankruptcy clerks in electronic form (to the extent such data
relates to public records pursuant to section
107 of the
Bankruptcy Code)
should be made available to the public in a useable electronic form in bulk,
subject to appropriate privacy concerns and safeguards as determined by
the Judicial Conference of the United States. It also states that a uniform
bankruptcy data system should be established that uses a single set of data
definitions and forms to collect
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such data and that data for any particular bankruptcy
case should be aggregated in electronic format.
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Sec.
701. Treatment of Certain Tax
Liens. Subsection (a)
of section 701 of the Act makes
several amendments to section 724 of the
Bankruptcy Code to provide greater protection for holders
of tax liens on real or
personal property of the estate, particularly holders of ad valorem
tax liens. Many school
boards obtain liens on
real property to ensure collection of unpaid ad valorem taxes. Under
current law, local governments are sometimes unable to collect these taxes
despite the presence of a statutory
lien because they may be subordinated to certain
claims and expenses as a
result of section 724. Pursuant
to section 701(a), subordination
of ad valorem tax liens
is still possible under section
724(b), but limited to the
payment of: (1)
claims for wages, salaries,
and commissions entitled to priority under section
507(a)(4); and
(2)
claims for contributions
to employee benefit plans entitled to priority under section
507(a)(5). Section
701(a) will also protect the
holders of these tax liens
as well as Federal tax liens
from erosion of their claims'
status by expenses incurred under chapter
11 of the
Bankruptcy Code.
Before a tax statutory lien
on real or personal property may be subordinated pursuant to section
724, the chapter
7 trustee must exhaust all other
unencumbered estate assets and, consistent with section
506, recover reasonably necessary
costs and expenses of preserving or disposing of such property.
Section 701(b) amends section
505(a)(2) of the
Bankruptcy
Code to prevent a bankruptcy court from determining the amount or legality
of an ad valorem tax on real or personal property if the applicable
period for contesting or redetermining the amount of the
claim under nonbankruptcy
law has expired.
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TITLE VII. BANKRUPTCY TAX PROVISIONS
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Sec.
702. Treatment of Fuel Tax Claims.
Section 702 of the Act amends
section 501 of the
Bankruptcy
Code to simplify the process for filing of
claims by states for certain
fuel taxes. Rather than requiring each state to file a
claim for these taxes (as
is the case under current law), section
702 permits the designated "base
jurisdiction" under the International Fuel Tax Agreement to file a
claim on behalf of all states,
which would then be allowed as a single
claim.
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Sec.
703. Notice of Request for a
Determination of Taxes. Under current law, a trustee or
debtor in possession may
request a governmental unit
to determine administrative tax liabilities in order to receive a discharge
of those liabilities. There are no requirements as to the content or form
of such notice to the government. Section
703 of the Act amends section
505(b) of the
Bankruptcy
Code to require the clerk of each district to maintain a list of addresses
designated by governmental
units for service of section
505 requests. In addition,
the list may also include information concerning filing requirements specified
by such governmental units.
If a governmental entity
does not designate an address and provide that address to the bankruptcy
court clerk, any request made under section
505(b) of the
Bankruptcy
Code may be served at the address for the filing of a tax return or protest
of the appropriate taxing authority of that
governmental unit.
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