Bankruptcy Reform bill

TABLE OF CONTENTS:

Title I: Needs-Based Bankruptcy

Title II: Enhanced Procedural Protections for Consumers

Title III: Improved Procedures for Efficient Administration

of the Bankruptcy System

Title IV: Technical Corrections

Consumer Bankruptcy Reform Act of 1998 - Title I: Needs Based Bankruptcy - Amends the bankruptcy code to modify the requirement that a debtor request conversion of a case from Chapter 7 (Liquidation) to Chapter 12 (Adjustment of Debts of a Family Farmer With Regular Annual Income) or Chapter 13 Adjustment of Debts of an Individual With Regular Income). Allows mere consent to conversion as an alternative to requesting it.

(Sec. 102) Revamps Chapter 7 dismissal guidelines to provide for: (1) conversion to Chapter 13 with or without the debtor's consent; (2) a motion for dismissal by a party in interest; and (3) repeal of the presumption in favor of granting the relief requested by the debtor.

Requires the court to consider whether: (1) the debtor can repay at least 20 percent of nonpriority unsecured debts; or (2) the debtor has filed in bad faith.

Directs the court to order debtor's counsel to reimburse the panel trustee's legal fees if the trustee's motion for dismissal or conversion has been granted, and the court finds that the chapter 7 filing by such counsel was not substantially justified. Subjects counsel to a civil penalty for certain bankruptcy rules violations.

Requires the court to award a debtor all reasonable costs in successfully contesting a dismissal motion brought by a party in interest (other than a panel trustee) if: (1) the party's position was not substantially justified; or (2) the party brought the motion solely to coerce the debtor into waiving a guaranteed right. Exempts from such a sanction any party in interest whose aggregate claim amount is less than $1,000. Prohibits a party in interest from bringing a dismissal motion if the debtor and debtor's spouse, combined, as of the date of the order for relief, have current monthly total income equal to or less than the national median household monthly income calculated on a monthly basis for a household of equal size.

Title II: Enhanced Procedural Protections for Consumers - Changes from mandatory to discretionary the authority of the court to: (1) award reasonable legal fees to a debtor if it disallows a creditor's claim, or reduces it by more than 20 percent, and finds it is not substantially justified; and (2) award such additional damages as may be required by the equities of the case.

(Sec. 202) Amends the prohibition against discharge from a debt obtained by a false representation to require such representation to be material, and one upon which the defrauded person justifiably relied.

Prohibits a creditor from requesting a determination of dischargeability of a consumer debt if, before the filing of the petition, the debtor made a good faith effort to negotiate a reasonable alternative repayment schedule and the creditor unreasonably refused. Places the burden of proof upon the debtor regarding the reasonableness of such offer.

(Sec. 203) Entitles to treble damages (up to $5,000), as well as costs and attorneys' fees, any individual injured by the willful failure of a creditor to credit payments received under a confirmed plan in the manner the plan requires.

(Sec. 204) Entitles to costs and attorneys' fees (as well as actual and punitive damages) any individual injured by any willful violation of an automatic stay.

(Sec. 205) Authorizes a court to award a debtor: (1) reasonable attorneys' fees and costs if a creditor files a motion for denial of discharge which is denied or withdrawn; and (2) any damages the equities of the case may require, if the creditor's position is not substantially justified.

(Sec. 206) Requires disallowance of any claim based upon a secured debt if the creditor has failed to comply with certain mortgage disclosure requirements of the Truth in Lending Act.

Title III: Improved Procedures for Efficient Administration of the Bankruptcy System - Revises procedural guidelines to mandate: (1) written notice of nonprofit debt counseling services to the individual consumer debtor before commencement of a case; and (2) specified additional disclosures to the court and to the creditor regarding the debtor's financial status (including tax returns).

(Sec. 301) Allows creditors to request and receive a debtor's petition, schedules, and statement of affairs, including any chapter 13 debt adjustment plan.

Instructs the Director of the Administrative Office of the U.S. Courts to establish safeguard procedures regarding the confidentiality of such requisite tax information.

(Sec. 302) Revises the requirements for allowed secured claims in a confirmed chapter 13 debt readjustment plan to redefine them as allowed claims secured under nonbankruptcy law by reason of a lien on property in which the estate has an interest or is subject to a setoff. Exempts such claims from application of specified requirements for determination of secured status.

States that, with respect to court confirmation of chapter 13 debt readjustment plan, a claim holder may retain the lien securing such claim until the underlying debt is fully paid.

Exempts from application of specified requirements for determination of secured status any allowed claim attributable to the purchase price of personal property acquired by the debtor during the 90-day period preceding the petition filing date.

(Sec. 303) Revises automatic stay guidelines to terminate a stay with respect to a debt or lease if the debtor has made repeat filings in bad faith. Establishes a rebuttable presumption that certain cases have been filed in bad faith.

(Sec. 304) Sets forth a deadline within which the debtor must file a debt adjustment plan.

(Sec. 305) Revises requirements governing a stay of action against a chapter 13 codebtor who did not receive the consideration for a claim to provide a maximum 30-day automatic stay to the extent that the creditor proceeds against: (1) the individual that received the consideration; or (2) the property not in the possession of the debtor that secures that claim. States that such stay shall apply in any case in which the debtor is primarily obligated to pay under a legally binding separation or property settlement agreement or divorce or dissolution decree.

(Sec. 306) Amends the Federal judicial code to mandate the compilation of bankruptcy statistics for individual debtors with primarily consumer debts seeking relief under chapters 7, 11 (Reorganization), and 13. Directs the Administrative Office of the U.S. Courts to compile and make such statistics public and to report them annually to the Congress.

(Sec. 307) Requires each U.S. trustee to report to the Attorney General on audit results performed by independent certified or licensed public accountants on bankruptcy petitions and schedules. Requires the Attorney General to establish random audits of individual cases.

(Sec. 308) Authorizes a creditor holding a consumer debt to participate in a meeting of creditors in a chapter 7 or 13 case, either alone or in conjunction with an attorney.

(Sec. 309) Prescribes notice procedures for chapter 7 and chapter 13 creditors.

(Sec. 310) Revises requirements governing the effects of conversion from chapter 13 to another chapter. Declares that: (1) valuations of property and of allowed secured claims in a chapter 13 case shall not apply in a case converted to chapter 7; and (2) with respect to cases converted from chapter 13, the claim of any creditor holding security as of the date of the petition shall continue to be secured by that security unless the full amount determined under applicable non-bankruptcy law has been fully paid as of the conversion date.

(Sec. 311) Revises automatic stay guidelines to provide that in the case of an individual filing under chapters 7, 11, or 13, the automatic stay shall terminate 60 days after a request for its release by a party in interest, unless the court or the parties agree to a longer time.

(Sec. 312) Provides for automatic dismissal if a chapter 7 debtor fails to furnish all mandatory information, or fails to timely file the requisite schedules. Requires the court to order dismissal within five days of a request by a party in interest for the debtor's failure to timely submit requisite documentation.

(Sec. 313) Prohibits a Chapter 13 confirmation hearing from being held less than 20 days after the first meeting of creditors if there is an objection.

(Sec. 314) Revamps Chapter 13 debt discharge guidelines. Prohibits discharge from a debt for restitution or damages awarded in a civil action against the debtor for willful or malicious injury by the debtor that caused personal injury or death of an individual.

(Sec. 315) Declares dischargeable certain debts incurred to pay prior nondischargeable debts if the debtor who paid the nondischargeable debt is a single parent with dependent children at the time of the order for relief, or: (1) an allowed claim pursuant to an order for child and spousal support was unpaid by the debtor as of the petition date; and (2) the creditor is unable to demonstrate that the debtor intentionally incurred the debt to pay the nondischargeable debt.

(Sec. 316) Establishes a presumption of nondischargeability for certain consumer debts of $400 or more incurred to a single creditor during the 90-day period preceding the date of the order for relief, and not reasonably necessary for maintenance and support of either debtor or debtor's dependent child.

(Sec. 318) Declares that the automatic stay is terminated regarding property of the bankrupt estate securing a claim (of more than $3,000) or subject to an unexpired lease (with at least one year remaining, where the debtor owes at least $3,000 for a one-year period), if the debtor fails to complete an intended surrender of consumer debt collateral within a revised, accelerated time frame.

(Sec. 319) Delineates a cash payment plan for chapter 13 debtors for payments to a lessor of personal property, and to a creditor holding a claim secured by personal property to the extent such claim is attributable to the debtor's purchase of such property.

(Sec. 320) Revises guidelines exempting property from the bankrupt estate to deny such exemption to any interest that exceeds $100,000 in aggregate value in certain property used as a residence or burial plot. Shields the principal residence of a family farmer from such restriction.

(Sec. 321) Denies an individual eligibility to be a debtor under the bankruptcy code unless the individual has, during the 90 days before filing a petition, made a good-faith attempt to create a debt repayment plan outside the judicial bankruptcy system through an approved credit counseling program.

Denies a chapter 7 or chapter 13 discharge in debt to a debtor who has failed to complete an approved instructional course in personal financial management after filing the petition. Requires an individual debtor to file documentation with the court attesting to the debtor's compliance with such counseling and instructional requirements.

Requires bankruptcy court staff to maintain and make available to debtors a list of approved credit counseling services and personal financial management instructional courses.

(Sec. 322) Bankruptcy Judgeship Act of 1998 - Amends the Federal judicial code to mandate appointments for additional temporary bankruptcy judgeships in California, Florida, Maryland, Michigan, Mississippi, New Jersey, New York, Pennsylvania, Tennessee, and Virginia. Provides that the first vacancy occurring in such a district five years or more after a judge is appointed under this Act shall not be filled.

Extends temporary bankruptcy judgeship positions authorized for the northern district of Alabama, the eastern district of Tennessee, and the districts of Delaware, Puerto Rico, and South Carolina.

Directs each chief bankruptcy judge to report annually to the Director of the Administrative Office of the U.S. Courts on the travel expenses of each bankruptcy judge assigned to the applicable district.

(Sec. 323) Revises chapter 7 priority payment guidelines to declare that a claim or expense entitled to priority for child and spousal support shall have first priority over any other prioritized claim or expense.

(Sec. 324) Permits a chapter 13 debt readjustment plan to provide for the payment of any claim entitled to priority for child and spousal support before the payment of any other prioritized claim.

(Sec. 325) Conditions court confirmation of such a plan (and its consequent discharge of debts) upon certification of debtor's payment of all amounts payable under an order for child or spousal support that are due after the petition filing date.

(Sec. 326) Excepts from an automatic stay: (1) the withholding of income for collection of child and spousal support; and (2) specified constraints placed upon driving, professional, occupational and recreational licenses pursuant to debtor's arrearages for child and spousal support.

(Sec. 328) Modifies guidelines governing property exempt from the bankruptcy estate to declare such property liable for child and spousal support and maintenance.

Title IV: Technical Corrections - Makes technical corrections to Federal bankruptcy, criminal, and judiciary law. Redefines single asset real estate to exclude family farms and to repeal the $4 million ceiling on the amount of noncontingent, liquidated secured debts on such property. Defines the term "transfer" to include: (1) creation of a lien; (2) retention of title as a security interest; (3) foreclosure of the debtor's equity of redemption; and (4) every mode of disposing of property or parting with an interest in property.

(Sec. 402) Requires triennial adjustment of: (1) the $5,000 value of certain implements, professional books, tools of the trade, farm animals, and crops which a debtor may exempt from the property of the estate (protecting it from creditors' liens); and (2) the national median household income calculated monthly.

(Sec. 406) Provides that a trustee or a creditors' and equity security holders' committee may pay a professional person they employ on a fixed or percentage fee basis, as well as on other bases already permitted.

(Sec. 409) Precludes an automatic stay of any transfer that is not avoidable in: (1) cases where the trustee serves as lien creditor and successor to certain creditors and purchasers; and (2) postpetition transactions.

Precludes an automatic stay of any act to obtain possession of estate property or to exercise control over such property with respect to the commencement or continuation of any eviction, unlawful detainer action, or similar proceeding by a lessor against a debtor involving residential real property in which the debtor resides as a tenant under a rental agreement that has terminated.

(Sec. 411) Excludes from compensable professional services any expenses incurred by an individual member of a creditors' and equity security holders' committee.

(Sec. 413) Revises the prohibition against debtor avoidance of certain judicial liens in connection with a liability designated as, and actually in the nature of, alimony, maintenance, or support.

(Sec. 414) Declares nondischargeable in bankruptcy a debt for death or personal injury caused by the debtor's operation of a watercraft or aircraft while intoxicated from alcohol, a drug, or other substance. Limits the nondischargeability of fees imposed by a court to fees so imposed on a prisoner.

(Sec. 419) Revises guidelines governing preferences to provide that, if the trustee avoids a security interest given between 90 days and one year before the date of the filing of the petition, by the debtor to a non-insider for the benefit of a creditor that is an insider, then such security interest shall be considered to be avoided only with respect to the insider creditor.

(Sec. 422) Revises setoff recovery rules to exclude from recovery by a trustee setoffs by swap participants.

(Sec. 425) Requires the U.S. trustee in a chapter 11 (Reorganization) case to file a report certifying the election of an eligible, disinterested trustee at a meeting of creditors. Declares that upon such filing: (1) the trustee elected shall be considered to have been selected and appointed; and (2) the service shall terminate of any trustee previously appointed to fill the term of specified ineligible or incapacitated trustees.

(Sec. 429) Amends the Bankruptcy Judges, U.S. Trustees, and Family Farmer Bankruptcy Act of 1986, with respect to judicial districts for Alabama and North Carolina, to eliminate: (1) the October 1, 2002, and October 1, 2003, alternative effective dates for specified amendments relating to U.S. Trustees, Trustee duties, and quarterly fees paid to them in chapter 11 cases; and (2) make such amendments effective only upon a district's election to be included in a bankruptcy region.