03.01.11
- The Senate and House of Representatives are drafting
legislation allowing individuals to REDUCE (cram-down)
the principal balance of their mortgage to the current
value of their home...
read more
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(a)
(1) Promptly after the order for relief under this chapter, the
United States trustee shall appoint one disinterested person that
is a member of the panel of private trustees established under section
586 (a)(1) of title 28 or that is serving as trustee in the case
immediately before the order for relief under this chapter to serve
as interim trustee in the case.
(2) If none of the members of such panel is willing to serve as
interim trustee in the case, then the United States trustee may
serve as interim trustee in the case.
(b) The service of an interim trustee under this section terminates
when a trustee elected or designated under section 702 of this title
to serve as trustee in the case qualifies under section 322 of this
title.
(c) An interim trustee serving under this section is a trustee in
a case under this title.
702. Election of trustee
(a) A creditor may vote for a candidate for trustee only if such
creditor
(1) holds an allowable, undisputed, fixed, liquidated, unsecured
claim of a kind entitled to distribution under section 726 (a)(2),
726 (a)(3), 726 (a)(4), 752 (a), 766 (h), or 766 (i) of this title;
(2) does not have an interest materially adverse, other than an
equity interest that is not substantial in relation to such creditors
interest as a creditor, to the interest of creditors entitled to
such distribution; and
(3) is not an insider.
(b) At the meeting of creditors held under section 341 of this title,
creditors may elect one person to serve as trustee in the case if
election of a trustee is requested by creditors that may vote under
subsection (a) of this section, and that hold at least 20 percent
in amount of the claims specified in subsection (a)(1) of this section
that are held by creditors that may vote under subsection (a) of
this section.
(c) A candidate for trustee is elected trustee if
(1) creditors holding at least 20 percent in amount of the claims
of a kind specified in subsection (a)(1) of this section that are
held by creditors that may vote under subsection (a) of this section
vote; and
(2) such candidate receives the votes of creditors holding a majority
in amount of claims specified in subsection (a)(1) of this section
that are held by creditors that vote for a trustee.
(d) If a trustee is not elected under this section, then the interim
trustee shall serve as trustee in the case.
703. Successor trustee
(a) If a trustee dies or resigns during a case, fails to qualify
under section 322 of this title, or is removed under section 324
of this title, creditors may elect, in the manner specified in section
702 of this title, a person to fill the vacancy in the office of
trustee.
(b) Pending election of a trustee under subsection (a) of this section,
if necessary to preserve or prevent loss to the estate, the United
States trustee may appoint an interim trustee in the manner specified
in section 701 (a).
(c) If creditors do not elect a successor trustee under subsection
(a) of this section or if a trustee is needed in a case reopened
under section 350 of this title, then the United States trustee
(1) shall appoint one disinterested person that is a member of the
panel of private trustees established under section 586 (a)(1) of
title 28 to serve as trustee in the case; or
(2) may, if none of the disinterested members of such panel is willing
to serve as trustee, serve as trustee in the case.
704. Duties of trustee
(a) The trustee shall
(1) collect and reduce to money the property of the estate for which
such trustee serves, and close such estate as expeditiously as is
compatible with the best interests of parties in interest;
(2) be accountable for all property received;
(3) ensure that the debtor shall perform his intention as specified
in section 521 (a)(2)(B) of this title;
(4) investigate the financial affairs of the debtor;
(5) if a purpose would be served, examine proofs of claims and object
to the allowance of any claim that is improper;
(6) if advisable, oppose the discharge of the debtor;
(7) unless the court orders otherwise, furnish such information
concerning the estate and the estates administration as is
requested by a party in interest;
(8) if the business of the debtor is authorized to be operated,
file with the court, with the United States trustee, and with any
governmental unit charged with responsibility for collection or
determination of any tax arising out of such operation, periodic
reports and summaries of the operation of such business, including
a statement of receipts and disbursements, and such other information
as the United States trustee or the court requires;
(9) make a final report and file a final account of the administration
of the estate with the court and with the United States trustee;
(10) if with respect to the debtor there is a claim for a domestic
support obligation, provide the applicable notice specified in subsection
(c);
(11) if, at the time of the commencement of the case, the debtor
(or any entity designated by the debtor) served as the administrator
(as defined in section 3 of the Employee Retirement Income Security
Act of 1974) of an employee benefit plan, continue to perform the
obligations required of the administrator; and
(12) use all reasonable and best efforts to transfer patients from
a health care business that is in the process of being closed to
an appropriate health care business that
(A) is in the vicinity of the health care business that is closing;
(B) provides the patient with services that are substantially similar
to those provided by the health care business that is in the process
of being closed; and
(C) maintains a reasonable quality of care.
(b)
(1) With respect to a debtor who is an individual in a case under
this chapter
(A) the United States trustee (or the bankruptcy administrator,
if any) shall review all materials filed by the debtor and, not
later than 10 days after the date of the first meeting of creditors,
file with the court a statement as to whether the debtors
case would be presumed to be an abuse under section 707 (b); and
(B) not later than 7 days after receiving a statement under subparagraph
(A), the court shall provide a copy of the statement to all creditors.
(2) The United States trustee (or bankruptcy administrator, if any)
shall, not later than 30 days after the date of filing a statement
under paragraph (1), either file a motion to dismiss or convert
under section 707 (b) or file a statement setting forth the reasons
the United States trustee (or the bankruptcy administrator, if any)
does not consider such a motion to be appropriate, if the United
States trustee (or the bankruptcy administrator, if any) determines
that the debtors case should be presumed to be an abuse under
section 707 (b) and the product of the debtors current monthly
income, multiplied by 12 is not less than
(A) in the case of a debtor in a household of 1 person, the median
family income of the applicable State for 1 earner; or
(B) in the case of a debtor in a household of 2 or more individuals,
the highest median family income of the applicable State for a family
of the same number or fewer individuals.
(c)
(1) In a case described in subsection (a)(10) to which subsection
(a)(10) applies, the trustee shall
(A)
(i) provide written notice to the holder of the claim described
in subsection (a)(10) of such claim and of the right of such holder
to use the services of the State child support enforcement agency
established under sections 464 and 466 of the Social Security Act
for the State in which such holder resides, for assistance in collecting
child support during and after the case under this title;
(ii) include in the notice provided under clause (i) the address
and telephone number of such State child support enforcement agency;
and
(iii) include in the notice provided under clause (i) an explanation
of the rights of such holder to payment of such claim under this
chapter;
(B)
(i) provide written notice to such State child support enforcement
agency of such claim; and
(ii) include in the notice provided under clause (i) the name, address,
and telephone number of such holder; and
(C) at such time as the debtor is granted a discharge under section
727, provide written notice to such holder and to such State child
support enforcement agency of
(i) the granting of the discharge;
(ii) the last recent known address of the debtor;
(iii) the last recent known name and address of the debtors
employer; and
(iv) the name of each creditor that holds a claim that
(I) is not discharged under paragraph (2), (4), or (14A) of section
523 (a); or
(II) was reaffirmed by the debtor under section 524 (c).
(2)
(A) The holder of a claim described in subsection (a)(10) or the
State child support enforcement agency of the State in which such
holder resides may request from a creditor described in paragraph
(1)(C)(iv) the last known address of the debtor.
(B) Notwithstanding any other provision of law, a creditor that
makes a disclosure of a last known address of a debtor in connection
with a request made under subparagraph (A) shall not be liable by
reason of making such disclosure.
705. Creditors committee
(a) At the meeting under section 341 (a) of this title, creditors
that may vote for a trustee under section 702 (a) of this title
may elect a committee of not fewer than three, and not more than
eleven, creditors, each of whom holds an allowable unsecured claim
of a kind entitled to distribution under section 726 (a)(2) of this
title.
(b) A committee elected under subsection (a) of this section may
consult with the trustee or the United States trustee in connection
with the administration of the estate, make recommendations to the
trustee or the United States trustee respecting the performance
of the trustees duties, and submit to the court or the United
States trustee any question affecting the administration of the
estate.
706. Conversion
(a) The debtor may convert a case under this chapter to a case
under chapter 11, 12, or 13 of this title at any time, if the case
has not been converted under section 1112, 1208, or 1307 of this
title. Any waiver of the right to convert a case under this subsection
is unenforceable.
(b) On request of a party in interest and after notice and a hearing,
the court may convert a case under this chapter to a case under
chapter 11 of this title at any time.
(c) The court may not convert a case under this chapter to a case
under chapter 12 or 13 of this title unless the debtor requests
or consents to such conversion.
(d) Notwithstanding any other provision of this section, a case
may not be converted to a case under another chapter of this title
unless the debtor may be a debtor under such chapter.
707. Dismissal of a case or
conversion to a case under chapter 11 or 13
(a) The court may dismiss a case under this chapter only after
notice and a hearing and only for cause, including
(1) unreasonable delay by the debtor that is prejudicial to creditors;
(2) nonpayment of any fees or charges required under chapter 123
of title 28; and
(3) failure of the debtor in a voluntary case to file, within fifteen
days or such additional time as the court may allow after the filing
of the petition commencing such case, the information required by
paragraph (1) of section 521 (a), but only on a motion by the United
States trustee.
(b)
(1) After notice and a hearing, the court, on its own motion or
on a motion by the United States trustee, trustee (or bankruptcy
administrator, if any), or any party in interest, may dismiss a
case filed by an individual debtor under this chapter whose debts
are primarily consumer debts, or, with the debtors consent,
convert such a case to a case under chapter 11 or 13 of this title,
if it finds that the granting of relief would be an abuse of the
provisions of this chapter. 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)).
(2)
(A)
(i) In considering under paragraph (1) whether the granting of relief
would be an abuse of the provisions of this chapter, the court shall
presume abuse exists if the debtors current monthly income
reduced by the amounts determined under clauses (ii), (iii), and
(iv), and multiplied by 60 is not less than the lesser of
(I) 25 percent of the debtors nonpriority unsecured claims
in the case, or $6,000, whichever is greater; or
(II) $10,000.
(ii)
(I) The debtors monthly expenses shall be the debtors
applicable monthly expense amounts specified under the National
Standards and Local Standards, and the debtors actual monthly
expenses for the categories specified as Other Necessary Expenses
issued by the Internal Revenue Service for the area in which the
debtor resides, as in effect on the date of the order for relief,
for the debtor, the dependents of the debtor, and the spouse of
the debtor in a joint case, if the spouse is not otherwise a dependent.
Such expenses shall include reasonably necessary health insurance,
disability insurance, and health savings account expenses for the
debtor, the spouse of the debtor, or the dependents of the debtor.
Notwithstanding any other provision of this clause, the monthly
expenses of the debtor shall not include any payments for debts.
In addition, the debtors monthly expenses shall include the
debtors reasonably necessary expenses incurred to maintain
the safety of the debtor and the family of the debtor from family
violence as identified under section 302 of the Family Violence
Prevention and Services Act, or other applicable Federal law. The
expenses included in the debtors monthly expenses described
in the preceding sentence shall be kept confidential by the court.
In addition, if it is demonstrated that it is reasonable and necessary,
the debtors monthly expenses may also include an additional
allowance for food and clothing of up to 5 percent of the food and
clothing categories as specified by the National Standards issued
by the Internal Revenue Service.
(II) In addition, the debtors monthly expenses may include,
if applicable, the continuation of actual expenses paid by the debtor
that are reasonable and necessary for care and support of an elderly,
chronically ill, or disabled household member or member of the debtors
immediate family (including parents, grandparents, siblings, children,
and grandchildren of the debtor, the dependents of the debtor, and
the spouse of the debtor in a joint case who is not a dependent)
and who is unable to pay for such reasonable and necessary expenses.
(III) In addition, for a debtor eligible for chapter 13, the debtors
monthly expenses may include the actual administrative expenses
of administering a chapter 13 plan for the district in which the
debtor resides, up to an amount of 10 percent of the projected plan
payments, as determined under schedules issued by the Executive
Office for United States Trustees.
(IV) In addition, the debtors monthly expenses may include
the actual expenses for each dependent child less than 18 years
of age, not to exceed $1,500 per year per child, to attend a private
or public elementary or secondary school if the debtor provides
documentation of such expenses and a detailed explanation of why
such expenses are reasonable and necessary, and why such expenses
are not already accounted for in the National Standards, Local Standards,
or Other Necessary Expenses referred to in subclause (I).
(V) In addition, the debtors monthly expenses may include
an allowance for housing and utilities, in excess of the allowance
specified by the Local Standards for housing and utilities issued
by the Internal Revenue Service, based on the actual expenses for
home energy costs if the debtor provides documentation of such actual
expenses and demonstrates that such actual expenses are reasonable
and necessary.
(iii) The debtors average monthly payments on account of secured
debts shall be calculated as the sum of
(I) the total of all amounts scheduled as contractually due to secured
creditors in each month of the 60 months following the date of the
filing of the petition; and
(II) any additional payments to secured creditors necessary for
the debtor, in filing a plan under chapter 13 of this title, to
maintain possession of the debtors primary residence, motor
vehicle, or other property necessary for the support of the debtor
and the debtors dependents, that serves as collateral for
secured debts;
divided by 60.
(iv) The debtors expenses for payment of all priority claims
(including priority child support and alimony claims) shall be calculated
as the total amount of debts entitled to priority, divided by 60.
(B)
(i) In any proceeding brought under this subsection, the presumption
of abuse may only be rebutted by demonstrating special circumstances,
such as a serious medical condition or a call or order to active
duty in the Armed Forces, to the extent such special circumstances
that justify additional expenses or adjustments of current monthly
income for which there is no reasonable alternative.
(ii) In order to establish special circumstances, the debtor shall
be required to itemize each additional expense or adjustment of
income and to provide
(I) documentation for such expense or adjustment to income; and
(II) a detailed explanation of the special circumstances that make
such expenses or adjustment to income necessary and reasonable.
(iii) The debtor shall attest under oath to the accuracy of any
information provided to demonstrate that additional expenses or
adjustments to income are required.
(iv) The presumption of abuse may only be rebutted if the additional
expenses or adjustments to income referred to in clause (i) cause
the product of the debtors current monthly income reduced
by the amounts determined under clauses (ii), (iii), and (iv) of
subparagraph (A) when multiplied by 60 to be less than the lesser
of
(I) 25 percent of the debtors nonpriority unsecured claims,
or $6,000, whichever is greater; or
(II) $10,000.
(C) As part of the schedule of current income and expenditures required
under section 521, the debtor shall include a statement of the debtors
current monthly income, and the calculations that determine whether
a presumption arises under subparagraph (A)(i), that show how each
such amount is calculated.
(D) Subparagraphs (A) through (C) shall not apply, and the court
may not dismiss or convert a case based on any form of means testing
(i) if the debtor is a disabled veteran (as defined in section 3741
(1) of title 38), and the indebtedness occurred primarily during
a period during which he or she was
(I) on active duty (as defined in section 101 (d)(1) of title 10);
or
(II) performing a homeland defense activity (as defined in section
901 (1) of title 32); or
(ii) with respect to the debtor, while the debtor is
(I) on, and during the 540-day period beginning immediately after
the debtor is released from, a period of active duty (as defined
in section 101 (d)(1) of title 10) of not less than 90 days; or
(II) performing, and during the 540-day period beginning immediately
after the debtor is no longer performing, a homeland defense activity
(as defined in section 901 (1) of title 32) performed for a period
of not less than 90 days;
if after September 11, 2001, the debtor while a member of a reserve
component of the Armed Forces or a member of the National Guard,
was called to such active duty or performed such homeland defense
activity.
(3) In considering under paragraph (1) whether the granting of relief
would be an abuse of the provisions of this chapter in a case in
which the presumption in paragraph (2)(A)(i) does not arise or is
rebutted, the court shall consider
(A) whether the debtor filed the petition in bad faith; or
(B) the totality of the circumstances (including whether the debtor
seeks to reject a personal services contract and the financial need
for such rejection as sought by the debtor) of the debtors
financial situation demonstrates abuse.
(4)
(A) The court, on its own initiative or on the motion of a party
in interest, in accordance with the procedures described in rule
9011 of the Federal Rules of Bankruptcy Procedure, may order the
attorney for the debtor to reimburse the trustee for all reasonable
costs in prosecuting a motion filed under section 707 (b), including
reasonable attorneys fees, if
(i) a trustee files a motion for dismissal or conversion under this
subsection; and
(ii) the court
(I) grants such motion; and
(II) finds that the action of the attorney for the debtor in filing
a case under this chapter violated rule 9011 of the Federal Rules
of Bankruptcy Procedure.
(B) If the court finds that the attorney for the debtor violated
rule 9011 of the Federal Rules of Bankruptcy Procedure, the court,
on its own initiative or on the motion of a party in interest, in
accordance with such procedures, may order
(i) the assessment of an appropriate civil penalty against the attorney
for the debtor; and
(ii) the payment of such civil penalty to the trustee, the United
States trustee (or the bankruptcy administrator, if any).
(C) The signature of an attorney on a petition, pleading, or written
motion shall constitute a certification that the attorney has
(i) performed a reasonable investigation into the circumstances
that gave rise to the petition, pleading, or written motion; and
(ii) determined that the petition, pleading, or written motion
(I) is well grounded in fact; and
(II) is warranted by existing law or a good faith argument for the
extension, modification, or reversal of existing law and does not
constitute an abuse under paragraph (1).
(D) The signature of an attorney on the petition shall constitute
a certification that the attorney has no knowledge after an inquiry
that the information in the schedules filed with such petition is
incorrect.
(5)
(A) Except as provided in subparagraph (B) and subject to paragraph
(6), the court, on its own initiative or on the motion of a party
in interest, in accordance with the procedures described in rule
9011 of the Federal Rules of Bankruptcy Procedure, may award a debtor
all reasonable costs (including reasonable attorneys fees)
in contesting a motion filed by a party in interest (other than
a trustee or United States trustee (or bankruptcy administrator,
if any)) under this subsection if
(i) the court does not grant the motion; and
(ii) the court finds that
(I) the position of the party that filed the motion violated rule
9011 of the Federal Rules of Bankruptcy Procedure; or
(II) the attorney (if any) who filed the motion did not comply with
the requirements of clauses (i) and (ii) of paragraph (4)(C), and
the motion was made solely for the purpose of coercing a debtor
into waiving a right guaranteed to the debtor under this title.
(B) A small business that has a claim of an aggregate amount less
than $1,000 shall not be subject to subparagraph (A)(ii)(I).
(C) For purposes of this paragraph
(i) the term small business means an unincorporated
business, partnership, corporation, association, or organization
that
(I) has fewer than 25 full-time employees as determined on the date
on which the motion is filed; and
(II) is engaged in commercial or business activity; and
(ii) the number of employees of a wholly owned subsidiary of a corporation
includes the employees of
(I) a parent corporation; and
(II) any other subsidiary corporation of the parent corporation.
(6) Only the judge or United States trustee (or bankruptcy administrator,
if any) may file a motion under section 707 (b), if the current
monthly income of the debtor, or in a joint case, the debtor and
the debtors spouse, as of the date of the order for relief,
when multiplied by 12, is equal to or less than
(A) in the case of a debtor in a household of 1 person, the median
family income of the applicable State for 1 earner;
(B) in the case of a debtor in a household of 2, 3, or 4 individuals,
the highest median family income of the applicable State for a family
of the same number or fewer individuals; or
(C) in the case of a debtor in a household exceeding 4 individuals,
the highest median family income of the applicable State for a family
of 4 or fewer individuals, plus $525 per month for each individual
in excess of 4.
(7)
(A) No judge, United States trustee (or bankruptcy administrator,
if any), trustee, or other party in interest may file a motion under
paragraph (2) if the current monthly income of the debtor, including
a veteran (as that term is defined in section 101 of title 38),
and the debtors spouse combined, as of the date of the order
for relief when multiplied by 12, is equal to or less than
(i) in the case of a debtor in a household of 1 person, the median
family income of the applicable State for 1 earner;
(ii) in the case of a debtor in a household of 2, 3, or 4 individuals,
the highest median family income of the applicable State for a family
of the same number or fewer individuals; or
(iii) in the case of a debtor in a household exceeding 4 individuals,
the highest median family income of the applicable State for a family
of 4 or fewer individuals, plus $525 per month for each individual
in excess of 4.
(B) In a case that is not a joint case, current monthly income of
the debtors spouse shall not be considered for purposes of
subparagraph (A) if
(i)
(I) the debtor and the debtors spouse are separated under
applicable nonbankruptcy law; or
(II) the debtor and the debtors spouse are living separate
and apart, other than for the purpose of evading subparagraph (A);
and
(ii) the debtor files a statement under penalty of perjury
(I) specifying that the debtor meets the requirement of subclause
(I) or (II) of clause (i); and
(II) disclosing the aggregate, or best estimate of the aggregate,
amount of any cash or money payments received from the debtors
spouse attributed to the debtors current monthly income.
(c)
(1) In this subsection
(A) the term crime of violence has the meaning given
such term in section 16 of title 18; and
(B) the term drug trafficking crime has the meaning
given such term in section 924 (c)(2) of title 18.
(2) Except as provided in paragraph (3), after notice and a hearing,
the court, on a motion by the victim of a crime of violence or a
drug trafficking crime, may when it is in the best interest of the
victim dismiss a voluntary case filed under this chapter by a debtor
who is an individual if such individual was convicted of such crime.
(3) The court may not dismiss a case under paragraph (2) if the
debtor establishes by a preponderance of the evidence that the filing
of a case under this chapter is necessary to satisfy a claim for
a domestic support obligation.
SUBCHAPTER
II - Collection, Liquidation, and Distribution of the Estate
721. Authorization to operate business
The court may authorize the trustee to operate the business of
the debtor for a limited period, if such operation is in the best
interest of the estate and consistent with the orderly liquidation
of the estate.
722. Redemption
An individual debtor may, whether or not the debtor has waived
the right to redeem under this section, redeem tangible personal
property intended primarily for personal, family, or household use,
from a lien securing a dischargeable consumer debt, if such property
is exempted under section 522 of this title or has been abandoned
under section 554 of this title, by paying the holder of such lien
the amount of the allowed secured claim of such holder that is secured
by such lien in full at the time of redemption.
723. Rights of partnership trustee
against general partners
(a) If there is a deficiency of property of the estate to pay in
full all claims which are allowed in a case under this chapter concerning
a partnership and with respect to which a general partner of the
partnership is personally liable, the trustee shall have a claim
against such general partner to the extent that under applicable
nonbankruptcy law such general partner is personally liable for
such deficiency.
(b) To the extent practicable, the trustee shall first seek recovery
of such deficiency from any general partner in such partnership
that is not a debtor in a case under this title. Pending determination
of such deficiency, the court may order any such partner to provide
the estate with indemnity for, or assurance of payment of, any deficiency
recoverable from such partner, or not to dispose of property.
(c) The trustee has a claim against the estate of each general partner
in such partnership that is a debtor in a case under this title
for the full amount of all claims of creditors allowed in the case
concerning such partnership. Notwithstanding section 502 of this
title, there shall not be allowed in such partners case a
claim against such partner on which both such partner and such partnership
are liable, except to any extent that such claim is secured only
by property of such partner and not by property of such partnership.
The claim of the trustee under this subsection is entitled to distribution
in such partners case under section 726 (a) of this title
the same as any other claim of a kind specified in such section.
(d) If the aggregate that the trustee recovers from the estates
of general partners under subsection (c) of this section is greater
than any deficiency not recovered under subsection (b) of this section,
the court, after notice and a hearing, shall determine an equitable
distribution of the surplus so recovered, and the trustee shall
distribute such surplus to the estates of the general partners in
such partnership according to such determination.
724. Treatment of certain liens
(a) The trustee may avoid a lien that secures a claim of a kind
specified in section 726 (a)(4) of this title.
(b) Property in which the estate has an interest and that is subject
to a lien that is not avoidable under this title (other than to
the extent that there is a properly perfected unavoidable tax lien
arising in connection with an ad valorem tax on real or personal
property of the estate) and that secures an allowed claim for a
tax, or proceeds of such property, shall be distributed
(1) first, to any holder of an allowed claim secured by a lien on
such property that is not avoidable under this title and that is
senior to such tax lien;
(2) second, to any holder of a claim of a kind specified in section
507 (a)(1)(C) or 507 (a)(2) (except that such expenses under each
such section, other than claims for wages, salaries, or commissions
that arise after the date of the filing of the petition, shall be
limited to expenses incurred under this chapter and shall not include
expenses incurred under chapter 11 of this title), 507(a)(1)(A),
507(a)(1)(B), 507(a)(3), 507(a)(4), 507(a)(5), 507(a)(6), or 507(a)(7)
of this title, to the extent of the amount of such allowed tax claim
that is secured by such tax lien;
(3) third, to the holder of such tax lien, to any extent that such
holders allowed tax claim that is secured by such tax lien
exceeds any amount distributed under paragraph (2) of this subsection;
(4) fourth, to any holder of an allowed claim secured by a lien
on such property that is not avoidable under this title and that
is junior to such tax lien;
(5) fifth, to the holder of such tax lien, to the extent that such
holders allowed claim secured by such tax lien is not paid
under paragraph (3) of this subsection; and
(6) sixth, to the estate.
(c) If more than one holder of a claim is entitled to distribution
under a particular paragraph of subsection (b) of this section,
distribution to such holders under such paragraph shall be in the
same order as distribution to such holders would have been other
than under this section.
(d) A statutory lien the priority of which is determined in the
same manner as the priority of a tax lien under section 6323 of
the Internal Revenue Code of 1986 shall be treated under subsection
(b) of this section the same as if such lien were a tax lien.
(e) Before subordinating a tax lien on real or personal property
of the estate, the trustee shall
(1) exhaust the unencumbered assets of the estate; and
(2) in a manner consistent with section 506 (c), recover from property
securing an allowed secured claim the reasonable, necessary costs
and expenses of preserving or disposing of such property.
(f) Notwithstanding the exclusion of ad valorem tax liens under
this section and subject to the requirements of subsection (e),
the following may be paid from property of the estate which secures
a tax lien, or the proceeds of such property:
(1) Claims for wages, salaries, and commissions that are entitled
to priority under section 507 (a)(4).
(2) Claims for contributions to an employee benefit plan entitled
to priority under section 507 (a)(5)
725. Disposition of certain
property
After the commencement of a case under this chapter, but before
final distribution of property of the estate under section 726 of
this title, the trustee, after notice and a hearing, shall dispose
of any property in which an entity other than the estate has an
interest, such as a lien, and that has not been disposed of under
another section of this title.
726. Distribution of property
of the estate
(a) Except as provided in section 510 of this title, property of
the estate shall be distributed
(1) first, in payment of claims of the kind specified in, and in
the order specified in, section 507 of this title, proof of which
is timely filed under section 501 of this title or tardily filed
on or before the earlier of
(A) the date that is 10 days after the mailing to creditors of the
summary of the trustees final report; or
(B) the date on which the trustee commences final distribution under
this section;
(2) second, in payment of any allowed unsecured claim, other than
a claim of a kind specified in paragraph (1), (3), or (4) of this
subsection, proof of which is
(A) timely filed under section 501 (a) of this title;
(B) timely filed under section 501 (b) or 501 (c) of this title;
or
(C) tardily filed under section 501 (a) of this title, if
(i) the creditor that holds such claim did not have notice or actual
knowledge of the case in time for timely filing of a proof of such
claim under section 501 (a) of this title; and
(ii) proof of such claim is filed in time to permit payment of such
claim;
(3) third, in payment of any allowed unsecured claim proof of which
is tardily filed under section 501 (a) of this title, other than
a claim of the kind specified in paragraph (2)(C) of this subsection;
(4) fourth, in payment of any allowed claim, whether secured or
unsecured, for any fine, penalty, or forfeiture, or for multiple,
exemplary, or punitive damages, arising before the earlier of the
order for relief or the appointment of a trustee, to the extent
that such fine, penalty, forfeiture, or damages are not compensation
for actual pecuniary loss suffered by the holder of such claim;
(5) fifth, in payment of interest at the legal rate from the date
of the filing of the petition, on any claim paid under paragraph
(1), (2), (3), or (4) of this subsection; and
(6) sixth, to the debtor.
(b) Payment on claims of a kind specified in paragraph (1), (2),
(3), (4), (5), (6), (7), (8), (9), or (10) of section 507 (a) of
this title, or in paragraph (2), (3), (4), or (5) of subsection
(a) of this section, shall be made pro rata among claims of the
kind specified in each such particular paragraph, except that in
a case that has been converted to this chapter under section 1112,
1208, or 1307 of this title, a claim allowed under section 503 (b)
of this title incurred under this chapter after such conversion
has priority over a claim allowed under section 503 (b) of this
title incurred under any other chapter of this title or under this
chapter before such conversion and over any expenses of a custodian
superseded under section 543 of this title.
(c) Notwithstanding subsections (a) and (b) of this section, if
there is property of the kind specified in section 541 (a)(2) of
this title, or proceeds of such property, in the estate, such property
or proceeds shall be segregated from other property of the estate,
and such property or proceeds and other property of the estate shall
be distributed as follows:
(1) Claims allowed under section 503 of this title shall be paid
either from property of the kind specified in section 541 (a)(2)
of this title, or from other property of the estate, as the interest
of justice requires.
(2) Allowed claims, other than claims allowed under section 503
of this title, shall be paid in the order specified in subsection
(a) of this section, and, with respect to claims of a kind specified
in a particular paragraph of section 507 of this title or subsection
(a) of this section, in the following order and manner:
(A) First, community claims against the debtor or the debtors
spouse shall be paid from property of the kind specified in section
541 (a)(2) of this title, except to the extent that such property
is solely liable for debts of the debtor.
(B) Second, to the extent that community claims against the debtor
are not paid under subparagraph (A) of this paragraph, such community
claims shall be paid from property of the kind specified in section
541 (a)(2) of this title that is solely liable for debts of the
debtor.
(C) Third, to the extent that all claims against the debtor including
community claims against the debtor are not paid under subparagraph
(A) or (B) of this paragraph such claims shall be paid from property
of the estate other than property of the kind specified in section
541 (a)(2) of this title.
(D) Fourth, to the extent that community claims against the debtor
or the debtors spouse are not paid under subparagraph (A),
(B), or (C) of this paragraph, such claims shall be paid from all
remaining property of the estate.
727. Discharge
(a) The court shall grant the debtor a discharge, unless
(1) the debtor is not an individual;
(2) the debtor, with intent to hinder, delay, or defraud a creditor
or an officer of the estate charged with custody of property under
this title, has transferred, removed, destroyed, mutilated, or concealed,
or has permitted to be transferred, removed, destroyed, mutilated,
or concealed
(A) property of the debtor, within one year before the date of the
filing of the petition; or
(B) property of the estate, after the date of the filing of the
petition;
(3) the debtor has concealed, destroyed, mutilated, falsified, or
failed to keep or preserve any recorded information, including books,
documents, records, and papers, from which the debtors financial
condition or business transactions might be ascertained, unless
such act or failure to act was justified under all of the circumstances
of the case;
(4) the debtor knowingly and fraudulently, in or in connection with
the case
(A) made a false oath or account;
(B) presented or used a false claim;
(C) gave, offered, received, or attempted to obtain money, property,
or advantage, or a promise of money, property, or advantage, for
acting or forbearing to act; or
(D) withheld from an officer of the estate entitled to possession
under this title, any recorded information, including books, documents,
records, and papers, relating to the debtors property or financial
affairs;
(5) the debtor has failed to explain satisfactorily, before determination
of denial of discharge under this paragraph, any loss of assets
or deficiency of assets to meet the debtors liabilities;
(6) the debtor has refused, in the case
(A) to obey any lawful order of the court, other than an order to
respond to a material question or to testify;
(B) on the ground of privilege against self-incrimination, to respond
to a material question approved by the court or to testify, after
the debtor has been granted immunity with respect to the matter
concerning which such privilege was invoked; or
(C) on a ground other than the properly invoked privilege against
self-incrimination, to respond to a material question approved by
the court or to testify;
(7) the debtor has committed any act specified in paragraph (2),
(3), (4), (5), or (6) of this subsection, on or within one year
before the date of the filing of the petition, or during the case,
in connection with another case, under this title or under the Bankruptcy
Act, concerning an insider;
(8) the debtor has been granted a discharge under this section,
under section 1141 of this title, or under section 14, 371, or 476
of the Bankruptcy Act, in a case commenced within 8 years before
the date of the filing of the petition;
(9) the debtor has been granted a discharge under section 1228 or
1328 of this title, or under section 660 or 661 of the Bankruptcy
Act, in a case commenced within six years before the date of the
filing of the petition, unless payments under the plan in such case
totaled at least
(A) 100 percent of the allowed unsecured claims in such case; or
(B)
(i) 70 percent of such claims; and
(ii) the plan was proposed by the debtor in good faith, and was
the debtors best effort;
(10) the court approves a written waiver of discharge executed by
the debtor after the order for relief under this chapter;
(11) after filing the petition, the debtor failed to complete an
instructional course concerning personal financial management described
in section 111, except that this paragraph shall not apply with
respect to a debtor who is a person described in section 109 (h)(4)
or who resides in a district for which the United States trustee
(or the bankruptcy administrator, if any) determines that the approved
instructional courses are not adequate to service the additional
individuals who would otherwise be required to complete such instructional
courses under this section (The United States trustee (or the bankruptcy
administrator, if any) who makes a determination described in this
paragraph shall review such determination not later than 1 year
after the date of such determination, and not less frequently than
annually thereafter.); or
(12) the court after notice and a hearing held not more than 10
days before the date of the entry of the order granting the discharge
finds that there is reasonable cause to believe that
(A) section 522 (q)(1) may be applicable to the debtor; and
(B) there is pending any proceeding in which the debtor may be found
guilty of a felony of the kind described in section 522 (q)(1)(A)
or liable for a debt of the kind described in section 522 (q)(1)(B).
(b) Except as provided in section 523 of this title, a discharge
under subsection (a) of this section discharges the debtor from
all debts that arose before the date of the order for relief under
this chapter, and any liability on a claim that is determined under
section 502 of this title as if such claim had arisen before the
commencement of the case, whether or not a proof of claim based
on any such debt or liability is filed under section 501 of this
title, and whether or not a claim based on any such debt or liability
is allowed under section 502 of this title.
(c)
(1) The trustee, a creditor, or the United States trustee may object
to the granting of a discharge under subsection (a) of this section.
(2) On request of a party in interest, the court may order the trustee
to examine the acts and conduct of the debtor to determine whether
a ground exists for denial of discharge.
(d) On request of the trustee, a creditor, or the United States
trustee, and after notice and a hearing, the court shall revoke
a discharge granted under subsection (a) of this section if
(1) such discharge was obtained through the fraud of the debtor,
and the requesting party did not know of such fraud until after
the granting of such discharge;
(2) the debtor acquired property that is property of the estate,
or became entitled to acquire property that would be property of
the estate, and knowingly and fraudulently failed to report the
acquisition of or entitlement to such property, or to deliver or
surrender such property to the trustee;
(3) the debtor committed an act specified in subsection (a)(6) of
this section; or
(4) the debtor has failed to explain satisfactorily
(A) a material misstatement in an audit referred to in section 586
(f) of title 28; or
(B) a failure to make available for inspection all necessary accounts,
papers, documents, financial records, files, and all other papers,
things, or property belonging to the debtor that are requested for
an audit referred to in section 586 (f) of title 28.
(e) The trustee, a creditor, or the United States trustee may request
a revocation of a discharge
(1) under subsection (d)(1) of this section within one year after
such discharge is granted; or
(2) under subsection (d)(2) or (d)(3) of this section before the
later of
(A) one year after the granting of such discharge; and
(B) the date the case is closed.
728. <Repealed>
Section, Pub. L. 95598, Nov. 6, 1978, 92 Stat. 2611; Pub.
L. 98353, title III, § 481, July 10, 1984, 98 Stat. 382;
Pub. L. 99554, title II, § 257(t), Oct. 27, 1986, 100
Stat. 3116, related to special tax provisions
SUBCHAPTER
III - Stockbroker Liquidation
741. Definitions for this subchapter
In this subchapter
(1) Commission means Securities and Exchange Commission;
(2) customer includes
(A) entity with whom a person deals as principal or agent and that
has a claim against such person on account of a security received,
acquired, or held by such person in the ordinary course of such
persons business as a stockbroker, from or for the securities
account or accounts of such entity
(i) for safekeeping;
(ii) with a view to sale;
(iii) to cover a consummated sale;
(iv) pursuant to a purchase;
(v) as collateral under a security agreement; or
(vi) for the purpose of effecting registration of transfer; and
(B) entity that has a claim against a person arising out of
(i) a sale or conversion of a security received, acquired, or held
as specified in subparagraph (A) of this paragraph; or
(ii) a deposit of cash, a security, or other property with such
person for the purpose of purchasing or selling a security;
(3) customer name security means security
(A) held for the account of a customer on the date of the filing
of the petition by or on behalf of the debtor;
(B) registered in such customers name on such date or in the
process of being so registered under instructions from the debtor;
and
(C) not in a form transferable by delivery on such date;
(4) customer property means cash, security, or other
property, and proceeds of such cash, security, or property, received,
acquired, or held by or for the account of the debtor, from or for
the securities account of a customer
(A) including
(i) property that was unlawfully converted from and that is the
lawful property of the estate;
(ii) a security held as property of the debtor to the extent such
security is necessary to meet a net equity claim of a customer based
on a security of the same class and series of an issuer;
(iii) resources provided through the use or realization of a customers
debit cash balance or a debit item includible in the Formula for
Determination of Reserve Requirement for Brokers and Dealers as
promulgated by the Commission under the Securities Exchange Act
of 1934; and
(iv) other property of the debtor that any applicable law, rule,
or regulation requires to be set aside or held for the benefit of
a customer, unless including such property as customer property
would not significantly increase customer property; but
(B) not including
(i) a customer name security delivered to or reclaimed by a customer
under section 751 of this title; or
(ii) property to the extent that a customer does not have a claim
against the debtor based on such property;
(5) margin payment means payment or deposit of cash,
a security, or other property, that is commonly known to the securities
trade as original margin, initial margin, maintenance margin, or
variation margin, or as a mark-to-market payment, or that secures
an obligation of a participant in a securities clearing agency;
(6) net equity means, with respect to all accounts of
a customer that such customer has in the same capacity
(A)
(i) aggregate dollar balance that would remain in such accounts
after the liquidation, by sale or purchase, at the time of the filing
of the petition, of all securities positions in all such accounts,
except any customer name securities of such customer; minus
(ii) any claim of the debtor against such customer in such capacity
that would have been owing immediately after such liquidation; plus
(B) any payment by such customer to the trustee, within 60 days
after notice under section 342 of this title, of any business related
claim of the debtor against such customer in such capacity;
(7) securities contract
(A) means
(i) a contract for the purchase, sale, or loan of a security, a
certificate of deposit, a mortgage loan, any interest in a mortgage
loan, a group or index of securities, certificates of deposit, or
mortgage loans or interests therein (including an interest therein
or based on the value thereof), or option on any of the foregoing,
including an option to purchase or sell any such security, certificate
of deposit, mortgage loan, interest, group or index, or option,
and including any repurchase or reverse repurchase transaction on
any such security, certificate of deposit, mortgage loan, interest,
group or index, or option (whether or not such repurchase or reverse
repurchase transaction is a repurchase agreement, as
defined in section 101);
(ii) any option entered into on a national securities exchange relating
to foreign currencies;
(iii) the guarantee (including by novation) by or to any securities
clearing agency of a settlement of cash, securities, certificates
of deposit, mortgage loans or interests therein, group or index
of securities, or mortgage loans or interests therein (including
any interest therein or based on the value thereof), or option on
any of the foregoing, including an option to purchase or sell any
such security, certificate of deposit, mortgage loan, interest,
group or index, or option (whether or not such settlement is in
connection with any agreement or transaction referred to in clauses
(i) through (xi));
(iv) any margin loan;
(v) any extension of credit for the clearance or settlement of securities
transactions;
(vi) any loan transaction coupled with a securities collar transaction,
any prepaid forward securities transaction, or any total return
swap transaction coupled with a securities sale transaction;
(vii) any other agreement or transaction that is similar to an agreement
or transaction referred to in this subparagraph;
(viii) any combination of the agreements or transactions referred
to in this subparagraph;
(ix) any option to enter into any agreement or transaction referred
to in this subparagraph;
(x) a master agreement that provides for an agreement or transaction
referred to in clause (i), (ii), (iii), (iv), (v), (vi), (vii),
(viii), or (ix), together with all supplements to any such master
agreement, without regard to whether the master agreement provides
for an agreement or transaction that is not a securities contract
under this subparagraph, except that such master agreement shall
be considered to be a securities contract under this subparagraph
only with respect to each agreement or transaction under such master
agreement that is referred to in clause (i), (ii), (iii), (iv),
(v), (vi), (vii), (viii), or (ix); or
(xi) any security agreement or arrangement or other credit enhancement
related to any agreement or transaction referred to in this subparagraph,
including any guarantee or reimbursement obligation by or to a stockbroker,
securities clearing agency, financial institution, or financial
participant in connection with any agreement or transaction referred
to in this subparagraph, but not to exceed the damages in connection
with any such agreement or transaction, measured in accordance with
section 562; and
(B) does not include any purchase, sale, or repurchase obligation
under a participation in a commercial mortgage loan;
(8) settlement payment means a preliminary settlement
payment, a partial settlement payment, an interim settlement payment,
a settlement payment on account, a final settlement payment, or
any other similar payment commonly used in the securities trade;
and
(9) SIPC means Securities Investor Protection Corporation.
742. Effect of section 362 of
this title in this subchapter
Notwithstanding section 362 of this title, SIPC may file an application
for a protective decree under the Securities Investor Protection
Act of 1970. The filing of such application stays all proceedings
in the case under this title unless and until such application is
dismissed. If SIPC completes the liquidation of the debtor, then
the court shall dismiss the case.
743. Notice
The clerk shall give the notice required by section 342 of this
title to SIPC and to the Commission.
744. Executory contracts
Notwithstanding section 365 (d)(1) of this title, the trustee shall
assume or reject, under section 365 of this title, any executory
contract of the debtor for the purchase or sale of a security in
the ordinary course of the debtors business, within a reasonable
time after the date of the order for relief, but not to exceed 30
days. If the trustee does not assume such a contract within such
time, such contract is rejected.
745. Treatment of accounts
(a) Accounts held by the debtor for a particular customer in separate
capacities shall be treated as accounts of separate customers.
(b) If a stockbroker or a bank holds a customer net equity claim
against the debtor that arose out of a transaction for a customer
of such stockbroker or bank, each such customer of such stockbroker
or bank shall be treated as a separate customer of the debtor.
(c) Each trustees account specified as such on the debtors
books, and supported by a trust deed filed with, and qualified as
such by, the Internal Revenue Service, and under the Internal Revenue
Code of 1986, shall be treated as a separate customer account for
each beneficiary under such trustee account.
746. Extent of customer claims
(a) If, after the date of the filing of the petition, an entity
enters into a transaction with the debtor, in a manner that would
have made such entity a customer had such transaction occurred before
the date of the filing of the petition, and such transaction was
entered into by such entity in good faith and before the qualification
under section 322 of this title of a trustee, such entity shall
be deemed a customer, and the date of such transaction shall be
deemed to be the date of the filing of the petition for the purpose
of determining such entitys net equity.
(b) An entity does not have a claim as a customer to the extent
that such entity transferred to the debtor cash or a security that,
by contract, agreement, understanding, or operation of law, is
(1) part of the capital of the debtor; or
(2) subordinated to the claims of any or all creditors.
747. Subordination of certain
customer claims
Except as provided in section 510 of this title, unless all other
customer net equity claims have been paid in full, the trustee may
not pay in full or pay in part, directly or indirectly, any net
equity claim of a customer that was, on the date the transaction
giving rise to such claim occurred
(1) an insider;
(2) a beneficial owner of at least five percent of any class of
equity securities of the debtor, other than
(A) nonconvertible stock having fixed preferential dividend and
liquidation rights; or
(B) interests of limited partners in a limited partnership;
(3) a limited partner with a participation of at least five percent
in the net assets or net profits of the debtor; or
(4) an entity that, directly or indirectly, through agreement or
otherwise, exercised or had the power to exercise control over the
management or policies of the debtor.
748. Reduction of securities
to money
As soon as practicable after the date of the order for relief,
the trustee shall reduce to money, consistent with good market practice,
all securities held as property of the estate, except for customer
name securities delivered or reclaimed under section 751 of this
title.
749. Voidable transfers
(a) Except as otherwise provided in this section, any transfer
of property that, but for such transfer, would have been customer
property, may be avoided by the trustee, and such property shall
be treated as customer property, if and to the extent that the trustee
avoids such transfer under section 544, 545, 547, 548, or 549 of
this title. For the purpose of such sections, the property so transferred
shall be deemed to have been property of the debtor and, if such
transfer was made to a customer or for a customers benefit,
such customer shall be deemed, for the purposes of this section,
to have been a creditor.
(b) Notwithstanding sections 544, 545, 547, 548, and 549 of this
title, the trustee may not avoid a transfer made before seven days
after the order for relief if such transfer is approved by the Commission
by rule or order, either before or after such transfer, and if such
transfer is
(1) a transfer of a securities contract entered into or carried
by or through the debtor on behalf of a customer, and of any cash,
security, or other property margining or securing such securities
contract; or
(2) the liquidation of a securities contract entered into or carried
by or through the debtor on behalf of a customer.
750. Distribution of securities
The trustee may not distribute a security except under section
751 of this title.
751. Customer name securities
The trustee shall deliver any customer name security to or on behalf
of the customer entitled to such security, unless such customer
has a negative net equity. With the approval of the trustee, a customer
may reclaim a customer name security after payment to the trustee,
within such period as the trustee allows, of any claim of the debtor
against such customer to the extent that such customer will not
have a negative net equity after such payment.
752. Customer property
(a) The trustee shall distribute customer property ratably to customers
on the basis and to the extent of such customers allowed net
equity claims and in priority to all other claims, except claims
of the kind specified in section 507 (a)(2) of this title that are
attributable to the administration of such customer property.
(b)
(1) The trustee shall distribute customer property in excess of
that distributed under subsection (a) of this section in accordance
with section 726 of this title.
(2) Except as provided in section 510 of this title, if a customer
is not paid the full amount of such customers allowed net
equity claim from customer property, the unpaid portion of such
claim is a claim entitled to distribution under section 726 of this
title.
(c) Any cash or security remaining after the liquidation of a security
interest created under a security agreement made by the debtor,
excluding property excluded under section 741 (4)(B) of this title,
shall be apportioned between the general estate and customer property
in the same proportion as the general estate of the debtor and customer
property were subject to such security interest.
Notwithstanding any other provision of this title, the exercise
of rights by a forward contract merchant, commodity broker, stockbroker,
financial institution, financial participant, securities clearing
agency, swap participant, repo participant, or master netting agreement
participant under this title shall not affect the priority of any
unsecured claim it may have after the exercise of such rights.
SUBCHAPTER
IV - Commodity Broker Liquidation
761. Definitions for this subchapter
In this subchapter
(1) Act means Commodity Exchange Act;
(2) clearing organization means a derivatives clearing
organization registered under the Act;
(3) Commission means Commodity Futures Trading Commission;
(4) commodity contract means
(A) with respect to a futures commission merchant, contract for
the purchase or sale of a commodity for future delivery on, or subject
to the rules of, a contract market or board of trade;
(B) with respect to a foreign futures commission merchant, foreign
future;
(C) with respect to a leverage transaction merchant, leverage transaction;
(D) with respect to a clearing organization, contract for the purchase
or sale of a commodity for future delivery on, or subject to the
rules of, a contract market or board of trade that is cleared by
such clearing organization, or commodity option traded on, or subject
to the rules of, a contract market or board of trade that is cleared
by such clearing organization;
(E) with respect to a commodity options dealer, commodity option;
(F) any other agreement or transaction that is similar to an agreement
or transaction referred to in this paragraph;
(G) any combination of the agreements or transactions referred to
in this paragraph;
(H) any option to enter into an agreement or transaction referred
to in this paragraph;
(I) a master agreement that provides for an agreement or transaction
referred to in subparagraph (A), (B), (C), (D), (E), (F), (G), or
(H), together with all supplements to such master agreement, without
regard to whether the master agreement provides for an agreement
or transaction that is not a commodity contract under this paragraph,
except that the master agreement shall be considered to be a commodity
contract under this paragraph only with respect to each agreement
or transaction under the master agreement that is referred to in
subparagraph (A), (B), (C), (D), (E), (F), (G), or (H); or
(J) any security agreement or arrangement or other credit enhancement
related to any agreement or transaction referred to in this paragraph,
including any guarantee or reimbursement obligation by or to a commodity
broker or financial participant in connection with any agreement
or transaction referred to in this paragraph, but not to exceed
the damages in connection with any such agreement or transaction,
measured in accordance with section 562;
(5) commodity option means agreement or transaction
subject to regulation under section 4c(b) of the Act;
(6) commodity options dealer means person that extends
credit to, or that accepts cash, a security, or other property from,
a customer of such person for the purchase or sale of an interest
in a commodity option;
(7) contract market means a registered entity;
(8) contract of sale, commodity, derivatives
clearing organization, future delivery, board
of trade, registered entity, and futures
commission merchant have the meanings assigned to those terms
in the Act;
(9) customer means
(A) with respect to a futures commission merchant
(i) entity for or with whom such futures commission merchant deals
and that holds a claim against such futures commission merchant
on account of a commodity contract made, received, acquired, or
held by or through such futures commission merchant in the ordinary
course of such futures commission merchants business as a
futures commission merchant from or for the commodity futures account
of such entity; or
(ii) entity that holds a claim against such futures commission merchant
arising out of
(I) the making, liquidation, or change in the value of a commodity
contract of a kind specified in clause (i) of this subparagraph;
(II) a deposit or payment of cash, a security, or other property
with such futures commission merchant for the purpose of making
or margining such a commodity contract; or
(III) the making or taking of delivery on such a commodity contract;
(B) with respect to a foreign futures commission merchant
(i) entity for or with whom such foreign futures commission merchant
deals and that holds a claim against such foreign futures commission
merchant on account of a commodity contract made, received, acquired,
or held by or through such foreign futures commission merchant in
the ordinary course of such foreign futures commission merchants
business as a foreign futures commission merchant from or for the
foreign futures account of such entity; or
(ii) entity that holds a claim against such foreign futures commission
merchant arising out of
(I) the making, liquidation, or change in value of a commodity contract
of a kind specified in clause (i) of this subparagraph;
(II) a deposit or payment of cash, a security, or other property
with such foreign futures commission merchant for the purpose of
making or margining such a commodity contract; or
(III) the making or taking of delivery on such a commodity contract;
(C) with respect to a leverage transaction merchant
(i) entity for or with whom such leverage transaction merchant deals
and that holds a claim against such leverage transaction merchant
on account of a commodity contract engaged in by or with such leverage
transaction merchant in the ordinary course of such leverage transaction
merchants business as a leverage transaction merchant from
or for the leverage account of such entity; or
(ii) entity that holds a claim against such leverage transaction
merchant arising out of
(I) the making, liquidation, or change in value of a commodity contract
of a kind specified in clause (i) of this subparagraph;
(II) a deposit or payment of cash, a security, or other property
with such leverage transaction merchant for the purpose of entering
into or margining such a commodity contract; or
(III) the making or taking of delivery on such a commodity contract;
(D) with respect to a clearing organization, clearing member of
such clearing organization with whom such clearing organization
deals and that holds a claim against such clearing organization
on account of cash, a security, or other property received by such
clearing organization to margin, guarantee, or secure a commodity
contract in such clearing members proprietary account or customers
account; or
(E) with respect to a commodity options dealer
(i) entity for or with whom such commodity options dealer deals
and that holds a claim on account of a commodity contract made,
received, acquired, or held by or through such commodity options
dealer in the ordinary course of such commodity options dealers
business as a commodity options dealer from or for the commodity
options account of such entity; or
(ii) entity that holds a claim against such commodity options dealer
arising out of
(I) the making of, liquidation of, exercise of, or a change in value
of, a commodity contract of a kind specified in clause (i) of this
subparagraph; or
(II) a deposit or payment of cash, a security, or other property
with such commodity options dealer for the purpose of making, exercising,
or margining such a commodity contract;
(10) customer property means cash, a security, or other
property, or proceeds of such cash, security, or property, received,
acquired, or held by or for the account of the debtor, from or for
the account of a customer
(A) including
(i) property received, acquired, or held to margin, guarantee, secure,
purchase, or sell a commodity contract;
(ii) profits or contractual or other rights accruing to a customer
as a result of a commodity contract;
(iii) an open commodity contract;
(iv) specifically identifiable customer property;
(v) warehouse receipt or other document held by the debtor evidencing
ownership of or title to property to be delivered to fulfill a commodity
contract from or for the account of a customer;
(vi) cash, a security, or other property received by the debtor
as payment for a commodity to be delivered to fulfill a commodity
contract from or for the account of a customer;
(vii) a security held as property of the debtor to the extent such
security is necessary to meet a net equity claim based on a security
of the same class and series of an issuer;
(viii) property that was unlawfully converted from and that is the
lawful property of the estate; and
(ix) other property of the debtor that any applicable law, rule,
or regulation requires to be set aside or held for the benefit of
a customer, unless including such property as customer property
would not significantly increase customer property; but
(B) not including property to the extent that a customer does not
have a claim against the debtor based on such property;
(11) foreign future means contract for the purchase
or sale of a commodity for future delivery on, or subject to the
rules of, a board of trade outside the United States;
(12) foreign futures commission merchant means entity
engaged in soliciting or accepting orders for the purchase or sale
of a foreign future or that, in connection with such a solicitation
or acceptance, accepts cash, a security, or other property, or extends
credit to margin, guarantee, or secure any trade or contract that
results from such a solicitation or acceptance;
(13) leverage transaction means agreement that is subject
to regulation under section 19 of the Commodity Exchange Act, and
that is commonly known to the commodities trade as a margin account,
margin contract, leverage account, or leverage contract;
(14) leverage transaction merchant means person in the
business of engaging in leverage transactions;
(15) margin payment means payment or deposit of cash,
a security, or other property, that is commonly known to the commodities
trade as original margin, initial margin, maintenance margin, or
variation margin, including mark-to-market payments, settlement
payments, variation payments, daily settlement payments, and final
settlement payments made as adjustments to settlement prices;
(16) member property means customer property received,
acquired, or held by or for the account of a debtor that is a clearing
organization, from or for the proprietary account of a customer
that is a clearing member of the debtor; and
(17) net equity means, subject to such rules and regulations
as the Commission promulgates under the Act, with respect to the
aggregate of all of a customers accounts that such customer
has in the same capacity
(A) the balance remaining in such customers accounts immediately
after
(i) all commodity contracts of such customer have been transferred,
liquidated, or become identified for delivery; and
(ii) all obligations of such customer in such capacity to the debtor
have been offset; plus
(B) the value, as of the date of return under section 766 of this
title, of any specifically identifiable customer property actually
returned to such customer before the date specified in subparagraph
(A) of this paragraph; plus
(C) the value, as of the date of transfer, of
(i) any commodity contract to which such customer is entitled that
is transferred to another person under section 766 of this title;
and
(ii) any cash, security, or other property of such customer transferred
to such other person under section 766 of this title to margin or
secure such transferred commodity contract.
762. Notice to the Commission
and right to be heard
(a) The clerk shall give the notice required by section 342 of
this title to the Commission.
(b) The Commission may raise and may appear and be heard on any
issue in a case under this chapter.
763. Treatment of accounts
(a) Accounts held by the debtor for a particular customer in separate
capacities shall be treated as accounts of separate customers.
(b) A member of a clearing organization shall be deemed to hold
such members proprietary account in a separate capacity from
such members customers account.
(c) The net equity in a customers account may not be offset
against the net equity in the account of any other customer.
764. Voidable transfers
(a) Except as otherwise provided in this section, any transfer
by the debtor of property that, but for such transfer, would have
been customer property, may be avoided by the trustee, and such
property shall be treated as customer property, if and to the extent
that the trustee avoids such transfer under section 544, 545, 547,
548, 549, or 724 (a) of this title. For the purpose of such sections,
the property so transferred shall be deemed to have been property
of the debtor, and, if such transfer was made to a customer or for
a customers benefit, such customer shall be deemed, for the
purposes of this section, to have been a creditor.
(b) Notwithstanding sections 544, 545, 547, 548, 549, and 724 (a)
of this title, the trustee may not avoid a transfer made before
seven days after the order for relief, if such transfer is approved
by the Commission by rule or order, either before or after such
transfer, and if such transfer is
(1) a transfer of a commodity contract entered into or carried by
or through the debtor on behalf of a customer, and of any cash,
securities, or other property margining or securing such commodity
contract; or
(2) the liquidation of a commodity contract entered into or carried
by or through the debtor on behalf of a customer.
765. Customer instructions
(a) The notice required by section 342 of this title to customers
shall instruct each customer
(1) to file a proof of such customers claim promptly, and
to specify in such claim any specifically identifiable security,
property, or commodity contract; and
(2) to instruct the trustee of such customers desired disposition,
including transfer under section 766 of this title or liquidation,
of any commodity contract specifically identified to such customer.
(b) The trustee shall comply, to the extent practicable, with any
instruction received from a customer regarding such customers
desired disposition of any commodity contract specifically identified
to such customer. If the trustee has transferred, under section
766 of this title, such a commodity contract, the trustee shall
transmit any such instruction to the commodity broker to whom such
commodity contract was so transferred.
766. Treatment of customer property
(a) The trustee shall answer all margin calls with respect to a
specifically identifiable commodity contract of a customer until
such time as the trustee returns or transfers such commodity contract,
but the trustee may not make a margin payment that has the effect
of a distribution to such customer of more than that to which such
customer is entitled under subsection (h) or (i) of this section.
(b) The trustee shall prevent any open commodity contract from remaining
open after the last day of trading in such commodity contract, or
into the first day on which notice of intent to deliver on such
commodity contract may be tendered, whichever occurs first. With
respect to any commodity contract that has remained open after the
last day of trading in such commodity contract or with respect to
which delivery must be made or accepted under the rules of the contract
market on which such commodity contract was made, the trustee may
operate the business of the debtor for the purpose of
(1) accepting or making tender of notice of intent to deliver the
physical commodity underlying such commodity contract;
(2) facilitating delivery of such commodity; or
(3) disposing of such commodity if a party to such commodity contract
defaults.
(c) The trustee shall return promptly to a customer any specifically
identifiable security, property, or commodity contract to which
such customer is entitled, or shall transfer, on such customers
behalf, such security, property, or commodity contract to a commodity
broker that is not a debtor under this title, subject to such rules
or regulations as the Commission may prescribe, to the extent that
the value of such security, property, or commodity contract does
not exceed the amount to which such customer would be entitled under
subsection (h) or (i) of this section if such security, property,
or commodity contract were not returned or transferred under this
subsection.
(d) If the value of a specifically identifiable security, property,
or commodity contract exceeds the amount to which the customer of
the debtor is entitled under subsection (h) or (i) of this section,
then such customer to whom such security, property, or commodity
contract is specifically identified may deposit cash with the trustee
equal to the difference between the value of such security, property,
or commodity contract and such amount, and the trustee then shall
(1) return promptly such security, property, or commodity contract
to such customer; or
(2) transfer, on such customers behalf, such security, property,
or commodity contract to a commodity broker that is not a debtor
under this title, subject to such rules or regulations as the Commission
may prescribe.
(e) Subject to subsection (b) of this section, the trustee shall
liquidate any commodity contract that
(1) is identified to a particular customer and with respect to which
such customer has not timely instructed the trustee as to the desired
disposition of such commodity contract;
(2) cannot be transferred under subsection (c) of this section;
or
(3) cannot be identified to a particular customer.
(f) As soon as practicable after the commencement of the case, the
trustee shall reduce to money, consistent with good market practice,
all securities and other property, other than commodity contracts,
held as property of the estate, except for specifically identifiable
securities or property distributable under subsection (h) or (i)
of this section.
(g) The trustee may not distribute a security or other property
except under subsection (h) or (i) of this section.
(h) Except as provided in subsection (b) of this section, the trustee
shall distribute customer property ratably to customers on the basis
and to the extent of such customers allowed net equity claims,
and in priority to all other claims, except claims of a kind specified
in section 507 (a)(2) of this title that are attributable to the
administration of customer property. Such distribution shall be
in the form of
(1) cash;
(2) the return or transfer, under subsection (c) or (d) of this
section, of specifically identifiable customer securities, property,
or commodity contracts; or
(3) payment of margin calls under subsection (a) of this section.
Notwithstanding any other provision of this subsection, a customer
net equity claim based on a proprietary account, as defined by Commission
rule, regulation, or order, may not be paid either in whole or in
part, directly or indirectly, out of customer property unless all
other customer net equity claims have been paid in full.
(i) If the debtor is a clearing organization, the trustee shall
distribute
(1) customer property, other than member property, ratably to customers
on the basis and to the extent of such customers allowed net
equity claims based on such customers accounts other than
proprietary accounts, and in priority to all other claims, except
claims of a kind specified in section 507 (a)(2) of this title that
are attributable to the administration of such customer property;
and
(2) member property ratably to customers on the basis and to the
extent of such customers allowed net equity claims based on
such customers proprietary accounts, and in priority to all
other claims, except claims of a kind specified in section 507 (a)(2)
of this title that are attributable to the administration of member
property or customer property.
(j)
(1) The trustee shall distribute customer property in excess of
that distributed under subsection (h) or (i) of this section in
accordance with section 726 of this title.
(2) Except as provided in section 510 of this title, if a customer
is not paid the full amount of such customers allowed net
equity claim from customer property, the unpaid portion of such
claim is a claim entitled to distribution under section 726 of this
title.
Notwithstanding any other provision of this title, the exercise
of rights by a forward contract merchant, commodity broker, stockbroker,
financial institution, financial participant, securities clearing
agency, swap participant, repo participant, or master netting agreement
participant under this title shall not affect the priority of any
unsecured claim it may have after the exercise of such rights.
SUBCHAPTER V
- Clearing Bank Liquidation
781. Definitions
For purposes of this subchapter, the following definitions shall
apply:
(1) Board. The term Board means the Board of Governors
of the Federal Reserve System.
(2) Depository institution. The term depository institution
has the same meaning as in section 3 of the Federal Deposit Insurance
Act.
(3) Clearing bank. The term clearing bank means
an uninsured State member bank, or a corporation organized under
section 25A of the Federal Reserve Act, which operates, or operates
as, a multilateral clearing organization pursuant to section 409
of the Federal Deposit Insurance Corporation Improvement Act of
1991.
782. Selection of trustee
(a) In General. (1) Appointment. Notwithstanding any
other provision of this title, the conservator or receiver who files
the petition shall be the trustee under this chapter, unless the
Board designates an alternative trustee.
(2) Successor. The Board may designate a successor trustee
if required.
(b) Authority of Trustee. Whenever the Board appoints or designates
a trustee, chapter 3 and sections 704 and 705 of this title shall
apply to the Board in the same way and to the same extent that they
apply to a United States trustee.
783. Additional powers of trustee
(a) Distribution of Property Not of the Estate. The trustee
under this subchapter has power to distribute property not of the
estate, including distributions to customers that are mandated by
subchapters III and IV of this chapter.
(b) Disposition of Institution. The trustee under this subchapter
may, after notice and a hearing
(1) sell the clearing bank to a depository institution or consortium
of depository institutions (which consortium may agree on the allocation
of the clearing bank among the consortium);
(2) merge the clearing bank with a depository institution;
(3) transfer contracts to the same extent as could a receiver for
a depository institution under paragraphs (9) and (10) of section
11(e) of the Federal Deposit Insurance Act;
(4) transfer assets or liabilities to a depository institution;
and
(5) transfer assets and liabilities to a bridge depository institution
as provided in paragraphs (1), (3)(A), (5), and (6) of section 11(n)
of the Federal Deposit Insurance Act, paragraphs (9) through (13)
of such section, and subparagraphs (A) through (H) and subparagraph
(K) of paragraph (4) of such section 11 (n), except that
(A) the bridge depository institution to which such assets or liabilities
are transferred shall be treated as a clearing bank for the purpose
of this subsection; and
(B) any references in any such provision of law to the Federal Deposit
Insurance Corporation shall be construed to be references to the
appointing agency and that references to deposit insurance shall
be omitted.
(c) Certain Transfers Included. Any reference in this section
to transfers of liabilities includes a ratable transfer of liabilities
within a priority class.
784. Right to be heard
The Board or a Federal reserve bank (in the case of a clearing
bank that is a member of that bank) may raise and may appear and
be heard on any issue in a case under this subchapter.