CONGRESSIONAL RECORD — SENATE S2737March 16, 1999the bipartisan leadership of the state,and the Bureau of Reclamation and Of-fice of Management and Budget. It re-flects a balanced approach to water re-source development that applies theprinciples of conservation while offer-ing the hope of economic development.

Ultimately, this bill practices thepolicy of being a good neighbor that isthe hallmark of our state. The Govern-ment of Canada approved the 1986 Gar-rison Act. This bill provides even moreprotection for Canadian interests. Sowhile we can’t appease the politicalagendas of certain folks in Canada, wecan sure keep faith with the BoundaryWaters Treaty. And we do.

In conclusion, the Dakota Water Re-sources Act of 1999 will guarantee thatthis project meets the tests of fiscal re-sponsibility, environmental protection,and treaty compliance. It will do sowhile also addressing the critical waterdevelopment needs of North Dakotaand fulfilling the Federal obligation forwater development for the commu-nities and tribes of our State. Accord-ingly, I urge that my colleagues sup-port the Dakota Water Resources Actof 1999.

By Mr. BURNS (for himself andMr. BAUCUS):

S. 624. A bill to authorize construc-tion of the Fort Peck ReservationRural Water System in the State ofMontana, and for other purposes; tothe Committee on Energy and NaturalResources.

FORT PECK RURAL WATER SYSTEM

Mr. BURNS. Mr. President, I risetoday to introduce a piece of legisla-tion that is vitally important for theNortheast corner of my great state ofMontana. As you are aware, water isthe most valuable commodity in theWest. Unfortunately, in many parts ofthe West the water available is unsafeto use. This is the case on the FortPeck Reservation and in the surround-ing communities.

These communities are currently de-pendent on water sources that are ei-ther unreliable or contaminated. Insome areas the ground water is in shortsupply, in others high levels of ni-trates, sulfates, manganese, iron, dis-solved solids and other contaminatesensure that the water is not only unus-able for human consumption, but evenunusable for livestock. Quite simply,the water is not safe.

Safe drinking water is a necessity inall communities, however, these com-munities have a very unique set ofneeds that underscore the importanceof clean water. This legislation wouldensure the Assiniboine and Sioux peo-ple of the Fort Peck Reservation a safeand reliable water supply system. Oneof the largest reservations in the na-tion, the Fort Peck Reservation is lo-cated in Northeastern Montana and isthe home of more than 10,000 people. Inaddition to a 75 percent unemploymentrate, the residents suffer from unusu-ally high incidents of heart disease,high blood pressure and diabetes.

These health problems are magnifiedby the poor drinking water currentlyavailable on the reservation. In onecommunity, the sulfate levels in thewater are four times the standard forsafe drinking water. In four other com-munities, the iron levels are five timesthe standard. Some families have evenbeen forced to abandon their homes asa result of the substandard water qual-ity.

In many cases, residents of the res-ervation purchased bottled water toavoid illness. While this isn’t a big dealto those who can afford it, we are deal-ing with an area living in extreme pov-erty. To add insult to injury, one of thelargest man made reservoirs in theUnited States is right down the road.Why must we continue to ask the resi-dents of these communities to placetheir health at risk when a clean, safe,stable source of water is readily avail-able?

The economic health of the region isalso affected by the poor water supply.In fact, a major constraint on thegrowth of the livestock industryaround Fort Peck has been the lack ofan adequate watering sites for cattle.Only an adequate water system willsolve this problem, and hopefully serveto spur economic activity on the res-ervation. Recently the administrationdesignated this area as an ‘‘Empower-ment Zone.’’ The purpose of this des-ignation is to help the tribal govern-ment enhance the economic and socialwell-being of the area’s residents. Whatbetter foundation can we provide thana safe and reliable water infrastruc-ture. This region’s aspirations towardsbeing healthy, both economically andphysically, will continue to be stifleduntil we reach out a helping hand andwork towards providing a safe watersystem.

This legislation, which has the sup-port of Fort Peck residents and the en-dorsement of the Tribal Council of theAssiniboine and Sioux Tribes, wouldauthorize a reservation-wide munici-pal, rural and industrial water systemfor the Fort Peck Reservation. A safeand reliable source of water would im-prove the health status of the residentsand increase the region’sattractiveness for economic develop-ment.

As the future water needs of the FortPeck Reservation expand, I believethat it is only right that we take ac-tion now. The people of the Fort PeckReservation and the State of Montanaare making a simple request—clean,safe drinking water.

Thank you Mr. President.f

FORT PECK RESERVATION RURALWATER SYSTEM ACT OF 1999

∑ Mr. BAUCUS. Mr. President, I risetoday with my colleague, SenatorBURNS, to introduce the ‘‘Fort PeckReservation Rural Water System Actof 1999.’’ This bill, which is broadlysupported, will ensure the Assiniboineand Sioux people of the Fort Peck Res-

ervation, as well as the surroundingcommunities in my great state of Mon-tana, something that each and every-one one of us in this body take forgranted everyday—a safe and reliablewater supply.

This legislation authorizes a munici-pal, rural and industrial water systemfor the Fort Peck Reservation and thesurrounding communities off the Res-ervation who compose the Dry PrairieWater Association. Using a smallamount of water from the MissouriRiver, this project will benefit the en-tire region of Northeast Montana. Thislegislation has the support of the Stateof Montana, the residents of the FortPeck Reservation, the Tribal Councilof the Assiniboine and Sioux Tribes,and all of the towns and communitiessurrounding the Reservation.

I am proud to sponsor this legislationbecause it represents the coming to-gether of people who have traditionallybeen divided on many issues. The needfor water has surfaced a tremendousshow of friendship and trust in North-east Montana. This project has giventhe Fort Peck Assiniboine and SiouxTribes and the off-Reservation publiccommon ground to work towards andprovided the trust needed for ruralcommunities to grow and prosper. Theneed for water exists not only fordrinking, but also for agricultural, mu-nicipal, and industrial purposes.

Together, the people in this regionare plagued with major drinking waterproblems. The Reservation and sur-rounding communities are clearly indesperate need of a safe and goodsource of drinking water. In one com-munity, the sulfate levels in the waterare four times the standard for safedrinking water. In four of the commu-nities, iron levels are five times thestandard. Sadly, some residents havebeen forced to abandon their homesand their farms because their onlysource of water has been polluted withbrine from oil production.

In all of the communities throughoutthe Reservation, groundwater exceedsthe standards for total dissolved solids,iron, sulfates, and nitrates. In some in-stances, more lethal minerals such asselenium, manganese, and fluorine arefound in high concentrations.

In the area north of Culbertson, ni-trate levels are too high to safely useground water. Along the Eastern bor-ders, from Froid to Plentywood, thehigh manganese, iron and total dis-solved solids, make treating the watervery expensive. In the Northeast, nearWestby, there is oil field contamina-tion from seismographing and saltwater injection methods.

In the middle of the service area,near Flaxville, nitrates and sulfates ex-ceed safe drinking water standardsalso. Finally, in the west, in the St.Marie area, ground water is so hardand in such short supply that it is un-usable. In addition, several local water

CONGRESSIONAL RECORD — SENATES2738 March 16, 1999systems have had occurrences of bio-logical contamination.

As a result of the poor water that ex-ists here, the Indian Health Service hasissued several public health alerts. Inmost communities in this region, resi-dents are forced to buy bottled waterat a cost of at least $75 a month. Thosewho cannot afford to buy bottledwater—of whom there are many—mustcontinue to use the existing watersources, at great risk to their health.Yet, despite the above mentionedhealth risks, an ideal source of safewater, the Missouri River, flows pastthese people every day.

In addition to the need for safe drink-ing water, an adequate source of wateris needed to preserve and protect agri-cultural operations. As you know Mr.President, Northeast Montana reliesalmost exclusively on agriculture tosurvive. The changing agricultural in-dustry has brought high unemploy-ment and low family income to thisarea. To compete in these challengingtimes, most agriculture producers inrural America are adding value to theproducts they grow. To add value how-ever, you must have processing facili-ties that allow you to manufacture ahigh quality, finished product. The peo-ple of Northeast Montana do not havethe quality of water needed to supportindustry of this kind. The region’s abil-ity to supply employment and competein agriculture is destroyed without es-sential infrastructure.

I have described a desperate and com-plex situation, Mr. President. The solu-tion however, is simple. We need toprovide a water system that will de-liver a safe and good source of water tothe residents of the Region. Fortu-nately, most of the work has beendone. By working together on a localand state level, these groups havestruck a deal that provides an adequatesource of water for all who need it, forthis generation of users and for futuregenerations. By using a small amountof water from the Missouri River, com-bined with the structure this bill pro-vides, residents of Northeast Montanawill be able to enjoy the same, safewater supply that you and I do.

I look forward to swift passage ofthis legislation.∑

By Mr. GRASSLEY (for himself,Mr. TORRICELLI, Mr. BIDEN, andMr. SESSIONS):

S. 625. A bill to amend title 11,United States Code, and for other pur-poses; to the Committee on the Judici-ary.

THE BANKRUPTCY REFORM ACT OF 1999

Mr. GRASSLEY. Mr. President, I risetoday to introduce ‘‘The BankruptcyReform Act of 1999’’ with SenatorsTORRICELLI and BIDEN. This bill buildson the conference report which theSenate and House produced at the endof the 105th Congress, which melded to-gether good legislation from both theSenate and the House to create a finalproduct that combined the best aspectsof both bills.

The bill I’m introducing today makesimportant changes to the conferencereport from last year to accommodateconcerns raised by some Senators.

The need for real bankruptcy reformis pretty obvious. You don’t need anarmy of so-called scientists, law profes-sors and academics to tell us that wehave a serious bankruptcy problem.

These are good times in America.Thanks to the hard work of a Repub-lican Congress, we have the first bal-anced budget in a generation. Unem-ployment is low, we have a solid stockmarket and most Americans are opti-mistic about the future.

Despite the prosperity we are experi-encing now, About one and a half mil-lion Americans will declare bank-ruptcy this year if previous trends con-tinue. Since 1990, the rate of personalbankruptcy filings are up an amazing94.7 percent. That’s almost a 100 per-cent increase in bankruptcies since1990.

Clearly something is amiss, and toparaphrase, ‘‘it’s not the economy stu-pid.’’ The problem with the explosionin bankruptcies lies elsewhere. Whilemany Americans who declare bank-ruptcy undoubtedly need a fresh start,it defies common sense to think thatall of the million and a half Americansin bankruptcy court can’t repay atleast some of their debts. The point ofbankruptcy reform is to limit chapter7—which provides for a no-questionsasked complete discharge of debts—topeople who don’t have the ability torepay any of their debts. People whocan repay some or all of their debtsshould be required to do so in a chapter13 repayment plan.

An important aspect to rememberabout bankruptcies is that we all haveto pick up the tab for bankrupts whowalk away from their debts. Businesseshave to raise prices on products andservices to offset bankruptcy losses.When you realize this, it becomes veryapparent that allowing unfettered ac-cess to chapter 7 bankruptcy for highincome people is a lot like a special in-terest tax loophole. Over 30 years ago,Senator Albert Gore, Sr. recognizedthis in a speech on the Senate floor.According to Senator Gore, like taxloopholes, chapter 7 allows someone toget out of paying his fair share and toshift the cost to hardworking Ameri-cans who play by the rules.

I think that Senator Gore had it ex-actly right. Bankruptcy reform is allabout closing loopholes so higher in-come can’t get out of paying their fairshare.

As I indicated earlier, the bill I’m in-troducing now contains significantmodifications to accommodate the con-cerns raised by some Senators. At theoutset, I want to make it clear that, aswas the case with the original Senatebill from last Congress, under this bill,a person in financial trouble can file inany chapter of the bankruptcy code heor she chooses. And before a debtor canbe transferred from chapter 7 to chap-ter 13 or kicked out of bankruptcy, a

judge will have the chance to reviewthe merits of each and every case. Iwant to repeat this: Each and everychapter 7 debtor who meets the means-test will receive an individual hearingto press his or her own unique case be-fore anything happens. In other words,this bill maintains much of the judicialscrutiny and discretion that was thedistinguishing factor of the Senatebill’s means-test in the 105th Congress.In the bill Senator TORRICELLI and Iare introducing today, there is moreflexibility given to the bankruptcyjudge.

Under the Grassley-Torricelli bill,there are even greater consumer pro-tections than were in last year’s con-ference report. For instance, in orderto protect consumers from deceptiveand coercive collection Practices, theJustice Department and the FBI are di-rected to appoint one agent and oneprosecutor to investigate abusive or de-ceptive reaffirmation practices. Searsrecently plead guilty in Massachusettsto bankruptcy fraud in connection withits business practices in seeking re-affirmations, and agreed to pay 60 mil-lion dollars in fines.

I think this shows that we alreadyhave tough laws on the books regard-ing reaffirmations. What we need isbetter law enforcement, not new laws.That’s why we require the Justice De-partment and the FBI to designate aperson to investigate reaffirmationpractices. Under the Grassley-Torricelli bill, State attorney generalsmay enforce State criminal statutessimilar to those under which Sears wasprosecuted, and the State attorneygenerals are given the express author-ity to enforce consumer protections al-ready in the bankruptcy code. Takentogether, these provisions amount to amassive infusion of Federal and Statelaw enforcment resources for the pur-pose of protecting consumers in bank-ruptcy court from abusive collectiontactics.

The Grassley-Torricelli bill retainsall the protections for child support inlast year’s conference report, with im-portant new additions. Now, bank-ruptcy trustees would be required tonotify State enforcment agencies of abankrupt’s address and telephone num-ber if the bankrupt owes child support.This means that the bankruptcy courtwill now help to track down dead-beatparents.

Also, the bill I’m introducing todayalso provides that debts incurred priorto bankruptcy to pay off non-dis-chargeable debts will still be discharge-able if the bankrupt owes child sup-port. This means that child supportwill never have to compete with thisnew category of non-dischargeable debtafter bankruptcy. Taken together,these provisions will provide key newprotections for child support claim-ants.

Mr. President, in addition to the con-sumer provisions, the Grassley-

CONGRESSIONAL RECORD — SENATE S2739March 16, 1999Torricelli bill also contains numerouschanges to improve the bankruptcycode for businesses. The bill makes nu-merous changes to the treatment oftax claims in bankruptcy, and I expectthat these provision will be refined onthe floor as the Finance Committeemakes some suggestions.

The bill also creates a new chapter 15to address the growing problem ontransnational bankruptcies.

The bill contains provisions to makechapter 12 permanent and to expand ac-cess to chapter 12.

The bill contains an entire title dedi-cated to expediting chapter 11 proceed-ings for small businesses.

One business-related provision I wantto high-light relates to protecting pa-tients when hospitals and health-carebusinesses declare bankruptcy. Ichaired a hearing on this topic lastyear and I was shocked to realize thatthe bankruptcy code doesn’t requirebankruptcy trustees and creditor com-mittees to consider the welfare of pa-tients when closing down or re-organiz-ing a hospital or nursing home. So,under the Grassley-Torricelli bill,whenever a hospital or nursing homedeclares bankruptcy a patient ombuds-man will be appointed to represent theinterests of patients during bankruptcyproceedings. And bankruptcy trusteesare required to safeguard the privacy ofmedical records when closing a healthcare business. These provisions willprovide significant protections for pa-tients in bankruptcy proceedings.

Mr. President, this bill containsmany much-needed reforms. This bill isfair, balanced and should receivestrong bi-partisan support. I ask unani-mous consent to print the bill in theRECORD as there is much public inter-est in bankruptcy reform and I want toget as much information out as pos-sible. I also ask unanimous consent toprint in the RECORD a summary of themajor differences between this bill andthe conference report from last year.

There being no objection, the mate-rial was ordered to be printed in theRECORD, as follows:

S. 625Be it enacted by the Senate and House of Rep-

resentatives of the United States of America inCongress assembled,SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE.—This Act may be cited asthe ‘‘Bankruptcy Reform Act of 1999’’.

(b) TABLE OF CONTENTS.—The table of con-tents of this Act is as follows:Sec. 1. Short title; table of contents.

TITLE I—NEEDS-BASED BANKRUPTCYSec. 101. Conversion.Sec. 102. Dismissal or conversion.Sec. 103. Notice of alternatives.Sec. 104. Debtor financial management

training test program.Sec. 105. Credit counseling.

TITLE II—ENHANCED CONSUMERPROTECTION

Subtitle A—Penalties for Abusive CreditorPractices

Sec. 201. Promotion of alternative disputeresolution.

Sec. 202. Effect of discharge.Sec. 203. Violations of the automatic stay.

Sec. 204. Discouraging abuse of reaffirma-tion practices.

Subtitle B—Priority Child SupportSec. 211. Priorities for claims for domestic

support obligations.Sec. 212. Requirements to obtain confirma-

tion and discharge in cases in-volving domestic support obli-gations.

Sec. 213. Exceptions to automatic stay indomestic support obligationproceedings.

Sec. 214. Nondischargeability of certaindebts for alimony, mainte-nance, and support.

Sec. 215. Continued liability of property.Sec. 216. Protection of domestic support

claims against preferentialtransfer motions.

Sec. 217. Amendment to section 1325 of title11, United States Code.

Sec. 218. Definition of domestic support obli-gation.

Sec. 219. Collection of child support.Subtitle C—Other Consumer Protections

Sec. 221. Definitions.Sec. 222. Disclosures.Sec. 223. Debtor’s bill of rights.Sec. 224. Enforcement.Sec. 225. Sense of Congress.Sec. 226. Additional amendments to title 11,

United States Code.TITLE III—DISCOURAGING BANKRUPTCY

ABUSESec. 301. Reinforcement of the fresh start.Sec. 302. Discouraging bad faith repeat fil-

ings.Sec. 303. Curbing abusive filings.Sec. 304. Debtor retention of personal prop-

erty security.Sec. 305. Relief from the automatic stay

when the debtor does not com-plete intended surrender of con-sumer debt collateral.

Sec. 306. Giving secured creditors fair treat-ment in chapter 13.

Sec. 307. Exemptions.Sec. 308. Residency requirement for home-

stead exemption.Sec. 309. Protecting secured creditors in

chapter 13 cases.Sec. 310. Limitation on luxury goods.Sec. 311. Automatic stay.Sec. 312. Extension of period between bank-

ruptcy discharges.Sec. 313. Definition of household goods and

antiques.Sec. 314. Debt incurred to pay nondischarge-

able debts.Sec. 315. Giving creditors fair notice in

chapters 7 and 13 cases.Sec. 316. Dismissal for failure to timely file

schedules or provide requiredinformation.

Sec. 317. Adequate time to prepare for hear-ing on confirmation of the plan.

Sec. 318. Chapter 13 plans to have a 5-yearduration in certain cases.

Sec. 319. Sense of the Congress regarding ex-pansion of rule 9011 of the Fed-eral Rules of Bankruptcy Pro-cedure.

Sec. 320. Prompt relief from stay in individ-ual cases.

TITLE IV—GENERAL AND SMALLBUSINESS BANKRUPTCY PROVISIONSSubtitle A—General Business Bankruptcy

ProvisionsSec. 401. Rolling stock equipment.Sec. 402. Adequate protection for investors.Sec. 403. Meetings of creditors and equity se-

curity holders.Sec. 404. Protection of refinance of security

interest.Sec. 405. Executory contracts and unexpired

leases.

Sec. 406. Creditors and equity security hold-ers committees.

Sec. 407. Amendment to section 546 of title11, United States Code.

Sec. 408. Limitation.Sec. 409. Amendment to section 330(a) of

title 11, United States Code.Sec. 410. Postpetition disclosure and solici-

tation.Sec. 411. Preferences.Sec. 412. Venue of certain proceedings.Sec. 413. Period for filing plan under chapter

11.Sec. 414. Fees arising from certain owner-

ship interests.Sec. 415. Creditor representation at first

meeting of creditors.Sec. 416. Elimination of certain fees payable

in chapter 11 bankruptcy cases.Sec. 417. Definition of disinterested person.Sec. 418. Factors for compensation of profes-

sional persons.Sec. 419. Appointment of elected trustee.

Subtitle B—Small Business BankruptcyProvisions

Sec. 421. Flexible rules for disclosure state-ment and plan.

Sec. 422. Definitions; effect of discharge.Sec. 423. Standard form disclosure state-

ment and plan.Sec. 424. Uniform national reporting re-

quirements.Sec. 425. Uniform reporting rules and forms

for small business cases.Sec. 426. Duties in small business cases.Sec. 427. Plan filing and confirmation dead-

lines.Sec. 428. Plan confirmation deadline.Sec. 429. Prohibition against extension of

time.Sec. 430. Duties of the United States trustee.Sec. 431. Scheduling conferences.Sec. 432. Serial filer provisions.Sec. 433. Expanded grounds for dismissal or

conversion and appointment oftrustee.

Sec. 434. Study of operation of title 11,United States Code, with re-spect to small businesses.

Sec. 435. Payment of interest.TITLE V—MUNICIPAL BANKRUPTCY

PROVISIONSSec. 501. Petition and proceedings related to

petition.Sec. 502. Applicability of other sections to

chapter 9.TITLE VI—IMPROVED BANKRUPTCY

STATISTICS AND DATASec. 601. Audit procedures.Sec. 602. Improved bankruptcy statistics.Sec. 603. Uniform rules for the collection of

bankruptcy data.Sec. 604. Sense of Congress regarding avail-

ability of bankruptcy data.TITLE VII—BANKRUPTCY TAX

PROVISIONSSec. 701. Treatment of certain liens.Sec. 702. Effective notice to government.Sec. 703. Notice of request for a determina-

tion of taxes.Sec. 704. Rate of interest on tax claims.Sec. 705. Tolling of priority of tax claim

time periods.Sec. 706. Priority property taxes incurred.Sec. 707. Chapter 13 discharge of fraudulent

and other taxes.Sec. 708. Chapter 11 discharge of fraudulent

taxes.Sec. 709. Stay of tax proceedings.Sec. 710. Periodic payment of taxes in chap-

ter 11 cases.Sec. 711. Avoidance of statutory tax liens

prohibited.Sec. 712. Payment of taxes in the conduct of

business.Sec. 713. Tardily filed priority tax claims.

CONGRESSIONAL RECORD — SENATES2740 March 16, 1999Sec. 714. Income tax returns prepared by tax

authorities.Sec. 715. Discharge of the estate’s liability

for unpaid taxes.Sec. 716. Requirement to file tax returns to

confirm chapter 13 plans.Sec. 717. Standards for tax disclosure.Sec. 718. Setoff of tax refunds.

TITLE VIII—ANCILLARY AND OTHERCROSS-BORDER CASES

Sec. 801. Amendment to add chapter 15 totitle 11, United States Code.

Sec. 802. Amendments to other chapters intitle 11, United States Code.

Sec. 803. Claims relating to insurance depos-its in cases ancillary to foreignproceedings.

TITLE IX—FINANCIAL CONTRACTPROVISIONSCONTRACTS.

Sec. 901. Bankruptcy Code amendments.Sec. 902. Damage measure.Sec. 903. Asset-backed securitizations.Sec. 904. Effective date; application of

amendments.TITLE X—PROTECTION OF FAMILY

FARMERSSec. 1001. Reenactment of chapter 12.Sec. 1002. Debt limit increase.Sec. 1003. Elimination of requirement that

family farmer and spouse re-ceive over 50 percent of incomefrom farming operation in yearprior to bankruptcy.

Sec. 1004. Certain claims owed to govern-mental units.

TITLE XI—HEALTH CARE ANDEMPLOYEE BENEFITS

Sec. 1101. Definitions.Sec. 1102. Disposal of patient records.Sec. 1103. Administrative expense claim for

costs of closing a health carebusiness.

Sec. 1104. Appointment of ombudsman to actas patient advocate.

Sec. 1105. Debtor in possession; duty oftrustee to transfer patients.

TITLE XII—TECHNICAL AMENDMENTSSec. 1201. Definitions.Sec. 1202. Adjustment of dollar amounts.Sec. 1203. Extension of time.Sec. 1204. Technical amendments.Sec. 1205. Penalty for persons who neg-

ligently or fraudulently preparebankruptcy petitions.

Sec. 1206. Limitation on compensation ofprofessional persons.

Sec. 1207. Special tax provisions.Sec. 1208. Effect of conversion.Sec. 1209. Allowance of administrative ex-

penses.Sec. 1210. Priorities.Sec. 1211. Exemptions.Sec. 1212. Exceptions to discharge.Sec. 1213. Effect of discharge.Sec. 1214. Protection against discriminatory

treatment.Sec. 1215. Property of the estate.Sec. 1216. Preferences.Sec. 1217. Postpetition transactions.Sec. 1218. Disposition of property of the es-

tate.Sec. 1219. General provisions.Sec. 1220. Abandonment of railroad line.Sec. 1221. Contents of plan.Sec. 1222. Discharge under chapter 12.Sec. 1223. Bankruptcy cases and proceedings.Sec. 1224. Knowing disregard of bankruptcy

law or rule.Sec. 1225. Transfers made by nonprofit char-

itable corporations.Sec. 1226. Protection of valid purchase

money security interests.Sec. 1227. Extensions.Sec. 1228. Bankruptcy judgeships.TITLE XIII—GENERAL EFFECTIVE DATE;

APPLICATION OF AMENDMENTSSec. 1301. Effective date; application of

amendments.

TITLE I—NEEDS-BASED BANKRUPTCYSEC. 101. CONVERSION.

Section 706(c) of title 11, United StatesCode, is amended by inserting ‘‘or consentsto’’ after ‘‘requests’’.SEC. 102. DISMISSAL OR CONVERSION.

(a) IN GENERAL.—Section 707 of title 11,United States Code, is amended—

(1) by striking the section heading and in-serting the following:‘‘§ 707. Dismissal of a case or conversion to a

case under chapter 13’’;and

(2) in subsection (b)—(A) by inserting ‘‘(1)’’ after ‘‘(b)’’;(B) in paragraph (1), as redesignated by

subparagraph (A) of this paragraph—(i) in the first sentence—(I) by striking ‘‘but not at the request or

suggestion’’ and inserting ‘‘, panel trusteeor’’;

(II) by inserting ‘‘, or, with the debtor’sconsent, convert such a case to a case underchapter 13 of this title,’’ after ‘‘consumerdebts’’; and

(III) by striking ‘‘substantial abuse’’ andinserting ‘‘abuse’’; and

(ii) by striking the next to last sentence;and

(C) by adding at the end the following:‘‘(2)(A)(i) In considering under paragraph

(1) whether the granting of relief would be anabuse of the provisions of this chapter, thecourt shall presume abuse exists if the debt-or’s current monthly income reduced by theamounts determined under clauses (ii), (iii),and (iv), and multiplied by 60 is not less thanthe lesser of—

‘‘(I) 25 percent of the debtor’s nonpriorityunsecured claims in the case; or

‘‘(II) $15,000.‘‘(ii) The debtor’s monthly expenses shall

be the applicable monthly (excluding pay-ments for debts) expenses under standardsissued by the Internal Revenue Service forthe area in which the debtor resides, as in ef-fect on the date of the entry of the order forrelief, for the debtor, the dependents of thedebtor, and the spouse of the debtor in ajoint case, if the spouse is not otherwise adependent.

‘‘(iii) The debtor’s average monthly pay-ments on account of secured debts shall becalculated as—

‘‘(I) the total of all amounts scheduled ascontractually due to secured creditors ineach month of the 60 months following thedate of the petition; divided by

‘‘(II) 60.‘‘(iv) The debtor’s expenses for payment of

all priority claims (including priority childsupport and alimony claims) shall be cal-culated as—

‘‘(I) the total amount of debts entitled topriority; divided by

‘‘(II) 60.‘‘(B)(i) In any proceeding brought under

this subsection, the presumption of abusemay be rebutted by demonstrating specialcircumstances that justify additional ex-penses or adjustments of current monthlytotal income. In order to establish specialcircumstances, the debtor shall be requiredto—

‘‘(I) itemize each additional expense or ad-justment of income; and

‘‘(II) provide—‘‘(aa) documentation for such expenses;

and‘‘(bb) a detailed explanation of the special

circumstances that make such expenses nec-essary and reasonable.

‘‘(ii) The debtor, and the attorney for thedebtor if the debtor has an attorney, shallattest under oath to the accuracy of any in-formation provided to demonstrate that ad-ditional expenses or adjustments to incomeare required.

‘‘(iii) The presumption of abuse may be re-butted if the additional expenses or adjust-ments to income referred to in clause (i)cause the product of the debtor’s currentmonthly income reduced by the amounts de-termined under clauses (ii), (iii), and (iv) ofsubparagraph (A) multiplied by 60 to be lessthan the lesser of—

‘‘(I) 25 percent of the debtor’s nonpriorityunsecured claims; or

‘‘(II) $15,000.‘‘(C)(i) As part of the schedule of current

income and expenditures required under sec-tion 521, the debtor shall include a statementof the debtor’s current monthly income, andthe calculations that determine whether apresumption arises under subparagraph(A)(i), that shows how each such amount iscalculated.

‘‘(ii) The Supreme Court shall promulgaterules under section 2075 of title 28, that pre-scribe a form for a statement under clause (i)and may provide general rules on the con-tent of the statement.

‘‘(3) In considering under paragraph (1)whether the granting of relief would be anabuse of the provisions of this chapter in acase in which the presumption in subpara-graph (A)(i) of such paragraph does not applyor has been rebutted, the court shallconsider—

‘‘(A) whether the debtor filed the petitionin bad faith; or

‘‘(B) the totality of the circumstances (in-cluding whether the debtor seeks to reject apersonal services contract and the financialneed for such rejection as sought by thedebtor) of the debtor’s financial situationdemonstrates abuse.’’.

(b) DEFINITION.—Title 11, United StatesCode, is amended—

(1) in section 101, by inserting after para-graph (10) the following:

‘‘(10A) ‘current monthly income’—‘‘(A) means the average monthly income

from all sources which the debtor, or in ajoint case, the debtor and the debtor’sspouse, receive without regard to whetherthe income is taxable income, derived duringthe 180-day period preceding the date of de-termination; and

‘‘(B) includes any amount paid by any en-tity other than the debtor (or, in a jointcase, the debtor and the debtor’s spouse), ona regular basis to the household expenses ofthe debtor or the debtor’s dependents (and,in a joint case, the debtor’s spouse if not oth-erwise a dependent);’’; and

(2) in section 704—(A) by inserting ‘‘(a)’’ before ‘‘The trustee

shall—’’; and(B) by adding at the end the following:‘‘(b)(1) With respect to an individual debtor

under this chapter—‘‘(A) the United States trustee or bank-

ruptcy administrator shall review all mate-rials filed by the debtor and, not later than10 days before the first meeting of creditors,file with the court a statement as to whetherthe debtor’s case would be presumed to be anabuse under section 707(b); and

‘‘(B) not later than 5 days after receiving astatement under subparagraph (A), the courtshall provide a copy of the statement to allcreditors.

‘‘(2) The United States trustee or bank-ruptcy administrator shall not later than 30days after receiving a statement filed underparagraph (1) file a motion to dismiss or con-vert under section 707(b), or file a statementsetting forth the reasons the United Statestrustee or bankruptcy administrator doesnot believe that such a motion would be ap-propriate. If, based on the filing of suchstatement with the court, the United Statestrustee or bankruptcy administrator deter-mines that the debtor’s case should be pre-sumed to be an abuse under section 707(b)

CONGRESSIONAL RECORD — SENATE S2741March 16, 1999and the product of the debtor’s currentmonthly income, multiplied by 12 is not lessthan—

‘‘(A) the highest national or applicableState median family income reported for afamily of equal or lesser size, whichever isgreater; or

‘‘(B) in the case of a household of 1 person,the national or applicable State medianhousehold income for 1 earner, whichever isgreater.

‘‘(3)(A) The court shall order the counselfor the debtor to reimburse the panel trusteefor all reasonable costs in prosecuting a mo-tion brought under section 707(b), includingreasonable attorneys’ fees, if—

‘‘(i) a panel trustee appointed under sec-tion 586(a)(1) of title 28 brings a motion fordismissal or conversion under this sub-section; and

‘‘(ii) the court—‘‘(I) grants that motion; and‘‘(II) finds that the action of the counsel

for the debtor in filing under this chapterwas not substantially justified.

‘‘(B) If the court finds that the attorney forthe debtor violated Rule 9011, at a minimum,the court shall order—

‘‘(i) the assessment of an appropriate civilpenalty against the counsel for the debtor;and

‘‘(ii) the payment of the civil penalty tothe panel trustee or the United States trust-ee.

‘‘(C) In the case of a petition referred to insubparagraph (B), the signature of an attor-ney shall constitute a certificate that the at-torney has—

‘‘(i) performed a reasonable investigationinto the circumstances that gave rise to thepetition; and

‘‘(ii) determined that the petition—‘‘(I) is well grounded in fact; and‘‘(II) is warranted by existing law or a good

faith argument for the extension, modifica-tion, or reversal of existing law and does notconstitute an abuse under paragraph (1).

‘‘(4)(A) Except as provided in subparagraph(B) and subject to paragraph (5), the courtmay award a debtor all reasonable costs incontesting a motion brought by a party ininterest (other than a panel trustee orUnited States trustee) under this subsection(including reasonable attorneys’ fees) if—

‘‘(i) the court does not grant the motion;and

‘‘(ii) the court finds that—‘‘(I) the position of the party that brought

the motion was not substantially justified;or

‘‘(II) the party brought the motion solelyfor the purpose of coercing a debtor intowaiving a right guaranteed to the debtorunder this title.

‘‘(B) A party in interest that has a claim ofan aggregate amount less than $1,000 shallnot be subject to subparagraph (A).

‘‘(5) Only the judge, United States trustee,bankruptcy administrator, or panel trusteemay bring a motion under this section if thedebtor and the debtor’s spouse combined, asof the date of the order for relief, have atotal current monthly income equal to orless than the national or applicable Statemedian family monthly income calculatedon a monthly basis for a family of equalsize.’’.

(c) CLERICAL AMENDMENT.—The table ofsections for chapter 7 of title 11, UnitedStates Code, is amended by striking the itemrelating to section 707 and inserting the fol-lowing:‘‘707. Dismissal of a case or conversion to a

case under chapter 13.’’.SEC. 103. NOTICE OF ALTERNATIVES.

Section 342(b) of title 11, United StatesCode, is amended to read as follows:

‘‘(b)(1) Before the commencement of a caseunder this title by an individual whose debtsare primarily consumer debts, that individ-ual shall be given or obtain (as required insection 521(a)(1), as part of the certificationprocess under subchapter I of chapter 5) awritten notice prescribed by the UnitedStates trustee for the district in which thepetition is filed under section 586 of title 28.

‘‘(2) The notice shall contain the following:‘‘(A) A brief description of chapters 7, 11,

12, and 13 and the general purpose, benefits,and costs of proceeding under each of thosechapters.

‘‘(B) A brief description of services thatmay be available to that individual from acredit counseling service that is approved bythe United States trustee for that district.’’.SEC. 104. DEBTOR FINANCIAL MANAGEMENT

TRAINING TEST PROGRAM.(a) DEVELOPMENT OF FINANCIAL MANAGE-

MENT AND TRAINING CURRICULUM AND MATE-RIALS.—The Director of the Executive Officefor United States Trustees (in this sectionreferred to as the ‘‘Director’’) shall—

(1) consult with a wide range of individualswho are experts in the field of debtor edu-cation, including trustees who are appointedunder chapter 13 of title 11, United StatesCode, and who operate financial manage-ment education programs for debtors; and

(2) develop a financial management train-ing curriculum and materials that may beused to educate individual debtors concern-ing how to better manage their finances.

(b) TEST.—(1) IN GENERAL.—The Director shall select 3

judicial districts of the United States inwhich to test the effectiveness of the finan-cial management training curriculum andmaterials developed under subsection (a).

(2) AVAILABILITY OF CURRICULUM AND MATE-RIALS.—For a 1-year period beginning notlater than 270 days after the date of enact-ment of this Act, the curriculum and mate-rials referred to in paragraph (1) shall bemade available by the Director, directly orindirectly, on request to individual debtorsin cases filed during that 1-year period underchapter 7 or 13 of title 11, United StatesCode.

(c) EVALUATION.—(1) IN GENERAL.—During the 1-year period

referred to in subsection (b), the Directorshall evaluate the effectiveness of—

(A) the financial management trainingcurriculum and materials developed undersubsection (a); and

(B) a sample of existing consumer edu-cation programs such as those described inthe report of the National Bankruptcy Re-view Commission issued on October 20, 1997,that are representative of consumer edu-cation programs carried out by—

(i) the credit industry;(ii) trustees serving under chapter 13 of

title 11, United States Code; and(iii) consumer counseling groups.(2) REPORT.—Not later than 3 months after

concluding the evaluation under paragraph(1), the Director shall submit a report to theSpeaker of the House of Representatives andthe President pro tempore of the Senate, forreferral to the appropriate committees ofCongress, containing the findings of the Di-rector regarding the effectiveness of suchcurriculum, such materials, and such pro-grams.SEC. 105. CREDIT COUNSELING.

(a) WHO MAY BE A DEBTOR.—Section 109 oftitle 11, United States Code, is amended byadding at the end the following:

‘‘(h)(1) Subject to paragraphs (2) and (3),and notwithstanding any other provision ofthis section, an individual may not be adebtor under this title unless that individualhas, during the 90-day period preceding the

date of filing of the petition of that individ-ual, received from an approved nonprofitcredit counseling service described in section111(a) an individual or group briefing thatoutlined the opportunities for available cred-it counseling and assisted that individual inperforming a related budget analysis.

‘‘(2)(A) Paragraph (1) shall not apply withrespect to a debtor who resides in a districtfor which the United States trustee or bank-ruptcy administrator of the bankruptcycourt of that district determines that the ap-proved nonprofit credit counseling servicesfor that district are not reasonably able toprovide adequate services to the additionalindividuals who would otherwise seek creditcounseling from those programs by reason ofthe requirements of paragraph (1).

‘‘(B) Each United States trustee or bank-ruptcy administrator that makes a deter-mination described in subparagraph (A) shallreview that determination not later than 1year after the date of that determination,and not less frequently than every yearthereafter.

‘‘(3)(A) Subject to subparagraph (B), the re-quirements of paragraph (1) shall not applywith respect to a debtor who submits to thecourt a certification that—

‘‘(i) describes exigent circumstances thatmerit a waiver of the requirements of para-graph (1);

‘‘(ii) states that the debtor requested cred-it counseling services from an approved non-profit credit counseling service, but was un-able to obtain the services referred to inparagraph (1) during the 5-day period begin-ning on the date on which the debtor madethat request; and

‘‘(iii) is satisfactory to the court.‘‘(B) With respect to a debtor, an exemp-

tion under subparagraph (A) shall cease toapply to that debtor on the date on whichthe debtor meets the requirements of para-graph (1), but in no case may the exemptionapply to that debtor after the date that is 30days after the debtor files a petition.’’.

(b) CHAPTER 7 DISCHARGE.—Section 727(a)of title 11, United States Code, is amended—

(1) in paragraph (9), by striking ‘‘or’’ at theend;

(2) in paragraph (10), by striking the periodand inserting ‘‘; or’’; and

(3) by adding at the end the following:‘‘(11) after the filing of the petition, the

debtor failed to complete an instructionalcourse concerning personal financial man-agement described in section 111.’’.

(c) CHAPTER 13 DISCHARGE.—Section 1328 oftitle 11, United States Code, is amended byadding at the end the following:

‘‘(g) The court shall not grant a dischargeunder this section to a debtor, unless afterfiling a petition the debtor has completed aninstructional course concerning personal fi-nancial management described in section111.

‘‘(h) Subsection (g) shall not apply with re-spect to a debtor who resides in a district forwhich the United States trustee or bank-ruptcy administrator of the bankruptcycourt of that district determines that the ap-proved instructional courses are not ade-quate to service the additional individualswho would be required to complete the in-structional course by reason of the require-ments of this section.

‘‘(i) Each United States trustee or bank-ruptcy administrator that makes a deter-mination described in subsection (h) shall re-view that determination not later than 1year after the date of that determination,and not less frequently than every yearthereafter.’’.

(d) DEBTOR’S DUTIES.—Section 521 of title11, United States Code, is amended—

(1) by inserting ‘‘(a)’’ before ‘‘The debtorshall—’’; and

CONGRESSIONAL RECORD — SENATES2742 March 16, 1999(2) by adding at the end the following:‘‘(b) In addition to the requirements under

subsection (a), an individual debtor shall filewith the court—

‘‘(1) a certificate from the credit counsel-ing service that provided the debtor servicesunder section 109(h); and

‘‘(2) a copy of the debt repayment plan, ifany, developed under section 109(h) throughthe credit counseling service referred to inparagraph (1).’’.

(e) GENERAL PROVISIONS.—(1) IN GENERAL.—Chapter 1 of title 11,

United States Code, is amended by adding atthe end the following:‘‘§ 111. Credit counseling services; financial

management instructional courses‘‘(a) The clerk of each district shall main-

tain a list of credit counseling services thatprovide 1 or more programs described in sec-tion 109(h) and a list of instructional coursesconcerning personal financial managementthat have been approved by—

‘‘(1) the United States trustee; or‘‘(2) the bankruptcy administrator for the

district.’’.(2) CLERICAL AMENDMENT.—The table of

sections for chapter 1 of title 11, UnitedStates Code, is amended by adding at the endthe following:‘‘111. Credit counseling services; financial

management instructionalcourses.’’.

(f) LIMITATION.—Section 362 of title 11,United States Code, is amended by adding atthe end the following:

‘‘(i) If a case commenced under chapter 7,11, or 13 of this title is dismissed due to thecreation of a debt repayment plan, for pur-poses of subsection (c)(3), any subsequentcase commenced by the debtor under anysuch chapter shall not be presumed to befiled not in good faith.’’.

TITLE II—ENHANCED CONSUMERPROTECTION

Subtitle A—Penalties for Abusive CreditorPractices

SEC. 201. PROMOTION OF ALTERNATIVE DISPUTERESOLUTION.

(a) REDUCTION OF CLAIM.—Section 502 oftitle 11, United States Code, is amended byadding at the end the following:

‘‘(k)(1) The court, on the motion of thedebtor and after a hearing, may reduce aclaim filed under this section based in wholeon unsecured consumer debts by not morethan 20 percent of the claim, if—

‘‘(A) the claim was filed by a creditor whounreasonably refused to negotiate a reason-able alternative repayment schedule pro-posed by an approved credit counseling agen-cy acting on behalf of the debtor;

‘‘(B) the offer of the debtor under subpara-graph (A)—

‘‘(i) was made at least 60 days before thefiling of the petition; and

‘‘(ii) provided for payment of at least 60percent of the amount of the debt over a pe-riod not to exceed the repayment period ofthe loan, or a reasonable extension thereof;and

‘‘(C) no part of the debt under the alter-native repayment schedule is nondischarge-able.

‘‘(2) The debtor shall have the burden ofproving, by clear and convincing evidence,that—

‘‘(A) the creditor unreasonably refused toconsider the debtor’s proposal; and

‘‘(B) the proposed alternative repaymentschedule was made in the 60-day period speci-fied in paragraph (1)(B)(i).’’.

(b) LIMITATION ON AVOIDABILITY.—Section547 of title 11, United States Code, is amend-ed by adding at the end the following:

‘‘(h) The trustee may not avoid a transferif such transfer was made as a part of an al-

ternative repayment plan between the debtorand any creditor of the debtor created by anapproved credit counseling agency.’’.SEC. 202. EFFECT OF DISCHARGE.

Section 524 of title 11, United States Code,is amended by adding at the end the follow-ing:

‘‘(i) The willful failure of a creditor tocredit payments received under a plan con-firmed under this title (including a plan ofreorganization confirmed under chapter 11 ofthis title) in the manner required by the plan(including crediting the amounts requiredunder the plan) shall constitute a violationof an injunction under subsection (a)(2).’’.SEC. 203. VIOLATIONS OF THE AUTOMATIC STAY.

Section 362(a) of title 11, United StatesCode, is amended—

(1) in paragraph (7), by striking ‘‘and’’ atthe end;

(2) in paragraph (8), by striking the periodat the end and inserting ‘‘; and’’; and

(3) by adding at the end the following:‘‘(9) any communication (other than a reci-

tation of the creditor’s legal rights) threat-ening a debtor (for the purpose of coercingan agreement for the reaffirmation of debt),at any time after the commencement and be-fore the granting of a discharge in a caseunder this title, of an intention to—

‘‘(A) file a motion to—‘‘(i) determine the dischargeability of a

debt; or‘‘(ii) under section 707(b), to dismiss or con-

vert a case; or‘‘(B) repossess collateral from the debtor to

which the stay applies.’’.SEC. 204. DISCOURAGING ABUSE OF REAFFIRMA-

TION PRACTICES.(a) IN GENERAL.—Section 524 of title 11,

United States Code, as amended by section202 of this Act, is amended—

(1) in subsection (c)—(A) in paragraph (2)—(i) in subparagraph (A), by striking ‘‘and’’

at the end;(ii) in subparagraph (B), by inserting ‘‘and’’

at the end; and(iii) by adding at the end the following:‘‘(C)(i) the consideration for such agree-

ment is based on a wholly unsecured con-sumer debt; and

‘‘(ii) such agreement contains a clear andconspicuous statement that advises the debt-or that—

‘‘(I) the debtor is entitled to a hearing be-fore the court at which—

‘‘(aa) the debtor shall appear in person; and‘‘(bb) the court shall decide whether the

agreement constitutes an undue hardship, isnot in the debtor’s best interest, or is not theresult of a threat by the creditor to take anaction that, at the time of the threat, thatthe creditor may not legally take or does notintend to take; and

‘‘(II) if the debtor is represented by coun-sel, the debtor may waive the debtor’s rightto a hearing under subclause (I) by signing astatement—

‘‘(aa) waiving the hearing;‘‘(bb) stating that the debtor is represented

by counsel; and‘‘(cc) identifying the counsel.’’; and(B) in paragraph (6)(A)—(i) in clause (i), by striking ‘‘and’’ at the

end;(ii) in clause (ii), by striking the period and

inserting ‘‘and’’; and(iii) by adding at the end the following:‘‘(iii) not an agreement that the debtor en-

tered into as a result of a threat by the cred-itor to take an action that, at the time ofthe threat, the creditor could not legallytake or did not intend to take.’’; and

(2) in subsection (d), in the third sentence,by inserting after ‘‘during the course of ne-gotiating an agreement’’ the following: ‘‘(or

if the consideration by such agreement isbased on a wholly secured consumer debt,and the debtor has not waived the right to ahearing under subsection (c)(2)(C))’’.

(b) LAW ENFORCEMENT.—(1) IN GENERAL.—Chapter 9 of title 18,

United States Code, is amended by adding atthe end the following:‘‘§ 158. Designation of United States attorneys

and agents of the Federal Bureau of Inves-tigation to address abusive reaffirmationsof debt‘‘(a) IN GENERAL.—The Attorney General of

the United States shall designate the indi-viduals described in subsection (b) to haveprimary responsibility in carrying out en-forcement activities in addressing violationsof section 152 or 157 relating to abusive re-affirmations of debt.

‘‘(b) UNITED STATES DISTRICT ATTORNEYSAND AGENTS OF THE FEDERAL BUREAU OF IN-VESTIGATION—The individuals referred to insubsection (a) are

‘‘(1) a United States attorney for each judi-cial district of the United States; and

‘‘(2) an agent of the Federal Bureau of In-vestigation (within the meaning of section3107) for each field office of the Federal Bu-reau of Investigation.

‘‘(c) BANKRUPTCY INVESTIGATIONS.—EachUnited States attorney designated under thissection shall have primary responsibility forcarrying out the duties of a United Statesattorney under section 3057.’’.

(2) CLERICAL AMENDMENT.—The analysis forchapter 9 of title 18, United States Code, isamended by adding at the end the following:‘‘158. Designation of United States attorneys

and agents of the Federal Bu-reau of Investigation to addressabusive reaffirmations ofdebt.’’.

(c) EXCEPTIONS TO DISCHARGE.—Section 523of title 11, United States Code, is amended byadding at the end the following:

‘‘(f) Nothing in this section or in any otherprovision of this title shall preempt anyState law relating to unfair trade practicesthat imposes restrictions on creditor con-duct that would give rise to liability—

‘‘(1) under this section; or‘‘(2) under section 524, for failure to comply

with applicable requirements for seeking areaffirmation of debt.

‘‘(g) ACTIONS BY STATES.—The attorneygeneral of a State, or an official or agencydesignated by a State—

‘‘(1) may bring an action on behalf of itsresidents to recover damages on their behalfunder subsection (d) or section 524(c); and

‘‘(2) may bring an action in a State courtto enforce a State criminal law that is simi-lar to section 152 or 157 of title 18.’’.

Subtitle B—Priority Child SupportSEC. 211. PRIORITIES FOR CLAIMS FOR DOMES-

TIC SUPPORT OBLIGATIONS.Section 507(a) of title 11, United States

Code, is amended—(1) by striking paragraph (7);(2) by redesignating paragraphs (1) through

(6) as paragraphs (2) through (7), respec-tively;

(3) in paragraph (2), as redesignated, bystriking ‘‘First’’ and inserting ‘‘Second’’;

(4) in paragraph (3), as redesignated, bystriking ‘‘Second’’ and inserting ‘‘Third’’;

(5) in paragraph (4), as redesignated, bystriking ‘‘Third’’ and inserting ‘‘Fourth’’;

(6) in paragraph (5), as redesignated, bystriking ‘‘Fourth’’ and inserting ‘‘Fifth’’;

(7) in paragraph (6), as redesignated, bystriking ‘‘Fifth’’ and inserting ‘‘Sixth’’;

(8) in paragraph (7), as redesignated, bystriking ‘‘Sixth’’ and inserting ‘‘Seventh’’;and

(9) by inserting before paragraph (2), as re-designated, the following:

CONGRESSIONAL RECORD — SENATE S2743March 16, 1999‘‘(1) First, allowed claims for domestic sup-

port obligations to be paid in the followingorder on the condition that funds receivedunder this paragraph by a governmental unitin a case under this title be applied:

‘‘(A) Claims that, as of the date of entry ofthe order for relief, are owed directly to aspouse, former spouse, or child of the debtor,or the parent of such child, without regard towhether the claim is filed by the spouse,former spouse, child, or parent, or is filed bya governmental unit on behalf of that per-son.

‘‘(B) Claims that, as of the date of entry ofthe order for relief, are assigned by a spouse,former spouse, child of the debtor, or theparent of that child to a governmental unitor are owed directly to a governmental unitunder applicable nonbankruptcy law.’’.SEC. 212. REQUIREMENTS TO OBTAIN CONFIRMA-

TION AND DISCHARGE IN CASES IN-VOLVING DOMESTIC SUPPORT OBLI-GATIONS.

Title 11, United States Code, is amended—(1) in section 1129(a), by adding at the end

the following:‘‘(14) If the debtor is required by a judicial

or administrative order or statute to pay adomestic support obligation, the debtor haspaid all amounts payable under such order orstatute for such obligation that become pay-able after the date on which the petition isfiled.’’;

(2) in section 1325(a)—(A) in paragraph (5), by striking ‘‘and’’ at

the end;(B) in paragraph (6), by striking the period

at the end and inserting ‘‘; and’’; and(C) by adding at the end the following:‘‘(7) if the debtor is required by a judicial

or administrative order or statute to pay adomestic support obligation, the debtor haspaid all amounts payable under such orderfor such obligation that become payableafter the date on which the petition isfiled.’’; and

(3) in section 1328(a), in the matter preced-ing paragraph (1), by inserting ‘‘, and withrespect to a debtor who is required by a judi-cial or administrative order to pay a domes-tic support obligation, certifies that allamounts payable under such order or statutethat are due on or before the date of the cer-tification (including amounts due before orafter the petition was filed) have been paid’’after ‘‘completion by the debtor of all pay-ments under the plan’’.SEC. 213. EXCEPTIONS TO AUTOMATIC STAY IN

DOMESTIC SUPPORT OBLIGATIONPROCEEDINGS.

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

(1) by striking paragraph (2) and insertingthe following:

‘‘(2) under subsection (a)—‘‘(A) of the commencement of an action or

proceeding for—‘‘(i) the establishment of paternity as a

part of an effort to collect domestic supportobligations; or

‘‘(ii) the establishment or modification ofan order for domestic support obligations; or

‘‘(B) the collection of a domestic supportobligation from property that is not prop-erty of the estate;’’;

(2) in paragraph (17), by striking ‘‘or’’ atthe end;

(3) in paragraph (18), by striking the periodat the end and inserting a semicolon; and

(4) by inserting after paragraph (18) the fol-lowing:

‘‘(19) under subsection (a) with respect tothe withholding of income under an order asspecified in section 466(b) of the Social Secu-rity Act (42 U.S.C. 666(b)); or

‘‘(20) under subsection (a) with respect to—‘‘(A) the withholding, suspension, or re-

striction of drivers’ licenses, professional

and occupational licenses, and recreationallicenses under State law, as specified in sec-tion 466(a)(16) of the Social Security Act (42U.S.C. 666(a)(16)) or with respect to the re-porting of overdue support owed by an ab-sent parent to any consumer reporting agen-cy as specified in section 466(a)(7) of the So-cial Security Act (42 U.S.C. 666(a)(7));

‘‘(B) the interception of tax refunds, asspecified in sections 464 and 466(a)(3) of theSocial Security Act (42 U.S.C. 664 and666(a)(3)); or

‘‘(C) the enforcement of medical obliga-tions as specified under title IV of the SocialSecurity Act (42 U.S.C. 601 et seq.).’’.SEC. 214. NONDISCHARGEABILITY OF CERTAIN

DEBTS FOR ALIMONY, MAINTE-NANCE, AND SUPPORT.

Section 523 of title 11, United States Code,is amended—

(1) in subsection (a), by striking paragraph(5) and inserting the following:

‘‘(5) for a domestic support obligation;’’;(2) in subsection (c), by striking ‘‘(6), or

(15)’’ and inserting ‘‘or (6)’’; and(3) in paragraph (15), by striking ‘‘govern-

mental unit’’ and all through the end of theparagraph and inserting a semicolon.SEC. 215. CONTINUED LIABILITY OF PROPERTY.

Section 522 of title 11, United States Code,is amended—

(1) in subsection (c), by striking paragraph(1) and inserting the following:

‘‘(1) a debt of a kind specified in paragraph(1) or (5) of section 523(a) (in which case, not-withstanding any provision of applicablenonbankruptcy law to the contrary, suchproperty shall be liable for a debt of a kindspecified in section 523(a)(5));’’; and

(2) in subsection (f)(1)(A), by striking thedash and all that follows through the end ofthe subparagraph and inserting ‘‘of a kindthat is specified in section 523(a)(5); or’’.SEC. 216. PROTECTION OF DOMESTIC SUPPORT

CLAIMS AGAINST PREFERENTIALTRANSFER MOTIONS.

Section 547(c)(7) of title 11, United StatesCode, is amended to read as follows:

‘‘(7) to the extent such transfer was a bonafide payment of a debt for a domestic sup-port obligation; or’’.SEC. 217. AMENDMENT TO SECTION 1325 OF

TITLE 11, UNITED STATES CODE.Section 1325(b)(2) of title 11, United States

Code, is amended by inserting ‘‘(other thanchild support payments, foster care pay-ments, or disability payments for a depend-ent child made in accordance with applicablenonbankruptcy law and which is reasonablynecessary to be expended)’’ after ‘‘receivedby the debtor’’.SEC. 218. DEFINITION OF DOMESTIC SUPPORT

OBLIGATION.Section 101 of title 11, United States Code,

is amended—(1) by striking paragraph (12A); and(2) by inserting after paragraph (14) the fol-

lowing:‘‘(14A) ‘domestic support obligation’ means

a debt that accrues before or after the entryof an order for relief under this title that is—

‘‘(A) owed to or recoverable by—‘‘(i) a spouse, former spouse, or child of the

debtor or that child’s legal guardian; or‘‘(ii) a governmental unit;‘‘(B) in the nature of alimony, mainte-

nance, or support (including assistance pro-vided by a governmental unit) of suchspouse, former spouse, or child, without re-gard to whether such debt is expressly sodesignated;

‘‘(C) established or subject to establish-ment before or after entry of an order for re-lief under this title, by reason of applicableprovisions of—

‘‘(i) a separation agreement, divorce de-cree, or property settlement agreement;

‘‘(ii) an order of a court of record; or‘‘(iii) a determination made in accordance

with applicable nonbankruptcy law by a gov-ernmental unit; and

‘‘(D) not assigned to a nongovernmentalentity, unless that obligation is assigned vol-untarily by the spouse, former spouse, child,or parent solely for the purpose of collectingthe debt.’’.SEC. 219. COLLECTION OF CHILD SUPPORT.

(a) DUTIES OF TRUSTEE UNDER CHAPTER 7.—Section 704 of title 11, United States Code, asamended by section 102(b) of this Act, isamended—

(1) in subsection (a)—(A) in paragraph (8), by striking ‘‘and’’ at

the end;(B) in paragraph (9), by striking the period

and inserting ‘‘; and’’; and(C) by adding at the end the following:‘‘(10) if, with respect to an individual debt-

or, there is a claim for support of a child ofthe debtor or a custodial parent of such childentitled to receive priority under section507(a)(1), provide the applicable notificationspecified in subsection (c).’’; and

(2) by adding at the end the following:‘‘(c)(1) In any case described in subsection

(a)(10), the trustee shall—‘‘(A)(i) notify in writing the holder of the

claim of the right of that holder to use theservices of a State child support enforcementagency established under sections 464 and 466of the Social Security Act (42 U.S.C. 654 and666, respectively) for the State in which theholder resides; and

‘‘(ii) include in the notice under this para-graph the address and telephone number ofthe child support enforcement agency; and

‘‘(B)(i) notify in writing the State childsupport agency of the State in which theholder of the claim resides of the claim;

‘‘(ii) include in the notice under this para-graph the name, address, and telephone num-ber of the holder of the claim; and

‘‘(iii) at such time as the debtor is granteda discharge under section 727, notify theholder of that claim and the State child sup-port agency of the State in which that hold-er resides of—

‘‘(I) the granting of the discharge;‘‘(II) the last recent known address of the

debtor; and‘‘(III) with respect to the debtor’s case, the

name of each creditor that holds a claim—‘‘(aa) that is not discharged under para-

graph (2), (4), or (14A) of section 523(a); or‘‘(bb) that was reaffirmed by the debtor

under section 524(c).‘‘(2)(A) If, after receiving a notice under

paragraph (1)(B)(iii), a holder of a claim or aState child support agency is unable to lo-cate the debtor that is the subject of the no-tice, that party may request from a creditordescribed in paragraph (1)(B)(iii)(III) (aa) or(bb) the last known address of the debtor.

‘‘(B) Notwithstanding any other provisionof law, a creditor that makes a disclosure ofa last known address of a debtor in connec-tion with a request made under subpara-graph (A) shall not be liable to the debtor orany other person by reason of making thatdisclosure.’’.

(b) DUTIES OF TRUSTEE UNDER CHAPTER13.—Section 1302 of title 11, United StatesCode, as amended by section 102(b) of thisAct, is amended—

(1) in subsection (b)—(A) in paragraph (4), by striking ‘‘and’’ at

the end;(B) in paragraph (5), by striking the period

and inserting ‘‘; and’’; and(C) by adding at the end the following:‘‘(6) if, with respect to an individual debt-

or, there is a claim for support of a child ofthe debtor or a custodial parent of such childentitled to receive priority under section

CONGRESSIONAL RECORD — SENATES2744 March 16, 1999507(a)(1), provide the applicable notificationspecified in subsection (d).’’; and

(s) by adding at the end the following:‘‘(d)(1) In any case described in subsection

(b)(6), the trustee shall—‘‘(A)(i) notify in writing the holder of the

claim of the right of that holder to use theservices of a State child support enforcementagency established under sections 464 and 466of the Social Security Act (42 U.S.C. 654 and666, respectively) for the State in which theholder resides; and

‘‘(ii) include in the notice under this para-graph the address and telephone number ofthe child support enforcement agency; and

‘‘(B)(i) notify in writing the State childsupport agency of the State in which theholder of the claim resides of the claim; and

‘‘(ii) include in the notice under this para-graph the name, address, and telephone num-ber of the holder of the claim;

‘‘(iii) at such time as the debtor is granteda discharge under section 1328, notify theholder of the claim and the State child sup-port agency of the State in which that hold-er resides of—

‘‘(I) the granting of the discharge;‘‘(II) the last recent known address of the

debtor; and‘‘(III) with respect to the debtor’s case, the

name of each creditor that holds a claim—‘‘(aa) that is not discharged under para-

graph (2), (4), or (14A) of section 523(a); or‘‘(bb) that was reaffirmed by the debtor

under section 524(c).‘‘(2)(A) If, after receiving a notice under

paragraph (1)(B)(iii), a holder of a claim or aState child support agency is unable to lo-cate the debtor that is the subject of the no-tice, that party may request from a creditordescribed in paragraph (1)(B)(iii)(III) (aa) or(bb) the last known address of the debtor.

‘‘(B) Notwithstanding any other provisionof law, a creditor that makes a disclosure ofa last known address of a debtor in connec-tion with a request made under subpara-graph (A) shall not be liable to the debtor orany other person by reason of making thatdisclosure.’’.

Subtitle C—Other Consumer ProtectionsSEC. 221. DEFINITIONS.

(a) DEFINITIONS.—Section 101 of title 11,United States Code, is amended—

(1) by inserting after paragraph (3) the fol-lowing:

‘‘(3A) ‘assisted person’ means any personwhose debts consist primarily of consumerdebts and whose nonexempt assets are lessthan $150,000;’’;

(2) by inserting after paragraph (4) the fol-lowing:

‘‘(4A) ‘bankruptcy assistance’ means anygoods or services sold or otherwise providedto an assisted person with the express or im-plied purpose of providing information, ad-vice, counsel, document preparation or fil-ing, or attendance at a creditors’ meeting orappearing in a proceeding on behalf of an-other or providing legal representation withrespect to a proceeding under this title;’’;and

(3) by inserting after paragraph (12A) thefollowing:

‘‘(12B) ‘debt relief agency’ means any per-son who provides any bankruptcy assistanceto an assisted person in return for the pay-ment of money or other valuable consider-ation, or who is a bankruptcy petition pre-parer under section 110, but does not includeany person that is any of the following or anofficer, director, employee, or agentthereof—

‘‘(A) any nonprofit organization which isexempt from taxation under section 501(c)(3)of the Internal Revenue Code of 1986;

‘‘(B) any creditor of the person to the ex-tent the creditor is assisting the person to

restructure any debt owed by the person tothe creditor; or

‘‘(C) any depository institution (as definedin section 3 of the Federal Deposit InsuranceAct (12 U.S.C. 1813)) or any Federal creditunion or State credit union (as those termsare defined in section 101 of the FederalCredit Union Act (12 U.S.C. 1751)), or any af-filiate or subsidiary of such a depository in-stitution or credit union;’’.

(b) CONFORMING AMENDMENT.—Section104(b)(1) of title 11, United States Code, isamended by inserting ‘‘101(3),’’ after ‘‘sec-tions’’.SEC. 222. DISCLOSURES.

(a) DISCLOSURES.—Subchapter II of chapter5 of title 11, United States Code, is amendedby adding at the end the following:‘‘§ 526. Disclosures

‘‘(a) A debt relief agency providing bank-ruptcy assistance to an assisted person shallprovide the following notices to the assistedperson:

‘‘(1) The written notice required under sec-tion 342(b)(1).

‘‘(2) To the extent not covered in the writ-ten notice described in paragraph (1) and notlater than 3 business days after the first dateon which a debt relief agency first offers toprovide any bankruptcy assistance servicesto an assisted person, a clear and conspicu-ous written notice advising assisted personsthat—

‘‘(A) all information the assisted person isrequired to provide with a petition andthereafter during a case under this title shallbe complete, accurate, and truthful;

‘‘(B) all assets and all liabilities shall becompletely and accurately disclosed in thedocuments filed to commence the case, andthe replacement value of each asset, as de-fined in section 506, shall be stated in thosedocuments if requested after reasonable in-quiry to establish such value;

‘‘(C) total current monthly income, pro-jected monthly net income and, in a caseunder chapter 13, monthly net income shallbe stated after reasonable inquiry; and

‘‘(D) information an assisted person pro-vides during the case of that person may beaudited under this title and the failure toprovide such information may result in dis-missal of the proceeding under this title orother sanction including, in some instances,criminal sanctions.

‘‘(b) A debt relief agency providing bank-ruptcy assistance to an assisted person shallprovide each assisted person at the sametime as the notices required under sub-section (a)(1) with the following statement,to the extent applicable, or a substantiallysimilar statement. The statement shall beclear and conspicuous and shall be in a singledocument separate from other documents ornotices provided to the assisted person:

‘‘ ‘IMPORTANT INFORMATION ABOUTBANKRUPTCY ASSISTANCE SERVICESFROM AN ATTORNEY OR BANKRUPTCYPETITION PREPARER

‘‘ ‘If you decide to seek bankruptcy relief,you can represent yourself, you can hire anattorney to represent you, or you can gethelp in some localities from a bankruptcypetition preparer who is not an attorney.THE LAW REQUIRES AN ATTORNEY ORBANKRUPTCY PETITION PREPARER TOGIVE YOU A WRITTEN CONTRACT SPECI-FYING WHAT THE ATTORNEY OR BANK-RUPTCY PETITION PREPARER WILL DOFOR YOU AND HOW MUCH IT WILL COST.Ask to see the contract before you hire any-one.

‘‘ ‘The following information helps you un-derstand what must be done in a routinebankruptcy case to help you evaluate howmuch service you need. Although bank-ruptcy can be complex, many cases are rou-tine.

‘‘ ‘Before filing a bankruptcy case, eitheryou or your attorney should analyze youreligibility for different forms of debt reliefmade available by the Bankruptcy Code andwhich form of relief is most likely to be ben-eficial for you. Be sure you understand therelief you can obtain and its limitations. Tofile a bankruptcy case, documents called aPetition, Schedules and Statement of Finan-cial Affairs, as well as in some cases a State-ment of Intention need to be prepared cor-rectly and filed with the bankruptcy court.You will have to pay a filing fee to the bank-ruptcy court. Once your case starts, you willhave to attend the required first meeting ofcreditors where you may be questioned by acourt official called a ‘‘trustee’’ and bycreditors.

‘‘ ‘If you choose to file a chapter 7 case, youmay be asked by a creditor to reaffirm adebt. You may want help deciding whetherto do so and a creditor is not permitted tocoerce you into reaffirming your debts.

‘‘ ‘If you choose to file a chapter 13 case inwhich you repay your creditors what you canafford over 3 to 5 years, you may also wanthelp with preparing your chapter 13 plan andwith the confirmation hearing on your planwhich will be before a bankruptcy judge.

‘‘ ‘If you select another type of relief underthe Bankruptcy Code other than chapter 7 orchapter 13, you will want to find out whatneeds to be done from someone familiar withthat type of relief.

‘‘ ‘Your bankruptcy case may also involvelitigation. You are generally permitted torepresent yourself in litigation in bank-ruptcy court, but only attorneys, not bank-ruptcy petition preparers, can give you legaladvice.’.

‘‘(c) Except to the extent the debt reliefagency provides the required informationitself after reasonably diligent inquiry of theassisted person or others so as to obtain suchinformation reasonably accurately for inclu-sion on the petition, schedules or statementof financial affairs, a debt relief agency pro-viding bankruptcy assistance to an assistedperson, to the extent permitted by nonbank-ruptcy law, shall provide each assisted per-son at the time required for the notice re-quired under subsection (a)(1) reasonably suf-ficient information (which may be providedorally or in a clear and conspicuous writing)to the assisted person on how to provide allthe information the assisted person is re-quired to provide under this title pursuant tosection 521, including—

‘‘(1) how to value assets at replacementvalue, determine total current monthly in-come, projected monthly income and, in acase under chapter 13, net monthly income,and related calculations;

‘‘(2) how to complete the list of creditors,including how to determine what amount isowed and what address for the creditorshould be shown; and

‘‘(3) how to—‘‘(A) determine what property is exempt;

and‘‘(B) value exempt property at replacement

value, as defined in section 506.‘‘(d) A debt relief agency shall maintain a

copy of the notices required under subsection(a) of this section for a period of 2 years afterthe latest date on which the notice is giventhe assisted person.’’.

(b) CONFORMING AMENDMENT.—The table ofsections for chapter 5 of title 11, UnitedStates Code, is amended by inserting afterthe item relating to section 525 the follow-ing:‘‘526. Disclosures.’’.SEC. 223. DEBTOR’S BILL OF RIGHTS.

(a) DEBTOR’S BILL OF RIGHTS.—SubchapterII of chapter 5 of title 11, United States Code,as amended by section 222 of this Act, isamended by adding at the end the following:

CONGRESSIONAL RECORD — SENATE S2745March 16, 1999‘‘§ 527. Debtor’s bill of rights

‘‘(a)(1) A debt relief agency shall—‘‘(A) not later than 5 business days after

the first date on which a debt relief agencyprovides any bankruptcy assistance servicesto an assisted person, but before that as-sisted person’s petition under this title isfiled—

‘‘(i) execute a written contract with the as-sisted person specifying clearly and con-spicuously the services the agency will pro-vide the assisted person and the basis onwhich fees or charges will be made for suchservices and the terms of payment; and

‘‘(ii) give the assisted person a copy of thefully executed and completed contract in aform the person is able to retain;

‘‘(B) disclose in any advertisement of bank-ruptcy assistance services or of the benefitsof bankruptcy directed to the general public(whether in general media, seminars or spe-cific mailings, telephonic or electronic mes-sages, or otherwise) that the services or ben-efits are with respect to proceedings underthis title, clearly and conspicuously usingthe statement: ‘We are a debt relief agency.We help people file bankruptcy petitions toobtain relief under the Bankruptcy Code.’ ora substantially similar statement; and

‘‘(C) if an advertisement directed to thegeneral public indicates that the debt reliefagency provides assistance with respect tocredit defaults, mortgage foreclosures, leaseeviction proceedings, excessive debt, debtcollection pressure, or inability to pay anyconsumer debt, disclose conspicuously inthat advertisement that the assistance iswith respect to or may involve proceedingsunder this title, using the following state-ment: ‘We are a debt relief agency. We helppeople file bankruptcy petitions to obtain re-lief under the Bankruptcy Code.’ or a sub-stantially similar statement.

‘‘(2) For purposes of paragraph (1)(B), anadvertisement shall be of bankruptcy assist-ance services if that advertisement describesor offers bankruptcy assistance with a planunder chapter 12, without regard to whetherchapter 13 is specifically mentioned. A state-ment such as ‘federally supervised repay-ment plan’ or ‘Federal debt restructuringhelp’ or any other similar statement thatwould lead a reasonable consumer to believethat help with debts is being offered when infact in most cases the help available is bank-ruptcy assistance with a plan under chapter13 is a statement covered under the preced-ing sentence.

‘‘(b) A debt relief agency shall not—‘‘(1) fail to perform any service that the

debt relief agency has told the assisted per-son or prospective assisted person the agencywould provide that person in connectionwith the preparation for or activities duringa proceeding under this title;

‘‘(2) make any statement, or counsel or ad-vise any assisted person to make any state-ment in any document filed in a proceedingunder this title, that—

‘‘(A) is untrue and misleading; or‘‘(B) upon the exercise of reasonable care,

should be known by the debt relief agency tobe untrue or misleading;

‘‘(3) misrepresent to any assisted person orprospective assisted person, directly or indi-rectly, affirmatively or by material omis-sion, what services the debt relief agencymay reasonably expect to provide that per-son, or the benefits an assisted person mayobtain or the difficulties the person may ex-perience if the person seeks relief in a pro-ceeding under this title; or

‘‘(4) advise an assisted person or prospec-tive assisted person to incur more debt incontemplation of that person filing a pro-ceeding under this title or in order to pay anattorney or bankruptcy petition preparer fee

or charge for services performed as part ofpreparing for or representing a debtor in aproceeding under this title.’’.

(b) CONFORMING AMENDMENT.—The table ofsections for chapter 5 of title 11, UnitedStates Code, as amended by section 222 ofthis Act, is amended by inserting after theitem relating to section 526 of title 11,United States Code, the following:‘‘527. Debtor’s bill of rights.’’.SEC. 224. ENFORCEMENT.

(a) ENFORCEMENT.—Subchapter II of chap-ter 5 of title 11, United States Code, asamended by section 223 of this Act, is amend-ed by adding at the end the following:‘‘§ 528. Debt relief agency enforcement

‘‘(a) Any waiver by any assisted person ofany protection or right provided by or undersection 526 or 527 shall be void and may notbe enforced by any Federal or State court orany other person.

‘‘(b)(1) Any contract between a debt reliefagency and an assisted person for bank-ruptcy assistance that does not comply withthe material requirements of section 526 or527 shall be treated as void and may not beenforced by any Federal or State court or byany other person.

‘‘(2) Any debt relief agency that has beenfound, after notice and hearing, to have—

‘‘(A) negligently failed to comply with anyprovision of section 526 or 527 with respect toa bankruptcy case or related proceeding ofan assisted person;

‘‘(B) provided bankruptcy assistance to anassisted person in a case or related proceed-ing which is dismissed or converted becausethe debt relief agency’s negligent failure tofile bankruptcy papers, including papersspecified in section 521; or

‘‘(C) negligently or intentionally dis-regarded the material requirements of thistitle or the Federal Rules of BankruptcyProcedure applicable to such debt reliefagency shall be liable to the assisted personin the amount of any fees and charges inconnection with providing bankruptcy as-sistance to such person that the debt reliefagency has already been paid on account ofthat proceeding.

‘‘(3) In addition to such other remedies asare provided under State law, whenever thechief law enforcement officer of a State, oran official or agency designated by a State,has reason to believe that any person hasviolated or is violating section 526 or 527, theState—

‘‘(A) may bring an action to enjoin suchviolation;

‘‘(B) may bring an action on behalf of itsresidents to recover the actual damages ofassisted persons arising from such violation,including any liability under paragraph (2);and

‘‘(C) in the case of any successful actionunder subparagraph (A) or (B), shall beawarded the costs of the action and reason-able attorney fees as determined by thecourt.

‘‘(4) The United States District Court forany district located in the State shall haveconcurrent jurisdiction of any action undersubparagraph (A) or (B) of paragraph (3).

‘‘(5) Notwithstanding any other provisionof Federal law, if the court, on its own mo-tion or on the motion of the United Statestrustee, finds that a person intentionallyviolated section 526 or 527, or engaged in aclear and consistent pattern or practice ofviolating section 526 or 527, the court may—

‘‘(A) enjoin the violation of such section;or

‘‘(B) impose an appropriate civil penaltyagainst such person.

‘‘(c) This section and sections 526 and 527shall not annul, alter, affect, or exempt anyperson subject to those sections from com-

plying with any law of any State except tothe extent that such law is inconsistent withthose sections, and then only to the extent ofthe inconsistency.’’.

(b) CONFORMING AMENDMENT.—The table ofsections for chapter 5 of title 11, UnitedStates Code, as amended by section 223 ofthis Act, is amended by inserting after theitem relating to section 527 of title 11,United States Code, the following:‘‘528. Debt relief agency enforcement.’’.SEC. 225. SENSE OF CONGRESS.

It is the sense of Congress that Statesshould develop curricula relating to the sub-ject of personal finance, designed for use inelementary and secondary schools.SEC. 226. ADDITIONAL AMENDMENTS TO TITLE

11, UNITED STATES CODE.(a) Section 507(a) of title 11, United States

Code, as amended by section 211 of this Act,is amended by inserting after paragraph (9)the following:

‘‘(10) Tenth, allowed claims for death orpersonal injuries resulting from the oper-ation of a motor vehicle or vessel if such op-eration was unlawful because the debtor wasintoxicated from using alcohol, a drug, oranother substance.’’.

(b) Section 523(a)(9) of title 11, UnitedStates Code, is amended by inserting ‘‘orvessel’’ after ‘‘vehicle’’.TITLE III—DISCOURAGING BANKRUPTCY

ABUSESEC. 301. REINFORCEMENT OF THE FRESH

START.Section 523(a)(17) of title 11, United States

Code, is amended—(1) by striking ‘‘by a court’’ and inserting

‘‘on a prisoner by any court’’,(2) by striking ‘‘section 1915(b) or (f)’’ and

inserting ‘‘subsection (b) or (f)(2) of section1915’’, and

(3) by inserting ‘‘(or a similar non-Federallaw)’’ after ‘‘title 28’’ each place it appears.SEC. 302. DISCOURAGING BAD FAITH REPEAT

FILINGS.Section 362(c) of title 11, United States

Code, is amended—(1) in paragraph (1), by striking ‘‘and’’ at

the end;(2) in paragraph (2) by striking the period

at the end and inserting a semicolon; and(3) by adding at the end the following:‘‘(3) if a single or joint case is filed by or

against an individual debtor under chapter 7,11, or 13, and if a single or joint case of thedebtor was pending within the preceding 1-year period but was dismissed, other than acase refiled under a chapter other than chap-ter 7 after dismissal under section 707(b)—

‘‘(A) the stay under subsection (a) with re-spect to any action taken with respect to adebt or property securing such debt or withrespect to any lease will terminate with re-spect to the debtor on the 30th day after thefiling of the later case;

‘‘(B) upon motion by a party in interest forcontinuation of the automatic stay and uponnotice and a hearing, the court may extendthe stay in particular cases as to any or allcreditors (subject to such conditions or limi-tations as the court may then impose) afternotice and a hearing completed before theexpiration of the 30-day period only if theparty in interest demonstrates that the fil-ing of the later case is in good faith as to thecreditors to be stayed; and

‘‘(C) for purposes of subparagraph (B), acase is presumptively filed not in good faith(but such presumption may be rebutted byclear and convincing evidence to the con-trary)—

‘‘(i) as to all creditors, if—‘‘(I) more than 1 previous case under any of

chapter 7, 11, or 13 in which the individualwas a debtor was pending within the preced-ing 1-year period;

CONGRESSIONAL RECORD — SENATES2746 March 16, 1999‘‘(II) a previous case under any of chapter

7, 11, or 13 in which the individual was adebtor was dismissed within such 1-year pe-riod, after the debtor failed to—

‘‘(aa) file or amend the petition or otherdocuments as required by this title or thecourt without substantial excuse (but mereinadvertence or negligence shall not be asubstantial excuse unless the dismissal wascaused by the negligence of the debtor’s at-torney);

‘‘(bb) provide adequate protection as or-dered by the court; or

‘‘(cc) perform the terms of a plan con-firmed by the court; or

‘‘(III) there has not been a substantialchange in the financial or personal affairs ofthe debtor since the dismissal of the nextmost previous case under chapter 7, 11, or 13of this title, or any other reason to concludethat the later case will be concluded—

‘‘(aa) if a case under chapter 7 of this title,with a discharge; or

‘‘(bb) if a case under chapter 11 or 13 of thistitle, with a confirmed plan which will befully performed; and

‘‘(ii) as to any creditor that commenced anaction under subsection (d) in a previouscase in which the individual was a debtor if,as of the date of dismissal of such case, thataction was still pending or had been resolvedby terminating, conditioning, or limiting thestay as to actions of such creditor; and

‘‘(4)(A)(i) if a single or joint case is filed byor against an individual debtor under thistitle, and if 2 or more single or joint cases ofthe debtor were pending within the previousyear but were dismissed, other than a caserefiled under section 707(b), the stay undersubsection (a) shall not go into effect uponthe filing of the later case; and

‘‘(ii) on request of a party in interest, thecourt shall promptly enter an order confirm-ing that no stay is in effect;

‘‘(B) if, within 30 days after the filing ofthe later case, a party in interest requeststhe court may order the stay to take effectin the case as to any or all creditors (subjectto such conditions or limitations as thecourt may impose), after notice and hearing,only if the party in interest demonstratesthat the filing of the later case is in goodfaith as to the creditors to be stayed;

‘‘(C) a stay imposed under subparagraph(B) shall be effective on the date of entry ofthe order allowing the stay to go into effect;and

‘‘(D) for purposes of subparagraph (B), acase is presumptively not filed in good faith(but such presumption may be rebutted byclear and convincing evidence to the con-trary)—

‘‘(i) as to all creditors if—‘‘(I) 2 or more previous cases under this

title in which the individual was a debtorwere pending within the 1-year period;

‘‘(II) a previous case under this title inwhich the individual was a debtor was dis-missed within the time period stated in thisparagraph after the debtor failed to file oramend the petition or other documents as re-quired by this title or the court without sub-stantial excuse (but mere inadvertence ornegligence shall not be substantial excuseunless the dismissal was caused by the neg-ligence of the debtor’s attorney), failed topay adequate protection as ordered by thecourt, or failed to perform the terms of aplan confirmed by the court; or

‘‘(III) there has not been a substantialchange in the financial or personal affairs ofthe debtor since the dismissal of the nextmost previous case under this title, or anyother reason to conclude that the later casewill not be concluded, if a case under chapter7, with a discharge, and if a case under chap-ter 11 or 13, with a confirmed plan that willbe fully performed; or

‘‘(ii) as to any creditor that commenced anaction under subsection (d) in a previouscase in which the individual was a debtor if,as of the date of dismissal of such case, suchaction was still pending or had been resolvedby terminating, conditioning, or limiting thestay as to action of such creditor.’’.SEC. 303. CURBING ABUSIVE FILINGS.

(a) IN GENERAL.—Section 362(d) of title 11,United States Code, is amended—

(1) in paragraph (2), by striking ‘‘or’’ at theend;

(2) in paragraph (3), by striking the periodat the end and inserting ‘‘; or’’; and

(3) by adding at the end the following:‘‘(4) with respect to a stay of an act against

real property under subsection (a), by a cred-itor whose claim is secured by an interest insuch real estate, if the court finds that thefiling of the bankruptcy petition was part ofa scheme to delay, hinder, and defraud credi-tors that involved either—

‘‘(A) transfer of all or part ownership of, orother interest in, the real property withoutthe consent of the secured creditor or courtapproval; or

‘‘(B) multiple bankruptcy filings affectingthe real property.If recorded in compliance with applicableState laws governing notices of interests orliens in real property, an order entered underthis subsection shall be binding in any othercase under this title purporting to affect thereal property filed not later than 2 yearsafter that recording, except that a debtor ina subsequent case may move for relief fromsuch order based upon changed cir-cumstances or for good cause shown, afternotice and a hearing.’’.

(b) AUTOMATIC STAY.—Section 362(b) oftitle 11, United States Code, as amended bysection 213 of this Act, is amended—

(1) in paragraph (19), by striking ‘‘or’’ atthe end;

(2) in paragraph (20), by striking the periodat the end; and

(3) by inserting after paragraph (20) the fol-lowing:

‘‘(21) under subsection (a), of any act to en-force any lien against or security interest inreal property following the entry of an orderunder section 362(d)(4) as to that property inany prior bankruptcy case for a period of 2years after entry of such an order, exceptthat the debtor, in a subsequent case, maymove the court for relief from such orderbased upon changed circumstances or forother good cause shown, after notice and ahearing; or

‘‘(22) under subsection (a), of any act to en-force any lien against or security interest inreal property—

‘‘(A) if the debtor is ineligible under sec-tion 109(g) to be a debtor in a bankruptcycase; or

‘‘(B) if the bankruptcy case was filed inviolation of a bankruptcy court order in aprior bankruptcy case prohibiting the debtorfrom being a debtor in another bankruptcycase.’’.SEC. 304. DEBTOR RETENTION OF PERSONAL

PROPERTY SECURITY.Title 11, United States Code, is amended—(1) in section 521(a), as so redesignated—(A) in paragraph (4), by striking ‘‘and’’ at

the end;(B) in paragraph (5), by striking the period

at the end and inserting ‘‘; and’’; and(C) by adding at the end the following:‘‘(6) in an individual case under chapter 7

of this title, not retain possession of per-sonal property as to which a creditor has anallowed claim for the purchase price securedin whole or in part by an interest in that per-sonal property unless, in the case of an indi-vidual debtor, the debtor within 45 days afterthe first meeting of creditors under section341(a)—

‘‘(A) enters into an agreement with thecreditor under section 524(c) with respect tothe claim secured by such property; or

‘‘(B) redeems such property from the secu-rity interest under section 722.’’; and

(C) by adding at the end the following:‘‘(b) If the debtor fails to so act within the

45-day period specified in subsection (a)(6),the personal property affected shall nolonger be property of the estate, and thecreditor may take whatever action as tosuch property as is permitted by applicablenonbankruptcy law, unless the court deter-mines on the motion of the trustee, and afternotice and a hearing, that such property is ofconsequential value or benefit to the es-tate.’’; and

(2) in section 722, by inserting ‘‘in full atthe time of redemption’’ before the period atthe end.SEC. 305. RELIEF FROM THE AUTOMATIC STAY

WHEN THE DEBTOR DOES NOT COM-PLETE INTENDED SURRENDER OFCONSUMER DEBT COLLATERAL.

Title 11, United States Code, is amended—(1) in section 362—(A) in subsection (c), by striking ‘‘(e), and

(f)’’ and inserting ‘‘(e), (f), and (h)’’; and(B) by redesignating subsection (h), as

amended by section 227 of this Act, as sub-section (j) and by inserting after subsection(g) the following:

‘‘(h)(1) Subject to paragraph (2), in an indi-vidual case under chapter 7, 11, or 13 the stayprovided by subsection (a) is terminated withrespect to property of the estate securing inwhole or in part a claim, or subject to an un-expired lease, if the debtor fails within theapplicable period of time set by section521(a)(2) to—

‘‘(A) file timely any statement of intentionrequired under section 521(a)(2) with respectto that property or to indicate therein thatthe debtor—

‘‘(i) will either surrender the property orretain the property; and

‘‘(ii) if retaining the property, will, asapplicable—

‘‘(I) redeem the property under section 722;‘‘(II) reaffirm the debt the property secures

under section 524(c); or‘‘(III) assume the unexpired lease under

section 365(p) if the trustee does not do so; or‘‘(B) take timely the action specified in

that statement of intention, as the state-ment may be amended before expiration ofthe period for taking action, unless thestatement of intention specifies reaffirma-tion and the creditor refuses to reaffirm onthe original contract terms.

‘‘(2) Paragraph (1) shall not apply if thecourt determines on the motion of the trust-ee, and after notice and a hearing, that suchproperty is of consequential value or benefitto the estate.’’; and

(2) in section 521, as amended by section 304of this Act—

(A) in subsection (a)(2), as redesignated—(i) by striking ‘‘consumer’’;(ii) in subparagraph (B)—(I) by striking ‘‘forty-five days after the

filing of a notice of intent under this sec-tion’’ and inserting ‘‘30 days after the firstdate set for the meeting of creditors undersection 341(a)’’; and

(II) by striking ‘‘forty-five day period’’ andinserting ‘‘30-day period’’; and

(iii) in subparagraph (C), by inserting ‘‘ex-cept as provided in section 362(h)’’ before thesemicolon; and

(B) by adding at the end the following:‘‘(c) If the debtor fails timely to take the

action specified in subsection (a)(6), or inparagraph (1) or (2) of section 362(h), with re-spect to property which a lessor or bailorowns and has leased, rented, or bailed to thedebtor or as to which a creditor holds a secu-rity interest not otherwise voidable under

CONGRESSIONAL RECORD — SENATE S2747March 16, 1999section 522(f), 544, 545, 547, 548, or 549, nothingin this title shall prevent or limit the oper-ation of a provision in the underlying leaseor agreement that has the effect of placingthe debtor in default under that lease oragreement by reason of the occurrence, pend-ency, or existence of a proceeding under thistitle or the insolvency of the debtor. Nothingin this subsection shall be deemed to justifylimiting such a provision in any other cir-cumstance.’’.SEC. 306. GIVING SECURED CREDITORS FAIR

TREATMENT IN CHAPTER 13.

(a) IN GENERAL.—Section 1325(a)(5)(B)(i) oftitle 11, United States Code, is amended toread as follows:

‘‘(i) the plan provides that—‘‘(I) the holder of such claim retain the lien

securing such claim until the earlier of—‘‘(aa) the payment of the underlying debt

determined under nonbankruptcy law; or‘‘(bb) discharge under section 1328; and‘‘(II) if the case under this chapter is dis-

missed or converted without completion ofthe plan, such lien shall also be retained bysuch holder to the extent recognized by ap-plicable nonbankruptcy law; and’’.

(b) RESTORING THE FOUNDATION FOR SE-CURED CREDIT.—Section 1325(a) of title 11,United States Code, is amended by adding atthe end the following flush sentence:

‘‘For purposes of paragraph (5), section 506shall not apply to a claim described in thatparagraph if the debt that is the subject ofthe claim was incurred within the 5-year pe-riod preceding the filing of the petition andthe collateral for that debt consists of amotor vehicle (as defined in section 30102 oftitle 49) acquired for the personal use of thedebtor, or if collateral for that debt consistsof any other thing of value, if the debt wasincurred during the 6-month period preced-ing that filing.’’.

(c) DEFINITIONS.—Section 101 of title 11,United States Code, as amended by section221 of this Act, is amended—

(1) by inserting after paragraph (13) the fol-lowing:

‘‘(13A) ‘debtor’s principal residence’—‘‘(A) means a residential structure, includ-

ing incidental property, without regard towhether that structure is attached to realproperty; and

‘‘(B) includes an individual condominiumor cooperative unit;’’; and

(2) by inserting after paragraph (27), thefollowing:

‘‘(27A) ‘incidental property’ means, withrespect to a debtor’s principal residence—

‘‘(A) property commonly conveyed with aprincipal residence in the area where the realestate is located;

‘‘(B) all easements, rights, appurtenances,fixtures, rents, royalties, mineral rights, oilor gas rights or profits, water rights, escrowfunds, or insurance proceeds; and

‘‘(C) all replacements or additions;’’.SEC. 307. EXEMPTIONS.

Section 522(b)(2)(A) of title 11, UnitedStates Code, is amended—

(1) by striking ‘‘180’’ and inserting ‘‘730’’;and

(2) by striking ‘‘, or for a longer portion ofsuch 180-day period than in any other place’’.SEC. 308. RESIDENCY REQUIREMENT FOR HOME-

STEAD EXEMPTION.

Section 522 of title 11, United States Code,as amended by section 307 of this Act, isamended—

(1) in subsection (b)(2)(A), by inserting‘‘subject to subsection (n),’’ before ‘‘anyproperty’’; and

(2) by adding at the end the following:‘‘(n) For purposes of subsection (b)(2)(A),

and notwithstanding subsection (a), thevalue of an interest in—

‘‘(1) real or personal property that thedebtor or a dependent of the debtor uses as aresidence;

‘‘(2) a cooperative that owns property thatthe debtor or a dependent of the debtor usesas a residence; or

‘‘(3) a burial plot for the debtor or a de-pendent of the debtor;shall be reduced to the extent such value isattributable to any portion of any propertythat the debtor disposed of in the 730-day pe-riod ending on the date of the filing of thepetition, with the intent to hinder, delay, ordefraud a creditor and that the debtor couldnot exempt, or that portion that the debtorcould not exempt, under subsection (b) if onsuch date the debtor had held the property sodisposed of.’’.SEC. 309. PROTECTING SECURED CREDITORS IN

CHAPTER 13 CASES.(a) STOPPING ABUSIVE CONVERSIONS FROM

CHAPTER 13.—Section 348(f)(1) of title 11,United States Code, is amended—

(1) in subparagraph (A), by striking ‘‘and’’at the end;

(2) in subparagraph (B)—(A) by striking ‘‘in the converted case,

with allowed secured claims’’ and inserting‘‘only in a case converted to chapter 11 or 12but not in a case converted to chapter 7, withallowed secured claims in cases under chap-ters 11 and 12’’; and

(B) by striking the period and inserting ‘‘;and’’; and

(3) by adding at the end the following:‘‘(C) with respect to cases converted from

chapter 13—‘‘(i) the claim of any creditor holding secu-

rity as of the date of the petition shall con-tinue to be secured by that security unlessthe full amount of such claim determinedunder applicable nonbankruptcy law hasbeen paid in full as of the date of conversion,notwithstanding any valuation or deter-mination of the amount of an allowed se-cured claim made for the purposes of thechapter 13 proceeding; and

‘‘(ii) unless a prebankruptcy default hasbeen fully cured under the plan at the timeof conversion, in any proceeding under thistitle or otherwise, the default shall have theeffect given under applicable nonbankruptcylaw.’’.

(b) GIVING DEBTORS THE ABILITY TO KEEPLEASED PERSONAL PROPERTY BY ASSUMP-TION.—Section 365 of title 11, United StatesCode, is amended by adding at the end thefollowing:

‘‘(p)(1) If a lease of personal property is re-jected or not timely assumed by the trusteeunder subsection (d), the leased property isno longer property of the estate and the stayunder section 362(a) is automatically termi-nated.

‘‘(2)(A) In the case of an individual underchapter 7, the debtor may notify the creditorin writing that the debtor desires to assumethe lease. Upon being so notified, the credi-tor may, at its option, notify the debtor thatit is willing to have the lease assumed by thedebtor and may condition such assumptionon cure of any outstanding default on termsset by the contract.

‘‘(B) If within 30 days after notice is pro-vided under subparagraph (A), the debtor no-tifies the lessor in writing that the lease isassumed, the liability under the lease will beassumed by the debtor and not by the estate.

‘‘(C) The stay under section 362 and the in-junction under section 524(a)(2) shall not beviolated by notification of the debtor and ne-gotiation of cure under this subsection.

‘‘(3) In a case under chapter 11 of this titlein which the debtor is an individual and in acase under chapter 13 of this title, if thedebtor is the lessee with respect to personalproperty and the lease is not assumed in the

plan confirmed by the court, the lease isdeemed rejected as of the conclusion of thehearing on confirmation. If the lease is re-jected, the stay under section 362 and anystay under section 1301 is automatically ter-minated with respect to the property subjectto the lease.’’.

(c) ADEQUATE PROTECTION OF LESSORS ANDPURCHASE MONEY SECURED CREDITORS.—

(1) IN GENERAL.—Subchapter I of chapter 13of title 11, United States Code, is amended byinserting after section 1307 the following:‘‘§ 1308. Adequate protection in chapter 13

cases‘‘(a)(1)(A) On or before the date that is 30

days after the filing of a case under thischapter, the debtor shall make cash pay-ments in an amount determined under para-graph (2), to—

‘‘(i) any lessor of personal property; and‘‘(ii) any creditor holding a claim secured

by personal property to the extent that theclaim is attributable to the purchase of thatproperty by the debtor.

‘‘(B) The debtor or the plan shall continuemaking the adequate protection paymentsuntil the earlier of the date on which—

‘‘(i) the creditor begins to receive actualpayments under the plan; or

‘‘(ii) the debtor relinquishes possession ofthe property referred to in subparagraph (A)to—

‘‘(I) the lessor or creditor; or‘‘(II) any third party acting under claim of

right.‘‘(2) The payments referred to in paragraph

(1)(A) shall be the contract amount.‘‘(b)(1) Subject to the limitations under

paragraph (2), the court may, after noticeand hearing, change the amount, and timingof the dates of payment, of payments madeunder subsection (a).

‘‘(2)(A) The payments referred to in para-graph (1) shall be payable not less frequentlythan monthly.

‘‘(B) The amount of payments referred toin paragraph (1) shall not be less than theamount of any weekly, biweekly, monthly,or other periodic payment schedules as pay-able under the contract between the debtorand creditor.

‘‘(c) Notwithstanding section 1326(b), thepayments referred to in subsection (a)(1)(A)shall be continued in addition to plan pay-ments under a confirmed plan until actualpayments to the creditor begin under thatplan, if the confirmed plan provides for—

‘‘(1) payments to a creditor or lessor de-scribed in subsection (a)(1); and

‘‘(2) the deferral of payments to such credi-tor or lessor under the plan until the pay-ment of amounts described in section 1326(b).

‘‘(d) Notwithstanding sections 362, 542, and543, a lessor or creditor described in sub-section (a) may retain possession of propertydescribed in that subsection that was ob-tained in accordance with applicable law be-fore the date of filing of the petition untilthe first payment under subsection (a)(1)(A)is received by the lessor or creditor.

‘‘(e) On or before the date that is 60 daysafter the filing of a case under this chapter,a debtor retaining possession of personalproperty subject to a lease or securing aclaim attributable in whole or in part to thepurchase price of such property shall provideeach creditor or lessor reasonable evidenceof the maintenance of any required insur-ance coverage with respect to the use orownership of such property and continue todo so for so long as the debtor retains posses-sion of such property.’’.

(2) CLERICAL AMENDMENT.—The table ofsections for chapter 13 of title 11, UnitedStates Code, is amended, in the matter relat-ing to subchapter I, by inserting after theitem relating to section 1307 the following:

CONGRESSIONAL RECORD — SENATES2748 March 16, 1999‘‘1308. Adequate protection in chapter 13

cases.’’.SEC. 310. LIMITATION ON LUXURY GOODS.

Section 523(a)(2)(C) of title 11, UnitedStates Code, is amended to read as follows:

‘‘(C)(i) for purposes of subparagraph (A)—‘‘(I) consumer debts owed to a single credi-

tor and aggregating more than $250 for lux-ury goods or services incurred by an individ-ual debtor on or within 90 days before theorder for relief under this title are presumedto be nondischargeable; and

‘‘(II) cash advances aggregating more than$750 that are extensions of consumer creditunder an open end credit plan obtained by anindividual debtor on or within 70 days beforethe order for relief under this title, are pre-sumed to be nondischargeable; and

‘‘(ii) for purposes of this subparagraph—‘‘(I) the term ‘extension of credit under an

open end credit plan’ means an extension ofcredit under an open end credit plan, withinthe meaning of the Consumer Credit Protec-tion Act (15 U.S.C. 1601 et seq.);

‘‘(II) the term ‘open end credit plan’ hasthe meaning given that term under section103 of Consumer Credit Protection Act (15U.S.C. 1602); and

‘‘(III) the term ‘luxury goods or services’does not include goods or services reasonablynecessary for the support or maintenance ofthe debtor or a dependent of the debtor.’’.SEC. 311. AUTOMATIC STAY.

Section 362(b) of title 11, United StatesCode, as amended by section 303(b) of thisAct, is amended—

(1) in paragraph (21), by striking ‘‘or’’ atthe end;

(2) in paragraph (22), by striking the periodat the end and inserting a semicolon; and

(3) by inserting after paragraph (22) the fol-lowing:

‘‘(23) under subsection (a)(3), of the con-tinuation of any eviction, unlawful detaineraction, or similar proceeding by a lessoragainst a debtor involving residential realproperty in which the debtor resides as atenant under a rental agreement;

‘‘(24) under subsection (a)(3), of the com-mencement of any eviction, unlawful de-tainer action, or similar proceeding by a les-sor against a debtor involving residentialreal property in which the debtor resides asa tenant under a rental agreement that hasterminated under the lease agreement or ap-plicable State law; or

‘‘(25) under subsection (a)(3), of eviction ac-tions based on endangerment to property orperson or the use of illegal drugs.’’.SEC. 312. EXTENSION OF PERIOD BETWEEN

BANKRUPTCY DISCHARGES.Title 11, United States Code, is amended—(1) in section 727(a)(8), by striking ‘‘six’’

and inserting ‘‘8’’; and(2) in section 1328, by adding at the end the

following:‘‘(f) Notwithstanding subsections (a) and

(b), the court shall not grant a discharge ofall debts provided for by the plan or dis-allowed under section 502 if the debtor hasreceived a discharge in any case filed underthis title within 5 years before the order forrelief under this chapter.’’.SEC. 313. DEFINITION OF HOUSEHOLD GOODS

AND ANTIQUES.Section 522(f) of title 11, United States

Code, is amended by adding at the end thefollowing:

‘‘(4)(A) Subject to subparagraph (B), forpurposes of paragraph (1)(B), the term‘household goods’ means—

‘‘(i) clothing;‘‘(ii) furniture;‘‘(iii) appliances;‘‘(iv) 1 radio;‘‘(v) 1 television;‘‘(vi) 1 VCR;

‘‘(vii) linens;‘‘(viii) china;‘‘(ix) crockery;‘‘(x) kitchenware;‘‘(xi) educational materials and edu-

cational equipment primarily for the use ofminor dependent children of the debtor, butonly 1 personal computer only if used pri-marily for the education or entertainment ofsuch minor children;

‘‘(xii) medical equipment and supplies;‘‘(xiii) furniture exclusively for the use of

minor children, or elderly or disabled de-pendents of the debtor; and

‘‘(xiv) personal effects (including weddingrings and the toys and hobby equipment ofminor dependent children) of the debtor andthe dependents of the debtor.

‘‘(B) The term ‘household goods’ does notinclude—

‘‘(i) works of art (unless by or of the debtoror the dependents of the debtor);

‘‘(ii) electronic entertainment equipment(except 1 television, 1 radio, and 1 VCR);

‘‘(iii) items acquired as antiques;‘‘(iv) jewelry (except wedding rings); and‘‘(v) a computer (except as otherwise pro-

vided for in this section), motor vehicle (in-cluding a tractor or lawn tractor), boat, or amotorized recreational device, conveyance,vehicle, watercraft, or aircraft.’’.SEC. 314. DEBT INCURRED TO PAY NON-

DISCHARGEABLE DEBTS.Section 523(a) of title 11, United States

Code, is amended by inserting after para-graph (14) the following:

‘‘(14A)(A) incurred to pay a debt that isnondischargeable by reason of section 727,1141, 1228(a), 1228(b), or 1328(b), or any otherprovision of this subsection, if the debtor in-curred the debt to pay such a nondischarge-able debt with the intent to discharge inbankruptcy the newly created debt;

‘‘(B) except that all debts incurred to paynondischargeable debts shall be presumed tobe nondischargeable debts if incurred within70 days before the filing of the petition (ex-cept that, in any case in which there is an al-lowed claim under section 502 for child sup-port or spousal support entitled to priorityunder section 507(a)(1) and that was filed ina timely manner, debts that would otherwisebe presumed to be nondischargeable debts byreason of this subparagraph shall be treatedas dischargeable debts);’’.

(b) DISCHARGE UNDER CHAPTER 13.Section 1328(a) of title 11, United States

Code, is amended by striking paragraphs (1)through (3) and inserting the following:

‘‘(1) provided for under section 1322(b)(5);‘‘(2) of the kind specified in paragraph (2),

(4), (3)(B), (5), (8), or (9) of section 523(a);‘‘(3) for restitution, or a criminal fine, in-

cluded in a sentence on the debtor’s convic-tion of a crime; or

‘‘(4) for restitution, or damages, awarded ina civil action against the debtor as a resultof willful or malicious injury by the debtorthat caused personal injury to an individualor the death of an individual.’’.SEC. 315. GIVING CREDITORS FAIR NOTICE IN

CHAPTERS 7 AND 13 CASES.(a) NOTICE.—Section 342 of title 11, United

States Code, is amended—(1) in subsection (c)—(A) by inserting ‘‘(1)’’ after ‘‘(c)’’; and(B) by striking ‘‘, but the failure of such

notice to contain such information shall notinvalidate the legal effect of such notice’’;and

(2) by adding at the end the following:‘‘(d) At any time, a creditor, in a case of an

individual debtor under chapter 7 or 13, mayfile with the court and serve on the debtor anotice of the address to be used to notify thecreditor in that case. Five days after receiptof such notice, if the court or the debtor is

required to give the creditor notice, such no-tice shall be given at that address.

‘‘(e) An entity may file with the court anotice stating its address for notice in casesunder chapters 7 and 13. After 30 days follow-ing the filing of such notice, any notice inany case filed under chapter 7 or 13 given bythe court shall be to that address unless spe-cific notice is given under subsection (d)with respect to a particular case.

‘‘(f)(1) Notice given to a creditor otherthan as provided in this section shall not beeffective notice until that notice has beenbrought to the attention of the creditor. Ifthe creditor designates a person or depart-ment to be responsible for receiving noticesconcerning bankruptcy cases and establishesreasonable procedures so that bankruptcynotices received by the creditor are to be de-livered to such department or person, noticeshall not be considered to have been broughtto the attention of the creditor until re-ceived by such person or department.

‘‘(2) No sanction under section 362(h) orany other sanction that a court may imposeon account of violations of the stay undersection 362(a) or failure to comply with sec-tion 542 or 543 may be imposed on any actionof the creditor unless the action takes placeafter the creditor has received notice of thecommencement of the case effective underthis section.’’.

(b) DEBTOR’S DUTIES.—Section 521 of title11, United States Code, as amended by sec-tion 305 of this Act, is amended—

(1) in subsection (a), by striking paragraph(1) and inserting the following:

‘‘(1) file—‘‘(A) a list of creditors; and‘‘(B) unless the court orders otherwise—‘‘(i) a schedule of assets and liabilities;‘‘(ii) a schedule of current income and cur-

rent expenditures;‘‘(iii) a statement of the debtor’s financial

affairs and, if applicable, a certificate—‘‘(I) of an attorney whose name is on the

petition as the attorney for the debtor orany bankruptcy petition preparer signingthe petition under section 110(b)(1) indicat-ing that such attorney or bankruptcy peti-tion preparer delivered to the debtor any no-tice required by section 342(b); or

‘‘(II) if no attorney for the debtor is indi-cated and no bankruptcy petition preparersigned the petition, of the debtor that suchnotice was obtained and read by the debtor;

‘‘(iv) copies of any Federal tax returns, in-cluding any schedules or attachments, filedby the debtor for the 3-year period precedingthe order for relief;

‘‘(v) copies of all payment advices or otherevidence of payment, if any, received by thedebtor from any employer of the debtor inthe period 60 days before the filing of the pe-tition;

‘‘(vi) a statement of the amount of pro-jected monthly net income, itemized to showhow the amount is calculated; and

‘‘(vii) a statement disclosing any reason-ably anticipated increase in income or ex-penditures over the 12-month period follow-ing the date of filing;’’; and

(2) by adding at the end the following:‘‘(d)(1) At any time, a creditor, in the case

of an individual under chapter 7 or 13, mayfile with the court notice that the creditorrequests the petition, schedules, and a state-ment of affairs filed by the debtor in the caseand the court shall make those documentsavailable to the creditor who requests thosedocuments.

‘‘(2)(A) At any time, a creditor in a caseunder chapter 13 may file with the court no-tice that the creditor requests the plan filedby the debtor in the case.

‘‘(B) The court shall make such plan avail-able to the creditor who requests such plan—

‘‘(i) at a reasonable cost; and

CONGRESSIONAL RECORD — SENATE S2749March 16, 1999‘‘(ii) not later than 5 days after such re-

quest.

‘‘(e) An individual debtor in a case underchapter 7 or 13 shall file with the court—

‘‘(1) at the time filed with the taxing au-thority, all tax returns, including any sched-ules or attachments, with respect to the pe-riod from the commencement of the caseuntil such time as the case is closed;

‘‘(2) at the time filed with the taxing au-thority, all tax returns, including any sched-ules or attachments, that were not filed withthe taxing authority when the schedulesunder subsection (a)(1) were filed with re-spect to the period that is 3 years before theorder for relief;

‘‘(3) any amendments to any of the tax re-turns, including schedules or attachments,described in paragraph (1) or (2); and

‘‘(4) in a case under chapter 13, a statementsubject to the penalties of perjury by thedebtor of the debtor’s income and expendi-tures in the preceding tax year and monthlyincome, that shows how the amounts arecalculated—

‘‘(A) beginning on the date that is the laterof 90 days after the close of the debtor’s taxyear or 1 year after the order for relief, un-less a plan has been confirmed; and

‘‘(B) thereafter, on or before the date thatis 45 days before each anniversary of the con-firmation of the plan until the case is closed.

‘‘(f)(1) A statement referred to in sub-section (e)(4) shall disclose—

‘‘(A) the amount and sources of income ofthe debtor;

‘‘(B) the identity of any person responsiblewith the debtor for the support of any de-pendent of the debtor; and

‘‘(C) the identity of any person who con-tributed, and the amount contributed, to thehousehold in which the debtor resides.

‘‘(2) The tax returns, amendments, andstatement of income and expenditures de-scribed in paragraph (1) shall be available tothe United States trustee, any bankruptcyadministrator, any trustee, and any party ininterest for inspection and copying, subjectto the requirements of subsection (f).

‘‘(g)(1) Not later than 30 days after the dateof enactment of the Bankruptcy Reform Actof 1999, the Director of the AdministrativeOffice of the United States Courts shall es-tablish procedures for safeguarding the con-fidentiality of any tax information requiredto be provided under this section.

‘‘(2) The procedures under paragraph (1)shall include restrictions on creditor accessto tax information that is required to be pro-vided under this section.

‘‘(3) Not later than 1 year after the date ofenactment of the Bankruptcy Reform Act of1999, the Director of the Administrative Of-fice of the United States Courts shall prepareand submit to Congress a report that—

‘‘(A) assesses the effectiveness of the proce-dures under paragraph (1); and

‘‘(B) if appropriate, includes proposed leg-islation to—

‘‘(i) further protect the confidentiality oftax information; and

‘‘(ii) provide penalties for the improper useby any person of the tax information re-quired to be provided under this section.

‘‘(h) If requested by the United Statestrustee or a trustee serving in the case, thedebtor shall provide—

‘‘(1) a document that establishes the iden-tity of the debtor, including a driver’s li-cense, passport, or other document that con-tains a photograph of the debtor; and

‘‘(2) such other personal identifying infor-mation relating to the debtor that estab-lishes the identity of the debtor.’’.

SEC. 316. DISMISSAL FOR FAILURE TO TIMELYFILE SCHEDULES OR PROVIDE RE-QUIRED INFORMATION.

Section 521 of title 11, United States Code,as amended by section 315 of this Act, isamended by adding at the end the following:

‘‘(i)(1) Notwithstanding section 707(a), andsubject to paragraph (2), if an individualdebtor in a voluntary case under chapter 7 or13 fails to file all of the information requiredunder subsection (a)(1) within 45 days afterthe filing of the petition commencing thecase, the case shall be automatically dis-missed effective on the 46th day after the fil-ing of the petition.

‘‘(2) With respect to a case described inparagraph (1), any party in interest may re-quest the court to enter an order dismissingthe case. If requested, the court shall enteran order of dismissal not later than 5 daysafter such request.

‘‘(3) Upon request of the debtor made with-in 45 days after the filing of the petitioncommencing a case described in paragraph(1), the court may allow the debtor an addi-tional period of not to exceed 45 days to filethe information required under subsection(a)(1) if the court finds justification for ex-tending the period for the filing.’’.SEC. 317. ADEQUATE TIME TO PREPARE FOR

HEARING ON CONFIRMATION OFTHE PLAN.

(a) HEARING.—Section 1324 of title 11,United States Code, is amended—

(1) by striking ‘‘After’’ and inserting thefollowing:

‘‘(a) Except as provided in subsection (b)and after’’; and

(2) by adding at the end the following:‘‘(b) The hearing on confirmation of the

plan may be held not later than 45 days afterthe meeting of creditors under section341(a).’’.

(b) FILING OF PLAN.—Section 1321 of title11, United States Code, is amended to read asfollows:‘‘§ 1321. Filing of plan

‘‘Not later than 90 days after the order forrelief under this chapter, the debtor shall filea plan, except that the court may extendsuch period if the need for an extension is at-tributable to circumstances for which thedebtor should not justly be held account-able.’’.SEC. 318. CHAPTER 13 PLANS TO HAVE A 5-YEAR

DURATION IN CERTAIN CASES.Section 1322(d) of title 11, United States

Code, is amended to read as follows:‘‘(d)(1) Except as provided in paragraph (2),

the plan may not provide for payments overa period that is longer than 3 years.

‘‘(2) The plan may provide for paymentsover a period that is longer than 3 years if—

‘‘(A) the plan is for a case that was con-verted to a case under this chapter from acase under chapter 7, in which case the planshall provide for payments over a period of 5years; or

‘‘(B) the plan is for a case that is not de-scribed in subparagraph (A), and the court,for cause, approves a period longer than 3years, but not to exceed 5 years.’’.SEC. 319. SENSE OF THE CONGRESS REGARDING

EXPANSION OF RULE 9011 OF THEFEDERAL RULES OF BANKRUPTCYPROCEDURE.

It is the sense of Congress that Rule 9011 ofthe Federal Rules of Bankruptcy Procedure(11 U.S.C. App.) should be modified to includea requirement that all documents (includingschedules), signed and unsigned, submittedto the court or to a trustee by debtors whorepresent themselves and debtors who arerepresented by an attorney be submittedonly after the debtor or the debtor’s attor-ney has made reasonable inquiry to verifythat the information contained in such docu-ments is—

(1) well grounded in fact; and(2) warranted by existing law or a good-

faith argument for the extension, modifica-tion, or reversal of existing law.SEC. 320. PROMPT RELIEF FROM STAY IN INDI-

VIDUAL CASES.Section 362(e) of title 11, United States

Code, is amended—(1) by inserting ‘‘(1)’’ after ‘‘(e)’’; and(2) by adding at the end the following:‘‘(2) Notwithstanding paragraph (1), in the

case of an individual filing under chapter 7,11, or 13, the stay under subsection (a) shallterminate on the date that is 60 days after arequest is made by a party in interest undersubsection (d), unless—

‘‘(A) a final decision is rendered by thecourt during the 60-day period beginning onthe date of the request; or

‘‘(B) that 60-day period is extended—‘‘(i) by agreement of all parties in interest;

or‘‘(ii) by the court for such specific period of

time as the court finds is required for goodcause, as described in findings made by thecourt.’’.

TITLE IV—GENERAL AND SMALLBUSINESS BANKRUPTCY PROVISIONS

Subtitle A—General Business BankruptcyProvisions

SEC. 401. ROLLING STOCK EQUIPMENT.(a) IN GENERAL.—Section 1168 of title 11,

United States Code, is amended to read asfollows:‘‘§ 1168. Rolling stock equipment

‘‘(a)(1) The right of a secured party with asecurity interest in or of a lessor or condi-tional vendor of equipment described inparagraph (2) to take possession of suchequipment in compliance with an equipmentsecurity agreement, lease, or conditionalsale contract, and to enforce any of its otherrights or remedies under such security agree-ment, lease, or conditional sale contract, tosell, lease, or otherwise retain or dispose ofsuch equipment, is not limited or otherwiseaffected by any other provision of this titleor by any power of the court, except that theright to take possession and enforce thoseother rights and remedies shall be subject tosection 362, if—

‘‘(A) before the date that is 60 days afterthe date of commencement of a case underthis chapter, the trustee, subject to thecourt’s approval, agrees to perform all obli-gations of the debtor under such securityagreement, lease, or conditional sale con-tract; and

‘‘(B) any default, other than a default of akind described in section 365(b)(2), undersuch security agreement, lease, or condi-tional sale contract that—

‘‘(i) occurs before the date of commence-ment of the case and is an event of defaulttherewith is cured before the expiration ofsuch 60-day period;

‘‘(ii) occurs or becomes an event of defaultafter the date of commencement of the caseand before the expiration of such 60-day pe-riod is cured before the later of—

‘‘(I) the date that is 30 days after the dateof the default or event of the default; or

‘‘(II) the expiration of such 60-day period;and

‘‘(iii) occurs on or after the expiration ofsuch 60-day period is cured in accordancewith the terms of such security agreement,lease, or conditional sale contract, if cure ispermitted under that agreement, lease, orconditional sale contract.

‘‘(2) The equipment described in thisparagraph—

‘‘(A) is rolling stock equipment or acces-sories used on rolling stock equipment, in-cluding superstructures or racks, that is sub-ject to a security interest granted by, leasedto, or conditionally sold to a debtor; and

CONGRESSIONAL RECORD — SENATES2750 March 16, 1999‘‘(B) includes all records and documents re-

lating to such equipment that are required,under the terms of the security agreement,lease, or conditional sale contract, to be sur-rendered or returned by the debtor in con-nection with the surrender or return of suchequipment.

‘‘(3) Paragraph (1) applies to a securedparty, lessor, or conditional vendor acting inits own behalf or acting as trustee or other-wise in behalf of another party.

‘‘(b) The trustee and the secured party, les-sor, or conditional vendor whose right totake possession is protected under sub-section (a) may agree, subject to the court’sapproval, to extend the 60-day period speci-fied in subsection (a)(1).

‘‘(c)(1) In any case under this chapter, thetrustee shall immediately surrender and re-turn to a secured party, lessor, or condi-tional vendor, described in subsection (a)(1),equipment described in subsection (a)(2), ifat any time after the date of commencementof the case under this chapter such securedparty, lessor, or conditional vendor is enti-tled under subsection (a)(1) to take posses-sion of such equipment and makes a writtendemand for such possession of the trustee.

‘‘(2) At such time as the trustee is requiredunder paragraph (1) to surrender and returnequipment described in subsection (a)(2), anylease of such equipment, and any securityagreement or conditional sale contract relat-ing to such equipment, if such securityagreement or conditional sale contract is anexecutory contract, shall be deemed re-jected.

‘‘(d) With respect to equipment first placedin service on or before October 22, 1994, forpurposes of this section—

‘‘(1) the term ‘lease’ includes any writtenagreement with respect to which the lessorand the debtor, as lessee, have expressed inthe agreement or in a substantially contem-poraneous writing that the agreement is tobe treated as a lease for Federal income taxpurposes; and

‘‘(2) the term ‘security interest’ means apurchase-money equipment security inter-est.

‘‘(e) With respect to equipment first placedin service after October 22, 1994, for purposesof this section, the term ‘rolling stock equip-ment’ includes rolling stock equipment thatis substantially rebuilt and accessories usedon such equipment.’’.

(b) AIRCRAFT EQUIPMENT AND VESSELS.—Section 1110 of title 11, United States Code,is amended to read as follows:‘‘§ 1110. Aircraft equipment and vessels

‘‘(a)(1) Except as provided in paragraph (2)and subject to subsection (b), the right of asecured party with a security interest inequipment described in paragraph (3), or of alessor or conditional vendor of such equip-ment, to take possession of such equipmentin compliance with a security agreement,lease, or conditional sale contract, and to en-force any of its other rights or remedies,under such security agreement, lease, or con-ditional sale contract, to sell, lease, or oth-erwise retain or dispose of such equipment,is not limited or otherwise affected by anyother provision of this title or by any powerof the court.

‘‘(2) The right to take possession and to en-force the other rights and remedies describedin paragraph (1) shall be subject to section362 if—

‘‘(A) before the date that is 60 days afterthe date of the order for relief under thischapter, the trustee, subject to the approvalof the court, agrees to perform all obliga-tions of the debtor under such securityagreement, lease, or conditional sale con-tract; and

‘‘(B) any default, other than a default of akind specified in section 365(b)(2), under such

security agreement, lease, or conditionalsale contract that occurs—

‘‘(i) before the date of the order is cured be-fore the expiration of such 60-day period;

‘‘(ii) after the date of the order and beforethe expiration of such 60-day period is curedbefore the later of—

‘‘(I) the date that is 30 days after the dateof the default; or

‘‘(II) the expiration of such 60-day period;and

‘‘(iii) on or after the expiration of such 60-day period is cured in compliance with theterms of such security agreement, lease, orconditional sale contract, if a cure is per-mitted under that agreement, lease, or con-tract.

‘‘(3) The equipment described in thisparagraph—

‘‘(A) is—‘‘(i) an aircraft, aircraft engine, propeller,

appliance, or spare part (as defined in section40102 of title 49) that is subject to a securityinterest granted by, leased to, or condi-tionally sold to a debtor that, at the timesuch transaction is entered into, holds an aircarrier operating certificate issued underchapter 447 of title 49 for aircraft capable ofcarrying 10 or more individuals or 6,000pounds or more of cargo; or

‘‘(ii) a documented vessel (as defined insection 30101(1) of title 46) that is subject toa security interest granted by, leased to, orconditionally sold to a debtor that is a watercarrier that, at the time such transaction isentered into, holds a certificate of publicconvenience and necessity or permit issuedby the Department of Transportation; and

‘‘(B) includes all records and documents re-lating to such equipment that are required,under the terms of the security agreement,lease, or conditional sale contract, to be sur-rendered or returned by the debtor in con-nection with the surrender or return of suchequipment.

‘‘(4) Paragraph (1) applies to a securedparty, lessor, or conditional vendor acting inits own behalf or acting as trustee or other-wise in behalf of another party.

‘‘(b) The trustee and the secured party, les-sor, or conditional vendor whose right totake possession is protected under sub-section (a) may agree, subject to the ap-proval of the court, to extend the 60-day pe-riod specified in subsection (a)(1).

‘‘(c)(1) In any case under this chapter, thetrustee shall immediately surrender and re-turn to a secured party, lessor, or condi-tional vendor, described in subsection (a)(1),equipment described in subsection (a)(3), ifat any time after the date of the order for re-lief under this chapter such secured party,lessor, or conditional vendor is entitledunder subsection (a)(1) to take possession ofsuch equipment and makes a written demandfor such possession to the trustee.

‘‘(2) At such time as the trustee is requiredunder paragraph (1) to surrender and returnequipment described in subsection (a)(3), anylease of such equipment, and any securityagreement or conditional sale contract relat-ing to such equipment, if such securityagreement or conditional sale contract is anexecutory contract, shall be deemed re-jected.

‘‘(d) With respect to equipment first placedin service on or before October 22, 1994, forpurposes of this section—

‘‘(1) the term ‘lease’ includes any writtenagreement with respect to which the lessorand the debtor, as lessee, have expressed inthe agreement or in a substantially contem-poraneous writing that the agreement is tobe treated as a lease for Federal income taxpurposes; and

‘‘(2) the term ‘security interest’ means apurchase-money equipment security inter-est.’’.

SEC. 402. ADEQUATE PROTECTION FOR INVES-TORS.

(a) DEFINITION.—Section 101 of title 11,United States Code, is amended by insertingafter paragraph (48) the following:

‘‘(48A) ‘securities self regulatory organiza-tion’ means either a securities associationregistered with the Securities and ExchangeCommission under section 15A of the Securi-ties Exchange Act of 1934 (15 U.S.C. 78o–3) ora national securities exchange registeredwith the Securities and Exchange Commis-sion under section 6 of the Securities Ex-change Act of 1934 (15 U.S.C. 78f);’’.

(b) AUTOMATIC STAY.—Section 362(b) oftitle 11, United States Code, as amended bysection 311 of this Act, is amended—

(1) in paragraph (24), by striking ‘‘or’’ atthe end;

(2) in paragraph (25), by striking the periodat the end and inserting ‘‘; or’’; and

(3) by inserting after paragraph (25) the fol-lowing:

‘‘(26) under subsection (a), of—‘‘(A) the commencement or continuation of

an investigation or action by a securities selfregulatory organization to enforce such or-ganization’s regulatory power;

‘‘(B) the enforcement of an order or deci-sion, other than for monetary sanctions, ob-tained in an action by the securities self reg-ulatory organization to enforce such organi-zation’s regulatory power; or

‘‘(C) any act taken by the securities selfregulatory organization to delist, delete, orrefuse to permit quotation of any stock thatdoes not meet applicable regulatory require-ments.’’.SEC. 403. MEETINGS OF CREDITORS AND EQUITY

SECURITY HOLDERS.Section 341 of title 11, United States Code,

is amended by adding at the end the follow-ing:

‘‘(e) Notwithstanding subsections (a) and(b), the court, on the request of a party in in-terest and after notice and a hearing, forcause may order that the United Statestrustee not convene a meeting of creditors orequity security holders if the debtor has fileda plan as to which the debtor solicited ac-ceptances prior to the commencement of thecase.’’.SEC. 404. PROTECTION OF REFINANCE OF SECU-

RITY INTEREST.Subparagraphs (A), (B), and (C) of section

547(e)(2) of title 11, United States Code, areeach amended by striking ‘‘10’’ each place itappears and inserting ‘‘30’’.SEC. 405. EXECUTORY CONTRACTS AND UNEX-

PIRED LEASES.Section 365(d)(4) of title 11, United States

Code, is amended to read as follows:‘‘(4)(A) Subject to subparagraph (B), in any

case under any chapter of this title, an unex-pired lease of nonresidential real propertyunder which the debtor is the lessee shall bedeemed rejected and the trustee shall imme-diately surrender that nonresidential realproperty to the lessor if the trustee does notassume or reject the unexpired lease by theearlier of—

‘‘(i) the date that is 120 days after the dateof the order for relief; or

‘‘(ii) the date of the entry of an order con-firming a plan.

‘‘(B) The court may extend the period de-termined under subparagraph (A) only upona motion of the lessor.’’.SEC. 406. CREDITORS AND EQUITY SECURITY

HOLDERS COMMITTEES.Section 1102(a)(2) of title 11, United States

Code, is amended by inserting before thefirst sentence the following: ‘‘On its own mo-tion or on request of a party in interest, andafter notice and hearing, the court mayorder a change in the membership of a com-mittee appointed under this subsection, if

CONGRESSIONAL RECORD — SENATE S2751March 16, 1999the court determines that the change is nec-essary to ensure adequate representation ofcreditors or equity security holders.’’.SEC. 407. AMENDMENT TO SECTION 546 OF TITLE

11, UNITED STATES CODE.Section 546 of title 11, United States Code,

is amended—(1) by redesignating the second subsection

designated as subsection (g) (as added by sec-tion 222(a) of Public Law 103–394) as sub-section (i); and

(2) by adding at the end the following:‘‘(j)(1) Notwithstanding section 545 (2) and

(3), the trustee may not avoid awarehouseman’s lien for storage, transpor-tation or other costs incidental to the stor-age and handling of goods.

‘‘(2) The prohibition under paragraph (1)shall be applied in a manner consistent withany applicable State statute that is similarto section 7–209 of the Uniform CommercialCode.’’.SEC. 408. LIMITATION.

Section 546(c)(1)(B) of title 11, UnitedStates Code, is amended by striking ‘‘20’’ andinserting ‘‘45’’.SEC. 409. AMENDMENT TO SECTION 330(a) OF

TITLE 11, UNITED STATES CODE.Section 330(a)(3) of title 11, United States

Code, is amended—(1) by striking ‘‘(A) the; and inserting ‘‘(i)

the’’;(2) by striking ‘‘(B)’’ and inserting ‘‘(ii)’’;(3) by striking ‘‘(C)’’ and inserting ‘‘(iii)’’;(4) by striking ‘‘(D)’’ and inserting ‘‘(iv)’’;(5) by striking ‘‘(E)’’ and inserting ‘‘(v)’’;(6) in subparagraph (A), by inserting ‘‘to an

examiner, trustee under chapter 11, or pro-fessional person’’ after ‘‘awarded’’; and

(7) by adding at the end the following:‘‘(B) In determining the amount of reason-

able compensation to be awarded a trustee,the court shall treat such compensation as acommission based on the results achieved.’’.SEC. 410. POSTPETITION DISCLOSURE AND SO-

LICITATION.Section 1125 of title 11, United States Code,

is amended by adding at the end the follow-ing:

‘‘(g) Notwithstanding subsection (b), an ac-ceptance or rejection of the plan may be so-licited from a holder of a claim or interest ifsuch solicitation complies with applicablenonbankruptcy law and if such holder wassolicited before the commencement of thecase in a manner complying with applicablenonbankruptcy law.’’.SEC. 411. PREFERENCES.

Section 547(c) of title 11, United StatesCode, is amended—

(1) by striking paragraph (2) and insertingthe following:

‘‘(2) to the extent that such transfer was inpayment of a debt incurred by the debtor inthe ordinary course of business or financialaffairs of the debtor and the transferee, andsuch transfer was—

‘‘(A) made in the ordinary course of busi-ness or financial affairs of the debtor and thetransferee; or

‘‘(B) made according to ordinary businessterms;’’;

(2) in paragraph (7) by striking ‘‘or’’ at theend;

(3) in paragraph (8) by striking the periodat the end and inserting ‘‘; or’’; and

(4) by adding at the end the following:‘‘(9) if, in a case filed by a debtor whose

debts are not primarily consumer debts, theaggregate value of all property that con-stitutes or is affected by such transfer is lessthan $5,000.’’.SEC. 412. VENUE OF CERTAIN PROCEEDINGS.

Section 1409(b) of title 28, United StatesCode, is amended by inserting ‘‘, or a non-consumer debt against a noninsider of lessthan $10,000,’’ after ‘‘$5,000’’.

SEC. 413. PERIOD FOR FILING PLAN UNDERCHAPTER 11.

Section 1121(d) of title 11, United StatesCode, is amended—

(1) by striking ‘‘On’’ and inserting ‘‘(1)Subject to paragraph (1), on’’; and

(2) by adding at the end the following:‘‘(2)(A) The 120-day period specified in

paragraph (1) may not be extended beyond adate that is 18 months after the date of theorder for relief under this chapter.

‘‘(B) The 180-day period specified in para-graph (1) may not be extended beyond a datethat is 20 months after the date of the orderfor relief under this chapter.’’.SEC. 414. FEES ARISING FROM CERTAIN OWNER-

SHIP INTERESTS.Section 523(a)(16) of title 11, United States

Code, is amended—(1) by striking ‘‘dwelling’’ the first place it

appears;(2) by striking ‘‘ownership or’’ and insert-

ing ‘‘ownership,’’;(3) by striking ‘‘housing’’ the first place it

appears; and(4) by striking ‘‘but only’’ and all that fol-

lows through ‘‘but nothing in this para-graph’’ and inserting ‘‘or a lot in a home-owners association, for as long as the debtoror the trustee has a legal, equitable, orpossessory ownership interest in such unit,such corporation, or such lot, and until suchtime as the debtor or trustee has surrenderedany legal, equitable or possessory interest insuch unit, such corporation, or such lot, butnothing in this paragraph’’.SEC. 415. CREDITOR REPRESENTATION AT FIRST

MEETING OF CREDITORS.Section 341(c) of title 11, United States

Code, is amended by inserting after the firstsentence the following: ‘‘Notwithstandingany local court rule, provision of a Stateconstitution, any other Federal or State lawthat is not a bankruptcy law, or other re-quirement that representation at the meet-ing of creditors under subsection (a) be by anattorney, a creditor holding a consumer debtor any representative of the creditor (whichmay include an entity or an employee of anentity and may be a representative for morethan 1 creditor) shall be permitted to appearat and participate in the meeting of credi-tors in a case under chapter 7 or 13, eitheralone or in conjunction with an attorney forthe creditor. Nothing in this subsection shallbe construed to require any creditor to berepresented by an attorney at any meetingof creditors.’’.SEC. 416. ELIMINATION OF CERTAIN FEES PAY-

ABLE IN CHAPTER 11 BANKRUPTCYCASES.

(a) AMENDMENTS.—Section 1930(a)(6) oftitle 28, United States Code, is amended—

(1) in the first sentence by striking ‘‘untilthe case is converted or dismissed, whicheveroccurs first’’; and

(2) in the second sentence—(A) by striking ‘‘The’’ and inserting ‘‘Until

the plan is confirmed or the case is con-verted (whichever occurs first) the’’; and

(B) by striking ‘‘less than $300,000;’’ and in-serting ‘‘less than $300,000. Until the case isconverted, dismissed, or closed (whicheveroccurs first and without regard to confirma-tion of the plan) the fee shall be’’.

(b) DELAYED EFFECTIVE DATE.—The amend-ments made by subsection (a) shall take ef-fect on October 1, 1999.SEC. 417. DEFINITION OF DISINTERESTED PER-

SON.Section 101(14) of title 11, United States

Code, is amended to read as follows:‘‘(14) ‘disinterested person’ means a person

that—‘‘(A) is not a creditor, an equity security

holder, or an insider;‘‘(B) is not and was not, within 2 years be-

fore the date of the filing of the petition, a

director, officer, or employee of the debtor;and

‘‘(C) does not have an interest materiallyadverse to the interest of the estate or ofany class of creditors or equity securityholders, by reason of any direct or indirectrelationship to, connection with, or interestin, the debtor, or for any other reason;’’.SEC. 418. FACTORS FOR COMPENSATION OF PRO-

FESSIONAL PERSONS.Section 330(a)(3) of title 11, United States

Code, is amended—(1) in subparagraph (D), by striking ‘‘and’’

at the end;(2) by redesignating subparagraph (E) as

subparagraph (F); and(3) by inserting after subparagraph (D) the

following:‘‘(E) with respect to a professional person,

whether the person is board certified or oth-erwise has demonstrated skill and experiencein the bankruptcy field;’’.SEC. 419. APPOINTMENT OF ELECTED TRUSTEE.

Section 1104(b) of title 11, United StatesCode, is amended—

(1) by inserting ‘‘(1)’’ after ‘‘(b)’’; and(2) by adding at the end the following:‘‘(2)(A) If an eligible, disinterested trustee

is elected at a meeting of creditors underparagraph (1), the United States trusteeshall file a report certifying that election.

‘‘(B) Upon the filing of a report under sub-paragraph (A)—

‘‘(i) the trustee elected under paragraph (1)shall be considered to have been selected andappointed for purposes of this section; and

‘‘(ii) the service of any trustee appointedunder subsection (d) shall terminate.

‘‘(C) In the case of any dispute arising outof an election described in subparagraph (A),the court shall resolve the dispute.’’.

Subtitle B—Small Business BankruptcyProvisions

SEC. 421. FLEXIBLE RULES FOR DISCLOSURESTATEMENT AND PLAN.

Section 1125 of title 11, United States Code,is amended by striking subsection (f) and in-serting the following:

‘‘(f) Notwithstanding subsection (b), in asmall business case—

‘‘(1) in determining whether a disclosurestatement provides adequate information,the court shall consider the complexity ofthe case, the benefit of additional informa-tion to creditors and other parties in inter-est, and the cost of providing additional in-formation;

‘‘(2) the court may determine that the planitself provides adequate information andthat a separate disclosure statement is notnecessary;

‘‘(3) the court may approve a disclosurestatement submitted on standard forms ap-proved by the court or adopted under section2075 of title 28; and

‘‘(4)(A) the court may conditionally ap-prove a disclosure statement subject to finalapproval after notice and a hearing;

‘‘(B) acceptances and rejections of a planmay be solicited based on a conditionally ap-proved disclosure statement if the debtorprovides adequate information to each hold-er of a claim or interest that is solicited, buta conditionally approved disclosure state-ment shall be mailed not later than 20 daysbefore the date of the hearing on confirma-tion of the plan; and

‘‘(C) the hearing on the disclosure state-ment may be combined with the hearing onconfirmation of a plan.’’.SEC. 422. DEFINITIONS; EFFECT OF DISCHARGE.

(a) DEFINITIONS.—Section 101 of title 11,United States Code, is amended by strikingparagraph (51C) and inserting the following:

‘‘(51C) ‘small business case’ means a casefiled under chapter 11 of this title in whichthe debtor is a small business debtor;

CONGRESSIONAL RECORD — SENATES2752 March 16, 1999‘‘(51D) ‘small business debtor’—‘‘(A) subject to subparagraph (B), means a

person (including any affiliate of such personthat is also a debtor under this title) thathas aggregate noncontingent, liquidated se-cured and unsecured debts as of the date ofthe petition or the order for relief in anamount not more than $4,000,000 (excludingdebts owed to 1 or more affiliates or insiders)for a case in which the United States trusteehas appointed under section 1102(a)(1) a com-mittee of unsecured creditors that the courthas determined is sufficiently active and rep-resentative to provide effective oversight ofthe debtor; and

‘‘(B) does not include any member of agroup of affiliated debtors that has aggre-gate noncontingent liquidated secured andunsecured debts in an amount greater than$4,000,000 (excluding debt owed to 1 or moreaffiliates or insiders);’’.

(b) EFFECT OF DISCHARGE.—Section 524 oftitle 11, United States Code, as amended bysection 204 of this Act, is amended by addingat the end the following:

‘‘(j)(1) An individual who is injured by thewillful failure of a creditor to substantiallycomply with the requirements specified insubsections (c) and (d), or by any willful vio-lation of the injunction operating under sub-section (a)(2), shall be entitled to recover—

‘‘(A) the greater of—‘‘(i) the amount of actual damages; or‘‘(ii) $1,000; and‘‘(B) costs and attorneys’ fees.‘‘(2) An action to recover for a violation

specified in paragraph (1) may not bebrought as a class action.’’.

(c) CONFORMING AMENDMENT.—Section1102(a)(3) of title 11, United States Code, isamended by inserting ‘‘debtor’’ after ‘‘smallbusiness’’.SEC. 423. STANDARD FORM DISCLOSURE STATE-

MENT AND PLAN.

Within a reasonable period of time afterthe date of the enactment of this Act, theAdvisory Committee on Bankruptcy Rules ofthe Judicial Conference of the United Statesshall propose for adoption standard form dis-closure statements and plans of reorganiza-tion for small business debtors (as defined insection 101 of title 11, United States Code, asamended by this Act), designed to achieve apractical balance between—

(1) the reasonable needs of the courts, theUnited States trustee, creditors, and otherparties in interest for reasonably completeinformation; and

(2) economy and simplicity for debtors.SEC. 424. UNIFORM NATIONAL REPORTING RE-

QUIREMENTS.

(a) REPORTING REQUIRED.—(1) IN GENERAL.—Chapter 3 of title 11,

United States Code, is amended by insertingafter section 307 the following:

‘‘§ 308. Debtor reporting requirements‘‘(1) For purposes of this section, the term

‘profitability’ means, with respect to a debt-or, the amount of money that the debtor hasearned or lost during current and recent fis-cal periods.

‘‘(2) A small business debtor shall file peri-odic financial and other reports containinginformation including—

‘‘(A) the debtor’s profitability;‘‘(B) reasonable approximations of the

debtor’s projected cash receipts and cash dis-bursements over a reasonable period;

‘‘(C) comparisons of actual cash receiptsand disbursements with projections in priorreports;

‘‘(D)(i) whether the debtor is—‘‘(I) in compliance in all material respects

with postpetition requirements imposed bythis title and the Federal Rules of Bank-ruptcy Procedure; and

‘‘(II) timely filing tax returns and payingtaxes and other administrative claims whendue; and

‘‘(ii) if the debtor is not in compliance withthe requirements referred to in clause (i)(I)or filing tax returns and making the pay-ments referred to in clause (i)(II), what thefailures are and how, at what cost, and whenthe debtor intends to remedy such failures;and

‘‘(iii) such other matters as are in the bestinterests of the debtor and creditors, and inthe public interest in fair and efficient pro-cedures under chapter 11 of this title.’’.

(2) CLERICAL AMENDMENT.—The table ofsections for chapter 3 of title 11, UnitedStates Code, is amended by inserting afterthe item relating to section 307 the follow-ing:‘‘308. Debtor reporting requirements.’’.

(b) EFFECTIVE DATE.—The amendmentsmade by subsection (a) shall take effect 60days after the date on which rules are pre-scribed under section 2075 of title 28, UnitedStates Code, to establish forms to be used tocomply with section 308 of title 11, UnitedStates Code, as added by subsection (a).SEC. 425. UNIFORM REPORTING RULES AND

FORMS FOR SMALL BUSINESSCASES.

(a) PROPOSAL OF RULES AND FORMS.—TheAdvisory Committee on Bankruptcy Rules ofthe Judicial Conference of the United Statesshall propose for adoption amended FederalRules of Bankruptcy Procedure and OfficialBankruptcy Forms to be used by small busi-ness debtors to file periodic financial andother reports containing information, in-cluding information relating to—

(1) the debtor’s profitability;(2) the debtor’s cash receipts and disburse-

ments; and(3) whether the debtor is timely filing tax

returns and paying taxes and other adminis-trative claims when due.

(b) PURPOSE.—The rules and forms pro-posed under subsection (a) shall be designedto achieve a practical balance among—

(1) the reasonable needs of the bankruptcycourt, the United States trustee, creditors,and other parties in interest for reasonablycomplete information;

(2) the small business debtor’s interestthat required reports be easy and inexpen-sive to complete; and

(3) the interest of all parties that the re-quired reports help the small business debtorto understand the small business debtor’s fi-nancial condition and plan the small busi-ness debtor’s future.SEC. 426. DUTIES IN SMALL BUSINESS CASES.

(a) DUTIES IN CHAPTER 11 CASES.—Title 11,United States Code, is amended by insertingafter section 1114 the following:‘‘§ 1115. Duties of trustee or debtor in posses-

sion in small business cases‘‘In a small business case, a trustee or the

debtor in possession, in addition to the du-ties provided in this title and as otherwiserequired by law, shall—

‘‘(1) append to the voluntary petition or, inan involuntary case, file within 3 days afterthe date of the order for relief—

‘‘(A) its most recent balance sheet, state-ment of operations, cash-flow statement,Federal income tax return; or

‘‘(B) a statement made under penalty ofperjury that no balance sheet, statement ofoperations, or cash-flow statement has beenprepared and no Federal tax return has beenfiled;

‘‘(2) attend, through its senior manage-ment personnel and counsel, meetings sched-uled by the court or the United States trust-ee, including initial debtor interviews,scheduling conferences, and meetings ofcreditors convened under section 341 unless

the court waives that requirement after no-tice and hearing, upon a finding of extraor-dinary and compelling circumstances;

‘‘(3) timely file all schedules and state-ments of financial affairs, unless the court,after notice and a hearing, grants an exten-sion, which shall not extend such time periodto a date later than 30 days after the date ofthe order for relief, absent extraordinary andcompelling circumstances;

‘‘(4) file all postpetition financial andother reports required by the Federal Rulesof Bankruptcy Procedure or by local rule ofthe district court;

‘‘(5) subject to section 363(c)(2), maintaininsurance customary and appropriate to theindustry;

‘‘(6)(A) timely file tax returns;‘‘(B) subject to section 363(c)(2), timely pay

all administrative expense tax claims, exceptthose being contested by appropriate pro-ceedings being diligently prosecuted; and

‘‘(C) subject to section 363(c)(2), establish 1or more separate deposit accounts not laterthan 10 business days after the date of orderfor relief (or as soon thereafter as possible ifall banks contacted decline the business) anddeposit therein, not later than 1 business dayafter receipt thereof, all taxes payable forperiods beginning after the date the case iscommenced that are collected or withheld bythe debtor for governmental units, unlessthe court waives that requirement after no-tice and hearing, upon a finding of extraor-dinary and compelling circumstances; and

‘‘(7) allow the United States trustee, or adesignated representative of the UnitedStates trustee, to inspect the debtor’s busi-ness premises, books, and records at reason-able times, after reasonable prior written no-tice, unless notice is waived by the debtor.’’.

(b) TECHNICAL AMENDMENT.—The table ofsections for chapter 11, United States Code,is amended by inserting after the item relat-ing to section 1114 the following:‘‘1115. Duties of trustee or debtor in posses-

sion in small business cases.’’.SEC. 427. PLAN FILING AND CONFIRMATION

DEADLINES.Section 1121 of title 11, United States Code,

is amended by striking subsection (e) and in-serting the following:

‘‘(e) In a small business case—‘‘(1) only the debtor may file a plan until

after 90 days after the date of the order forrelief, unless that period is —

‘‘(A) shortened on request of a party in in-terest made during the 90-day period;

‘‘(B) extended as provided by this sub-section, after notice and hearing; or

‘‘(C) the court, for cause, orders otherwise;‘‘(2) the plan, and any necessary disclosure

statement, shall be filed not later than 90days after the date of the order for relief;and

‘‘(3) the time periods specified in para-graphs (1) and (2), and the time fixed in sec-tion 1129(e), within which the plan shall beconfirmed, may be extended only if—

‘‘(A) the debtor, after providing notice toparties in interest (including the UnitedStates trustee), demonstrates by a prepon-derance of the evidence that it is more likelythan not that the court will confirm a planwithin a reasonable period of time;

‘‘(B) a new deadline is imposed at the timethe extension is granted; and

‘‘(C) the order extending time is signed be-fore the existing deadline has expired.’’.SEC. 428. PLAN CONFIRMATION DEADLINE.

Section 1129 of title 11, United States Code,is amended by adding at the end the follow-ing:

‘‘(e) In a small business case, the plan shallbe confirmed not later than 150 days afterthe date of the order for relief, unless such150-day period is extended as provided in sec-tion 1121(e)(3).’’.

CONGRESSIONAL RECORD — SENATE S2753March 16, 1999SEC. 429. PROHIBITION AGAINST EXTENSION OF

TIME.Section 105(d) of title 11, United States

Code, is amended—(1) in paragraph (1), by striking ‘‘and’’ at

the end;(2) in paragraph (2)(B)(vi), by striking the

period at the end and inserting ‘‘; and’’; and(3) by adding at the end the following:‘‘(3) in a small business case, not extend

the time periods specified in sections 1121(e)and 1129(e), except as provided in section1121(e)(3).’’.SEC. 430. DUTIES OF THE UNITED STATES TRUST-

EE.Section 586(a) of title 28, United States

Code, is amended—(1) in paragraph (3)—(A) in subparagraph (G), by striking ‘‘and’’

at the end;(B) by redesignating subparagraph (H) as

subparagraph (I); and(C) by inserting after subparagraph (G) the

following:‘‘(H) in small business cases (as defined in

section 101 of title 11), performing the addi-tional duties specified in title 11 pertainingto such cases;’’;

(2) in paragraph (5), by striking ‘‘and’’ atthe end;

(3) in paragraph (6), by striking the periodat the end and inserting ‘‘; and’’; and

(4) by inserting after paragraph (6) the fol-lowing:

‘‘(7) in each of such small business cases—‘‘(A) conduct an initial debtor interview as

soon as practicable after the entry of orderfor relief but before the first meeting sched-uled under section 341(a) of title 11, at whichtime the United States trustee shall—

‘‘(i) begin to investigate the debtor’s via-bility;

‘‘(ii) inquire about the debtor’s businessplan;

‘‘(iii) explain the debtor’s obligations tofile monthly operating reports and other re-quired reports;

‘‘(iv) attempt to develop an agreed schedul-ing order; and

‘‘(v) inform the debtor of other obligations;‘‘(B) if determined to be appropriate and

advisable, visit the appropriate businesspremises of the debtor and ascertain thestate of the debtor’s books and records andverify that the debtor has filed its tax re-turns; and

‘‘(C) review and monitor diligently thedebtor’s activities, to identify as promptlyas possible whether the debtor will be unableto confirm a plan; and

‘‘(8) in any case in which the United Statestrustee finds material grounds for any reliefunder section 1112 of title 11, the UnitedStates trustee shall apply promptly aftermaking that finding to the court for relief.’’.SEC. 431. SCHEDULING CONFERENCES.

Section 105(d) of title 11, United StatesCode, as amended by section 429 of this Act,is amended—

(1) in the matter preceding paragraph (1)by striking ‘‘, may’’;

(2) by striking paragraph (1) and insertingthe following:

‘‘(1) shall hold such status conferences asare necessary to further the expeditious andeconomical resolution of the case; and’’; and

(3) in paragraph (2), by striking ‘‘unless in-consistent with another provision of thistitle or with applicable Federal Rules ofBankruptcy Procedure,’’ and inserting‘‘may’’.SEC. 432. SERIAL FILER PROVISIONS.

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

(1) in subsection (j), as redesignated by sec-tion 305(1) of this Act—

(A) by striking ‘‘An’’ and inserting ‘‘(1) Ex-cept as provided in paragraph (2), an’’; and

(B) by adding at the end the following:‘‘(2) If such violation is based on an action

taken by an entity in the good faith beliefthat subsection (h) applies to the debtor, therecovery under paragraph (1) against suchentity shall be limited to actual damages.’’;and

(2) by inserting after subsection (j), asadded by section 419 of this Act, the follow-ing:

‘‘(k)(1) Except as provided in paragraph (2),the filing of a petition under chapter 11 ofthis title operates as a stay of the acts de-scribed in subsection (a) only in an involun-tary case involving no collusion by the debt-or with creditors and in which the debtor—

‘‘(A) is a debtor in a small business casepending at the time the petition is filed;

‘‘(B) was a debtor in a small business casethat was dismissed for any reason by anorder that became final in the 2-year periodending on the date of the order for relief en-tered with respect to the petition;

‘‘(C) was a debtor in a small business casein which a plan was confirmed in the 2-yearperiod ending on the date of the order for re-lief entered with respect to the petition; or

‘‘(D) is an entity that has succeeded to sub-stantially all of the assets or business of asmall business debtor described in subpara-graph (A), (B), or (C).

‘‘(2) Paragraph (1) does not apply to the fil-ing of a petition if the debtor proves by apreponderance of the evidence that—

‘‘(A) the filing of that petition resultedfrom circumstances beyond the control ofthe debtor not foreseeable at the time thecase then pending was filed; and

‘‘(B) it is more likely than not that thecourt will confirm a feasible plan, but not aliquidating plan, within a reasonable periodof time.’’.SEC. 433. EXPANDED GROUNDS FOR DISMISSAL

OR CONVERSION AND APPOINT-MENT OF TRUSTEE.

(a) EXPANDED GROUNDS FOR DISMISSAL ORCONVERSION.—Section 1112 of title 11, UnitedStates Code, is amended by striking sub-section (b) and inserting the following:

‘‘(b)(1) Except as provided in paragraph (2),in subsection (c), and section 1104(a)(3), onrequest of a party in interest, and after no-tice and a hearing, the court shall convert acase under this chapter to a case under chap-ter 7 or dismiss a case under this chapter,whichever is in the best interest of creditorsand the estate, if the movant establishescause.

‘‘(2) The relief provided in paragraph (1)shall not be granted if the debtor or anotherparty in interest objects and establishes by apreponderance of the evidence that—

‘‘(A) it is more likely than not that a planwill be confirmed within—

‘‘(i) a period of time fixed under this titleor by order of the court entered under sec-tion 1121(e)(3); or

‘‘(ii) a reasonable period of time if no pe-riod of time has been fixed; and

‘‘(B) if the reason is an act or omission ofthe debtor that—

‘‘(i) there exists a reasonable justificationfor the act or omission; and

‘‘(ii)(I) the act or omission will be curedwithin a reasonable period of time fixed bythe court, but not to exceed 30 days after thecourt decides the motion, unless the movantexpressly consents to a continuance for aspecific period of time; or

‘‘(II) compelling circumstances beyond thecontrol of the debtor justify an extension.

‘‘(3) The court shall commence the hearingon any motion under this subsection notlater than 30 days after filing of the motion,and shall decide the motion within 15 daysafter commencement of the hearing, unlessthe movant expressly consents to a continu-ance for a specific period of time or compel-

ling circumstances prevent the court frommeeting the time limits established by thisparagraph.

‘‘(4) For purposes of this subsection, causeincludes—

‘‘(A) substantial or continuing loss to ordiminution of the estate;

‘‘(B) gross mismanagement of the estate;‘‘(C) failure to maintain appropriate insur-

ance;‘‘(D) unauthorized use of cash collateral

harmful to 1 or more creditors;‘‘(E) failure to comply with an order of the

court;‘‘(F) failure timely to satisfy any filing or

reporting requirement established by thistitle or by any rule applicable to a caseunder this chapter;

‘‘(G) failure to attend the meeting of credi-tors convened under section 341(a) or an ex-amination ordered under Rule 2004 of theFederal Rules of Bankruptcy Procedure;

‘‘(H) failure timely to provide informationor attend meetings reasonably requested bythe United States trustee;

‘‘(I) failure timely to pay taxes due afterthe date of the order for relief or to file taxreturns due after the order for relief;

‘‘(J) failure to file a disclosure statement,or to file or confirm a plan, within the timefixed by this title or by order of the court;

‘‘(K) failure to pay any fees or charges re-quired under chapter 123 of title 28;

‘‘(L) revocation of an order of confirmationunder section 1144;

‘‘(M) inability to effectuate substantialconsummation of a confirmed plan;

‘‘(N) material default by the debtor withrespect to a confirmed plan; and

‘‘(O) termination of a plan by reason of theoccurrence of a condition specified in theplan.

‘‘(5) The court shall commence the hearingon any motion under this subsection notlater than 30 days after filing of the motion,and shall decide the motion within 15 daysafter commencement of the hearing, unlessthe movant expressly consents to a continu-ance for a specific period of time or compel-ling circumstances prevent the court frommeeting the time limits established by thisparagraph.’’.

(b) ADDITIONAL GROUNDS FOR APPOINTMENTOF TRUSTEE.—Section 1104(a) of title 11,United States Code, is amended—

(1) in paragraph (1) by striking ‘‘or’’ at theend;

(2) in paragraph (2) by striking the periodat the end and inserting ‘‘; or’’; and

(3) by adding at the end the following:‘‘(3) if grounds exist to convert or dismiss

the case under section 1112, but the court de-termines that the appointment of a trusteeis in the best interests of creditors and theestate.’’.SEC. 434. STUDY OF OPERATION OF TITLE 11,

UNITED STATES CODE, WITH RE-SPECT TO SMALL BUSINESSES.

Not later than 2 years after the date of theenactment of this Act, the Administrator ofthe Small Business Administration, in con-sultation with the Attorney General of theUnited States, the Director of the Adminis-trative Office of United States Trustees, andthe Director of the Administrative Office ofthe United States Courts, shall—

(1) conduct a study to determine—(A) the internal and external factors that

cause small businesses, especially sole pro-prietorships, to become debtors in casesunder title 11, United States Code, and thatcause certain small businesses to success-fully complete cases under chapter 11 of suchtitle; and

(B) how Federal laws relating to bank-ruptcy may be made more effective and effi-cient in assisting small businesses to remainviable; and

CONGRESSIONAL RECORD — SENATES2754 March 16, 1999(2) submit to the President pro tempore of

the Senate and the Speaker of the House ofRepresentatives a report summarizing thatstudy.SEC. 435. PAYMENT OF INTEREST.

Section 362(d)(3) of title 11, United StatesCode, is amended—

(1) by inserting ‘‘or 30 days after the courtdetermines that the debtor is subject to thisparagraph, whichever is later’’ after ‘‘90-dayperiod)’’; and

(2) by striking subparagraph (B) and insert-ing the following:

‘‘(B) the debtor has commenced monthlypayments that—

‘‘(i) may, in the debtor’s sole discretion,notwithstanding section 363(c)(2), be madefrom rents or other income generated beforeor after the commencement of the case by orfrom the property to each creditor whoseclaim is secured by such real estate (otherthan a claim secured by a judgment lien orby an unmatured statutory lien); and

‘‘(ii) are in an amount equal to interest atthe then applicable nondefault contract rateof interest on the value of the creditor’s in-terest in the real estate; or’’.

TITLE V—MUNICIPAL BANKRUPTCYPROVISIONS

SEC. 501. PETITION AND PROCEEDINGS RELATEDTO PETITION.

(a) TECHNICAL AMENDMENT RELATING TOMUNICIPALITIES.—Section 921(d) of title 11,United States Code, is amended by inserting‘‘, notwithstanding section 301(b)’’ before theperiod at the end.

(b) CONFORMING AMENDMENT.—Section 301of title 11, United States Code, is amended—

(1) by inserting ‘‘(a)’’ before ‘‘A vol-untary’’; and

(2) by striking the last sentence and insert-ing the following:

‘‘(b) The commencement of a voluntarycase under a chapter of this title constitutesan order for relief under such chapter.’’.SEC. 502. APPLICABILITY OF OTHER SECTIONS

TO CHAPTER 9.Section 901 of title 11, United States Code,

is amended—(1) by inserting ‘‘555, 556,’’ after ‘‘553,’’; and(2) by inserting ‘‘559, 560,’’ after ‘‘557,’’.

TITLE VI—IMPROVED BANKRUPTCYSTATISTICS AND DATA

SEC. 601. AUDIT PROCEDURES.(a) AMENDMENTS.—Section 586 of title 28,

United States Code, is amended—(1) in subsection (a), by striking paragraph

(6) and inserting the following:‘‘(6) make such reports as the Attorney

General directs, including the results of au-dits performed under subsection (f); and’’;and

(2) by adding at the end the following:‘‘(f)(1)(A) The Attorney General shall es-

tablish procedures to determine the accu-racy, veracity, and completeness of peti-tions, schedules, and other informationwhich the debtor is required to provide undersections 521 and 1322 of title 11, and, if appli-cable, section 111 of title 11, in individualcases filed under chapter 7 or 13 of such title.

‘‘(B) Those procedures shall—‘‘(i) establish a method of selecting appro-

priate qualified persons to contract to per-form those audits;

‘‘(ii) establish a method of randomly se-lecting cases to be audited, except that notless than 1 out of every 250 cases in each Fed-eral judicial district shall be selected foraudit;

‘‘(iii) require audits for schedules of in-come and expenses which reflect greaterthan average variances from the statisticalnorm of the district in which the scheduleswere filed if those variances occur by reasonof higher income or higher expenses than the

statistical norm of the disctrict in which theschedules were filed; and

‘‘(iv) include procedures for providing, notless frequently than annually, public infor-mation concerning the aggregate results ofthe audits referred to in this subparagraph,including the percentage of cases, by dis-trict, in which a material misstatement ofincome or expenditures is reported.

‘‘(2) The United States trustee for each dis-trict may contract with auditors to performaudits in cases designated by the UnitedStates trustee according to the proceduresestablished under paragraph (1).

‘‘(3)(A) The report of each audit conductedunder this subsection shall be filed with thecourt and transmitted to the United Statestrustee. Each report shall clearly and con-spicuously specify any materialmisstatement of income or expenditures orof assets identified by the person performingthe audit. In any case where a materialmisstatement of income or expenditures orof assets has been reported, the clerk of thebankruptcy court shall give notice of themisstatement to the creditors in the case.

‘‘(B) If a material misstatement of incomeor expenditures or of assets is reported, theUnited States trustee shall—

‘‘(i) report the material misstatement, ifappropriate, to the United States Attorneyunder section 3057 of title 18; and

‘‘(ii) if advisable, take appropriate action,including commencing an adversary proceed-ing to revoke the debtor’s discharge undersection 727(d) of title 11.’’.

(b) AMENDMENTS TO SECTION 521 OF TITLE11, UNITED STATES CODE.—Paragraphs (3) and(4) of section 521(a) of title 11, United StatesCode, as amended by section 315 of this Act,are each amended by inserting ‘‘or an audi-tor appointed under section 586 of title 28’’after ‘‘serving in the case’’ each place thatterm appears.

(c) AMENDMENTS TO SECTION 727 OF TITLE11, UNITED STATES CODE.—Section 727(d) oftitle 11, United States Code, is amended—

(1) in paragraph (2), by striking ‘‘or’’ at theend;

(2) in paragraph (3), by striking the periodat the end and inserting ‘‘; or’’; and

(3) by adding at the end the following:‘‘(4) the debtor has failed to explain

satisfactorily—‘‘(A) a material misstatement in an audit

performed under section 586(f) of title 28; or‘‘(B) a failure to make available for inspec-

tion all necessary accounts, papers, docu-ments, financial records, files, and any otherpapers, things, or property belonging to thedebtor that are requested for an audit con-ducted under section 586(f).’’.

(d) EFFECTIVE DATE.—The amendmentsmade by this section shall take effect 18months after the date of enactment of thisAct.SEC. 602. IMPROVED BANKRUPTCY STATISTICS.

(a) AMENDMENT.—Chapter 6 of title 28,United States Code, is amended by adding atthe end the following:‘‘§ 159. Bankruptcy statistics

‘‘(a) The clerk of each district court shallcompile statistics regarding individual debt-ors with primarily consumer debts seekingrelief under chapters 7, 11, and 13 of title 11.Those statistics shall be in a form prescribedby the Director of the Administrative Officeof the United States Courts (referred to inthis section as the ‘Office’).

‘‘(b) The Director shall—‘‘(1) compile the statistics referred to in

subsection (a);‘‘(2) make the statistics available to the

public; and‘‘(3) not later than October 31, 1999, and an-

nually thereafter, prepare, and submit toCongress a report concerning the informa-

tion collected under subsection (a) that con-tains an analysis of the information.

‘‘(c) The compilation required under sub-section (b) shall—

‘‘(1) be itemized, by chapter, with respectto title 11;

‘‘(2) be presented in the aggregate and foreach district; and

‘‘(3) include information concerning—‘‘(A) the total assets and total liabilities of

the debtors described in subsection (a), andin each category of assets and liabilities, asreported in the schedules prescribed undersection 2075 and filed by those debtors;

‘‘(B) the total current monthly income,projected monthly net income, and averageincome, and average expenses of those debt-ors as reported on the schedules and state-ments that each such debtor files under sec-tions 111, 521, and 1322 of title 11;

‘‘(C) the aggregate amount of debt dis-charged in the reporting period, determinedas the difference between the total amountof debt and obligations of a debtor reportedon the schedules and the amount of suchdebt reported in categories which are pre-dominantly nondischargeable;

‘‘(D) the average period of time betweenthe filing of the petition and the closing ofthe case;

‘‘(E) for the reporting period—‘‘(i) the number of cases in which a reaffir-

mation was filed; and‘‘(ii)(I) the total number of reaffirmations

filed;‘‘(II) of those cases in which a reaffirma-

tion was filed, the number in which the debt-or was not represented by an attorney; and

‘‘(III) of the cases under each of subclauses(I) and (II), the number of cases in which thereaffirmation was approved by the court;

‘‘(F) with respect to cases filed under chap-ter 13 of title 11, for the reporting period—

‘‘(i)(I) the number of cases in which a finalorder was entered determining the value ofproperty securing a claim in an amount lessthan the amount of the claim; and

‘‘(II) the number of final orders determin-ing the value of property securing a claimissued;

‘‘(ii) the number of cases dismissed for fail-ure to make payments under the plan; and

‘‘(iii) the number of cases in which thedebtor filed another case during the 6-yearperiod preceding the date of filing;

‘‘(G) the number of cases in which credi-tors were fined for misconduct and anyamount of punitive damages awarded by thecourt for creditor misconduct; and

‘‘(H) the number of cases in which sanc-tions under Rule 9011 of the Federal Rules ofBankruptcy Procedure were imposed againstdebtor’s counsel and damages awarded undersuch rule.’’.

(b) CLERICAL AMENDMENT.—The table ofsections for chapter 6 of title 28, UnitedStates Code, is amended by adding at the endthe following:‘‘159. Bankruptcy statistics.’’.

(c) EFFECTIVE DATE.—The amendmentsmade by this section shall take effect 18months after the date of enactment of thisAct.SEC. 603. UNIFORM RULES FOR THE COLLECTION

OF BANKRUPTCY DATA.(a) AMENDMENT.—Chapter 39 of title 28,

United States Code, is amended by insertingafter section 589a the following:‘‘§ 589b. Bankruptcy data

‘‘(a) Within a reasonable period of timeafter the effective date of this section, TheAttorney General of the United States shallissue rules requiring uniform forms for (andfrom time to time thereafter to appro-priately modify and approve)—

‘‘(1) final reports by trustees in cases underchapters 7, 12, and 13 of title 11; and

CONGRESSIONAL RECORD — SENATE S2755March 16, 1999‘‘(2) periodic reports by debtors in posses-

sion or trustees, as the case may be, in casesunder chapter 11 of title 11.

‘‘(b) Each report referred to in subsection(a) shall be designed (and the requirementsas to place and manner of filing shall be es-tablished) so as to facilitate compilation ofdata and maximum practicable access of thepublic, by—

‘‘(1) physical inspection at 1 or more cen-tral filing locations; and

‘‘(2) electronic access through the Internetor other appropriate media.

‘‘(c)(1) The information required to be filedin the reports referred to in subsection (b)shall be information that is—

‘‘(A) in the best interests of debtors andcreditors, and in the public interest; and

‘‘(B) reasonable and adequate informationto evaluate the efficiency and practicality ofthe Federal bankruptcy system.

‘‘(2) In issuing rules proposing the formsreferred to in subsection (a), the AttorneyGeneral shall strike the best achievablepractical balance between—

‘‘(A) the reasonable needs of the public forinformation about the operational results ofthe Federal bankruptcy system; and

‘‘(B) economy, simplicity, and lack ofundue burden on persons with a duty to filereports.

‘‘(d)(1) Final reports proposed for adoptionby trustees under chapters 7, 12, and 13 oftitle 11 shall include with respect to a caseunder such title, by appropriate category—

‘‘(A) information about the length of timethe case was pending;

‘‘(B) assets abandoned;‘‘(C) assets exempted;‘‘(D) receipts and disbursements of the es-

tate;‘‘(E) expenses of administration;‘‘(F) claims asserted;‘‘(G) claims allowed; and‘‘(H) distributions to claimants and claims

discharged without payment.‘‘(2) In cases under chapters 12 and 13 of

title 11, final reports proposed for adoptionby trustees shall include—

‘‘(A) the date of confirmation of the plan;‘‘(B) each modification to the plan; and‘‘(C) defaults by the debtor in performance

under the plan.‘‘(3) The information described in para-

graphs (1) and (2) shall be in addition to suchother matters as are required by law for afinal report or as the Attorney General, inthe discretion of the Attorney General, maypropose for a final report.

‘‘(e)(1) Periodic reports proposed for adop-tion by trustees or debtors in possessionunder chapter 11 of title 11 shall include—

‘‘(A) information about the standard indus-try classification, published by the Depart-ment of Commerce, for the businesses con-ducted by the debtor;

‘‘(B) the length of time the case has beenpending;

‘‘(C) the number of full-time employees—‘‘(i) as of the date of the order for relief;

and‘‘(ii) at the end of each reporting period

since the case was filed;‘‘(D) cash receipts, cash disbursements, and

profitability of the debtor for the most re-cent period and cumulatively since the dateof the order for relief;

‘‘(E) compliance with title 11, whether ornot tax returns and tax payments since thedate of the order for relief have been timelyfiled and made;

‘‘(F) all professional fees approved by thecourt in the case for the most recent periodand cumulatively since the date of the orderfor relief (separately reported, for the profes-sional fees incurred by or on behalf of thedebtor, between those that would have beenincurred absent a bankruptcy case and thosethat would not have been so incurred); and

‘‘(G) plans of reorganization filed and con-firmed and, with respect thereto, by class,the recoveries of the holders, expressed inaggregate dollar values and, in the case ofclaims, as a percentage of total claims of theclass allowed.

‘‘(2) The information described in para-graph (1) shall be in addition to such othermatters as are required by law for a periodicreport or as the Attorney General, in the dis-cretion of the Attorney General, may pro-pose for a periodic report.’’.

(b) TECHNICAL AMENDMENT.—The table ofsections for chapter 39 of title 28, UnitedStates Code, is amended by adding at the endthe following:‘‘589b. Bankruptcy data.’’.SEC. 604. SENSE OF CONGRESS REGARDING

AVAILABILITY OF BANKRUPTCYDATA.

It is the sense of Congress that—(1) it should be the national policy of the

United States that all data held by bank-ruptcy clerks in electronic form, to the ex-tent such data reflects only public records(as defined in section 107 of title 11, UnitedStates Code), should be released in a usableelectronic form in bulk to the public subjectto such appropriate privacy concerns andsafeguards as the Judicial Conference of theUnited States may determine; and

(2) there should be established a bank-ruptcy data system in which—

(A) a single set of data definitions andforms are used to collect data nationwide;and

(B) data for any particular bankruptcycase are aggregated in the same electronicrecord.

TITLE VII—BANKRUPTCY TAXPROVISIONS

SEC. 701. TREATMENT OF CERTAIN LIENS.(a) TREATMENT OF CERTAIN LIENS.—Section

724 of title 11, United States Code, isamended—

(1) in subsection (b), in the matter preced-ing paragraph (1), by inserting ‘‘(other thanto the extent that there is a properly per-fected unavoidable tax lien arising in con-nection with an ad valorem tax on real orpersonal property of the estate)’’ after‘‘under this title’’;

(2) in subsection (b)(2), by inserting ‘‘(ex-cept that such expenses, other than claimsfor wages, salaries, or commissions whicharise after the filing of a petition, shall belimited to expenses incurred under chapter 7of this title and shall not include expensesincurred under chapter 11 of this title)’’ after‘‘507(a)(1)’’; and

(3) by adding at the end the following:‘‘(e) Before subordinating a tax lien on real

or personal property of the estate, the trust-ee shall—

‘‘(1) exhaust the unencumbered assets ofthe estate; and

‘‘(2) in a manner consistent with section506(c), recover from property securing an al-lowed secured claim the reasonable, nec-essary costs, and expenses of preserving ordisposing of that property.

‘‘(f) Notwithstanding the exclusion of advalorem tax liens under this section and sub-ject to the requirements of subsection (e),the following may be paid from property ofthe estate which secures a tax lien, or theproceeds of such property:

‘‘(1) Claims for wages, salaries, and com-missions that are entitled to priority undersection 507(a)(3).

‘‘(2) Claims for contributions to an em-ployee benefit plan entitled to priority undersection 507(a)(4).’’.

(b) DETERMINATION OF TAX LIABILITY.—Sec-tion 505(a)(2) of title 11, United States Code,is amended—

(1) in subparagraph (A), by striking ‘‘or’’ atthe end;

(2) in subparagraph (B), by striking the pe-riod at the end and inserting ‘‘; or’’; and

(3) by adding at the end the following:‘‘(C) the amount or legality of any amount

arising in connection with an ad valorem taxon real or personal property of the estate, ifthe applicable period for contesting or rede-termining that amount under any law (otherthan a bankruptcy law) has expired.’’.SEC. 702. EFFECTIVE NOTICE TO GOVERNMENT.

(a) EFFECTIVE NOTICE TO GOVERNMENTALUNITS.—Section 342 of title 11, United StatesCode, as amended by section 315(a) of thisAct, is amended by adding at the end the fol-lowing:

‘‘(g)(1) If a debtor lists a governmental unitas a creditor in a list or schedule, any noticerequired to be given by the debtor under thistitle, applicable rule, other provision of law,or order of the court, shall identify the de-partment, agency, or instrumentalitythrough which the debtor is indebted.

‘‘(2) The debtor shall identify (with infor-mation such as a taxpayer identificationnumber, loan, account or contract number,or real estate parcel number, if applicable),and describe the underlying basis for theclaim of the governmental unit.

‘‘(3) If the liability of the debtor to a gov-ernmental unit arises from a debt or obliga-tion owed or incurred by another individual,entity, or organization, or under a differentname, the debtor shall identify that individ-ual, entity, organization, or name.

‘‘(h) The clerk shall keep and update on aquarterly basis, in such form and manner asthe Director of the Administrative Office ofthe United States Courts prescribes, a reg-ister in which a governmental unit may des-ignate or redesignate a mailing address forservice of notice in cases pending in the dis-trict. The clerk shall make such registeravailable to debtors.’’.

(b) ADOPTION OF RULES PROVIDING NO-TICE.—

(1) IN GENERAL.—Within a reasonable pe-riod of time after the date of enactment ofthis Act, the Advisory Committee on Bank-ruptcy Rules of the Judicial Conference shallpropose for adoption enhanced rules for pro-viding notice to Federal, State, and localgovernment units that have regulatory au-thority over the debtor or that may be credi-tors in the debtor’s case.

(2) PERSONS NOTIFIED.—The rules proposedunder paragraph (1) shall be reasonably cal-culated to ensure that notice will reach therepresentatives of the governmental unit (orsubdivision thereof) who will be the appro-priate persons authorized to act upon the no-tice.

(3) RULES REQUIRED.—At a minimum, therules under paragraph (1) should require thatthe debtor—

(A) identify in the schedules and the no-tice, the subdivision, agency, or entity withrespect to which such notice should be re-ceived;

(B) provide sufficient information (such ascase captions, permit numbers, taxpayeridentification numbers, or similar identify-ing information) to permit the governmentalunit (or subdivision thereof) entitled to re-ceive such notice to identify the debtor orthe person or entity on behalf of which thedebtor is providing notice in any case inwhich—

(i) the debtor may be a successor in inter-est; or

(ii) may not be the same entity as the en-tity that incurred the debt or obligation; and

(C) identify, in appropriate schedules,served together with the notice—

(i) the property with respect to which theclaim or regulatory obligation may havearisen, if applicable;

(ii) the nature of such claim or regulatoryobligation; and

CONGRESSIONAL RECORD — SENATES2756 March 16, 1999(iii) the purpose for which notice is being

given.(c) EFFECT OF FAILURE OF NOTICE.—Section

342 of title 11, United States Code, as amend-ed by subsection (a), is amended by adding atthe end the following:

‘‘(i) A notice that does not comply withsubsections (d) and (e) shall not be effectiveunless the debtor demonstrates by clear andconvincing evidence that—

‘‘(1) timely notice was given in a mannerreasonably calculated to satisfy the require-ments of this section; and

‘‘(2) either—‘‘(A) the notice was timely sent to the ad-

dress provided in the register maintained bythe clerk of the district in which the casewas pending for such purposes; or

‘‘(B) no address was provided in such listfor the governmental unit and that an officerof the governmental unit who is responsiblefor the matter or claim had actual knowl-edge of the case in sufficient time to act.’’.SEC. 703. NOTICE OF REQUEST FOR A DETER-

MINATION OF TAXES.The second sentence of section 505(b) of

title 11, United States Code, is amended bystriking ‘‘Unless’’ and inserting ‘‘If the re-quest is made substantially in the mannerdesignated by the governmental unit and un-less’’.SEC. 704. RATE OF INTEREST ON TAX CLAIMS.

(a) IN GENERAL.—Subchapter I of chapter 5of title 11, United States Code, is amended byadding at the end the following:

‘‘§ 511. Rate of interest on tax claims‘‘If any provision of this title requires the

payment of interest on a tax claim or thepayment of interest to enable a creditor toreceive the present value of the allowedamount of a tax claim, the rate of interestshall be as follows:

‘‘(1) In the case of secured tax claims, unse-cured ad valorem tax claims, other unse-cured tax claims in which interest is re-quired to be paid under section 726(a)(5), andadministrative tax claims paid under section503(b)(1), the rate shall be determined underapplicable nonbankruptcy law.

‘‘(2)(A) In the case of any tax claim otherthan a claim described in paragraph (1), theminimum rate of interest shall be a percent-age equal to the sum of—

‘‘(i) 3; plus‘‘(ii) the Federal short-term rate rounded

to the nearest full percent, determined undersection 1274(d) of the Internal Revenue Codeof 1986.

‘‘(B) In the case of any claim for Federalincome taxes, the minimum rate of interestshall be subject to any adjustment that maybe required under section 6621(d) of the Inter-nal Revenue Code of 1986.

‘‘(C) In the case of taxes paid under a con-firmed plan or reorganization under thistitle, the minimum rate of interest shall bedetermined as of the calendar month inwhich the plan is confirmed.’’.

(b) CLERICAL AMENDMENT.—The table ofsections for chapter 5 of title 11, UnitedStates Code, is amended by inserting afterthe item relating to section 510 the follow-ing:

‘‘511. Rate of interest on tax claims.’’.SEC. 705. TOLLING OF PRIORITY OF TAX CLAIM

TIME PERIODS.Section 507(a)(8)(A) of title 11, United

States Code, as redesignated by section 221 ofthis Act, is amended—

(1) in clause (i), by inserting before thesemicolon at the end, the following: ‘‘, plusany time during which the stay of proceed-ings was in effect in a prior case under thistitle, plus 6 months’’; and

(2) by striking clause (ii) and inserting thefollowing:

‘‘(ii) assessed within 240 days before thedate of the filing of the petition, exclusiveof—

‘‘(I) any time during which an offer in com-promise with respect to that tax, was pend-ing or in effect during that 240-day period,plus 30 days;

‘‘(II) the lesser of—‘‘(aa) any time during which an install-

ment agreement with respect to that tax waspending or in effect during that 240-day pe-riod, plus 30 days; or

‘‘(bb) 1 year; and‘‘(III) any time during which a stay of pro-

ceedings against collections was in effect ina prior case under this title during that 240-day period; plus 6 months.’’.SEC. 706. PRIORITY PROPERTY TAXES INCURRED.

Section 507(a)(9)(B) of title 11, UnitedStates Code, as redesignated by section 221 ofthis Act, is amended by striking ‘‘assessed’’and inserting ‘‘incurred’’.SEC. 707. CHAPTER 13 DISCHARGE OF FRAUDU-

LENT AND OTHER TAXES.Section 1328(a)(2) of title 11, United States

Code, as amended by section 228 of this Act,is amended by inserting ‘‘(1),’’ after ‘‘para-graph’’.SEC. 708. CHAPTER 11 DISCHARGE OF FRAUDU-

LENT TAXES.Section 1141(d) of title 11, United States

Code, is amended by adding at the end thefollowing:

‘‘(5) Notwithstanding paragraph (1), theconfirmation of a plan does not discharge adebtor that is a corporation from any debtfor a tax or customs duty with respect towhich the debtor—

‘‘(A) made a fraudulent return; or‘‘(B) willfully attempted in any manner to

evade or defeat that tax or duty.’’.SEC. 709. STAY OF TAX PROCEEDINGS.

(a) SECTION 362 STAY LIMITED TOPREPETITION TAXES.—Section 362(a)(8) oftitle 11, United States Code, is amended byinserting before the semicolon at the end thefollowing: ‘‘, with respect to a tax liabilityfor a taxable period ending before the orderfor relief under section 301, 302, or 303’’.

(b) APPEAL OF TAX COURT DECISIONS PER-MITTED.—Section 362(b)(9) of title 11, UnitedStates Code, is amended—

(1) in subparagraph (C), by striking ‘‘or’’ atthe end;

(2) in subparagraph (D), by striking the pe-riod at the end and inserting ‘‘; or’’; and

(3) by adding at the end the following:‘‘(E) the appeal of a decision by a court or

administrative tribunal which determines atax liability of the debtor (without regard towhether such determination was madeprepetition or postpetition).’’.SEC. 710. PERIODIC PAYMENT OF TAXES IN CHAP-

TER 11 CASES.Section 1129(a)(9) of title 11, United States

Code, is amended—(1) in subparagraph (B), by striking ‘‘and’’

at the end; and(2) in subparagraph (C), by striking ‘‘de-

ferred cash payments, over a period not ex-ceeding six years after the date of assess-ment of such claim,’’ and all that followsthrough the end of the subparagraph, and in-serting ‘‘regular installment payments—

‘‘(i) of a total value, as of the effective dateof the claim, equal to the allowed amount ofsuch claim in cash, but in no case with a bal-loon payment; and

‘‘(ii) beginning not later than the effectivedate of the plan and ending on the earlierof—

‘‘(I) the date that is 5 years after the dateof the filing of the petition; or

‘‘(II) the last date payments are to be madeunder the plan to unsecured creditors; and’’;and

(3) by adding at the end the following:

‘‘(D) with respect to a secured claim whichwould otherwise meet the description on anunsecured claim of a governmental unitunder section 507(a)(8), but for the securedstatus of that claim, the holder of that claimwill receive on account of that claim, cashpayments, in the same manner and over thesame period, as prescribed in subparagraph(C).’’.SEC. 711. AVOIDANCE OF STATUTORY TAX LIENS

PROHIBITED.Section 545(2) of title 11, United States

Code, is amended by striking the semicolonat the end and inserting ‘‘, except in anycase in which a purchaser is a purchaser de-scribed in section 6323 of the Internal Reve-nue Code of 1986, or in any other similar pro-vision of State or local law;’’.SEC. 712. PAYMENT OF TAXES IN THE CONDUCT

OF BUSINESS.(a) PAYMENT OF TAXES REQUIRED.—Section

960 of title 28, United States Code, isamended—

(1) by inserting ‘‘(a)’’ before ‘‘Any’’; and(2) by adding at the end the following:‘‘(b) A tax under subsection (a) shall be

paid when due in the conduct of businessunless—

‘‘(1) the tax is a property tax secured by alien against property that is abandonedwithin a reasonable period of time after thelien attaches, by the trustee of a bankruptcyestate, under section 554 of title 11; or

‘‘(2) payment of the tax is excused under aspecific provision of title 11.

‘‘(c) In a case pending under chapter 7 oftitle 11, payment of a tax may be deferreduntil final distribution is made under section726 of title 11, if—

‘‘(1) the tax was not incurred by a trusteeduly appointed under chapter 7 of title 11; or

‘‘(2) before the due date of the tax, thecourt makes a finding of probable insuffi-ciency of funds of the estate to pay in fullthe administrative expenses allowed undersection 503(b) of title 11 that have the samepriority in distribution under section 726(b)of title 11 as the priority of that tax.’’.

(b) PAYMENT OF AD VALOREM TAXES RE-QUIRED.—Section 503(b)(1)(B)(i) of title 11,United States Code, is amended by inserting‘‘whether secured or unsecured, includingproperty taxes for which liability is in rem,in personam, or both,’’ before ‘‘except’’.

(c) REQUEST FOR PAYMENT OF ADMINISTRA-TIVE EXPENSE TAXES ELIMINATED.—Section503(b)(1) of title 11, United States Code, isamended—

(1) in subparagraph (B), by striking ‘‘and’’at the end;

(2) in subparagraph (C), by adding ‘‘and’’ atthe end; and

(3) by adding at the end the following:‘‘(D) notwithstanding the requirements of

subsection (a), a governmental unit shall notbe required to file a request for the paymentof a claim described in subparagraph (B) or(C);’’.

(d) PAYMENT OF TAXES AND FEES AS SE-CURED CLAIMS.—Section 506 of title 11,United States Code, is amended—

(1) in subsection (b), by inserting ‘‘or Statestatute’’ after ‘‘agreement’’; and

(2) in subsection (c), by inserting ‘‘, includ-ing the payment of all ad valorem propertytaxes with respect to the property’’ beforethe period at the end.SEC. 713. TARDILY FILED PRIORITY TAX CLAIMS.

Section 726(a)(1) of title 11, United StatesCode, is amended by striking ‘‘before thedate on which the trustee commences dis-tribution under this section;’’ and insertingthe following: ‘‘on or before the earlier of—

‘‘(A) the date that is 10 days after the mail-ing to creditors of the summary of the trust-ee’s final report; or

‘‘(B) the date on which the trustee com-mences final distribution under this sec-tion;’’.

CONGRESSIONAL RECORD — SENATE S2757March 16, 1999SEC. 714. INCOME TAX RETURNS PREPARED BY

TAX AUTHORITIES.Section 523(a) of title 11, United States

Code, is amended—(1) in paragraph (1)(B)—(A) by inserting ‘‘or equivalent report or

notice,’’ after ‘‘a return,’’;(B) in clause (i)—(i) by inserting ‘‘or given’’ after ‘‘filed’’;

and(ii) by striking ‘‘or’’ at the end; and(C) in clause (ii)—(i) by inserting ‘‘or given’’ after ‘‘filed’’;

and(ii) by inserting ‘‘, report, or notice’’ after

‘‘return’’; and(2) by adding at the end the following flush

sentences:‘‘For purposes of this subsection, the term‘return’ means a return that satisfies the re-quirements of applicable nonbankruptcy law(including applicable filing requirements).Such term includes a return prepared pursu-ant to section 6020(a) of the Internal RevenueCode of 1986, or similar State or local law, ora written stipulation to a judgment enteredby a nonbankruptcy tribunal, but does notinclude a return made pursuant to section6020(b) of the Internal Revenue Code of 1986,or a similar State or local law.’’.SEC. 715. DISCHARGE OF THE ESTATE’S LIABIL-

ITY FOR UNPAID TAXES.The second sentence of section 505(b) of

title 11, United States Code, as amended bysection 703 of this Act, is amended by insert-ing ‘‘the estate,’’ after ‘‘misrepresentation,’’.SEC. 716. REQUIREMENT TO FILE TAX RETURNS

TO CONFIRM CHAPTER 13 PLANS.(a) FILING OF PREPETITION TAX RETURNS

REQUIRED FOR PLAN CONFIRMATION.—Section1325(a) of title 11, United States Code, asamended by section 212 of this Act, isamended—

(1) in paragraph (6), by striking ‘‘and’’ atthe end;

(2) in paragraph (7), by striking the periodat the end and inserting ‘‘; and’’; and

(3) by adding at the end the following:‘‘(8) if the debtor has filed all applicable

Federal, State, and local tax returns as re-quired by section 1309.’’.

(b) ADDITIONAL TIME PERMITTED FOR FILINGTAX RETURNS.—

(1) IN GENERAL.—Chapter 13 of title 11,United States Code, as amended by section309(c) of this Act, is amended by adding atthe end the following:‘‘§ 1309. Filing of prepetition tax returns

‘‘(a) Not later than the day before the dayon which the first meeting of the creditors isconvened under section 341(a), the debtorshall file with appropriate tax authorities alltax returns for all taxable periods endingduring the 3-year period ending on the dateof the filing of the petition.

‘‘(b)(1) Subject to paragraph (2), if the taxreturns required by subsection (a) have notbeen filed by the date on which the firstmeeting of creditors is convened under sec-tion 341(a), the trustee may continue thatmeeting for a reasonable period of time toallow the debtor an additional period of timeto file any unfiled returns, but such addi-tional period of time shall not extendbeyond—

‘‘(A) for any return that is past due as ofthe date of the filing of the petition, the datethat is 120 days after the date of that firstmeeting; or

‘‘(B) for any return that is not past due asof the date of the filing of the petition, thelater of—

‘‘(i) the date that is 120 days after the dateof that first meeting; or

‘‘(ii) the date on which the return is dueunder the last automatic extension of timefor filing that return to which the debtor is

entitled, and for which request has beentimely made, according to applicable non-bankruptcy law.

‘‘(2) Upon notice and hearing, and order en-tered before the tolling of any applicable fil-ing period determined under this subsection,if the debtor demonstrates by clear and con-vincing evidence that the failure to file a re-turn as required under this subsection is at-tributable to circumstances beyond the con-trol of the debtor, the court may extend thefiling period established by the trustee underthis subsection for—

‘‘(A) a period of not more than 30 days forreturns described in paragraph (1); and

‘‘(B) a period not to extend after the appli-cable extended due date for a return de-scribed in paragraph (2).

‘‘(c) For purposes of this section, the term‘return’ includes a return prepared pursuantto section 6020 (a) or (b) of the Internal Reve-nue Code of 1986, or a similar State or locallaw, or written stipulation to a judgment en-tered by a nonbankruptcy tribunal.’’.

(2) CONFORMING AMENDMENT.—The table ofsections for chapter 13 of title 11, UnitedStates Code, is amended by inserting afterthe item relating to section 1308 the follow-ing:‘‘1309. Filing of prepetition tax returns.’’.

(c) DISMISSAL OR CONVERSION ON FAILURETO COMPLY.—Section 1307 of title 11, UnitedStates Code, is amended—

(1) by redesignating subsections (e) and (f)as subsections (f) and (g), respectively; and

(2) by inserting after subsection (d), thefollowing:

‘‘(e) Upon the failure of the debtor to file atax return under section 1309, on request of aparty in interest or the United States trust-ee and after notice and a hearing, the courtshall dismiss the case.’’.

(d) TIMELY FILED CLAIMS.—Section 502(b)(9)of title 11, United States Code, is amended byinserting before the period at the end the fol-lowing ‘‘, and except that in a case underchapter 13 of this title, a claim of a govern-mental unit for a tax with respect to a re-turn filed under section 1309 shall be timelyif the claim is filed on or before the date thatis 60 days after that return was filed in ac-cordance with applicable requirements’’.

(e) RULES FOR OBJECTIONS TO CLAIMS ANDTO CONFIRMATION.—It is the sense of Con-gress that the Advisory Committee on Bank-ruptcy Rules of the Judicial Conferenceshould, within a reasonable period of timeafter the date of enactment of this Act, pro-pose for adoption amended Federal Rules ofBankruptcy Procedure which provide that—

(1) notwithstanding the provisions of Rule3015(f), in cases under chapter 13 of title 11,United States Code, a governmental unitmay object to the confirmation of a plan onor before the date that is 60 days after thedate on which the debtor files all tax returnsrequired under sections 1309 and 1325(a)(7) oftitle 11, United States Code; and

(2) in addition to the provisions of Rule3007, in a case under chapter 13 of title 11,United States Code, no objection to a taxwith respect to which a return is required tobe filed under section 1309 of title 11, UnitedStates Code, shall be filed until such returnhas been filed as required.SEC. 717. STANDARDS FOR TAX DISCLOSURE.

Section 1125(a)(1) of title 11, United StatesCode, is amended—

(1) by inserting ‘‘including a full discussionof the potential material, Federal, State, andlocal tax consequences of the plan to thedebtor, any successor to the debtor, and ahypothetical investor domiciled in the Statein which the debtor resides or has its prin-cipal place of business typical of the holdersof claims or interests in the case,’’ after‘‘records’’; and

(2) by striking ‘‘a hypothetical reasonableinvestor typical of holders of claims or inter-ests’’ and inserting ‘‘such a hypothetical in-vestor’’.SEC. 718. SETOFF OF TAX REFUNDS.

Section 362(b) of title 11, United StatesCode, as amended by section 402 of this Act,is amended—

(1) in paragraph (25), by striking ‘‘or’’ atthe end;

(2) in paragraph (26), by striking the periodat the end and inserting ‘‘; or’’; and

(3) by inserting after paragraph (26) the fol-lowing:

‘‘(27) under subsection (a), of the setoff ofan income tax refund, by a governmentalunit, with respect to a taxable period thatended before the order for relief against anincome tax liability for a taxable period thatalso ended before the order for relief,unless—

‘‘(A) before that setoff, an action to deter-mine the amount or legality of that tax li-ability under section 505(a) was commenced;or

‘‘(B) in any case in which the setoff of anincome tax refund is not permitted becauseof a pending action to determine the amountor legality of a tax liability, in which casethe governmental unit may hold the refundpending the resolution of the action.’’.

TITLE VIII—ANCILLARY AND OTHERCROSS-BORDER CASES

SEC. 801. AMENDMENT TO ADD CHAPTER 15 TOTITLE 11, UNITED STATES CODE.

(a) IN GENERAL.—Title 11, United StatesCode, is amended by inserting after chapter13 the following:

‘‘CHAPTER 15—ANCILLARY AND OTHERCROSS-BORDER CASES

‘‘Sec.‘‘1501. Purpose and scope of application.‘‘SUBCHAPTER I—GENERAL PROVISIONS‘‘1502. Definitions.‘‘1503. International obligations of the

United States.‘‘1504. Commencement of ancillary case.‘‘1505. Authorization to act in a foreign

country.‘‘1506. Public policy exception.‘‘1507. Additional assistance.‘‘1508. Interpretation.‘‘SUBCHAPTER II—ACCESS OF FOREIGN

REPRESENTATIVES AND CREDITORSTO THE COURT

‘‘1509. Right of direct access.‘‘1510. Limited jurisdiction.‘‘1511. Commencement of case under section

301 or 303.‘‘1512. Participation of a foreign representa-

tive in a case under this title.‘‘1513. Access of foreign creditors to a case

under this title.‘‘1514. Notification to foreign creditors con-

cerning a case under this title.‘‘SUBCHAPTER III—RECOGNITION OF A

FOREIGN PROCEEDING AND RELIEF‘‘1515. Application for recognition of a for-

eign proceeding.‘‘1516. Presumptions concerning recognition.‘‘1517. Order recognizing a foreign proceed-

ing.‘‘1518. Subsequent information.‘‘1519. Relief that may be granted upon peti-

tion for recognition of a foreignproceeding.

‘‘1520. Effects of recognition of a foreignmain proceeding.

‘‘1521. Relief that may be granted upon rec-ognition of a foreign proceed-ing.

‘‘1522. Protection of creditors and other in-terested persons.

‘‘1523. Actions to avoid acts detrimental tocreditors.

CONGRESSIONAL RECORD — SENATES2758 March 16, 1999‘‘1524. Intervention by a foreign representa-

tive.‘‘SUBCHAPTER IV—COOPERATION WITH

FOREIGN COURTS AND FOREIGN REP-RESENTATIVES

‘‘1525. Cooperation and direct communica-tion between the court and for-eign courts or foreign rep-resentatives.

‘‘1526. Cooperation and direct communica-tion between the trustee andforeign courts or foreign rep-resentatives.

‘‘1527. Forms of cooperation.‘‘SUBCHAPTER V—CONCURRENT

PROCEEDINGS‘‘1528. Commencement of a case under this

title after recognition of a for-eign main proceeding.

‘‘1529. Coordination of a case under this titleand a foreign proceeding.

‘‘1530. Coordination of more than 1 foreignproceeding.

‘‘1531. Presumption of insolvency based onrecognition of a foreign mainproceeding.

‘‘1532. Rule of payment in concurrent pro-ceedings.

‘‘§ 1501. Purpose and scope of application‘‘(a) The purpose of this chapter is to in-

corporate the Model Law on Cross-Border In-solvency so as to provide effective mecha-nisms for dealing with cases of cross-borderinsolvency with the objectives of—

‘‘(1) cooperation between—‘‘(A) United States courts, United States

Trustees, trustees, examiners, debtors, anddebtors in possession; and

‘‘(B) the courts and other competent au-thorities of foreign countries involved incross-border insolvency cases;

‘‘(2) greater legal certainty for trade andinvestment;

‘‘(3) fair and efficient administration ofcross-border insolvencies that protects theinterests of all creditors, and other inter-ested entities, including the debtor;

‘‘(4) protection and maximization of thevalue of the debtor’s assets; and

‘‘(5) facilitation of the rescue of financiallytroubled businesses, thereby protecting in-vestment and preserving employment.

‘‘(b) This chapter applies if—‘‘(1) assistance is sought in the United

States by a foreign court or a foreign rep-resentative in connection with a foreign pro-ceeding;

‘‘(2) assistance is sought in a foreign coun-try in connection with a case under thistitle;

‘‘(3) a foreign proceeding and a case underthis title with respect to the same debtor aretaking place concurrently; or

‘‘(4) creditors or other interested personsin a foreign country have an interest in re-questing the commencement of, or partici-pating in, a case or proceeding under thistitle.

‘‘(c) This chapter does not apply to—‘‘(1) a proceeding concerning an entity

identified by exclusion in subsection 109(b);‘‘(2) an individual, or to an individual and

such individual’s spouse, who have debtswithin the limits specified in section 109(e)and who are citizens of the United States oraliens lawfully admitted for permanent resi-dence in the United States; or

‘‘(3) an entity subject to a proceedingunder the Securities Investor Protection Actof 1970 (84 Stat. 1636 et seq.), a stockbrokersubject to subchapter III of chapter 7 of thistitle, or a commodity broker subject to sub-chapter IV of chapter 7 of this title.‘‘SUBCHAPTER I—GENERAL PROVISIONS‘‘§ 1502. Definitions

‘‘For the purposes of this chapter, theterm—

‘‘(1) ‘debtor’ means an entity that is thesubject of a foreign proceeding;

‘‘(2) ‘establishment’ means any place of op-erations where the debtor carries out a non-transitory economic activity;

‘‘(3) ‘foreign court’ means a judicial orother authority competent to control or su-pervise a foreign proceeding;

‘‘(4) ‘foreign main proceeding’ means a for-eign proceeding taking place in the countrywhere the debtor has the center of its maininterests;

‘‘(5) ‘foreign nonmain proceeding’ means aforeign proceeding, other than a foreignmain proceeding, taking place in a countrywhere the debtor has an establishment;

‘‘(6) ‘trustee’ includes a trustee, a debtor inpossession in a case under any chapter ofthis title, or a debtor under chapter 9 of thistitle; and

‘‘(7) ‘within the territorial jurisdiction ofthe United States’ when used with referenceto property of a debtor refers to tangibleproperty located within the territory of theUnited States and intangible propertydeemed under applicable nonbankruptcy lawto be located within that territory, includingany property subject to attachment or gar-nishment that may properly be seized or gar-nished by an action in a Federal or Statecourt in the United States.‘‘§ 1503. International obligations of the

United States‘‘To the extent that this chapter conflicts

with an obligation of the United States aris-ing out of any treaty or other form of agree-ment to which it is a party with 1 or moreother countries, the requirements of thetreaty or agreement prevail.‘‘§ 1504. Commencement of ancillary case

‘‘A case under this chapter is commencedby the filing of a petition for recognition ofa foreign proceeding under section 1515.‘‘§ 1505. Authorization to act in a foreign

country‘‘A trustee or another entity, including an

examiner, may be authorized by the court toact in a foreign country on behalf of an es-tate created under section 541. An entity au-thorized to act under this section may act inany way permitted by the applicable foreignlaw.‘‘§ 1506. Public policy exception

‘‘Nothing in this chapter prevents thecourt from refusing to take an action gov-erned by this chapter if the action would bemanifestly contrary to the public policy ofthe United States.‘‘§ 1507. Additional assistance

‘‘(a) Subject to the specific limitationsunder other provisions of this chapter, thecourt, upon recognition of a foreign proceed-ing, may provide additional assistance to aforeign representative under this title orunder other laws of the United States.

‘‘(b) In determining whether to provide ad-ditional assistance under this title or underother laws of the United States, the courtshall consider whether such additional as-sistance, consistent with the principles ofcomity, will reasonably assure—

‘‘(1) just treatment of all holders of claimsagainst or interests in the debtor’s property;

‘‘(2) protection of claim holders in theUnited States against prejudice and incon-venience in the processing of claims in suchforeign proceeding;

‘‘(3) prevention of preferential or fraudu-lent dispositions of property of the debtor;

‘‘(4) distribution of proceeds of the debtor’sproperty substantially in accordance withthe order prescribed by this title; and

‘‘(5) if appropriate, the provision of an op-portunity for a fresh start for the individualthat such foreign proceeding concerns.

‘‘§ 1508. Interpretation‘‘In interpreting this chapter, the court

shall consider its international origin, andthe need to promote an application of thischapter that is consistent with the applica-tion of similar statutes adopted by foreignjurisdictions.‘‘SUBCHAPTER II—ACCESS OF FOREIGN

REPRESENTATIVES AND CREDITORSTO THE COURT

‘‘§ 1509. Right of direct access‘‘(a) A foreign representative is entitled to

commence a case under section 1504 by filinga petition for recognition under section 1515,and upon recognition, to apply directly toother Federal and State courts for appro-priate relief in those courts.

‘‘(b) Upon recognition, and subject to sec-tion 1510, a foreign representative shall havethe capacity to sue and be sued, and shall besubject to the laws of the United States ofgeneral applicability.

‘‘(c) Subject to section 1510, a foreign rep-resentative is subject to laws of general ap-plication.

‘‘(d) Recognition under this chapter is pre-requisite to the granting of comity or co-operation to a foreign representative in anyFederal or State court in the United States.Any request for comity or cooperation by aforeign representative in any court shall beaccompanied by a sworn statement settingforth whether recognition under section 1515has been sought and the status of any suchpetition.

‘‘(e) Upon denial of recognition under thischapter, the court may issue appropriate or-ders necessary to prevent an attempt to ob-tain comity or cooperation from courts inthe United States without such recognition.‘‘§ 1510. Limited jurisdiction

‘‘The sole fact that a foreign representa-tive files a petition under section 1515 doesnot subject the foreign representative to thejurisdiction of any court in the UnitedStates for any other purpose.‘‘§ 1511. Commencement of case under section

301 or 303‘‘(a) Upon recognition, a foreign represent-

ative may commence—‘‘(1) an involuntary case under section 303;

or‘‘(2) a voluntary case under section 301 or

302, if the foreign proceeding is a foreignmain proceeding.

‘‘(b) The petition commencing a case undersubsection (a) must be accompanied by astatement describing the petition for rec-ognition and its current status. The courtwhere the petition for recognition has beenfiled must be advised of the foreign rep-resentative’s intent to commence a caseunder subsection (a) prior to such com-mencement.‘‘§ 1512. Participation of a foreign representa-

tive in a case under this title‘‘Upon recognition of a foreign proceeding,

the foreign representative in that proceedingis entitled to participate as a party in inter-est in a case regarding the debtor under thistitle.‘‘§ 1513. Access of foreign creditors to a case

under this title‘‘(a) Foreign creditors have the same rights

regarding the commencement of, and partici-pation in, a case under this title as domesticcreditors.

‘‘(b)(1) Subsection (a) does not change orcodify law in effect on the date of enactmentof this chapter as to the priority of claimsunder section 507 or 726, except that theclaim of a foreign creditor under section 507or 726 shall not be given a lower prioritythan that of general unsecured claims with-out priority solely because the holder of suchclaim is a foreign creditor.

CONGRESSIONAL RECORD — SENATE S2759March 16, 1999‘‘(2)(A) Subsection (a) and paragraph (1) do

not change or codify law in effect on the dateof enactment of this chapter as to the allow-ability of foreign revenue claims or otherforeign public law claims in a proceedingunder this title.

‘‘(B) Allowance and priority as to a foreigntax claim or other foreign public law claimshall be governed by any applicable tax trea-ty of the United States, under the conditionsand circumstances specified therein.‘‘§ 1514. Notification to foreign creditors con-

cerning a case under this title‘‘(a) Whenever in a case under this title no-

tice is to be given to creditors generally orto any class or category of creditors, suchnotice shall also be given to the knowncreditors generally, or to creditors in the no-tified class or category, that do not have ad-dresses in the United States. The court mayorder that appropriate steps be taken with aview to notifying any creditor whose addressis not yet known.

‘‘(b) Such notification to creditors withforeign addresses described in subsection (a)shall be given individually, unless the courtconsiders that, under the circumstances,some other form of notification would bemore appropriate. No letters rogatory orother similar formality is required.

‘‘(c) When a notification of commencementof a case is to be given to foreign creditors,the notification shall—

‘‘(1) indicate the time period for filingproofs of claim and specify the place fortheir filing;

‘‘(2) indicate whether secured creditorsneed to file their proofs of claim; and

‘‘(3) contain any other information re-quired to be included in such a notificationto creditors pursuant to this title and the or-ders of the court.

‘‘(d) Any rule of procedure or order of thecourt as to notice or the filing of a claimshall provide such additional time to credi-tors with foreign addresses as is reasonableunder the circumstances.

‘‘SUBCHAPTER III—RECOGNITION OF AFOREIGN PROCEEDING AND RELIEF

‘‘§ 1515. Application for recognition of a for-eign proceeding‘‘(a) A foreign representative applies to the

court for recognition of the foreign proceed-ing in which the foreign representative hasbeen appointed by filing a petition for rec-ognition.

‘‘(b) A petition for recognition shall be ac-companied by—

‘‘(1) a certified copy of the decision com-mencing the foreign proceeding and appoint-ing the foreign representative;

‘‘(2) a certificate from the foreign court af-firming the existence of the foreign proceed-ing and of the appointment of the foreignrepresentative; or

‘‘(3) in the absence of evidence referred toin paragraphs (1) and (2), any other evidenceacceptable to the court of the existence ofthe foreign proceeding and of the appoint-ment of the foreign representative.

‘‘(c) A petition for recognition shall also beaccompanied by a statement identifying allforeign proceedings with respect to the debt-or that are known to the foreign representa-tive.

‘‘(d) The documents referred to in para-graphs (1) and (2) of subsection (b) must betranslated into English. The court may re-quire a translation into English of additionaldocuments.‘‘§ 1516. Presumptions concerning recognition

‘‘(a) If the decision or certificate referredto in section 1515(b) indicates that the for-eign proceeding is a foreign proceeding as de-fined in section 101 and that the person orbody is a foreign representative as defined in

section 101, the court is entitled to so pre-sume.

‘‘(b) The court is entitled to presume thatdocuments submitted in support of the peti-tion for recognition are authentic, whetheror not they have been legalized.

‘‘(c) In the absence of evidence to the con-trary, the debtor’s registered office, or habit-ual residence in the case of an individual, ispresumed to be the center of the debtor’smain interests.‘‘§ 1517. Order recognizing a foreign proceed-

ing‘‘(a) Subject to section 1506, after notice

and a hearing an order recognizing a foreignproceeding shall be entered if—

‘‘(1) the foreign proceeding is a foreignmain proceeding or foreign nonmain proceed-ing within the meaning of section 1502;

‘‘(2) the foreign representative applying forrecognition is a person or body as defined insection 101; and

‘‘(3) the petition meets the requirements ofsection 1515.

‘‘(b) The foreign proceeding shall berecognized—

‘‘(1) as a foreign main proceeding if it istaking place in the country where the debtorhas the center of its main interests; or

‘‘(2) as a foreign nonmain proceeding if thedebtor has an establishment within themeaning of section 1502 in the foreign coun-try where the proceeding is pending.

‘‘(c) A petition for recognition of a foreignproceeding shall be decided upon at the earli-est possible time. Entry of an order recogniz-ing a foreign proceeding shall constitute rec-ognition under this chapter.

‘‘(d) The provisions of this subchapter donot prevent modification or termination ofrecognition if it is shown that the groundsfor granting it were fully or partially lack-ing or have ceased to exist, but in consider-ing such action the court shall give dueweight to possible prejudice to parties thathave relied upon the granting of recognition.The case under this chapter may be closed inthe manner prescribed for a case under sec-tion 350.‘‘§ 1518. Subsequent information

‘‘After the the petition for recognition ofthe foreign proceeding is filed, the foreignrepresentative shall file with the courtpromptly a notice of change of statusconcerning—

‘‘(1) any substantial change in the status ofthe foreign proceeding or the status of theforeign representative’s appointment; and

‘‘(2) any other foreign proceeding regardingthe debtor that becomes known to the for-eign representative.‘‘§ 1519. Relief that may be granted upon peti-

tion for recognition of a foreign proceeding‘‘(a) Beginning on the date on which a peti-

tion for recognition is filed and ending onthe date on which the petition is decidedupon, the court may, at the request of theforeign representative, where relief is ur-gently needed to protect the assets of thedebtor or the interests of the creditors, grantrelief of a provisional nature, including—

‘‘(1) staying execution against the debtor’sassets;

‘‘(2) entrusting the administration or real-ization of all or part of the debtor’s assets lo-cated in the United States to the foreign rep-resentative or another person authorized bythe court, including an examiner, in order toprotect and preserve the value of assets that,by their nature or because of other cir-cumstances, are perishable, susceptible todevaluation, or otherwise in jeopardy; and

‘‘(3) any relief referred to in paragraph (3),(4), or (7) of section 1521(a).

‘‘(b) Unless extended under section1521(a)(6), the relief granted under this sec-

tion terminates when the petition for rec-ognition is decided upon.

‘‘(c) It is a ground for denial of relief underthis section that such relief would interferewith the administration of a foreign mainproceeding.

‘‘(d) The court may not enjoin a police orregulatory act of a governmental unit, in-cluding a criminal action or proceeding,under this section.

‘‘(e) The standards, procedures, and limita-tions applicable to an injunction shall applyto relief under this section.‘‘§ 1520. Effects of recognition of a foreign

main proceeding‘‘(a) Upon recognition of a foreign proceed-

ing that is a foreign main proceeding—‘‘(1) section 362 applies with respect to the

debtor and that property of the debtor thatis within the territorial jurisdiction of theUnited States;

‘‘(2) a transfer, an encumbrance, or anyother disposition of an interest of the debtorin property within the territorial jurisdic-tion of the United States is restrained as andto the extent that is provided for property ofan estate under sections 363, 549, and 552; and

‘‘(3) unless the court orders otherwise, theforeign representative may operate the debt-or’s business and may exercise the powers ofa trustee under section 549, subject to sec-tions 363 and 552.

‘‘(b) The scope, and the modification ortermination, of the stay and restraints re-ferred to in subsection (a) are subject to theexceptions and limitations provided in sub-sections (b), (c), and (d) of section 362, sub-sections (b) and (c) of section 363, and sec-tions 552, 555 through 557, 559, and 560.

‘‘(c) Subsection (a) does not affect theright to commence individual actions or pro-ceedings in a foreign country to the extentnecessary to preserve a claim against thedebtor.

‘‘(d) Subsection (a) does not affect theright of a foreign representative or an entityto file a petition commencing a case underthis title or the right of any party to fileclaims or take other proper actions in sucha case.‘‘§ 1521. Relief that may be granted upon rec-

ognition of a foreign proceeding‘‘(a) Upon recognition of a foreign proceed-

ing, whether main or nonmain, where nec-essary to effectuate the purpose of this chap-ter and to protect the assets of the debtor orthe interests of the creditors, the court may,at the request of the foreign representative,grant any appropriate relief, including—

‘‘(1) staying the commencement or con-tinuation of individual actions or individualproceedings concerning the debtor’s assets,rights, obligations or liabilities to the extentthe actions or proceedings have not beenstayed under section 1520(a);

‘‘(2) staying execution against the debtor’sassets to the extent the execution has notbeen stayed under section 1520(a);

‘‘(3) suspending the right to transfer, en-cumber or otherwise dispose of any assets ofthe debtor to the extent that right has notbeen suspended under section 1520(a);

‘‘(4) providing for the examination of wit-nesses, the taking of evidence or the deliveryof information concerning the debtor’s as-sets, affairs, rights, obligations or liabilities;

‘‘(5) entrusting the administration or real-ization of all or part of the debtor’s assetswithin the territorial jurisdiction of theUnited States to the foreign representativeor another person, including an examiner,authorized by the court;

‘‘(6) extending relief granted under section1519(a); and

‘‘(7) granting any additional relief thatmay be available to a trustee, except for re-lief available under sections 522, 544, 545, 547,548, 550, and 724(a).

CONGRESSIONAL RECORD — SENATES2760 March 16, 1999‘‘(b) Upon recognition of a foreign proceed-

ing, whether main or nonmain, the courtmay, at the request of the foreign represent-ative, entrust the distribution of all or partof the debtor’s assets located in the UnitedStates to the foreign representative or an-other person, including an examiner, author-ized by the court, if the court is satisfiedthat the interests of creditors in the UnitedStates are sufficiently protected.

‘‘(c) In granting relief under this section toa representative of a foreign nonmain pro-ceeding, the court must be satisfied that therelief relates to assets that, under the law ofthe United States, should be administered inthe foreign nonmain proceeding or concernsinformation required in that proceeding.

‘‘(d) The court may not enjoin a police orregulatory act of a governmental unit, in-cluding a criminal action or proceeding,under this section.

‘‘(e) The standards, procedures, and limita-tions applicable to an injunction shall applyto relief under paragraphs (1), (2), (3), and (6)of subsection (a).

‘‘§ 1522. Protection of creditors and other in-terested persons‘‘(a) The court may grant relief under sec-

tion 1519 or 1521, or may modify or terminaterelief under subsection (c), only if the inter-ests of the creditors and other interested en-tities, including the debtor, are sufficientlyprotected.

‘‘(b) The court may subject relief grantedunder section 1519 or 1521, or the operation ofthe debtor’s business under section 1520(a)(2),to conditions that the court considers to beappropriate, including the giving of securityor the filing of a bond.

‘‘(c) The court may, at the request of theforeign representative or an entity affectedby relief granted under section 1519 or 1521,or at its own motion, modify or terminatethe relief referred to in subsection (b).

‘‘(d) Section 1104(d) shall apply to the ap-pointment of an examiner under this chap-ter. Any examiner shall comply with thequalification requirements imposed on atrustee by section 322.

‘‘§ 1523. Actions to avoid acts detrimental tocreditors‘‘(a) Upon recognition of a foreign proceed-

ing, the foreign representative has standingin a case concerning the debtor pendingunder another chapter of this title to initi-ate actions under sections 522, 544, 545, 547,548, 550, and 724(a).

‘‘(b) In any case in which the foreign pro-ceeding is a foreign nonmain proceeding, thecourt must be satisfied that an action undersubsection (a) relates to assets that, underUnited States law, should be administered inthe foreign nonmain proceeding.

‘‘§ 1524. Intervention by a foreign representa-tive‘‘Upon recognition of a foreign proceeding,

the foreign representative may intervene inany proceedings in a State or Federal courtin the United States in which the debtor is aparty.

‘‘SUBCHAPTER IV—COOPERATION WITHFOREIGN COURTS AND FOREIGN REP-RESENTATIVES

‘‘§ 1525. Cooperation and direct communica-tion between the court and foreign courtsor foreign representatives‘‘(a) Consistent with section 1501, the court

shall cooperate to the maximum extent pos-sible with foreign courts or foreign rep-resentatives, either directly or through thetrustee.

‘‘(b) The court is entitled to communicatedirectly with, or to request information orassistance directly from, foreign courts orforeign representatives, subject to the rights

of parties in interest to notice and participa-tion.

‘‘§ 1526. Cooperation and direct communica-tion between the trustee and foreign courtsor foreign representatives‘‘(a) Consistent with section 1501, the trust-

ee or other person, including an examiner,authorized by the court, shall, subject to thesupervision of the court, cooperate to themaximum extent possible with foreigncourts or foreign representatives.

‘‘(b) The trustee or other person, includingan examiner, authorized by the court is enti-tled, subject to the supervision of the court,to communicate directly with foreign courtsor foreign representatives.

‘‘§ 1527. Forms of cooperation‘‘Cooperation referred to in sections 1525

and 1526 may be implemented by any appro-priate means, including—

‘‘(1) appointment of a person or body, in-cluding an examiner, to act at the directionof the court;

‘‘(2) communication of information by anymeans considered appropriate by the court;

‘‘(3) coordination of the administration andsupervision of the debtor’s assets and affairs;

‘‘(4) approval or implementation of agree-ments concerning the coordination of pro-ceedings; and

‘‘(5) coordination of concurrent proceed-ings regarding the same debtor.

‘‘SUBCHAPTER V—CONCURRENTPROCEEDINGS

‘‘§ 1528. Commencement of a case under thistitle after recognition of a foreign mainproceeding‘‘After recognition of a foreign main pro-

ceeding, a case under another chapter of thistitle may be commenced only if the debtorhas assets in the United States. The effectsof such case shall be restricted to the assetsof the debtor that are within the territorialjurisdiction of the United States and, to theextent necessary to implement cooperationand coordination under sections 1525, 1526,and 1527, to other assets of the debtor thatare within the jurisdiction of the court undersections 541(a), and 1334(e) of title 28, to theextent that such other assets are not subjectto the jurisdiction and control of a foreignproceeding that has been recognized underthis chapter.

‘‘§ 1529. Coordination of a case under thistitle and a foreign proceeding‘‘In any case in which a foreign proceeding

and a case under another chapter of this titleare taking place concurrently regarding thesame debtor, the court shall seek coopera-tion and coordination under sections 1525,1526, and 1527, and the following shall apply:

‘‘(1) If the case in the United States is tak-ing place at the time the petition for rec-ognition of the foreign proceeding is filed—

‘‘(A) any relief granted under sections 1519or 1521 must be consistent with the reliefgranted in the case in the United States; and

‘‘(B) even if the foreign proceeding is rec-ognized as a foreign main proceeding, section1520 does not apply.

‘‘(2) If a case in the United States underthis title commences after recognition, orafter the filing of the petition for recogni-tion, of the foreign proceeding—

‘‘(A) any relief in effect under sections 1519or 1521 shall be reviewed by the court andshall be modified or terminated if inconsist-ent with the case in the United States; and

‘‘(B) if the foreign proceeding is a foreignmain proceeding, the stay and suspension re-ferred to in section 1520(a) shall be modifiedor terminated if inconsistent with the reliefgranted in the case in the United States.

‘‘(3) In granting, extending, or modifyingrelief granted to a representative of a foreign

nonmain proceeding, the court must be satis-fied that the relief relates to assets that,under the law of the United States, should beadministered in the foreign nonmain pro-ceeding or concerns information required inthat proceeding.

‘‘(4) In achieving cooperation and coordina-tion under sections 1528 and 1529, the courtmay grant any of the relief authorized undersection 305.‘‘§ 1530. Coordination of more than 1 foreign

proceeding‘‘In matters referred to in section 1501,

with respect to more than 1 foreign proceed-ing regarding the debtor, the court shallseek cooperation and coordination under sec-tions 1525, 1526, and 1527, and the followingshall apply:

‘‘(1) Any relief granted under section 1519or 1521 to a representative of a foreignnonmain proceeding after recognition of aforeign main proceeding must be consistentwith the foreign main proceeding.

‘‘(2) If a foreign main proceeding is recog-nized after recognition, or after the filing ofa petition for recognition, of a foreignnonmain proceeding, any relief in effectunder section 1519 or 1521 shall be reviewedby the court and shall be modified or termi-nated if inconsistent with the foreign mainproceeding.

‘‘(3) If, after recognition of a foreignnonmain proceeding, another foreignnonmain proceeding is recognized, the courtshall grant, modify, or terminate relief forthe purpose of facilitating coordination ofthe proceedings.‘‘§ 1531. Presumption of insolvency based on

recognition of a foreign main proceeding‘‘In the absence of evidence to the con-

trary, recognition of a foreign main proceed-ing is for the purpose of commencing a pro-ceeding under section 303, proof that thedebtor is generally not paying its debts assuch debts become due.‘‘§ 1532. Rule of payment in concurrent pro-

ceedings‘‘Without prejudice to secured claims or

rights in rem, a creditor who has receivedpayment with respect to its claim in a for-eign proceeding pursuant to a law relating toinsolvency may not receive a payment forthe same claim in a case under any otherchapter of this title regarding the debtor, solong as the payment to other creditors of thesame class is proportionately less than thepayment the creditor has already received.’’.

(b) CLERICAL AMENDMENT.—The table ofchapters for title 11, United States Code, isamended by inserting after the item relatingto chapter 13 the following:‘‘15. Ancillary and Other Cross-Border

Cases ............................................ 1501’’.SEC. 802. AMENDMENTS TO OTHER CHAPTERS IN

TITLE 11, UNITED STATES CODE.(a) APPLICABILITY OF CHAPTERS.—Section

103 of title 11, United States Code, isamended—

(1) in subsection (a), by inserting beforethe period the following: ‘‘, and this chapter,sections 307, 304, 555 through 557, 559, and 560apply in a case under chapter 15’’; and

(2) by adding at the end the following:‘‘(j) Chapter 15 applies only in a case under

such chapter, except that—‘‘(1) sections 1513 and 1514 apply in all cases

under this title; and‘‘(2) section 1505 applies to trustees and to

any other entity (including an examiner) au-thorized by the court under chapter 7, 11, or12, to debtors in possession under chapter 11or 12, and to debtors under chapter 9 who areauthorized to act under section 1505.’’.

(b) DEFINITIONS.—Paragraphs (23) and (24)of section 101 of title 11, United States Code,are amended to read as follows:

CONGRESSIONAL RECORD — SENATE S2761March 16, 1999‘‘(23) ‘foreign proceeding’ means a collec-

tive judicial or administrative proceeding ina foreign country, including an interim pro-ceeding, pursuant to a law relating to insol-vency in which proceeding the assets and af-fairs of the debtor are subject to control orsupervision by a foreign court, for the pur-pose of reorganization or liquidation;

‘‘(24) ‘foreign representative’ means a per-son or body, including a person or body ap-pointed on an interim basis, authorized in aforeign proceeding to administer the reorga-nization or the liquidation of the debtor’s as-sets or affairs or to act as a representative ofthe foreign proceeding;’’.

(c) AMENDMENTS TO TITLE 28, UNITEDSTATES CODE.—

(1) PROCEDURES.—Section 157(b)(2) of title28, United States Code, is amended—

(A) in subparagraph (N), by striking ‘‘and’’at the end;

(B) in subparagraph (O), by striking the pe-riod at the end and inserting ‘‘; and’’; and

(C) by adding at the end the following:‘‘(P) recognition of foreign proceedings and

other matters under chapter 15 of title 11.’’.(2) BANKRUPTCY CASES AND PROCEEDINGS.—

Section 1334(c)(1) of title 28, United StatesCode, is amended by striking ‘‘Nothing in’’and inserting ‘‘Except with respect to a caseunder chapter 15 of title 11, nothing in’’.

(3) DUTIES OF TRUSTEES.—Section 586(a)(3)of title 28, United States Code, is amended byinserting ‘‘15,’’ after ‘‘chapter’’.SEC. 803. CLAIMS RELATING TO INSURANCE DE-

POSITS IN CASES ANCILLARY TOFOREIGN PROCEEDINGS.

Section 304 of title 11, United States Code,is amended to read as follows:‘‘§ 304. Cases ancillary to foreign proceedings

‘‘(a) For purposes of this section—‘‘(1) the term ‘domestic insurance com-

pany’ means a domestic insurance company,as such term is used in section 109(b)(2);

‘‘(2) the term ‘foreign insurance company’means a foreign insurance company, as suchterm is used in section 109(b)(3);

‘‘(3) the term ‘United States claimant’means a beneficiary of any deposit referredto in subsection (b) or any multibeneficiarytrust referred to in subsection (b);

‘‘(4) the term ‘United States creditor’means, with respect to a foreign insurancecompany—

‘‘(i) a United States claimant; or‘‘(ii) any business entity that operates in

the United States and that is a creditor; and‘‘(5) the term ‘United States policyholder’

means a holder of an insurance policy issuedin the United States.

‘‘(b) The court may not grant relief underchapter 15 of this title with respect to anydeposit, escrow, trust fund, or other securityrequired or permitted under any applicableState insurance law or regulation for thebenefit of claim holders in the UnitedStates.’’.

TITLE IX—FINANCIAL CONTRACTPROVISIONS

SEC. 901. BANKRUPTCY CODE AMENDMENTS.(a) DEFINITIONS OF FORWARD CONTRACT, RE-

PURCHASE AGREEMENT, SECURITIES CLEARINGAGENCY, SWAP AGREEMENT, COMMODITY CON-TRACT, AND SECURITIES CONTRACT.—Title 11,United States Code, is amended—

(1) in section 101—(A) in paragraph (25)—(i) by striking ‘‘means a contract’’ and in-

serting ‘‘means—‘‘(A) a contract’’;(ii) by striking ‘‘, or any combination

thereof or option thereon;’’ and inserting ‘‘,or any other similar agreement;’’; and

(iii) by adding at the end the following:‘‘(B) a combination of agreements or trans-

actions referred to in subparagraphs (A) and(C);

‘‘(C) an option to enter into an agreementor transaction referred to in subparagraph(A) or (B);

‘‘(D) a master netting agreement that pro-vides for an agreement or transaction re-ferred to in subparagraph (A), (B), or (C), to-gether with all supplements to such masternetting agreement, without regard to wheth-er such master netting agreement providesfor an agreement or transaction that is nota forward contract under this paragraph, ex-cept that such master netting agreementshall be considered to be a forward contractunder this paragraph only with respect toeach agreement or transaction under suchmaster netting agreement that is referred toin subparagraph (A), (B) or (C); or

‘‘(E) a security agreement or arrangement,or other credit enhancement, directly per-taining to a contract, option, agreement, ortransaction referred to in subparagraph (A),(B), (C), or (D), but not to exceed the actualvalue of such contract, option, agreement, ortransaction on the date of the filing of thepetition;’’;

(B) by striking paragraph (47) and insertingthe following:

‘‘(47) ‘repurchase agreement’ and ‘reverserepurchase agreement’—

‘‘(A) mean—‘‘(i) an agreement, including related terms,

which provides for the transfer of—‘‘(I) a certificate of deposit, mortgage re-

lated security (as defined in section 3 of theSecurities Exchange Act of 1934), mortgageloan, interest in a mortgage related securityor mortgage loan, eligible bankers’ accept-ance, or qualified foreign government secu-rity (defined for purposes of this paragraphto mean a security that is a direct obligationof, or that is fully guaranteed by, the centralgovernment of a member of the Organizationfor Economic Cooperation and Develop-ment); or

‘‘(II) a security that is a direct obligationof, or that is fully guaranteed by, the UnitedStates or an agency of the United Statesagainst the transfer of funds by the trans-feree of such certificate of deposit, eligiblebankers’ acceptance, security, loan, or inter-est;with a simultaneous agreement by suchtransferee to transfer to the transferorthereof a certificate of deposit, eligiblebankers’ acceptance, security, loan, or inter-est of the kind described in subclause (I) or(II), at a date certain that is not later than1 year after the date of the transferor’stransfer or on demand, against the transferof funds;

‘‘(ii) a combination of agreements or trans-actions referred to in clauses (i) and (iii);

‘‘(iii) an option to enter into an agreementor transaction referred to in clause (i) or (ii);or

‘‘(iv) a master netting agreement that pro-vides for an agreement or transaction re-ferred to in clause (i), (ii), or (iii), togetherwith all supplements to such master nettingagreement, without regard to whether suchmaster netting agreement provides for anagreement or transaction that is not a repur-chase agreement under this subparagraph,except that such master netting agreementshall be considered to be a repurchase agree-ment under this subparagraph only with re-spect to each agreement or transactionunder such master netting agreement that isreferred to in clause (i), (ii), or (iii); or

‘‘(v) a security agreement or arrangement,or other credit enhancement, directly per-taining to a contract referred to in clause (i),(ii), (iii), or (iv), but not to exceed the actualvalue of such contract on the date of the fil-ing of the petition; and

‘‘(B) do not include a repurchase obligationunder a participation in a commercial mort-gage loan;’’;

(C) in paragraph (48) by inserting ‘‘, or ex-empt from such registration under such sec-tion pursuant to an order of the Securitiesand Exchange Commission’’ after ‘‘1934’’; and

(D) by striking paragraph (53B) and insert-ing the following:

‘‘(53B) ‘swap agreement’—‘‘(A) means—‘‘(i) an agreement, including the terms and

conditions incorporated by reference in suchagreement, that is—

‘‘(I) an interest rate swap, option, future,or forward agreement, including a rate floor,rate cap, rate collar, cross-currency rateswap, and basis swap;

‘‘(II) a spot, same day-tomorrow, tomor-row-next, forward, or other foreign exchangeor precious metals agreement;

‘‘(III) a currency swap, option, future, orforward agreement;

‘‘(IV) an equity index or an equity swap,option, future, or forward agreement;

‘‘(V) a debt index or a debt swap, option,future, or forward agreement;

‘‘(VI) a credit spread or a credit swap, op-tion, future, or forward agreement; or

‘‘(VII) a commodity index or a commodityswap, option, future, or forward agreement;

‘‘(ii) an agreement or transaction that issimilar to an agreement or transaction re-ferred to in clause (i) that—

‘‘(I) is currently, or in the future becomes,regularly entered into in the swap market(including terms and conditions incorporatedby reference therein); and

‘‘(II) is a forward, swap, future, or optionon a rate, currency, commodity, equity secu-rity, or other equity instrument, on a debtsecurity or other debt instrument, or on aneconomic index or measure of economic riskor value;

‘‘(iii) a combination of agreements ortransactions referred to in clauses (i) and(ii);

‘‘(iv) an option to enter into an agreementor transaction referred to in this subpara-graph;

‘‘(v) a master netting agreement that pro-vides for an agreement or transaction re-ferred to in clause (i), (ii), (iii), or (iv), to-gether with all supplements to such masternetting agreement and without regard towhether such master netting agreement con-tains an agreement or transaction describedin any such clause, but only with respect toeach agreement or transaction referred to inany such clause that is under such masternetting agreement; except that

‘‘(B) the definition under subparagraph (A)is applicable for purposes of this title only,and shall not be construed or applied so as tochallenge or affect the characterization, def-inition, or treatment of any swap agreementunder any other statute, regulation, or rule,including the Securities Act of 1933, the Se-curities Exchange Act of 1934, the PublicUtility Holding Company Act of 1935, theTrust Indenture Act of 1939, the InvestmentCompany Act of 1940, the Investment Advis-ers Act of 1940, the Securities Investor Pro-tection Act of 1970, the Commodity ExchangeAct, and the regulations prescribed by theSecurities and Exchange Commission or theCommodity Futures Trading Commission.’’;

(2) in section 741, by striking paragraph (7)and inserting the following:

‘‘(7) ‘securities contract’—‘‘(A) means—‘‘(i) a contract for the purchase, sale, or

loan of a security, a mortgage loan or an in-terest in a mortgage loan, a group or indexof securities, or mortgage loans or intereststherein (including an interest therein orbased on the value thereof), or option on anyof the foregoing, including an option to pur-chase or sell any of the foregoing;

CONGRESSIONAL RECORD — SENATES2762 March 16, 1999‘‘(ii) an option entered into on a national

securities exchange relating to foreign cur-rencies;

‘‘(iii) the guarantee by or to a securitiesclearing agency of a settlement of cash, se-curities, mortgage loans or interests therein,group or index of securities, or mortgageloans or interests therein (including any in-terest therein or based on the value thereof),or option on any of the foregoing, includingan option to purchase or sell any of the fore-going;

‘‘(iv) a margin loan;‘‘(v) any other agreement or transaction

that is similar to an agreement or trans-action referred to in this subparagraph;

‘‘(vi) a combination of the agreements ortransactions referred to in this subpara-graph;

‘‘(vii) an option to enter into an agreementor transaction referred to in this subpara-graph;

‘‘(viii) a master netting agreement thatprovides for an agreement or transaction re-ferred to in clause (i), (ii), (iii), (iv), (v), (vi),or (vii), together with all supplements tosuch master netting agreement, without re-gard to whether such master netting agree-ment provides for an agreement or trans-action that is not a securities contract underthis subparagraph, except that such masternetting agreement shall be considered to bea securities contract under this subpara-graph only with respect to each agreementor transaction under such master nettingagreement that is referred to in clause (i),(ii), (iii), (iv), (v), (vi), or (vii); or

‘‘(ix) a security agreement or arrangement,or other credit enhancement, directly per-taining to a contract referred to in this sub-paragraph, but not to exceed the actualvalue of such contract on the date of the fil-ing of the petition; and

‘‘(B) does not include a purchase, sale, orrepurchase obligation under a participationin a commercial mortgage loan;’’; and

(3) in section 761(4)—(A) by striking ‘‘or’’ at the end of subpara-

graph (D);(B) in subparagraph (E), by striking the pe-

riod at the end and inserting ‘‘; and’’; and(C) by adding at the end the following:‘‘(F) any other agreement or transaction

that is similar to an agreement or trans-action referred to in this paragraph;

‘‘(G) a combination of the agreements ortransactions referred to in this paragraph;

‘‘(H) an option to enter into an agreementor transaction referred to in this paragraph;

‘‘(I) a master netting agreement that pro-vides for an agreement or transaction re-ferred to in subparagraph (A), (B), (C), (D),(E), (F), (G), or (H), together with all supple-ments to such master netting agreement,without regard to whether such master net-ting agreement provides for an agreement ortransaction that is not a commodity con-tract under this paragraph, except that suchmaster netting agreement shall be consid-ered to be a commodity contract under thisparagraph only with respect to each agree-ment or transaction under such master net-ting agreement that is referred to in sub-paragraph (A), (B), (C), (D), (E), (F), (G), or(H); or

‘‘(J) a security agreement or arrangement,or other credit enhancement, directly per-taining to a contract referred to in this para-graph, but not to exceed the actual value ofsuch contract on the date of the filing of thepetition.’’.

(b) DEFINITIONS OF FINANCIAL INSTITUTION,FINANCIAL PARTICIPANT, AND FORWARD CON-TRACT MERCHANT.—Section 101 of title 11,United States Code, is amended—

(1) by striking paragraph (22) and insertingthe following:

‘‘(22) ‘financial institution’ means—

‘‘(A)(i) a Federal reserve bank, or an entitythat is a commercial or savings bank, indus-trial savings bank, savings and loan associa-tion, trust company, or receiver or conserva-tor for such entity; and

‘‘(ii) if such Federal reserve bank, receiver,or conservator or entity is acting as agent orcustodian for a customer in connection witha securities contract, as defined in section741, such customer; or

‘‘(B) in connection with a securities con-tract, as defined in section 741 of this title,an investment company registered under theInvestment Company Act of 1940;’’;

(2) by inserting after paragraph (22) the fol-lowing:

‘‘(22A) ‘financial participant’ means an en-tity that is a party to a securities contract,commodity contract or forward contract, oron the date of the filing of the petition, hasa commodity contract (as defined in section761) with the debtor or any other entity(other than an affiliate) of a total gross dol-lar value of not less than $1,000,000,000 in no-tional or actual principal amount outstand-ing on any day during the previous 15-monthperiod, or has gross mark-to-market posi-tions of not less than $100,000,000 (aggregatedacross counterparties) in any such agree-ment or transaction with the debtor or anyother entity (other than an affiliate) on anyday during the previous 15-month period;’’;and

(3) by striking paragraph (26) and insertingthe following:

‘‘(26) ‘forward contract merchant’ means aFederal reserve bank, or an entity, the busi-ness of which consists in whole or in part ofentering into forward contracts as or withmerchants or in a commodity, as defined orin section 761, or any similar good, article,service, right, or interest that is presently orin the future becomes the subject of dealingor in the forward contract trade;’’.

(c) DEFINITION OF MASTER NETTING AGREE-MENT AND MASTER NETTING AGREEMENT PAR-TICIPANT.—Section 101 of title 11, UnitedStates Code, is amended by inserting afterparagraph (38) the following new paragraphs:

‘‘(38A) the term ‘master nettingagreement’—

‘‘(A) means an agreement providing for theexercise of rights, including rights of net-ting, setoff, liquidation, termination, accel-eration, or closeout, under or in connectionwith 1 or more contracts that are describedin any 1 or more of paragraphs (1) through (5)of section 561(a), or any security agreementor arrangement or other credit enhancementrelated to 1 or more of the foregoing; exceptthat

‘‘(B) if a master netting agreement con-tains provisions relating to agreements ortransactions that are not contracts describedin paragraphs (1) through (5) of section561(a), the master netting agreement shall bedeemed to be a master netting agreementonly with respect to those agreements ortransactions that are described in any 1 ormore of the paragraphs (1) through (5) of sec-tion 561(a);

‘‘(38B) the term ‘master netting agreementparticipant’ means an entity that, at anytime before the filing of the petition, is aparty to an outstanding master nettingagreement with the debtor;’’.

(d) SWAP AGREEMENTS, SECURITIES CON-TRACTS, COMMODITY CONTRACTS, FORWARDCONTRACTS, REPURCHASE AGREEMENTS, ANDMASTER NETTING AGREEMENTS UNDER THEAUTOMATIC STAY.—

(1) IN GENERAL.—Section 362(b) of title 11,United States Code, as amended by section718 of this Act, is amended—

(A) in paragraph (6), by inserting ‘‘,pledged to, and under the control of,’’ after‘‘held by’’;

(B) in paragraph (7), by inserting ‘‘, pledgedto, and under the control of,’’ after ‘‘heldby’’;

(C) by striking paragraph (17) and insertingthe following:

‘‘(17) under subsection (a), of the setoff bya swap participant of a mutual debt andclaim under or in connection with a swapagreement that constitutes the setoff of aclaim against the debtor for a payment ortransfer due from the debtor under or in con-nection with a swap agreement against apayment due to the debtor from the swapparticipant under or in connection with aswap agreement or against cash, securities,or other property held by, pledged to, andunder the control of, or due from such swapparticipant to guarantee, secure, or settle aswap agreement;’’;

(D) in paragraph (26), by striking ‘‘or’’ atthe end;

(E) in paragraph (27), by striking the pe-riod at the end and inserting ‘‘; or’’; and

(F) by inserting after paragraph (27) thefollowing:

‘‘(28) under subsection (a), of the setoff bya master netting agreement participant of amutual debt and claim under or in connec-tion with 1 or more master netting agree-ments or any contract or agreement subjectto such agreements that constitutes thesetoff of a claim against the debtor for anypayment or other transfer of property duefrom the debtor under or in connection withsuch agreements or any contract or agree-ment subject to such agreements against anypayment due to the debtor from such masternetting agreement participant under or inconnection with such agreements or any con-tract or agreement subject to such agree-ments or against cash, securities, or otherproperty held by, pledged or and under thecontrol of, or due from such master nettingagreement participant to margin, guarantee,secure, or settle such agreements or any con-tract or agreement subject to such agree-ments, to the extent such participant is eli-gible to exercise such offset rights underparagraph (6), (7), or (17) for each individualcontract covered by the master nettingagreement in issue.’’.

(2) LIMITATION.—Section 362 of title 11,United States Code, as amended by section432(2) of this Act, is amended by adding atthe end the following:

‘‘(l) LIMITATION.—The exercise of rights notsubject to the stay arising under subsection(a) pursuant to paragraph (6), (7), or (17) ofsubsection (b) shall not be stayed by an orderof a court or administrative agency in anyproceeding under this title.’’.

(e) LIMITATION OF AVOIDANCE POWERSUNDER MASTER NETTING AGREEMENT.—Sec-tion 546 of title 11, United States Code, isamended—

(1) in subsection (g) (as added by section103 of Public Law 101–311 (104 Stat. 267 etseq.))—

(A) by striking ‘‘under a swap agreement’’;and

(B) by striking ‘‘in connection with a swapagreement’’ and inserting ‘‘under or in con-nection with any swap agreement’’; and

(2) by inserting before subsection (i) (as re-designated by section 407 of this Act) the fol-lowing new subsection:

‘‘(h) Notwithstanding sections 544, 545, 547,548(a)(2)(B), and 548(b), the trustee may notavoid a transfer made by or to a master net-ting agreement participant under or in con-nection with any master netting agreementor any individual contract covered therebythat is made before the commencement ofthe case, and except to the extent that thetrustee could otherwise avoid such a transfermade under an individual contract coveredby such master netting agreement (exceptunder section 548(a)(1)(A)).’’.

CONGRESSIONAL RECORD — SENATE S2763March 16, 1999(f) FRAUDULENT TRANSFERS OF MASTER

NETTING AGREEMENTS.—Section 548(d)(2) oftitle 11, United States Code, is amended—

(1) in subparagraph (C), by striking ‘‘and’’;(2) in subparagraph (D), by striking the pe-

riod at the end and inserting ‘‘; and’’; and(3) by adding at the end the following new

subparagraph:‘‘(E) a master netting agreement partici-

pant that receives a transfer in connectionwith a master netting agreement or any in-dividual contract covered thereby takes forvalue to the extent of such transfer, except,with respect to a transfer under any individ-ual contract covered thereby, to the extentthat such master netting agreement partici-pant otherwise did not take (or is otherwisenot deemed to have taken) such transfer forvalue.’’.

(g) TERMINATION OR ACCELERATION OF SECU-RITIES CONTRACTS.—Section 555 of title 11,United States Code, is amended—

(1) by striking the section heading and in-serting the following:‘‘§ 555. Contractual right to liquidate, termi-

nate, or accelerate a securities contract’’;and

(2) in the first sentence, by striking ‘‘liq-uidation’’ and inserting ‘‘liquidation, termi-nation, or acceleration’’.

(h) TERMINATION OR ACCELERATION OF COM-MODITIES OR FORWARD CONTRACTS.—Section556 of title 11, United States Code, isamended—

(1) by striking the section heading and in-serting the following:‘‘§ 556. Contractual right to liquidate, termi-

nate, or accelerate a commodities contractor forward contract’’;

and(2) in the first sentence, by striking ‘‘liq-

uidation’’ and inserting ‘‘liquidation, termi-nation, or acceleration’’.

(i) TERMINATION OR ACCELERATION OF RE-PURCHASE AGREEMENTS.—Section 559 of title11, United States Code, is amended—

(1) by striking the section heading and in-serting the following:‘‘§ 559. Contractual right to liquidate, termi-

nate, or accelerate a repurchase agree-ment’’;

and(2) in the first sentence, by striking ‘‘liq-

uidation’’ and inserting ‘‘liquidation, termi-nation, or acceleration’’.

(j) LIQUIDATION, TERMINATION, OR ACCEL-ERATION OF SWAP AGREEMENTS.—Section 560of title 11, United States Code, is amended—

(1) by striking the section heading and in-serting following:‘‘§ 560. Contractual right to liquidate, termi-

nate, or accelerate a swap agreement’’;(2) in the first sentence, by striking ‘‘ter-

mination of a swap agreement’’ and inserting‘‘liquidation, termination, or acceleration ofa swap agreement’’; and

(3) by striking ‘‘in connection with anyswap agreement’’ and inserting ‘‘in connec-tion with the termination, liquidation, or ac-celeration of a swap agreement’’.

(k) LIQUIDATION, TERMINATION, ACCELERA-TION, OR OFFSET UNDER A MASTER NETTINGAGREEMENT AND ACROSS CONTRACTS.—Title11, United States Code, is amended by insert-ing after section 560 the following new sec-tion:‘‘§ 561. Contractual right to terminate, liq-

uidate, accelerate, or offset under a masternetting agreement and across contracts‘‘(a) Subject to subsection (b), the exercise

of any contractual right, because of a condi-tion of the kind specified in section 365(e)(1),to cause the termination, liquidation, or ac-celeration of or to offset or net terminationvalues, payment amounts or other transfer

obligations arising under or in connectionwith 1 or more (or the termination, liquida-tion, or acceleration of 1 or more)—

‘‘(1) securities contracts, as defined in sec-tion 741(7);

‘‘(2) commodity contracts, as defined insection 761(4);

‘‘(3) forward contracts;‘‘(4) repurchase agreements;‘‘(5) swap agreements; or‘‘(6) master netting agreements,

shall not be stayed, avoided, or otherwiselimited by operation of any provision of thistitle or by any order of a court or adminis-trative agency in any proceeding under thistitle.

‘‘(b)(1) A party may exercise a contractualright described in subsection (a) to termi-nate, liquidate, or accelerate only to the ex-tent that such party could exercise such aright under section 555, 556, 559, or 560 foreach individual contract covered by the mas-ter netting agreement in issue.

‘‘(2) If a debtor is a commodity broker sub-ject to subchapter IV of chapter 7 of thistitle—

‘‘(A) a party may not net or offset an obli-gation to the debtor arising under, or in con-nection with, a commodity contract againstany claim arising under, or in connectionwith, other instruments, contracts, or agree-ments listed in subsection (a), except to theextent that the party has no positive net eq-uity in the commodity accounts at the debt-or, as calculated under subchapter IV; and

‘‘(B) another commodity broker may notnet or offset an obligation to the debtor aris-ing under, or in connection with, a commod-ity contract entered into or held on behalf ofa customer of the debtor against any claimarising under, or in connection with, otherinstruments, contracts, or agreements re-ferred to in subsection (a).

‘‘(c) As used in this section, the term ‘con-tractual right’ includes a right set forth in arule or bylaw of a national securities ex-change, a national securities association, ora securities clearing agency, a right set forthin a bylaw of a clearing organization or con-tract market or in a resolution of the gov-erning board thereof, and a right, whether ornot evidenced in writing, arising under com-mon law, under law merchant, or by reasonof normal business practice.’’.

(l) ANCILLARY PROCEEDINGS.—Section 304 oftitle 11, United States Code, is amended byadding at the end the following:

‘‘(d) Any provisions of this title relating tosecurities contracts, commodity contracts,forward contracts, repurchase agreements,swap agreements, or master netting agree-ments shall apply in a case ancillary to aforeign proceeding under this section or anyother section of this title, so that enforce-ment of contractual provisions of such con-tracts and agreements in accordance withtheir terms—

‘‘(1) shall not be stayed or otherwise lim-ited by—

‘‘(A) operation of any provision of thistitle; or

‘‘(B) order of a court in any case under thistitle;

‘‘(2) shall limit avoidance powers to thesame extent as in a proceeding under chapter7 or 11; and

‘‘(3) shall not be limited based on the pres-ence or absence of assets of the debtor in theUnited States.’’.

(m) COMMODITY BROKER LIQUIDATIONS.—Title 11, United States Code, is amended byinserting after section 766 the following:

‘‘§ 767. Commodity broker liquidation and for-ward contract merchants, commodity bro-kers, stockbrokers, financial institutions,securities clearing agencies, swap partici-pants, repo participants, and master net-ting agreement participants‘‘Notwithstanding any other provision of

this title, the exercise of rights by a forwardcontract merchant, commodity broker,stockbroker, financial institution, securitiesclearing agency, swap participant, repo par-ticipant, or master netting agreement par-ticipant under this title shall not affect thepriority of any unsecured claim it may haveafter the exercise of such rights.’’.

(n) STOCKBROKER LIQUIDATIONS.—Title 11,United States Code, is amended by insertingafter section 752 the following:‘‘§ 753. Stockbroker liquidation and forward

contract merchants, commodity brokers,stockbrokers, financial institutions, securi-ties clearing agencies, swap participants,repo participants, and master nettingagreement participants‘‘Notwithstanding any other provision of

this title, the exercise of rights by a forwardcontract merchant, commodity broker,stockbroker, financial institution, securitiesclearing agency, swap participant, repo par-ticipant, financial participant, or masternetting agreement participant under thistitle shall not affect the priority of any un-secured claim it may have after the exerciseof such rights.’’.

(o) SETOFF.—Section 553 of title 11, UnitedStates Code, is amended—

(1) in subsection (a)(3)(C), by inserting‘‘(except for a setoff of a kind described insection 362(b)(6), 362(b)(7), 362(b)(17),362(b)(19), 555, 556, 559, or 560)’’ before the pe-riod; and

(2) in subsection (b)(1), by striking‘‘362(b)(14),’’ and inserting ‘‘362(b)(17),362(b)(19), 555, 556, 559, 560,’’.

(p) SECURITIES CONTRACTS, COMMODITY CON-TRACTS, AND FORWARD CONTRACTS.—Title 11,United States Code, is amended—

(1) in section 362(b)(6), by striking ‘‘finan-cial institutions,’’ each place such term ap-pears and inserting ‘‘financial institution, fi-nancial participant’’;

(2) in section 546(e), by inserting ‘‘financialparticipant’’ after ‘‘financial institution,’’;

(3) in section 548(d)(2)(B), by inserting ‘‘fi-nancial participant’’ after ‘‘financial institu-tion,’’;

(4) in section 555—(A) by inserting ‘‘financial participant’’

after ‘‘financial institution,’’; and(B) by inserting before the period ‘‘, a right

set forth in a bylaw of a clearing organiza-tion or contract market or in a resolution ofthe governing board thereof, and a right,whether or not in writing, arising undercommon law, under law merchant, or by rea-son of normal business practice’’; and

(5) in section 556, by inserting ‘‘, financialparticipant’’ after ‘‘commodity broker’’.

(q) CONFORMING AMENDMENTS.—Title 11 ofthe United States Code is amended—

(1) in the table of sections for chapter 5—(A) by striking the items relating to sec-

tions 555 and 556 and inserting the following:‘‘555. Contractual right to liquidate, termi-

nate, or accelerate a securitiescontract.

‘‘556. Contractual right to liquidate, termi-nate, or accelerate a commod-ities contract or forward con-tract.’’;

(B) by striking the items relating to sec-tions 559 and 560 and inserting the following:‘‘559. Contractual right to liquidate, termi-

nate, or accelerate a repurchaseagreement.

‘‘560. Contractual right to liquidate, termi-nate, or accelerate a swapagreement.’’;

CONGRESSIONAL RECORD — SENATES2764 March 16, 1999and

(C) by adding after the item relating tosection 560 the following:‘‘561. Contractual right to terminate, liq-

uidate, accelerate, or offsetunder a master netting agree-ment and across contracts.’’;

and(2) in the table of sections for chapter 7—(A) by inserting after the item relating to

section 766 the following:‘‘767. Commodity broker liquidation and for-

ward contract merchants, com-modity brokers, stockbrokers,financial institutions, securi-ties clearing agencies, swapparticipants, repo participants,and master netting agreementparticipants.’’;

and(B) by inserting after the item relating to

section 752 the following:‘‘753. Stockbroker liquidation and forward

contract merchants, commod-ity brokers, stockbrokers, fi-nancial institutions, securitiesclearing agencies, swap partici-pants, repo participants, andmaster netting agreement par-ticipants.’’.

SEC. 902. DAMAGE MEASURE.(a) IN GENERAL.—Title 11, United States

Code, is amended—(1) by inserting after section 561 the follow-

ing:‘‘§ 562. Damage measure in connection with

swap agreements, securities contracts, for-ward contracts, commodity contracts, re-purchase agreements, or master nettingagreements‘‘If the trustee rejects a swap agreement,

securities contract (as defined in section741), forward contract, commodity contract(as defined in section 761) repurchase agree-ment, or master netting agreement undersection 365(a), or if a forward contract mer-chant, stockbroker, financial institution, se-curities clearing agency, repo participant, fi-nancial participant, master netting agree-ment participant, or swap participantliquidates, terminates, or accelerates suchcontract or agreement, damages shall bemeasured as of the earlier of—

‘‘(1) the date of such rejection; or‘‘(2) the date of such liquidation, termi-

nation, or acceleration.’’; and(2) in the table of sections for chapter 5 by

inserting after the item relating to section561 the following:‘‘562. Damage measure in connection with

swap agreements, securitiescontracts, forward contracts,commodity contracts, repur-chase agreements, or masternetting agreements.’’.

(b) CLAIMS ARISING FROM REJECTION.—Sec-tion 502(g) of title 11, United States Code, isamended—

(1) by inserting ‘‘(1)’’ after ‘‘(g)’’; and(2) by adding at the end the following:‘‘(2) A claim for damages calculated in ac-

cordance with section 561 shall be allowedunder subsection (a), (b), or (c) of this sec-tion, or disallowed under subsection (d) or (e)of this section, as if such claim had arisenbefore the date of the filing of the petition.’’.SEC. 903. ASSET-BACKED SECURITIZATIONS.

Section 541 of title 11, United States Code,is amended—

(1) in subsection (b), by striking ‘‘or’’ atthe end of paragraph (4);

(2) by redesignating paragraph (5) of sub-section (b) as paragraph (6);

(3) by inserting after paragraph (4) of sub-section (b) the following new paragraph:

‘‘(5) any eligible asset (or proceeds there-of), to the extent that such eligible asset was

transferred by the debtor, before the date ofcommencement of the case, to an eligible en-tity in connection with an asset-backedsecuritization, except to the extent thatsuch asset (or proceeds or value thereof) maybe recovered by the trustee under section 550by virtue of avoidance under section 548(a);or’’; and

(4) by adding at the end the following newsubsection:

‘‘(e) For purposes of this section, the fol-lowing definitions shall apply:

‘‘(1) The term ‘asset-backed securitization’means a transaction in which eligible assetstransferred to an eligible entity are used asthe source of payment on securities, themost senior of which are rated investmentgrade by 1 or more nationally recognized se-curities rating organizations, issued by anissuer.

‘‘(2) The term ‘eligible asset’ means—‘‘(A) financial assets (including interests

therein and proceeds thereof), either fixed orrevolving, including residential and commer-cial mortgage loans, consumer receivables,trade receivables, and lease receivables,that, by their terms, convert into cash with-in a finite time period, plus any rights orother assets designed to assure the servicingor timely distribution of proceeds to securityholders;

‘‘(B) cash; and‘‘(C) securities.‘‘(3) The term ‘eligible entity’ means—‘‘(A) an issuer; or‘‘(B) a trust, corporation, partnership, or

other entity engaged exclusively in the busi-ness of acquiring and transferring eligible as-sets directly or indirectly to an issuer andtaking actions ancillary thereto.

‘‘(4) The term ‘issuer’ means a trust, cor-poration, partnership, or other entity en-gaged exclusively in the business of acquir-ing and holding eligible assets, issuing secu-rities backed by eligible assets, and takingactions ancillary thereto.

‘‘(5) The term ‘transferred’ means the debt-or, under a written agreement, representedand warranted that eligible assets were sold,contributed, or otherwise conveyed with theintention of removing them from the estateof the debtor pursuant to subsection (b)(5),irrespective, without limitation of—

‘‘(A) whether the debtor directly or indi-rectly obtained or held an interest in theissuer or in any securities issued by theissuer;

‘‘(B) whether the debtor had an obligationto repurchase or to service or supervise theservicing of all or any portion of such eligi-ble assets; or

‘‘(C) the characterization of such sale, con-tribution, or other conveyance for tax, ac-counting, regulatory reporting, or other pur-poses.’’.SEC. 904. EFFECTIVE DATE; APPLICATION OF

AMENDMENTS.(a) EFFECTIVE DATE.—This title shall take

effect on the date of enactment of this Act.(b) APPLICATION OF AMENDMENTS.—The

amendments made by this title shall applywith respect to cases commenced or appoint-ments made under any Federal or State lawafter the date of enactment of this Act, butshall not apply with respect to cases com-menced or appointments made under anyFederal or State law before the date of en-actment of this Act.

TITLE X—PROTECTION OF FAMILYFARMERS

SEC. 1001. REENACTMENT OF CHAPTER 12.(a) REENACTMENT.—(1) IN GENERAL.—Chapter 12 of title 11,

United States Code, as reenacted by section149 of division C of the Omnibus Consolidatedand Emergency Supplemental Appropria-tions Act, 1999 (Public Law 105–277), andamended by this Act, is reenacted.

(2) EFFECTIVE DATE.—Subsection (a) shalltake effect on April 1, 1999.

(b) CONFORMING AMENDMENT.—Section 302of the Bankruptcy, Judges, United StatesTrustees, and Family Farmer BankruptcyAct of 1986 (28 U.S.C. 581 note) is amended bystriking subsection (f).SEC. 1002. DEBT LIMIT INCREASE.

Section 104(b) of title 11, United StatesCode, is amended by adding at the end thefollowing:

‘‘(4) The dollar amount in section 101(18)shall be adjusted at the same times and inthe same manner as the dollar amounts inparagraph (1) of this subsection, beginningwith the adjustment to be made on April 1,2001.’’.SEC. 1003. ELIMINATION OF REQUIREMENT THAT

FAMILY FARMER AND SPOUSE RE-CEIVE OVER 50 PERCENT OF IN-COME FROM FARMING OPERATIONIN YEAR PRIOR TO BANKRUPTCY.

Section 101(18)(A) of title 11, United StatesCode, is amended by striking ‘‘the taxableyear preceding the taxable year’’ and insert-ing ‘‘at least 1 of the 3 calendar years preced-ing the year’’.

SEC. 1004. CERTAIN CLAIMS OWED TO GOVERN-MENTAL UNITS.

(a) CONTENTS OF PLAN.—Section 1222(a)(2)of title 11, United States Code, is amended toread as follows:

‘‘(2) provide for the full payment, in de-ferred cash payments, of all claims entitledto priority under section 507, unless—

‘‘(A) the claim is a claim owed to a govern-mental unit that arises as a result of thesale, transfer, exchange, or other dispositionof any farm asset used in the debtor’s farm-ing operation, in which case the claim shallbe treated as an unsecured claim that is notentitled to priority under section 507, but thedebt shall be treated in such manner only ifthe debtor receives a discharge; or

‘‘(B) the holder of a particular claim agreesto a different treatment of that claim; and’’.

(b) SPECIAL NOTICE PROVISIONS.—Section1231(d) of title 11, United States Code, isamended by striking ‘‘a State or local gov-ernmental unit’’ and inserting ‘‘any govern-mental unit’’.TITLE XI—HEALTH CARE AND EMPLOYEE

BENEFITSSEC. 1101. DEFINITIONS.

(a) HEALTH CARE BUSINESS DEFINED.—Sec-tion 101 of title 11, United States Code, asamended by section 1004(a) of this Act, isamended—

(1) by redesignating paragraph (27A) asparagraph (27C); and

(2) inserting after paragraph (27) the fol-lowing:

‘‘(27A) ‘health care business’—‘‘(A) means any public or private entity

(without regard to whether that entity is or-ganized for profit or not for profit) that isprimarily engaged in offering to the generalpublic facilities and services for—

‘‘(i) the diagnosis or treatment of injury,deformity, or disease; and

‘‘(ii) surgical, drug treatment, psychiatricor obstetric care; and

‘‘(B) includes—‘‘(i) any—‘‘(I) general or specialized hospital;‘‘(II) ancillary ambulatory, emergency, or

surgical treatment facility;‘‘(III) hospice;‘‘(IV) health maintenance organization;‘‘(V) home health agency; and‘‘(VI) other health care institution that is

similar to an entity referred to in subclause(I), (II), (III), (IV), or (V); and

‘‘(ii) any long-term care facility, includingany—

‘‘(I) skilled nursing facility;‘‘(II) intermediate care facility;

CONGRESSIONAL RECORD — SENATE S2765March 16, 1999‘‘(III) assisted living facility;‘‘(IV) home for the aged;‘‘(V) domicilary care facility; and‘‘(VI) health care institution that is relat-

ed to a facility referred to in subclause (I),(II), (III), (IV), or (V), if that institution isprimarily engaged in offering room, board,laundry, or personal assistance with activi-ties of daily living and incidentals to activi-ties of daily living;’’.

(b) HEALTH MAINTENANCE ORGANIZATIONDEFINED.—Section 101 of title 11, UnitedStates Code, as amended by subsection (a), isamended by inserting after paragraph (27A)the following:

‘‘(27B) ‘health maintenance organization’means any person that undertakes to provideor arrange for basic health care servicesthrough an organized system that—

‘‘(A)(i) combines the delivery and financingof health care to enrollees; and

‘‘(ii)(I) provides—‘‘(aa) physician services directly through

physicians or 1 or more groups of physicians;and

‘‘(bb) basic health care services directly orunder a contractual arrangement; and

‘‘(II) if reasonable and appropriate, pro-vides physician services and basic healthcare services through arrangements otherthan the arrangements referred to in clause(i); and

‘‘(B) includes any organization described insubparagraph (A) that provides, or arrangesfor, health care services on a prepayment orother financial basis;’’.

(c) PATIENT.—Section 101 of title 11, UnitedStates Code, as amended by subsection (b), isamended by inserting after paragraph (40)the following:

‘‘(40A) ‘patient’ means any person who ob-tains or receives services from a health carebusiness;’’.

(d) PATIENT RECORDS.—Section 101 of title11, United States Code, as amended by sub-section (c), is amended by inserting afterparagraph (40A) the following:

‘‘(40B) ‘patient records’ means any writtendocument relating to a patient or record re-corded in a magnetic, optical, or other formof electronic medium;’’.SEC. 1102. DISPOSAL OF PATIENT RECORDS.

(a) IN GENERAL.—Subchapter III of chapter3 of title 11, United States Code, is amendedby adding at the end the following:‘‘§ 351. Disposal of patient records

‘‘If a health care business commences acase under chapter 7, 9, or 11, and the trusteedoes not have a sufficient amount of funds topay for the storage of patient records in themanner required under applicable Federal orState law, the following requirements shallapply:

‘‘(1) The trustee shall mail, by certifiedmail, a written request to each appropriateFederal or State agency to request permis-sion from that agency to deposit the patientrecords with that agency.

‘‘(2) If no appropriate Federal or Stateagency agrees to permit the deposit of pa-tient records referred to in paragraph (1) bythe date that is 60 days after the trusteemails a written request under that para-graph, the trustee shall—

‘‘(A) publish notice, in 1 or more appro-priate newspapers, that if those patientrecords are not claimed by the patient or aninsurance provider (if applicable law permitsthe insurance provider to make that claim)by the date that is 60 days after the date ofthat notification, the trustee will destroythe patient records; and

‘‘(B) during the 60-day period described insubparagraph (A), the trustee shall attemptto notify directly each patient that is thesubject of the patient records concerning thepatient records by mailing to the last known

address of that patient an appropriate noticeregarding the claiming or disposing of pa-tient records.

‘‘(3) If, after providing the notificationunder paragraph (2), patient records are notclaimed during the 60-day period described inparagraph (2)(A) or in any case in which anotice is mailed under paragraph (2)(B), dur-ing the 90-day period beginning on the dateon which the notice is mailed, by a patientor insurance provider in accordance withthat paragraph, the trustee shall destroythose records by—

‘‘(A) if the records are written, shreddingor burning the records; or

‘‘(B) if the records are magnetic, optical, orother electronic records, by otherwise de-stroying those records so that those recordscannot be retrieved.’’.

(b) CLERICAL AMENDMENT.—The chapteranalysis for chapter 3 of title 11, UnitedStates Code, is amended by inserting afterthe item relating to section 350 the follow-ing:‘‘351. Disposal of patient records.’’.SEC. 1103. ADMINISTRATIVE EXPENSE CLAIM FOR

COSTS OF CLOSING A HEALTH CAREBUSINESS.

Section 503(b) of title 11, United StatesCode, is amended—

(1) in paragraph (5), by striking ‘‘and’’ atthe end;

(2) in paragraph (6), by striking the periodat the end and inserting ‘‘; and’’; and

(3) by adding at the end the following:‘‘(7) the actual, necessary costs and ex-

penses of closing a health care business in-curred by a trustee, including any cost or ex-pense incurred—

‘‘(A) in disposing of patient records in ac-cordance with section 351; or

‘‘(B) in connection with transferring pa-tients from the health care business that isin the process of being closed to anotherhealth care business.’’.SEC. 1104. APPOINTMENT OF OMBUDSMAN TO

ACT AS PATIENT ADVOCATE.(a) IN GENERAL.—(1) APPOINTMENT OF OMBUDSMAN.—Sub-

chapter II of chapter 3 of title 11, UnitedStates Code, is amended by inserting aftersection 331 the following:‘‘§ 332. Appointment of ombudsman

‘‘(a) Not later than 30 days after a case iscommenced by a health care business underchapter 7, 9, or 11, the court shall appoint anombudsman to represent the interests of thepatients of the health care business.

‘‘(b) An ombudsman appointed under sub-section (a) shall—

‘‘(1) monitor the quality of patient care, tothe extent necessary under the cir-cumstances, including reviewing records andinterviewing patients and physicians;

‘‘(2) not later than 60 days after the date ofappointment, and not less frequently thanevery 60 days thereafter, report to the court,at a hearing or in writing, regarding thequality of patient care at the health carebusiness involved; and

‘‘(3) if the ombudsman determines that thequality of patient care is declining signifi-cantly or is otherwise being materially com-promised, notify the court by motion orwritten report, with notice to appropriateparties in interest, immediately upon mak-ing that determination.

‘‘(c) An ombudsman shall maintain any in-formation obtained by the ombudsman underthis section that relates to patients (includ-ing information relating to patient records)as confidential information.’’.

(2) CLERICAL AMENDMENT.—The chapteranalysis for chapter 3 of title 11, UnitedStates Code, is amended by inserting afterthe item relating to section 331 the follow-ing:‘‘332. Appointment of ombudsman.’’.

(b) COMPENSATION OF OMBUDSMAN.—Section330(a)(1) of title 11, United States Code, isamended—

(1) in the matter proceeding subparagraph(A), by inserting ‘‘an ombudsman appointedunder section 331, or’’ before ‘‘a professionalperson’’; and

(2) in subparagraph (A), by inserting ‘‘om-budsman,’’ before ‘‘professional person’’.SEC. 1105. DEBTOR IN POSSESSION; DUTY OF

TRUSTEE TO TRANSFER PATIENTS.(a) IN GENERAL.—Section 704(a) of title 11,

United States Code, as amended by section219 of this Act, is amended—

(1) in paragraph (9), by striking ‘‘and’’ atthe end;

(2) in paragraph (10), by striking the periodand inserting ‘‘; and’’; and

(3) by adding at the end the following:‘‘(11) use all reasonable and best efforts to

transfer patients from a health care businessthat is in the process of being closed to anappropriate health care business that—

‘‘(A) is in the vicinity of the health carebusiness that is closing;

‘‘(B) provides the patient with servicesthat are substantially similar to those pro-vided by the health care business that is inthe process of being closed; and

‘‘(C) maintains a reasonable quality ofcare.’’.

(b) CONFORMING AMENDMENT.—Section1106(a)(1) of title 11, United States Code, isamended by striking ‘‘and 704(9)’’ and insert-ing ‘‘704(9), and 704(10)’’.

TITLE XII—TECHNICAL AMENDMENTSSEC. 1201. DEFINITIONS.

Section 101 of title 11, United States Code,as amended by section 1101 of this Act, isamended—

(1) by striking ‘‘In this title—’’ and insert-ing ‘‘In this title:’’;

(2) in each paragraph, by inserting ‘‘Theterm’’ after the paragraph designation;

(3) in paragraph (35)(B), by striking ‘‘para-graphs (21B) and (33)(A)’’ and inserting‘‘paragraphs (23) and (35)’’;

(4) in each of paragraphs (35A) and (38), bystriking ‘‘; and’’ at the end and inserting aperiod;

(5) in paragraph (51B)—(A) by inserting ‘‘who is not a family farm-

er’’ after ‘‘debtor’’ the first place it appears;and

(B) by striking ‘‘thereto having aggregate’’and all that follows through the end of theparagraph;

(6) by striking paragraph (54) and insertingthe following:

‘‘(54) The term ‘transfer’ means—‘‘(A) the creation of a lien;‘‘(B) the retention of title as a security in-

terest;‘‘(C) the foreclosure of a debtor’s equity of

redemption; or‘‘(D) each mode, direct or indirect, abso-

lute or conditional, voluntary or involun-tary, of disposing of or parting with—

‘‘(i) property; or‘‘(ii) an interest in property;’’;(7) in each of paragraphs (1) through (35), in

each of paragraphs (36) and (37), and in eachof paragraphs (40) through (55) (includingparagraph (54), as amended by paragraph (6)of this section), by striking the semicolon atthe end and inserting a period; and

(8) by redesignating paragraphs (4) through(55), including paragraph (54), as amended byparagraph (6) of this section, in entirely nu-merical sequence.SEC. 1202. ADJUSTMENT OF DOLLAR AMOUNTS.

Section 104 of title 11, United States Code,is amended by inserting ‘‘522(f)(3), 707(b)(5),’’after ‘‘522(d),’’ each place it appears.SEC. 1203. EXTENSION OF TIME.

Section 108(c)(2) of title 11, United StatesCode, is amended by striking ‘‘922’’ and all

CONGRESSIONAL RECORD — SENATES2766 March 16, 1999that follows through ‘‘or’’, and inserting‘‘922, 1201, or’’.SEC. 1204. TECHNICAL AMENDMENTS.

Title 11 of the United States Code isamended—

(1) in section 109(b)(2), by striking ‘‘sub-section (c) or (d) of’’;

(2) in section 541(b)(4), by adding ‘‘or’’ atthe end; and

(3) in section 552(b)(1), by striking ‘‘prod-uct’’ each place it appears and inserting‘‘products’’.SEC. 1205. PENALTY FOR PERSONS WHO NEG-

LIGENTLY OR FRAUDULENTLY PRE-PARE BANKRUPTCY PETITIONS.

Section 110(j)(3) of title 11, United StatesCode, is amended by striking ‘‘attorney’s’’and inserting ‘‘attorneys’ ’’.SEC. 1206. LIMITATION ON COMPENSATION OF

PROFESSIONAL PERSONS.Section 328(a) of title 11, United States

Code, is amended by inserting ‘‘on a fixed orpercentage fee basis,’’ after ‘‘hourly basis,’’.SEC. 1207. SPECIAL TAX PROVISIONS.

Section 346(g)(1)(C) of title 11, UnitedStates Code, is amended by striking ‘‘, ex-cept’’ and all that follows through ‘‘1986’’.SEC. 1208. EFFECT OF CONVERSION.

Section 348(f)(2) of title 11, United StatesCode, is amended by inserting ‘‘of the es-tate’’ after ‘‘property’’ the first place it ap-pears.SEC. 1209. ALLOWANCE OF ADMINISTRATIVE EX-

PENSES.Section 503(b)(4) of title 11, United States

Code, is amended by inserting ‘‘subparagraph(A), (B), (C), (D), or (E) of’’ before ‘‘paragraph(3)’’.SEC. 1210. PRIORITIES.

Section 507(a) of title 11, United StatesCode, as amended by sections 211 and 229 ofthis Act, is amended—

(1) in paragraph (4)(B), by striking thesemicolon at the end and inserting a period;and

(2) in paragraph (8), by inserting ‘‘unse-cured’’ after ‘‘allowed’’.SEC. 1211. EXEMPTIONS.

Section 522(g)(2) of title 11, United StatesCode, as amended by section 311 of this Act,is amended by striking ‘‘subsection (f)(2)’’and inserting ‘‘subsection (f)(1)(B)’’.SEC. 1212. EXCEPTIONS TO DISCHARGE.

Section 523 of title 11, United States Code,as amended by section 229 of this Act, isamended—

(1) as amended by section 304(e) of PublicLaw 103–394 (108 Stat. 4133), in paragraph (15),by transferring such paragraph so as to in-sert it after paragraph (14) of subsection (a);

(2) in subsection (a)—(A) in paragraph (3), by striking ‘‘or (6)’’

each place it appears and inserting ‘‘(6), or(15)’’;

(B) in paragraph (9), by striking ‘‘motor ve-hicle or vessel’’ and inserting ‘‘motor vehi-cle, vessel, or aircraft’’; and

(C) in paragraph (15), as so redesignated byparagraph (1) of this subsection, by inserting‘‘to a spouse, former spouse, or child of thedebtor and’’ after ‘‘(15)’’; and

(3) in subsection (e), by striking ‘‘a in-sured’’ and inserting ‘‘an insured’’.SEC. 1213. EFFECT OF DISCHARGE.

Section 524(a)(3) of title 11, United StatesCode, is amended by striking ‘‘section 523’’and all that follows through ‘‘or that’’ andinserting ‘‘section 523, 1228(a)(1), or 1328(a)(1),or that’’.SEC. 1214. PROTECTION AGAINST DISCRIMINA-

TORY TREATMENT.Section 525(c) of title 11, United States

Code, is amended—(1) in paragraph (1), by inserting ‘‘student’’

before ‘‘grant’’ the second place it appears;and

(2) in paragraph (2), by striking ‘‘the pro-gram operated under part B, D, or E of’’ andinserting ‘‘any program operated under’’.SEC. 1215. PROPERTY OF THE ESTATE.

Section 541(b)(4)(B)(ii) of title 11, UnitedStates Code, is amended by inserting ‘‘365or’’ before ‘‘542’’.SEC. 1216. PREFERENCES.

(a) IN GENERAL.—Section 547 of title 11,United States Code, is amended—

(1) in subsection (b), by striking ‘‘sub-section (c)’’ and inserting ‘‘subsections (c)and (i)’’; and

(2) by adding at the end the following:‘‘(i) If the trustee avoids under subsection

(b) a security interest given between 90 daysand 1 year before the date of the filing of thepetition, by the debtor to an entity that isnot an insider for the benefit of a creditorthat is an insider, such security interestshall be considered to be avoided under thissection only with respect to the creditorthat is an insider.’’.

(b) APPLICABILITY.—The amendments madeby this section shall apply to any case thatpending or commenced on or after the dateof enactment of this Act.SEC. 1217. POSTPETITION TRANSACTIONS.

Section 549(c) of title 11, United StatesCode, is amended—

(1) by inserting ‘‘an interest in’’ after‘‘transfer of’’;

(2) by striking ‘‘such property’’ and insert-ing ‘‘such real property’’; and

(3) by striking ‘‘the interest’’ and inserting‘‘such interest’’.SEC. 1218. DISPOSITION OF PROPERTY OF THE

ESTATE.Section 726(b) of title 11, United States

Code, is amended by striking ‘‘1009,’’.SEC. 1219. GENERAL PROVISIONS.

Section 901(a) of title 11, United StatesCode, as amended by section 901(k) of thisAct, is amended by inserting ‘‘1123(d),’’ after‘‘1123(b),’’.SEC. 1220. ABANDONMENT OF RAILROAD LINE.

Section 1170(e)(1) of title 11, United StatesCode, is amended by striking ‘‘section 11347’’and inserting ‘‘section 11326(a)’’.SEC. 1221. CONTENTS OF PLAN.

Section 1172(c)(1) of title 11, United StatesCode, is amended by striking ‘‘section 11347’’and inserting ‘‘section 11326(a)’’.SEC. 1222. DISCHARGE UNDER CHAPTER 12.

Subsections (a) and (c) of section 1228 oftitle 11, United States Code, are amended bystriking ‘‘1222(b)(10)’’ each place it appearsand inserting ‘‘1222(b)(9)’’.SEC. 1223. BANKRUPTCY CASES AND PROCEED-

INGS.Section 1334(d) of title 28, United States

Code, is amended—(1) by striking ‘‘made under this sub-

section’’ and inserting ‘‘made under sub-section (c)’’; and

(2) by striking ‘‘This subsection’’ and in-serting ‘‘Subsection (c) and this subsection’’.SEC. 1224. KNOWING DISREGARD OF BANK-

RUPTCY LAW OR RULE.Section 156(a) of title 18, United States

Code, is amended—(1) in the first undesignated paragraph—(A) by inserting ‘‘(1) the term’’ before

‘‘ ‘bankruptcy’’; and(B) by striking the period at the end and

inserting ‘‘; and’’; and(2) in the second undesignated paragraph—(A) by inserting ‘‘(2) the term’’ before

‘‘ ‘document’’; and(B) by striking ‘‘this title’’ and inserting

‘‘title 11’’.SEC. 1225. TRANSFERS MADE BY NONPROFIT

CHARITABLE CORPORATIONS.(a) SALE OF PROPERTY OF ESTATE.—Section

363(d) of title 11, United States Code, is

amended by striking ‘‘only’’ and all that fol-lows through the end of the subsection andinserting ‘‘only—

‘‘(1) in accordance with applicable non-bankruptcy law that governs the transfer ofproperty by a corporation or trust that isnot a moneyed, business, or commercial cor-poration or trust; and

‘‘(2) to the extent not inconsistent withany relief granted under subsection (c), (d),(e), or (f) of section 362.’’.

(b) CONFIRMATION OF PLAN FOR REORGA-NIZATION.—Section 1129(a) of title 11, UnitedStates Code, as amended by section 212 ofthis Act, is amended by adding at the endthe following:

‘‘(15) All transfers of property of the planshall be made in accordance with any appli-cable provisions of nonbankruptcy law thatgovern the transfer of property by a corpora-tion or trust that is not a moneyed, business,or commercial corporation or trust.’’.

(c) TRANSFER OF PROPERTY.—Section 541 oftitle 11, United States Code, is amended byadding at the end the following:

‘‘(f) Notwithstanding any other provisionof this title, property that is held by a debt-or that is a corporation described in section501(c)(3) of the Internal Revenue Code of 1986and exempt from tax under section 501(a) ofsuch Code may be transferred to an entitythat is not such a corporation, but onlyunder the same conditions as would apply ifthe debtor had not filed a case under thistitle.’’.

(d) APPLICABILITY.—The amendments madeby this section shall apply to a case pendingunder title 11, United States Code, on thedate of enactment of this Act, except thatthe court shall not confirm a plan underchapter 11 of this title without consideringwhether this section would substantially af-fect the rights of a party in interest whofirst acquired rights with respect to thedebtor after the date of the petition. Theparties who may appear and be heard in aproceeding under this section include the at-torney general of the State in which thedebtor is incorporated, was formed, or doesbusiness.

(e) RULE OF CONSTRUCTION.—Nothing inthis section shall be construed to require thecourt in which a case under chapter 11 ispending to remand or refer any proceeding,issue, or controversy to any other court or torequire the approval of any other court forthe transfer of property.SEC. 1226. PROTECTION OF VALID PURCHASE

MONEY SECURITY INTERESTS.Section 547(c)(3)(B) of title 11, United

States Code, is amended by striking ‘‘20’’ andinserting ‘‘30’’.SEC. 1227. EXTENSIONS.

Section 302(d)(3) of the Bankruptcy,Judges, United States Trustees, and FamilyFarmer Bankruptcy Act of 1986 (28 U.S.C. 581note) is amended—

(1) in subparagraph (A), in the matter fol-lowing clause (ii), by striking ‘‘or October 1,2002, whichever occurs first’’; and

(2) in subparagraph (F)—(A) in clause (i)—(i) in subclause (II), by striking ‘‘or Octo-

ber 1, 2002, whichever occurs first’’; and(ii) in the matter following subclause (II),

by striking ‘‘October 1, 2003, or’’; and(B) in clause (ii), in the matter following

subclause (II)—(i) by striking ‘‘before October 1, 2003, or’’;

and(ii) by striking ‘‘, whichever occurs first’’.

SEC. 1228. BANKRUPTCY JUDGESHIPS.(a) SHORT TITLE.—This section may be

cited as the ‘‘Bankruptcy Judgeship Act of1999’’.

(b) TEMPORARY JUDGESHIPS.—(1) APPOINTMENTS.—The following judge-

ship positions shall be filled in the manner

CONGRESSIONAL RECORD — SENATE S2767March 16, 1999prescribed in section 152(a)(1) of title 28,United States Code, for the appointment ofbankruptcy judges provided for in section152(a)(2) of such title:

(A) One additional bankruptcy judgeshipfor the eastern district of California.

(B) Four additional bankruptcy judgeshipsfor the central district of California.

(C) One additional bankruptcy judgeshipfor the southern district of Florida.

(D) Two additional bankruptcy judgeshipsfor the district of Maryland.

(E) One additional bankruptcy judgeshipfor the eastern district of Michigan.

(F) One additional bankruptcy judgeshipfor the southern district of Mississippi.

(G) One additional bankruptcy judgeshipfor the district of New Jersey.

(H) One additional bankruptcy judgeshipfor the eastern district of New York.

(I) One additional bankruptcy judgeship forthe northern district of New York.

(J) One additional bankruptcy judgeshipfor the southern district of New York.

(K) One additional bankruptcy judgeshipfor the eastern district of Pennsylvania.

(L) One additional bankruptcy judgeshipfor the middle district of Pennsylvania.

(M) One additional bankruptcy judgeshipfor the western district of Tennessee.

(N) One additional bankruptcy judgeshipfor the eastern district of Virginia.

(2) VACANCIES.—The first vacancy occur-ring in the office of a bankruptcy judge ineach of the judicial districts set forth inparagraph (1) that—

(A) results from the death, retirement, res-ignation, or removal of a bankruptcy judge;and

(B) occurs 5 years or more after the ap-pointment date of a bankruptcy judge ap-pointed under paragraph (1);

shall not be filled.(c) EXTENSIONS.—(1) IN GENERAL.—The temporary bank-

ruptcy judgeship positions authorized for thenorthern district of Alabama, the district ofDelaware, the district of Puerto Rico, thedistrict of South Carolina, and the easterndistrict of Tennessee under section 3(a) (1),(3), (7), (8), and (9) of the Bankruptcy Judge-ship Act of 1992 (28 U.S.C. 152 note) are ex-tended until the first vacancy occurring inthe office of a bankruptcy judge in the appli-cable district resulting from the death, re-tirement, resignation, or removal of a bank-ruptcy judge and occurring—

(A) 8 years or more after November 8, 1993,with respect to the northern district of Ala-bama;

(B) 10 years or more after October 28, 1993,with respect to the district of Delaware;

(C) 8 years or more after August 29, 1994,with respect to the district of Puerto Rico;

(D) 8 years or more after June 27, 1994, withrespect to the district of South Carolina; and

(E) 8 years or more after November 23, 1993,with respect to the eastern district of Ten-nessee.

(2) APPLICABILITY OF OTHER PROVISIONS.—All other provisions of section 3 of the Bank-ruptcy Judgeship Act of 1992 remain applica-ble to such temporary judgeship positions.

(d) TECHNICAL AMENDMENT.—The first sen-tence of section 152(a)(1) of title 28, UnitedStates Code, is amended to read as follows:‘‘Each bankruptcy judge to be appointed fora judicial district as provided in paragraph(2) shall be appointed by the United Statescourt of appeals for the circuit in which suchdistrict is located.’’.

(e) TRAVEL EXPENSES OF BANKRUPTCYJUDGES.—Section 156 of title 28, UnitedStates Code, is amended by adding at the endthe following:

‘‘(g)(1) In this subsection, the term ‘travelexpenses’—

‘‘(A) means the expenses incurred by abankruptcy judge for travel that is not di-rectly related to any case assigned to suchbankruptcy judge; and

‘‘(B) shall not include the travel expensesof a bankruptcy judge if—

‘‘(i) the payment for the travel expenses ispaid by such bankruptcy judge from the per-sonal funds of such bankruptcy judge; and

‘‘(ii) such bankruptcy judge does not re-ceive funds (including reimbursement) fromthe United States or any other person or en-tity for the payment of such travel expenses.

‘‘(2) Each bankruptcy judge shall annuallysubmit the information required under para-graph (3) to the chief bankruptcy judge forthe district in which the bankruptcy judge isassigned.

‘‘(3)(A) Each chief bankruptcy judge shallsubmit an annual report to the Director ofthe Administrative Office of the UnitedStates Courts on the travel expenses of eachbankruptcy judge assigned to the applicabledistrict (including the travel expenses of thechief bankruptcy judge of such district).

‘‘(B) The annual report under this para-graph shall include—

‘‘(i) the travel expenses of each bankruptcyjudge, with the name of the bankruptcyjudge to whom the travel expenses apply;

‘‘(ii) a description of the subject matterand purpose of the travel relating to eachtravel expense identified under clause (i),with the name of the bankruptcy judge towhom the travel applies; and

‘‘(iii) the number of days of each travel de-scribed under clause (ii), with the name ofthe bankruptcy judge to whom the travel ap-plies.

‘‘(4)(A) The Director of the AdministrativeOffice of the United States Courts shall—

‘‘(i) consolidate the reports submittedunder paragraph (3) into a single report; and

‘‘(ii) annually submit such consolidated re-port to Congress.

‘‘(B) The consolidated report submittedunder this paragraph shall include the spe-cific information required under paragraph(3)(B), including the name of each bank-ruptcy judge with respect to clauses (i), (ii),and (iii) of paragraph (3)(B).’’.

TITLE XIII—GENERAL EFFECTIVE DATE;APPLICATION OF AMENDMENTS

SEC. 1301. EFFECTIVE DATE; APPLICATION OFAMENDMENTS.

(a) EFFECTIVE DATE.—Except as providedotherwise in this Act, this Act and theamendments made by this Act shall take ef-fect 180 days after the date of enactment ofthis Act.

(b) APPLICATION OF AMENDMENTS.—Theamendments made by this Act shall notapply with respect to cases commencedunder title 11, United States Code, before theeffective date of this Act.

SUMMARY OF MAJOR DIFFERENCES BETWEENTHE GRASSLEY/TORRICELLI BANKRUPTCY RE-FORM BILL AND THE H.R. 3150 CONFERENCEREPORT

MEANS TEST

The new Senate bill gives bankruptcyjudges greater discretion in consideringwhether to transfer a debtor from Chapter 7to Chapter 13.

The new Senate bill requires only a show-ing of ‘‘special circumstances,’’ rather than‘‘extraordinary circumstances,’’ for Chapter7 debtors with apparent repayment ability toavoid being transferred to Chapter 13.

A new Senate bill raises the minimum dol-lar amount from $5,000 to $15,000, with the ef-fect that debtors with a marginal ability torepay won’t be swept up by the means test.

CONSUMER PROTECTIONS

The new Senate bill requires the AttorneyGeneral and the FBI Director to designate

one prosecutor and one agent in every dis-trict to investigate reaffirmation practiceswhich violate current federal criminal laws,including the criminal laws under whichSears was prosecuted.

The new Senate bill specifically authorizesstate attorneys general to enforce federalcriminal laws against abusive reaffirma-tions, again including the criminal lawsunder which Sears was prosecuted.

The new Senate bill specifically authorizesstate attorneys general to enforce state lawsregarding unfair trade practices againstcreditors who deceive debtors into reaffirma-tion agreements, including the state lawsunder which Sears was prosecuted.

The new Senate bill drops a provision bar-ring class action lawsuits for reaffirmationviolations.

The new Senate bill reinserts a provisionmaking it a violation of the automatic stayto threaten to file motions in order to coercereaffirmations.

The new Senate bill reinserts a provisionpenalizing creditors who fail to acknowledgepayments received in Chapter 13 plans and,thereafter, seek a ‘‘double payment.’’

GREATER PROTECTIONS FOR CHILD SUPPORT

The new Senate bill requires bankruptcytrustees to notify appropriate state agenciesof a debtor’s location and specific address, ifthe debtor owes child support. This effec-tively turns bankruptcy courts into locatorservices to help track down ‘‘deadbeat par-ents.’’

The new Senate bill requires bankruptcytrustees to notify child support claimants oftheir right to enforce payment through anappropriate state agency.

The new Senate bill permits state agencieswhich enforce payment of child support obli-gations to request that creditors who holdreaffirmed or non-discharged debts to pro-vide the last known address and telephonenumber of the debtor. Again, this effectivelyturns bankruptcy courts into locator serv-ices which will help to track down ‘‘deadbeatparents.’’

The new Senate bill provides that debts in-curred to pay non-dischargeable debts willcontinue to be dischargeable if the debtorowes child support or alimony.

FEWER NON-DISCHARGEABLE DEBTS

The new Senate bill raises the dollar limitson cash advances on the eve of bankruptcy,presumed non-dischargeable from $250 to$750.

The new Senate bill shortens the time dur-ing which purchases and cash advances arepresumed non-dischargeable from 90 days to70 days.

∑ Mr. BIDEN. Mr. President, I ampleased to join today with SenatorGRASSLEY and Senator TORRICELLI,along with our colleague from the Ju-diciary Committee, Senator SESSIONS,to introduce legislation to reform ournation’s bankruptcy laws.

In a time of rising incomes, historiclevels of job creation, and strong eco-nomic growth, America has seen an un-expected rise in the number of personalbankruptcies. Last year, 1.4 millionAmericans filed for personal bank-ruptcy, and we expect that number togrow again this year, as it has for thelast 4 years. This means more peopleare filing for bankruptcy now than dur-ing the worst years of job losses in the1980’s.

Bankruptcy laws give Americans avery special kind of protection fromthe worst form of financial distress. Asa nation of immigrants, our country is

CONGRESSIONAL RECORD — SENATES2768 March 16, 1999the very embodiment of the idea of afresh start. Bankruptcy protection wasconsidered so important that it wasamong the specific powers granted toCongress in our Constitution. That iswhy we provide in law that no oneshould have to shoulder anunsustainable burden of debt, a burdenthat can hurt us all by threatening theweakest links in our society.

But at the same time, Mr. President,our nation is founded on the idea ofpersonal responsibility, the only foun-dation that can sustain and protect ourfreedom. Until recently, bankruptcywas considered a stain on one’s per-sonal reputation, an admission of fail-ure, something to be avoided at allcosts. While we may sympathize withthe special circumstances that canthrow an individual into unexpectedhardship, Americans expect that thosewho have the resources must meettheir financial obligations.

But the explosion in the number ofpersonal bankruptcies, in a time ofeconomic prosperity, raises seriousquestions. Mr. President, every timeone of us fails to pay a legitimate debt,the rest of us pay a little more, becauseof the higher interest rates lendersmust charge to cover their loses. Whenthe circumstances are unavoidable, andwhen it is clear that a fresh start is de-served, bankruptcy must be there forthose who need it. But when those whohave the ability to pay use the bank-ruptcy system to walk away from theirdebts, something is wrong.

It is now clear to most of us that ourbankruptcy system—and the laws thatguide it—are in serious need of reform.Last year, in the Senate, we passed abipartisan bill by the nearly unani-mous vote of 97 to 1 to fix the problemsin our bankruptcy laws. While thatproposal did not become law, wereached agreement that bankruptcy re-form—done the right way—is some-thing we all can support.

Working closely with his new rank-ing member, Senator TORRICELLI, Sen-ator GRASSLEY has once again shown usthe leadership on this issue that heprovided last year. I believe that wehave built a foundation in this bill fora reasonable approach, one that re-stores some of the balance that hasbeen lost in recent years. To that end,this legislation assures that those whohave the ability to pay will continue tomeet their obligations, and that bank-ruptcy is not seen as a financial plan-ning device, but the last resort for themost extraordinary circumstances.

At the same time, again with thehelp of Senator TORRICELLI we havegone a long way toward addressing thehonest concerns that many of our col-leagues have expressed about the needsof those, like single parents and thosewho receive child support, who deservegreater protection.

This is a tough balance to strike, andI will continue to work with SenatorGRASSLEY, Senator TORRICELLIE, andSenator SESSIONS, and with our col-leagues on the Judiciary Committee, to

listen to the concerns of other Sen-ators, to achieve the kind of consensusthat we found here in the Senate lastyear.∑

Mr. Mr. ROBERTS (for himselfand Mr. BROWNBACK):

S. 626. A bill to provide from unfairinterest and penalties on refunds retro-actively ordered by the Federal EnergyRegulatory Commission; to the Com-mittee on Energy and Natural Re-sources.

KANSAS NATURAL GAS INDUSTRY

∑ Mr. ROBERTS. Mr. President, I risetoday to introduce a bill of critical im-portance to the natural gas industry inKansas.

Natural gas production is an impor-tant industry in Kansas, paying goodwages to hard working Kansans andtaxes to support county and state taxrolls. Kansas is a national leader innatural gas production, and we pipeour product all over the nation. It is anaffordable, abundant and clean energysource. This bill will ensure that wecan continue to produce this naturalresource in Kansas.

This issue is complex, full of legal-ities and arcane federal policy. But Ibelieve the crux of the matter will re-verberate throughout the Congress.

The problem before us arises out ofthe system of federal price controls onnatural gas. In 1974, natural gas pro-ducers were given permission to exceedthe national ceiling rates for gas bythe cost of any state or federal tax onproduction. In Kansas, one such taxwas the ad valorem tax. In 1974, theFederal Power Commission issuedOpinion 699–D, finding that the Kansasad valorem tax was a production tax el-igible for recovery. Kansas gas produc-ers, like producers in other states, wereallowed to exceed the national rates bythe costs of a local production tax.

In 1978, Congress passed the NaturalGas Policy Act. That statute continuedthe practice of price controls on natu-ral gas, but also codified prior prac-tices that allowed natural gas produc-ers to exceed price ceilings by the costsof production taxes. The newly createdFederal Energy Regulatory Commis-sion, the federal body charged with im-plementing federal policies in thisfield, continued the practice of allow-ing Kansas producers to recover thecosts of the Kansas ad valorem tax.Business continued as it had since 1974.

This practice of adding on the Kansasad valorem tax was challenged in 1983.The FERC responded with opinions in1986 and again in 1987, stating that it is‘‘clear, beyond question,’’ that theKansas ad valorem tax is a tax on pro-duction and therefore, under law, eligi-ble for recovery. Kansas producers hadclear authority to recover the costs ofthe ad valorem tax.

What happened next is inexplicable.In 1988, the prior FERC decisions onthe Kansas ad valorem tax were chal-lenged in court. The D.C. Circuit Courtremanded the issue to the FERC. In1993, five years later, the FERC did the

unthinkable. They overturned all theirprevious rulings in this matter and re-quired Kansas natural gas producers torefund, plus interest, all ad valoremtax monies collected above the gasprice ceilings from 1988 forward. TheFERC wisely chose 1988 as the collec-tion date based on the D.C. Circuit’sdecision date. Unfortunately, uponchallenge in 1996, the D.C. Circuit ex-tended the refund period to 1983. Theresult is an estimated $340 million li-ability due by every producer operatingbetween the years 1983 and 1988.

What has occurred is an atrociousmiscarriage of justice. Kansas naturalgas producers, who in their businesspractices relied on the rules and fol-lowed the orders of the FERC, weresubsequently told they had been break-ing federal law since 1974, or for 19years. They were then retroactivelyfound to be liable for all of the col-lected tax funds back to 1983. In lay-man’s terms, these producers are beingheld liable for following the orders ofthe FERC.

The FERC did not carry out its du-ties in a vacuum. Section 110 of theNatural Gas Policy Act clearly statedthat production taxes could be added tothe price of gas, even if the add-on ex-ceeded national price ceilings. TheNGPA report language went so far asto spell out what kind of taxes are pro-duction taxes, stating ‘‘The term‘‘State severance tax’’ is intended to beconstrued broadly. It includes any taximposed upon mineral or natural re-source production including an ad valo-rem tax. . .’’ It is evident to me, and Ihope to anyone reading this, that Con-gress included the words ‘‘ad valorem’’tax for an explicit reason—becauseCongress intended that ad valoremtaxes were to be included in the list oftaxes eligible for recovery. I have all ofthese documents in my possession, andwould be pleased to provide any of thisinformation to my colleagues. Mr.President, we must remedy this situa-tion. Before us are the citizens of Kan-sas, the natural gas producers, who for19 years dutifully ran their businessesin compliance with federal law, andstrictly followed the edicts of the Fed-eral Energy Regulatory Commission.They had a right, indeed a responsibil-ity, to rely on the FERC’s orders.Today, they are being punished for fol-lowing these very orders. The FERC’sincompetence has caused these honestcitizens to be treated as criminals.However, it is the incompetence of theFERC that is criminal.

Mr. President, I rise today to re-in-troduce legislation from the last Con-gress. This bill would repeal the mostunjust aspect of this order. Requiringproducers to refund these recoveredtaxes is bad enough. However, assess-ing an interest penalty on this refundorder extends beyond the bounds of de-cency and fairness. The interest por-tion represents roughly two-thirds ofthe estimated $340 million cost to Kan-sas producers. While the FERC had the

CONGRESSIONAL RECORD — SENATE S2769March 16, 1999opportunity to waive the interest por-tion, they refused to do so. This legis-lation is made necessary by the FERC’srefusal to take any actions to mitigatethis harsh, retroactive and unjust deci-sion.

Mr. President, I will do everything inmy power to push this issue through toresolution. I will continue my effortsto encourage the Senate Energy andNatural Resources Committee to holdhearings on this issue, so they mayhear firsthand of the events that leadus where we find ourselves today. Iwant Congress to hear from the citi-zens of my state, the young and theold, those in business and those retired,those who have money, and those liv-ing on a fixed income, all of whom theFERC has ordered must pay refundsoften ranging into the tens of thou-sands of dollars.

I also believe it is time for Congressto review the independence and powerdelegated to the Federal Energy Regu-latory Commission. They are unac-countable for their actions, unwillingto accept responsibility and unmovedby the pleas of the stakeholders in thisprocess. Congress entrusted oversightand administration of federal gas pol-icy to the FERC. In this case, theFERC has failed to properly administerthe law, and has exercised its authorityin an egregious and inequitable mannerinconsistent with congressional intent.Congress has a clear responsibility tointervene in this case.

Mr. President, I ask unanimous con-sent that the text of this bill be printedin the RECORD.

There being no objection, the bill wasordered to be printed in the RECORD, asfollows:

S. 626

Be it enacted by the Senate and House of Rep-resentatives of the United States of America inCongress assembled,SECTION 1. LIABILITY OF CERTAIN NATURAL GAS

PRODUCERS.The Natural Gas Policy Act of 1978 (15

U.S.C. 3301 et seq.) is amended by adding atthe end the following:‘‘SEC. 603. LIABILITY OF CERTAIN NATURAL GAS

PRODUCERS.‘‘If the Commission orders any refund of

any rate or charge made, demanded, or re-ceived for reimbursement of State ad valo-rem taxes in connection with the sale of nat-ural gas before 1989, the refund shall be or-dered to be made without interest or penaltyof any kind.’’.∑

By Mr. ROCKFELLER (for him-self, Ms. COLLINS, Mr. COCHRAN,Mr. CONRAD, Mr. WYDEN, andMr. JEFFORDS):

S. 628. A bill to amend titles XVIIIand XIX of the Social Security Act toexpand and clarify the requirements re-garding advance directives in order toensure that an individual’s health caredecisions are complied with, and forother purposes; to the Committee onFinance.ADVANCE PLANNING AND COMPASSIONATE CARE

ACT OF 1999

∑ Mr. ROCKEFELLER. Mr. President, Iam pleased to be introducing the ‘‘Ad-

vance Planning and CompassionateCare Act of 1999’’ with my colleaguefrom Maine, Senator COLLINS. We in-troduce this legislation to ask Con-gress to take action that responds di-rectly and humanely to the needs ofthe elderly and others during some oftheir most difficult and traumatictimes of their lives. The time I refer tois the end-of-life.

Our perceptions of illness, end-of-lifecare, and death are changing in re-sponse to advances in medical tech-nology, a shift from treating acute careillnesses to managing chronic care con-ditions, improvements in palliativecare, and a greater respect for patientinvolvement and autonomy in end-of-life decisions.

Patients want to maintain a sense ofcontrol of their lives throughout theirlast days. But studies show that tre-mendous variation exists in the medi-cal care that Medicare beneficiaries re-ceive in the last few months of theirlives. This sort of analysis highlightsthat patient preferences have little todo with the sort of care patients re-ceive in their final months of life.Where you live determines the sort ofmedical care you will receive more sothan what you might prefer. Our billaddresses this issue by calling for anevaluation of current standards of careand promoting better communicationbetween health care providers andtheir patients.

Unfortunately, while people do worryabout end-of-life issues, the truth isthat patients, families, and physicianshave difficulty talking about them.People have an endless list of reasonsfor not talking about end-of-life care,for not making decisions to prepare forit. Some are afraid of jinxing them-selves by planning their end-of-lifecare, and many have faith that theirfamilies will know the right thing todo when the time comes.

Not talking about death does notstop it from occurring. We all know itis a natural, inevitable part of life. Butby not talking about end-of-life care,we hamper our ability to learn aboutthe options that are available to re-lieve suffering, promote personalchoice, and obtain greater care andcomfort in our final months.

End-of-life care is a major—and grow-ing—issue in the future of health care.Unfortunately, in recent years, debateson end-of-life care have focused almostexclusively on the subject of physician-assisted suicide. Mr. President, I havespent considerable time delving intothe concerns and dilemmas that facepatients, their family members andtheir physicians when confronted withdeath or the possibility of dying. In al-most all such difficult situations, peo-ple are not thinking about physician-assisted suicide. The needs and dilem-mas that confront them have muchmore to do with the kind of care andinformation they need desperately.

The legislation we are introducingtoday builds on bipartisan legislationenacted in 1990, called the Patient Self-

Determination Act. As a result of thatbill, hospitals, skilled nursing facili-ties, home health agencies, hospiceprograms, and HMO’s participating inthe Medicaid and Medicare programsmust provide every adult receivingmedical care with written informationconcerning patient involvement intheir own treatment decisions. Thehealth care institutions must also doc-ument in the medical record whetherthe patient has an advance directive.In addition, States were required towrite descriptions of their State lawsconcerning advance directives.

The first section of the AdvancePlanning and Compassionate Care Actinstructs the Department of Healthand Human Services to develop appro-priate quality measures and models ofcare for persons with chronic, debili-tating illnesses, including the veryfrail elderly who will comprise an in-creasing number of Medicare bene-ficiaries.

The second part of our bill directsthe Secretary of Health and HumanServices to advise Congress on an ap-proach to adopting the provisions ofthe Uniform Health Care Decisions Actfor Medicare beneficiaries. The Uni-form Health Care Decisions Act was de-veloped by the Uniform Law Commis-sioners, a group with representationfrom all States that has been in exist-ence for over 100 years. The UniformHealth Care Decisions Act includes allthe important components of model ad-vance directive legislation. A greatdeal of legal effort went into its devel-opment, with input by all the Statesand approval by the American Bar As-sociation. Medicare beneficiaries de-serve a uniform approach to advancedirectives, especially since many movefrom one State to another while in theMedicare Program. The tremendousvariation in State laws that currentlyexists only adds to the confusion ofhealth care professionals and their pa-tients.

The third section strengthens thepreviously enacted Patient Self Deter-mination Act in the following ways:

First, it requires that every Medicarebeneficiary have the opportunity todiscuss health care decision-makingissues with an appropriately trainedprofessional, when he or she makes arequest. This measure would help makesure that patients and their familieshave the ability to discuss and addressconcerns and issues relating to theircare, including end-of-life care, with atrained professional. Many health careinstitutions already have teams of pro-viders to address difficult health caredecisions and some even mediateamong patients, families, and provid-ers. In smaller institutions, socialworkers, chaplains, nurses or othertrained professionals could be madeavailable for consultation.

Second, our bill requires that a per-son’s advance directive be placed in aprominent part of the medical record.Often advance directives cannot evenbe found in the medical record, making

CONGRESSIONAL RECORD — SENATES2770 March 16, 1999it more difficult for providers to re-spect patients’ wishes. It is essentialthat an individual’s advance directivebe readily available and visible to any-one involved in their health care.

Third, it will assure that an advancedirective valid in one State will bevalid in another State. At present,portability of advance directives fromState to State is not assured. Suchportability can only be guaranteedthrough Federal legislation.

The fourth part of this legislationwould encourage the development ofmodels for end-of-life care for Medicarebeneficiaries who do not qualify for theMedicare hospice benefit but still havechronic, debilitating and ultimatelyfatal illnesses. The tremendous ad-vances in medicine and medical tech-nology over the past 30 to 50 years haveresulted in a greatly lengthened life ex-pectancy for Americans, as well asvastly improved functioning and qual-ity of life for the elderly and thosewith chronic disease. Many of these ad-vances have been made possible by fed-erally financed health care programs,such as the Medicare Program thatassures access to high quality healthcare for all elderly Americans. Medi-care has also funded much of the devel-opment of technology and a highlyskilled physician workforce throughsupport of medical education and aca-demic medical centers. These advanceshave also created major dilemmas inaddressing terminal or potentially ter-minal disease, as well as a sense of lossof control by many with terminal ill-ness.

Mr. President, I am learning moreand more about the importance of edu-cating health care providers and thepublic that chronic, debilitating, ter-minal disease need not be associatedwith pain, major discomfort, and lossof control. We can control pain andtreat depression, as well as the othercauses of suffering during the dyingprocess. We must now apply thisknowledge to assure all Americans ap-propriate end-of-life care. And to makesure that Medicare beneficiaries areable to receive the most effective medi-cine to control their pain, Medicare’scoverage rules would be expandedunder our bill to include coverage forself-administered pain medications.

Mr. President, I realize that there isstill a lot of work to be done. I believeour bill represents a significant steptowards improving end-of-life care forMedicare beneficiaries. By advocatingchanges within the health care system,research community, and national pol-icy, we reaffirm our commitment toquality patient care. In our legislation,we have set forth a broad framework torespond to many of the concerns facingpeople at the end-of-life. This legisla-tion embodies the fundamental prin-ciple of the Patient Self-DeterminationAct—to involve patients in their owntreatment decisions and to respect andfollow their wishes when they are nolonger capable of voicing them.

To conclude, I am proud to offer thislegislation with Senator COLLINS. We

hope consideration of this bill will bean opportunity to take notice of themany constructive steps that can betaken to address the needs of patientsand family members grappling withgreat pain and medical difficulties.During this time when physician as-sisted suicide obtains so many head-lines, we are eager to call on Congressto turn to the alternative ways of pro-viding help and relief to seniors andother Americans who only are inter-ested in such alternatives.∑∑ Ms. COLLINS. Mr. President, I ampleased to be joining my colleaguefrom West Virginia, Senator ROCKE-FELLER, in introducing the AdvancePlanning and Compassionate Care Act,which is intended to improve the waywe care for people at the end of theirlives.

Noted health economist UweReinhardt once observed that ‘‘Ameri-cans are the only people on earth whobelieve that death is negotiable.’’ Ad-vancements in medicine, public health,and technology have enabled more andmore of us to live longer and healthierlives. However, when medical treat-ment can no longer promise a continu-ation of life, patients and their fami-lies should not have to fear that theprocess of dying will be marked by pre-ventable pain, avoidable distress, orcare that is inconsistent with their val-ues or wishes.

The fact is, dying is a universal expe-rience, and it is time to re-examinehow we approach death and dying andhow we care for people at the end oftheir lives. Clearly, there is more thatwe can do to relieve suffering, respectpersonal choice and dignity, and pro-vide opportunities for people to findmeaning and comfort at life’s conclu-sion.

Unfortunately, most Medicare pa-tients and their physicians do not cur-rently discuss death or routinely makeadvance plans for end-of-life care. As aresult, about one-fourth of Medicarefunds are now spent on care at the endof life that is geared toward expensive,high-technology interventions and‘‘rescue’’ care. While most Americanssay they would prefer to die at home,studies show that almost 80 percent diein institutions where they may be inpain, and where they are subjected tohigh-tech treatments that merely pro-long suffering.

Moreover, according to a Dartmouthstudy conducted by Dr. JackWennberg, where a patient lives has adirect impact on how that patient dies.The study found that the amount ofmedical treatment Americans receivein their final months varies tremen-dously in the different parts of thecountry, and it concluded that the de-termination of whether or not an olderpatient dies in the hospital probablyhas more to do with the supply of hos-pital beds than the patient’s needs orpreference.

The Advance Planning and Compas-sionate Care Act is intended to help usimprove the way our health care sys-

tem serves patients at the end of theirlives. Among other provisions, the billmakes a number of changes to the Pa-tient Self-Determination Act of 1990 tofacilitate appropriate discussions andindividual autonomy in making dif-ficult discussions about end-of-lifecare. For instance, the legislation re-quires that every Medicare beneficiaryreceiving care in a hospital or nursingfacility be given the opportunity todiscuss end-of-life care and the prepa-ration of an advanced directive with anappropriately trained professionalwithin the institution. The legislationalso requires that if a patient has anadvanced directive, it must be dis-played in a prominent place in themedical record so that all the doctorsand nurses can clearly see it.

The legislation will expand access toeffective and appropriate pain medica-tions for Medicare beneficiaries at theend of their lives. Severe pain, includ-ing breakthrough pain that defiesusual methods of pain control, is one ofthe most debilitating aspects of termi-nal illness. However, the only painmedication currently covered by Medi-care in an outpatient setting is thatwhich is administered by a portablepump.

It is widely recognized among physi-cians treating patients with cancer andother life-threatening diseases thatself-administered pain medications, in-cluding oral drugs and transdermalpatches, offer alternatives that areequally effective in controlling pain,more comfortable for the patient, andmuch less costly than the pump. There-fore, the Advance Planning and Com-passionate Care Act would expandMedicare to cover self-administeredpain medications prescribed for the re-lief of chronic pain in life-threateningdiseases or conditions.

In addition, the legislation author-izes the Department of Health andHuman Services to study end-of-lifeissues for Medicare and Medicaid pa-tients and also to develop demonstra-tion projects to develop models for end-of-life care for Medicare beneficiarieswho do not qualify for the hospice ben-efit, but who still have chronic debili-tating and ultimately fatal illnesses.Currently, in order for a Medicare ben-eficiary to qualify for the hospice bene-fit, a physician must document thatthe person has a life expectancy of sixmonths or less. With some conditions—like congestive heart failure—it is dif-ficult to project life expectancy withany certainty. However, these patientsstill need hospice-like services, includ-ing advance planning, support services,symptom management, and other serv-ices that are not currently available.

Finally, the legislation establishes atelephone hotline to provide consumerinformation and advice concerning ad-vance directives, end-of-life issues andmedical decision making and directsthe Agency for Health Care Policy andResearch to develop a research agendafor the development of quality meas-ures for end-of-life care. In this regard,

CONGRESSIONAL RECORD — SENATE S2771March 16, 1999Senator ROCKEFELLER and I are par-ticularly appreciative that SenatorBILL FRIST has incorporated our rec-ommendation that end-of-lifehealthcare be added as a priority popu-lation in the Agency for Health CarePolicy and Research’s overall missionand duties in the bipartisan legislationhe introduced last week to reauthorizethe Agency.

The legislation we are introducingtoday is particularly important inlight of the current debate on physi-cian-assisted suicide. The desire for as-sisted suicide is generally driven byconcerns about the quality of care forthe terminally ill; by the fear of pro-longed pain, loss of dignity and emo-tional strain on family members. Suchworries would recede and support forassisted suicide would evaporate if bet-ter palliative care and more effectivepain management were widely avail-able.

Mr. President, patients and theirfamilies should be able to trust thatthe care they receive at the end oftheir lives is not only of high quality,but also that it respects their desiresfor peace, autonomy and dignity. TheAdvanced Planning and CompassionateCare Act that Senator ROCKEFELLERand I are introducing today will give ussome of the tools that we need to im-prove care of the dying in this country,and I urge all of my colleagues to joinus as cosponsors.∑

By Mr. BAUCUS (for himself andMr. CRAIG):

S. 629. A bill to amend the FederalCrop Insurance Act and the Agricul-tural Market Transition Act to providefor a safety net to producers throughcost of production crop insurance cov-erage, to improve procedures used todetermine yields for crop insurance, toimprove the noninsured crop assistanceprogram, and for other purposes; to theCommittee on Agriculture, Nutrition,and Forestry.‘‘CROP INSURANCE IMPROVEMENT ACT OF 1999’’

∑ Mr. BAUCUS. Mr. President, I risetoday to announce the introduction ofthe Crop Insurance Improvement Actof 1999. Senator CRAIG and I are intro-ducing this bill today to provide a safe-ty net to our agricultural producersand make rural America stronger thanever.

I especially would like to thank Sen-ator CRAIG’s staff, Wayne Hammon,who has worked diligently with mystaff in bringing together this biparti-san effort for agriculture. I also com-pliment my colleagues Senators KERRYand ROBERTS who have introduced cropinsurance reform legislation, of which Iam also a cosponsor, for setting thestage for a major overhaul of the cropinsurance program. This bill, the CropInsurance Improvement Act of 1999 isdesigned to compliment their effortsby extending the safety net to helpthose producers of speciality or alter-native crops who find particular chal-lenges in the present system.

Now more than ever this crop insur-ance reform legislation is needed formy state’s leading industry.

Mr. President, agriculture is Mon-tana’s leading industry. More than100,000 Montanans work in farm andranch related jobs. That is nearly 20percent of our state’s total employ-ment. In 1998, Montana agriculturegenerated $2.4 billion—65 percent of ourstate’s total economy. In Montana, ag-riculture is not only an integral part ofour economy, it’s a way of life. Andthat way of life is in peril.

In 1998, Montana producers were hithard as our ag exports dropped by $570million, and commodities such aswheat and beef plummeted to Depres-sion-era prices.

In response to this severe economichit, we fought hard in the 105th Con-gress to install a safety net where the1996 Freedom to Farm bill fell short.With help from the White House, wewere able to get almost $8 billion inemergency assistance for our producersin Montana and across the country. Weresponded to the crisis but there’s noassurance that we won’t be faced withthe same problems each year.

This bill is aimed at getting Montanaproducers back on their feet. We dothat by focusing on, and fighting foragriculture, together. I sincerely hopethat 1999 will be the ‘‘Year of Recov-ery.’’ And I believe we can do this bymaintaining focus on three goals:

We must pry open foreign markets toMontana products.

We must help agriculture producersat home.

We must install a permanent safetynet to help producers weather times ofcrisis.

By aggressively pursuing these threegoals, I am confident that we can helpMontana agriculture not only recover,but be stronger than ever before.

Today, however, I would like to focuson the goal of installing a safety net tohelp producers during times of crisis.

Mr. President, no matter how well weare doing nationally and internation-ally, we must be prepared for hardtimes. In 1996, Congress passed theFreedom to Farm Act. Since then,wheat prices have fallen 55 percent.Who could have predicted that priceswould plunge from $4.50 a bushel forwheat in 1996 to $2.91 a bushel by Sep-tember 1998? This drop, triggered by acombination of natural disasters andoversupply in the marketplace, was im-possible to predict.

As wheat and other agricultural com-modity prices dipped to record lows,America’s producers were suddenlystranded without a safety net, causinga severe financial crisis. This made itclear to me that we need a contingencyplan to help us when hard times comeso that we can continue to grow whentimes are good.

In February I hosted a crop insurancefield hearing in Shelby, Montana. KenAckerman, Director of the Risk Man-agement Agency traveled from Wash-ington, D.C. to meet with Montana pro-

ducers to hear first hand their concernsabout crop insurance. At that hearingsome of Montana’s outstanding produc-ers shared their stories, their frustra-tions and their ideas about reformingthe system. I would like to thank RickSampsen, Bill Brewer, Verg Aageson,Brian Schweitzer, Nancy Peterson,Rollie Schlepp, Scott Kulbeck andMary Schuler for taking the time tolend their voices to this important dis-cussion. Their ideas are reflected inthis legislation today which will:

(1) Install a safety net;(2) Allow producers to buy a policy

that covers their cost of production;(3) Shorten the Actual Production

History requirement for rotated crops;and

(4) Eliminate the Area Requirementfor speciality crops reliant on the Non-insured Crop Disaster Assistance Pro-gram (NAP).

Simply put, Mr. President, the CropInsurance Improvement Act of 1999takes decisive action to help those pro-ducers who are presently in danger oflosing their agricultural heritage. Itprovides them the flexibility to trynew and alternative crops and givesthem the freedom to farm, as origi-nally intended, by allowing them thechance to build up a production his-tory, cover their cost of production,and eventually purchase crop insurancecoverage for their speciality crops. Itgives producers a chance to do whatthey do best—farm.

Mr. President, I urge all of all of mycolleagues to support this importantlegislation, and join Senators CRAIGand myself in getting rural Americaback on its feet.∑∑ Mr. CRAIG. Mr. President, I risetoday to join my colleague SenatorBAUCUS in the introduction of legisla-tion to reform the federal agriculturalcrop insurance program. Like legisla-tion introduced earlier this month bySenator ROBERTS, KERREY, myself, andothers, this bill aims at bringing aboutcommon sense reform to the programand will assist farmers through theeconomic hardship they currently face.

The bill addresses several concernsfarmers from my state and I haveabout the current crop insurance pro-gram. Specifically, I am pleased thatthe legislation includes provisions toreform the noninsured crop disaster as-sistance program, or NAP. NAP is usedby farmers who grow ‘‘specialty’’ or‘‘minor’’ crops across the nation.

Idaho’s great agricultural economy isbased on minor and non-traditionalcrops. We lead the nation in the pro-duction of such crops as potatoes, win-ter peas, and trout. Idaho is second inthe production of seed peas, lentils,sugar beets, barley, and mint. Further-more, we are in the top 5 states in theproduction of hops, onions, plums,sweet cherries, alfalfa, and Americancheese. The needs of these producersare just as important as those of moretraditional farm commodity producers.

I believe this bill to be an importantstep toward meaningful and sweeping

CONGRESSIONAL RECORD — SENATES2772 March 16, 1999reform and includes changes that arelong overdue. I look forward to work-ing with my colleagues on the SenateAgricultural Committee to enact theseimportant reforms and give farmersthe risk management tools they need.∑

By Mr. DEWINE (for himself, Mr.BROWNBACK, Mr. BINGAMAN, Mr.INOUYE, Mr. LEVIN, Mr. HOL-LINGS, and Mr. DURBIN):

S. 631. A bill to amend the Social Se-curity Act to eliminate the time limi-tation on benefits for immuno-suppressive drugs under the medicareprogram, to provide continued entitle-ment for such drugs for certain individ-uals after medicare benefits end, and toextend certain medicare secondarypayer requirements; to the Committeeon Finance.

IMMUNOSUPPRESSIVE DRUG COVERAGE ACT OF1999

∑ Mr. DEWINE. Mr. President, for quitesome time, I have worked with theorgan and tissue donation communityto help educate others about donationand transplant issues. With each organthat is successfully transplanted, a giftof new life is given to the recipient.

Today I rise to offer the Immuno-suppressive Drug Coverage Act of 1999to help ensure that those receivingMedicare covered transplants will beable to afford the drugs necessary tokeep their bodies from rejecting theirnew organs. The current 36-monthMedicare coverage limit is arbitrary,and frankly, sorely inadequate. We arenot talking about a car lease, butabout a new lease on life. This coveragecan mean the difference between lifeand death for some, and at the veryleast, the difference between a Medi-care transplant recipient having to ex-perience the pain of an organ rejection,a return to dialysis—for kidney recipi-ents—and the return to a very longwaiting list for another organ.

These organs are a precious invest-ment, and it simply defies logic thatMedicare covers the initial transplant,the life-long extensive medical treat-ment that is needed if the organ is re-jected, and a second transplant (if thatperson is fortunate enough to find asecond organ)—but not the drugs thatcan help prevent the rejection of theinitial transplanted organ beyond 36months. Many Medicare transplant re-cipients are not able to afford these im-munosuppressive drugs, so they mayration their use of the drugs or theymay stop taking them altogether. Let’sgive them a third alternative—to keeptaking the drugs and to keep their or-gans.∑

By Mr. DEWINE (for himself, Mr.ABRAHAM, Mr. CHAFEE, Mr.GRAHAM, Mr. BOND, Mr. DOMEN-ICI, Mr. KENNEDY, Mr. DURBIN,Mr. BURNS, and Mr. DODD):

S. 632. A bill to provide assistance forpoison prevention and to stabilize thefunding of regional poison control cen-ters; to the Committee on Health, Edu-cation, Labor, and Pensions.

POISON CONTROL CENTER ENHANCEMENT ANDAWARENESS ACT OF 1999

∑ Mr. DEWINE. Mr. President, today Irise to introduce the Poison ControlCenter Enhancement and AwarenessAct of 1999. These poison control cen-ters need our help. The unstablesources of funding for these centershave resulted in many of them havingto close. This unfortunate decline canbe reversed and cost savings can beachieved by the efficient use of thesecenters. I would like to thank my col-league, Senator ABRAHAM, for his ef-forts on behalf of this bill and I’d alsolike to thank my colleagues on theCongressional Prevention Coalition,Senators CHAFEE and GRAHAM of Flor-ida, for their support of this legisla-tion.

This bill establishes and authorizesfunding for a national toll-free numberto ensure that all Americans have ac-cess to poison control center services.This number will be automaticallyrouted to the center designated tocover the caller’s region. By having toonly remember one national phonenumber, parents will be able to callthis number in the event their child ac-cidentally swallows a poisonous sub-stance while they are away from homeon vacation, and be routed to the clos-est poison control center for treatmentadvice. This system will improve ac-cess to poison control center servicesfor everyone. It will simplify efforts toeducate parents and the public aboutwhat to do in the event of a poisoningexposure.

Each year, more than 2 million poi-soning are reported to poison controlcenters throughout the United States.More than 90% of these poisonings hap-pen in the home—and over 50 percent ofpoisoning victims are children under 6years of age. By providing expert ad-vice to distraught parents, babysitters,poisoning victims, and health care pro-fessionals, poison control centers de-crease the severity of illness and pre-vent deaths.

These centers serve cost-effectivepublic health services. For every dollarspent on poison control center services,$7 in medical costs are saved by reduc-ing the inappropriate services. Mostimportantly, we can save lives by en-suring that stabilizing funding sourcesfor these centers. My home state ofOhio, for example, has 3 poison controlcenters—one in Columbus, Cincinnati,and Cleveland—that rely on an uncer-tain patchwork of federal, state, local,and private funding sources. The fed-eral dollars that will be provided bythis legislation may be used to supple-ment, NOT replace, existing federal,state, local, and private funds that areinvested in these centers. For thosestates that have recently experiencedthe closure of the only existing poisoncontrol center in the area, this grantfunding can be used to open a new cen-ter—provided it can meet certificationrequirements. It is essential for us toact now to prevent further closures ofsuch valuable resources.∑

By Mr. ASHCROFT:S. 633. A bill to amend title II of the

Social Security Act to require that in-vestment decisions regarding the socialsecurity trust funds be made on thebasis of the best interests of bene-ficiaries, and for other purposes; to theCommittee on Finance.

THE SOCIAL SECURITY TRUST FUNDMANAGEMENT ACT OF 1999

Mr. ASHCROFT. Mr. President, thereis no more worthy government obliga-tion than ensuring that those who paida lifetime of Social Security taxes willreceive their full Social Security bene-fits. Social Security is our most impor-tant social program, a contract be-tween the government and its citizens.Americans, including one million Mis-sourians, depend on this commitment.

Unfortunately, as you know, the So-cial Security system is facing somelong-term difficulties. While the TrustFunds are currently building uphealthy surpluses—$127 billion in FY99—by 2013 these surpluses will dis-appear, and by 2032 the system is facingbankruptcy.

With this impeding crisis in mind, Ihave embarked on a serious examina-tion of the Social Security system. Ihave spent many hours in the last fewmonths, analyzing the history andworkings of this important program, inorder to figure out how we can makethis program work better.

The result of this effort has been apackage of important reforms designedto protect Social Security. This pack-age is designed to protect Social Secu-rity but, more importantly, it is de-signed to protect the American peo-ple—from debt, from risky, unwise in-vestments, from policies that unfairlydeny Social Security to some seniorswho choose to work after retirement,and from attempts to use our retire-ment dollars on spending purposesother than Social Security. The SocialSecurity system has some imperfec-tions that now make our long-term sit-uation worse than it should be, and mypackage is designed to improve the sys-tem in the near term, so that we canbegin the important work of reformingSocial Security for the long term.

One of the points I have already in-troduced. Last week, I introduced theProtect Social Security Benefits Act.This legislation will prevent surplusesin the Social Security Trust Fundsfrom financing deficits in the rest ofthe federal budget. Social Securityshould not finance irresponsible spend-ing or tax cuts that are not otherwisepaid for. No rules now stop deficitbudgets from being considered. Thatmust end.

In addition to the problem of themisdirection of Social Security’s sur-pluses, I also want to improve the waythe funds are handled. There is no get-ting around the fact that a key to thelong-term solvency of Social Securityis how the current mushrooming SocialSecurity Trust Funds ManagementAct, which focuses on how the currentSocial Security surplus is invested andmanaged.

CONGRESSIONAL RECORD — SENATE S2773March 16, 1999The bill requires the Secretary of the

Treasury, the Managing Trustee of So-cial Security, to consult with the So-cial Security Commissioner before de-cisions are made about investing theSocial Security trust funds. This addi-tional step will preserve the independ-ence of Social Security and make sureinvestment decisions are based on thebest interest of paying current and fu-ture benefits. Currently, the Secretaryof the Treasury, who is by law theManaging Trustee, has the sole author-ity to invest Social Security surpluses,although the law limits that authorityto two types of government debt. No-where in current law is the ManagingTrustee or the Board of Trustees or theSocial Security Commissioner directedto make investment decisions on thebasis of protecting current and futurebenefits. Making sure that we can paybenefits now and in the future shouldbe the highest priority. My bill addsthis important change to the law.

The Social Security Trust FundsManagement Act explicitly forbids So-cial Security Trust Funds from beinginvested in the stock market. Chair-man Alan Greenspan says that invest-ing Social Security funds in the mar-ket is bad for Social Security and badfor our economy. When Alan Greenspantalks, Congress ought to listen. Thefederal government should not owncorporate stocks and bonds. The gov-ernment must not have undue influ-ence over the market. In addition, hav-ing the government put Social Secu-rity taxes in the stock market addsrisk to retirement, and that is a gam-ble I am unwilling to make for the onemillion Missourians who now rely onSocial Security. The Social SecurityTrust Funds Management Act legis-lates that government will not gamblewith Social Security in the stock mar-ket.

In addition, the bill requires SocialSecurity to provide upon request—and,as soon as secure enough to ensure con-fidentiality, over the Internet—moredetailed information about individuals’contribution levels and rates of return.

Let me explain the reasons for thesethree provisions.

In order to understand the invest-ment of the Social Security TrustFunds, we must first answer the ques-tion, Where is the Social Security sur-plus? This question helps us under-stand what the Social Security surplusis, and is not. In truth, the Trust Fundshave no money, only interest-bearingnotes. It would be foolish to havemoney in the trust fund that earned nointerest or had no return. In return forthe Social Security notes, Social Secu-rity taxes are sent to the U.S. Treasuryand mingled with other governmentrevenues, where the entire pool of cashpays the government’s day-to-day ex-penses. While the Trust Funds recordsnow show a total of $857 billion in thefund, these assets exist only in theform of government securities, or debt.According to the Washington Post,‘‘The entire Social Security Trust

Fund, all [$857] billion or so of it, fitsreadily in four ordinary brown, accor-dion-style folders that one can easilyhold in both hands. The 174 certificatesreside in a plain combination-lock fil-ing cabinet on the third floor of the bu-reau’s office building.’’

The placement of all of these fundsinto nonmarketable government secu-rities raises some questions about thelaw that governs the management ofSocial Security money. Under currentlaw, Social Security is now an inde-pendent agency. Its Board of Trusteesoversees the financial operations of So-cial Security. This Board is composedof six members: The Secretaries ofTreasury, Labor, Health and HumanServices, the Commissioner of SocialSecurity and two members of the pub-lic nominated by the President andconfirmed by the Senate. This Boardreports annually to Congress on the fi-nancial status of the Trust Funds. TheSecretary of Treasury is the ManagingTrustee. The Managing Trustee hassole authority to invest the surplustrust funds not needed to pay currentbenefits. As for the investment of thefund, while the Managing Trustee is re-sponsible for the investment, his in-vestment options are limited by law totwo types of Federal Government debtsecurities.

The law directs the Managing Trust-ee to invest the surplus in ‘‘specialissue non-marketable’’ federal debt ob-ligations, except where he determinesthat the purchase of ‘‘marketable secu-rities is ‘‘in the public interest,’’ notSocial Security’s interest. Sadly, it isall too easy to think of times when anadministration strapped for fundsmight use this power to act in the pub-lic interest, and not in the interest ofSocial Security. It‘s even happened re-cently. In 1995, the Clinton Administra-tion used Federal employee pensionfunds to prevent the government frombreaching the debt limit during thetwo week Government shutdown.

Right now, about 99% of the securi-ties in the trust funds are special issuenon-marketable securities, and about1% are marketable securities. Thesetwo types of bonds are similar in thatthey both represent government debt.They differ in that non-marketable se-curities are available only to the trustfunds and not to the public and theypay a rate of interest that is calculatedand set in law. Marketable securities,in contrast, are sold to the public atauction and pay the prevailing yield asdetermined by the marketplace.

This review of current law highlightsthree important points.

First, nowhere in current law is theManaging Trustee or the Board ofTrustees or the Social Security Com-missioner directed to make investmentdecisions on the basis of how to bestprotect payment of current and futurebenefits, taking risk into account. Thisis unacceptable. The Social SecurityTrust Funds Management Act changesthis. This change is consistent with thelegal concept that a trustee owes a fi-

duciary duty to act on behalf of the in-tended beneficiary, and exercises aheightened standard of care in manage-ment decisions and actions.

Second, although Social Security isan independent agency, the Secretaryof Treasury retains sole authority toinvest Social Security surpluses. Thereis a conflict of responsibilities held bythe Secretary of Treasury in his dualcapacity as Managing Trustee of SocialSecurity. Presumably, the Trustee isto invest those funds as securely aspossible, but also with the highest pos-sible rate of return. The role of theSecretary of the Treasury is to managethe finances of the United States Gov-ernment, minimizing, to the extentpossible, the interest charges that thegovernment has to pay in the long run.The problem is that the interest re-ceived by the trust fund is also interestthat must be paid by the Treasury. Ifthe Managing Trustee is maximizingSocial Security’s returns, he may notbe minimizing the Treasury’s interestobligations. And if he is minimizingthe Treasury’s interest obligations, hemay not be maximizing the returns forthe Social Security Trust Funds.

The Social Security Trust FundsManagement Act is designed to resolvethis inherent conflict, and still be con-sistent with the principle that SocialSecurity is distinct from the FederalGovernment generally. The Act re-quires the Secretary of the Treasury toconsult with the Social Security Com-missioner before investment decisionsare made. If the Social Security Com-missioner disagrees with investmentdecisions made by the Secretary, he orshe must notify the President and Con-gress immediately in writing.

Some experts believe that in someyears and in certain market conditionsit is preferable for the Trust Funds tobuy marketable securities rather thannon-market securities. A leading Mis-souri investment firm, Edward Jones,says the following:

Edward Jones believes that this idea hasmerit because it provides additional flexibil-ity to the management of the federal debt.The use of marketable securities would notonly increase liquidity, but also would makebond swaps possible (the exchange of onebond issue for another) which could betterfacilitate management of the debt. It alsocould reduce interest payments by targetingspecific securities when market conditionsdictate.

Under the Social Security TrustFunds Management Act, the Commis-sioner of Social Security could so ad-vise the Treasury Secretary. If theTreasury Secretary does not accept therecommendation of the Social SecurityCommissioner, the Commissioner hasthe duty to inform both the Presidentand to Congress.

These investment issues take ongreater importance in the context ofthe President’s proposal to allow, forthe first time in the history of SocialSecurity, as much as $700 billion in So-cial Security funds to be invested inthe stock market by the Government.

The legislation I am proposing reaf-firms current law, making explicit

CONGRESSIONAL RECORD — SENATES2774 March 16, 1999what is now implicit that this kind ofgovernmental meddling into privatemarkets is forbidden. Federal ReserveChairman Alan Greenspan says thisidea is bad for Social Security and badfor our economy. As I said before, whenChairman Greenspan talks, Congressought to listen. Chairman Greenspanhas said this plan ‘‘will create a lowerrate of return for Social Security re-cipients,’’ and he ‘‘does not believethat it is politically feasible to insu-late such huge funds from a govern-mental direction.’’ The last thing thiscountry needs is the Federal Govern-ment directing the investment of So-cial Security funds based on sometrendy politically-driven notion ofwhich industries or which countries arein political favor at the moment.

The Government’s putting Social Se-curity taxes in the stock market addsrisk to retirement and is a gamble I amunwilling to make for one million Mis-sourians who get Social Security. Thislegislation puts Congress on recordthat Government will not gamble So-cial Security in the stock market.While I understand the impulse to har-ness the great potential of the stockmarket, significant government in-volvement in the stock market couldtend toward economic nationalization,excess government involvement in pri-vate financial markets, and short-term, politically motivated investmentdecisions that could diminish SocialSecurity’s potential rate of return.

This scheme is dangerous. Imagine, ifyou will, what would happen if the gov-ernment had $2.7 billion in the marketon Black Monday, October 19, 1987,when the stock market lost 22% of itsvalue. The trust fund’s owners—Ameri-ca’s current and future retirees—wouldhave lost a collective total of $633 bil-lion. Imagine seniors who depend onSocial Security watching TV news ofthe stock market collapse, wondering,even fearing, if their Social Securitywas in danger. While individuals prop-erly manage their financial portfoliosto control risk, the government has nobusiness taking these gambles with thepeople’s money.

Even President Clinton has expressedskepticism with this idea. In Albuquer-que last year, the President said thefollowing: ‘‘I think most people justthink if there is going to be a risktaken, I’d rather take it than have thegovernment take it for me.’’ He wasright then, and he is wrong now. WhileAmericans should invest as much asthey can afford in private equities toplan for their own retirements, thegovernment should stay out of thestock market.

I recently received a letter fromTodd Lawrence of Greenwood, Mis-souri, who wrote: ‘‘It has been sug-gested that the government would in-vest in the stock market with my So-cial Security money. No offense, butthere is not much that the Governmenttouches that works well. Why wouldmaking MY investment decisions forme be any different. Looking at it from

a business perspective, would theowner of a corporation feel comfortableif the government were the primaryshareholder?’’ Todd Lawrence under-stands what President Clinton doesnot. No corporation would want thegovernment as a shareholder, and noinvestor should want the governmenthandling their investment.

The last provision of my bill givesAmericans more information abouthow much they can expect to receivefrom the Social Security system. Whilethe Social Security Administration al-ready provides helpful and comprehen-sive information about future benefits,it does not provide much informationabout its costs or its rate of return.While the Social Security’s currentpractice of providing benefit informa-tion is useful, it is not enough.

It is not fair to ask Americans toplan for retirement and not tell themthe actual cost or the opportunitycosts of those benefits. As the Amer-ican people consider that further stepsare necessary to reform Social Secu-rity, they are entitled to accurate in-formation about how well their SocialSecurity investments are doing.

This legislation would address thisproblem by requiring the Social Secu-rity Administration, upon request, toprovide individuals’ own rate of returninformation, and to make such infor-mation available over the Internet assoon as it is sufficiently secure to en-sure beneficiary confidentiality. Amer-icans need to know the rate of returnon Social Security. This information isvital for Americans in order for themto make the right decisions about theirown financial futures, as well as the fu-ture of the Social Security program.

The Social Security Trust FundsManagement Act is designed to protectthe Social Security Trust Funds. Moreimportantly, it is designed to protectthe American people—from conflicts ofinterest, from bad investments, frommisinformation, and from attempts toplace the Trust Funds in risky and in-appropriate investments. While I valuethe Social Security system, I value theAmerican people, people like ToddLawrence and the four million otherMissourians who either pay into theSocial Security system or receive So-cial Security benefits, more. My pri-mary responsibility is to them. Myplan to protect the Social Security sys-tem will protect the American peoplefirst, and I will work to make sure thatthis package becomes law.

Mr. President, I ask unanimous con-sent that the text of the bill be printedin the RECORD.

There being no objection, the bill wasordered to be printed in the RECORD, asfollows:

S. 633

Be it enacted by the Senate and House of Rep-resentatives of the United States of America inCongress assembled,SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Social Secu-rity Trust Funds Management Act of 1999’’.

SEC. 2. INVESTMENT OF THE FEDERAL OLD-AGEAND SURVIVORS INSURANCE TRUSTFUND AND THE FEDERAL DISABIL-ITY INSURANCE TRUST FUND.

(a) IN GENERAL.—Section 201(d) of the So-cial Security Act (42 U.S.C. 401(d)) is amend-ed to read as follows:

‘‘(d)(1) Subject to paragraphs (2) and (3), itshall be the duty of the Managing Trustee toinvest such portion of the Trust Funds as isnot, in the judgment of the Trustee, requiredto meet current withdrawals. The ManagingTrustee may purchase interest-bearing obli-gations of the United States or obligationsguaranteed as to both principal and interestby the United States, on original issue or atthe market price.

‘‘(2)(A) If the Managing Trustee, after con-sultation with the Commissioner of SocialSecurity, determines that the purchase ofobligations issued in accordance with para-graph (4) is in the best interest of payingcurrent and future benefits under this title,and will not jeopardize the payment of suchbenefits, the Managing Trustee may pur-chase such obligations.

‘‘(B) If the Commissioner of Social Secu-rity does not concur with the investment de-cisions of the Managing Trustee, or believesthat other investment strategies are appro-priate, the Commissioner shall promptly soinform the President and Congress in writ-ing.

‘‘(3) In investing contributions made to theTrust Funds, the Managing Trustee may notinvest such contributions in private finan-cial markets. Neither the Managing Trusteenor any other officer or employee of the Fed-eral Government shall direct private pensionplans as to what type of investments tomake or in which financial markets to in-vest.

‘‘(4) The purposes for which obligations ofthe United States may be issued under chap-ter 31 of title 31, United States Code, arehereby extended to authorize the issuance atpar of public-debt obligations for purchaseby the Trust Funds. Such obligations issuedfor purchase by the Trust Funds shall havematurities fixed with due regard for theneeds of the Trust Funds and shall bear in-terest at a rate equal to the average marketyield (computed by the Managing Trustee onthe basis of market quotations as of the endof the calendar month next preceding thedate of such issue) on all marketable inter-est-bearing obligations of the United Statesthen forming a part of the public debt whichare not due or callable until after the expira-tion of four years from the end of such cal-endar month; except that where such aver-age market yield is not a multiple of one-eighth of 1 percent, the rate of interest ofsuch obligations shall be the multiple of one-eighth of 1 percent nearest such marketyield. Each obligation issued for purchase bythe Trust Funds under this subsection shallbe evidenced by a paper instrument in theform of a bond, note, or certificate of indebt-edness issued by the Secretary of the Treas-ury setting forth the principal amount, dateof maturity, and interest rate of the obliga-tion, and stating on its face that the obliga-tion shall be incontestable in the hands ofthe Trust Fund to which it is issued, that theobligation is supported by the full faith andcredit of the United States, and that theUnited States is pledged to the payment ofthe obligation with respect to both principaland interest.’’.

(b) EFFECTIVE DATE.—The amendmentmade by subsection (a) shall take effect onthe date of enactment of this Act.SEC. 3. INFORMATION REQUIREMENTS FOR SO-

CIAL SECURITY ACCOUNT STATE-MENTS.

(a) IN GENERAL.—Section 1143(a) of the So-cial Security Act (42 U.S.C. 1320b–13(a)) isamended—

CONGRESSIONAL RECORD — SENATE S2775March 16, 1999(1) in paragraph (2)—(A) in subparagraph (B), by inserting ‘‘, in-

cluding a separate estimate of the amount ofinterest earned on the contributions,’’ after‘‘disability insurance’’;

(B) in subparagraph (C)—(i) by inserting ‘‘, including a separate esti-

mate of the amount of interest earned on thecontributions,’’ after ‘‘hospital insurance’’;and

(ii) by striking ‘‘and’’ after the semicolon;(C) in subparagraph (D), by striking the pe-

riod at the end and inserting a semicolon;(D) by redesignating subparagraphs (A),

(B), (C), and (D) as subparagraphs (B), (C),(D), and (E), respectively;

(E) by inserting after the matter precedingsubparagraph (B), as redesignated by sub-paragraph (D), the following:

‘‘(A) the name, age, gender, mailing ad-dress, and marital status of the eligible indi-vidual;’’;

(F) by adding at the end the following:‘‘(F) the total amount of the employer and

employee contributions for the eligible indi-vidual for old-age and survivors insurancebenefits, as of the end of the month preced-ing the date of the statement, in both actualdollars and dollars adjusted for inflation;

‘‘(G) the projected value of—‘‘(i) the aggregate amount of the employer

and employee contributions for old-age andsurvivors insurance benefits that are ex-pected to be made by or on behalf of the indi-vidual prior to the individual attaining re-tirement age, in both actual dollars and dol-lars adjusted for inflation;

‘‘(ii) the annual amount of old-age and sur-vivors insurance benefits that are expectedto be payable on the eligible individual’s ac-count for a single individual and for a mar-ried couple, in dollars adjusted for inflation;

‘‘(iii) the total amount of old-age and sur-vivors insurance benefits payable on the eli-gible individual’s account for the individ-ual’s life expectancy, in dollars adjusted forinflation, identifying—

‘‘(I) the life expectancy assumed;‘‘(II) the amount of benefits received on

the basis of each $1 of contributions made byor on behalf of the individual; and

‘‘(III) the projected annual rate of returnfor the individual, taking into account thedate on which the contributions are made inthe eligible individual’s account and the dateon which the benefits are paid;

‘‘(iv) the total amount of old-age and sur-vivors insurance benefits that would have ac-cumulated on the eligible individual’s ac-count on the date on which the individual at-tains retirement age if the contributions forsuch individual had been invested in Treas-ury 10-year saving bonds at the prevailing in-terest rate for such bonds as of the end of themonth preceding the date of the statement,and, alternatively, in the Standard andPoor’s 500, or an equivalent portfolio of com-mon stock equities that are based on a broadindex of United States market performance,in dollars adjusted for inflation,identifying—

‘‘(I) the date of retirement assumed;‘‘(II) the interest rate used for the projec-

tion; and‘‘(III) the amount that would be received

on the basis of each $1 of contributions madeby or on behalf of the individual;

‘‘(H) the average annual rate of return, ad-justed for inflation, on the Treasury 10-yearsaving bond as of the date of the statement;

‘‘(I) the average annual rate of return, ad-justed for inflation, on the Standard andPoor’s 500, or an equivalent portfolio of com-mon stock equities that are based on a broadindex of United States market performance,for the preceding 25 years;

‘‘(J) a brief statement that identifies—

‘‘(i) the balance of the trust fund accountsas of the end of the month preceding the dateof the statement;

‘‘(ii) the annual estimated balance of thetrust fund accounts for each of the succeed-ing 30 years; and

‘‘(iii) the assumptions used to provide theinformation described in clauses (i) and (ii),including the rates of return and the natureof the investments of such trust fund ac-counts; and

‘‘(K) a simple 1-page summary and com-parison of the information that is providedto an eligible individual under subpara-graphs (G), (H), and (I).’’; and

(2) by striking paragraph (3) and insertingthe following:

‘‘(3) The estimated amounts required to beprovided in a statement under this sectionshall be determined by the Commissionerusing a general methodology for makingsuch estimates, as formulated and publishedat the beginning of each calendar year by theBoard of Trustees of the trust fund accounts.A description of the general methodologyused shall be provided to the eligible individ-ual as part of the statement required underthis section.

‘‘(4) The Commissioner of Social Securityshall notify an individual who receives a so-cial security account statement under thissection that the individual may request thatthe information described in paragraph (2) bedetermined on the basis of relevant informa-tion provided by the individual, including in-formation regarding the individual’s futureincome, marital status, date of retirement,or race.

‘‘(5) For purposes of this section—‘‘(A) the term ‘dollars adjusted for infla-

tion’ means—‘‘(i) dollars in constant or real value terms

on the date on which the statement is issued;and

‘‘(ii) an amount that is adjusted on thebasis of the Consumer Price Index.

‘‘(B) the term ‘eligible individual’ meansan individual who—

‘‘(i) has a social security account number;‘‘(ii) has attained age 25 or over; and‘‘(iii) has wages or net earnings from self-

employment; and‘‘(C) the term ‘trust fund account’ means—‘‘(i) the Federal Old-Age and Survivors In-

surance Trust Fund; and‘‘(ii) the Federal Disability Insurance

Trust Fund.’’.(b) MANDATORY PROVISION OF STATEMENTS

THROUGH MEANS SUCH AS THE INTERNET.—Section 1143(c)(2) of the Social Security Act(42 U.S.C. 1320b–13(c)(2)) is amended—

(1) in the first sentence, by inserting‘‘(which shall include the Internet as soon asthe Commissioner of Social Security deter-mines that adequate measures are in place toprotect the confidentiality of the informa-tion contained in the statement)’’ before theperiod; and

(2) by striking the second and third sen-tences.

(c) TECHNICAL AMENDMENT.—Section 1143 ofthe Social Security Act (42 U.S.C. 1320b–13) isamended by striking ‘‘Secretary’’ each placeit appears and inserting ‘‘Commissioner ofSocial Security’’.

(d) EFFECTIVE DATE.—The amendmentsmade by this Act shall apply to statementsprovided for fiscal years beginning with fis-cal year 2000.

By Mr. MACK (for himself, Mr.GRAMS, Mr. LIEBERMAN, and Mr.KYL):

S. 635. A bill to amend the InternalRevenue Code of 1986 to more accu-rately codify the depreciable life ofprinted wiring board and printed wir-

ing assembly equipment; to the Com-mittee on Finance.

THE PRINTED CIRCUIT INVESTMENT ACT OF 1999

Mr. MACK. Mr. President, today,along with Senators GRAMS,LIEBERMAN, and KYL, I introduce thePrinted Circuit Investment Act of 1999.This bill would allow manufacturers ofprinted wiring boards and printed wir-ing assemblies, known as the electronicinterconnection industry, to depreciatetheir production equipment in 3 yearsrather than the 5 year period undercurrent law.

As we approach the 21st century, ourNation’s Tax Code should not stand inthe way of technological progress.Printed wiring boards and assembliesare literally central to our economy, asthey are the nerve centers of nearlyevery electronic device fromcamcorders and televisions to medicaldevices, computers and defense sys-tems. But the Tax Code places U.S.manufacturers at the disadvantage rel-ative to their Asian competitors, be-cause of different depreciation treat-ment. This disadvantage is particularlydifficult for U.S. firms to bear, as theinterconnection industry consists over-whelmingly of small firms that cannoteasily absorb the costs inflicted by anirrationally-long depreciated schedule.

As technology continues to advanceat light speed, the exhilaration of com-petition in a dynamic market is damp-ened by the effects of a tax code thathas not kept pace with these changes.Obsolete interconnection manufactur-ing equipment is kept on the bookslong after this equipment has gone outthe door. Companies with the competi-tive fire to enter such a rapidly-evolv-ing industry must constantly invest innew state-of-the art equipment, replac-ing obsolete equipment every 18 to 36months just to remain competitive.U.S. investments in new printed wiringboard and assembly manufacturingequipment have nearly tripled since1991—growing from $847 million to anestimated $2.4 billion.

But this investment is taxed at anartificially-high rate, because deduc-tions for the cost of the equipment arespread over a period that is severalyears longer than justified. The indus-try is at the mercy of tax laws passedin the 1980s, which were based on 1970s-era electronics technology. It is nowonder that the market share of U.S.interconnection companies has beencut in half over this period. Our TaxCode should not continue to underminethe competitiveness of American busi-nesses. The opportunity is before us tocorrect the tax laws that dictate howrapidly board manufacturers and elec-tronic assemblers can depreciate equip-ment needed to fabricate and assemblecircuit boards.

The Printed Circuit Investment Actof 1999 will provide modest tax relief tothe electronics interconnection indus-try and the 250,000 Americans, residingin every state in the Union, whose jobsrely on the success of this industry.This industry should get fair and accu-rate tax treatment.

CONGRESSIONAL RECORD — SENATES2776 March 16, 1999Mr. President, I ask unanimous con-

sent that the text of the bill be printedin the RECORD.

There being no objection, the bill wasordered to be printed in the RECORD, asfollows:

S. 635Be it enacted by the Senate and House of Rep-

resentatives of the United States of America inCongress assembled,SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Printed Cir-cuit Investment Act of 1999’’.SEC. 2. 3-YEAR DEPRECIABLE LIFE FOR PRINTED

WIRING BOARD AND PRINTED WIR-ING ASSEMBLY EQUIPMENT.

(a) IN GENERAL.—Subparagraph (A) of sec-tion 168(e)(3) of the Internal Revenue Code of1986 (relating to classification of property) isamended by striking ‘‘and’’ at the end ofclause (ii), by striking the period at the endof clause (iii) and inserting ‘‘, and’’, and byadding at the end the following new clause:

‘‘(iv) any printed wiring board or printedwiring assembly equipment.’’

(b) 3-YEAR CLASS LIFE.—Subparagraph (B)of section 168(g)(3) of such Code is amendedby inserting after the item relating to sub-paragraph (A)(iii) the following new item:‘‘(A)(iv) .............................................. 3’’.

(c) EFFECTIVE DATE.—The amendmentsmade by this section shall apply to equip-ment placed in service after the date of theenactment of this Act.

By Mr. SCHUMER:S. 637. A bill to amend title 18,

United States Code, to regulate thetransfer of firearms over the Internet,and for other purposes; to the Commit-tee on the Judiciary.

THE INTERNET GUN TRAFFICKING ACT OF 1999

∑ Mr. SCHUMER. Mr. President, todayI am introducing the Internet GunTrafficking Act of 1999. The Act wouldplug a gaping loophole in the enforce-ment of federal firearms laws—theability of felons and minors to findguns for sale on-line and illegally ac-quire those guns without detection.

The Internet affords computerusers—including children and felons—easier-than-ever access to individualsoffering firearms for sale. It also facili-tates firearms transactions in whichsellers and buyers need not meet face-to-face. For these reasons, individualswho are legally prohibited from pur-chasing or selling firearms can turn tothe Internet to find others willing toengage in gun transactions withthem—either knowing or not knowingof the illegality of such transactions.Unlike firearms sales at gun dealer-ships and even gun shows, illegal Inter-net firearms sales occur ‘‘sight un-seen,’’ thus presenting significant en-forcement challenges for federal, stateand local authorities.

In particular, a number of Internetweb-sites are designed specifically toallow individuals who are not licensedfirearms dealers to offer their firearmsfor sale. These individuals post phonenumbers or e-mail addresses by whichpotential buyers may contact them.Unfortunately, the operators of theseweb-sites do not monitor the inter-actions between firearms sellers andbuyers. Thus, sellers and buyers maywith ‘‘no-questions-asked’’ and littleprospect of detection evade laws pro-hibiting sales of certain types of fire-

arms, prohibiting firearms sales to fel-ons and minors, and prohibiting the di-rect shipment of firearms to unlicensedpersons.

Last month, eBay—a popular on-lineauction site that had allowed users tolist firearms for sale—changed its pol-icy to prohibit auctions selling fire-arms, explaining: ‘‘The current lawsgoverning the sale of firearms werecreated for the non-Internet sale offirearms. These laws may work well inthe real world, but they work less wellfor the on-line trading of firearms,where the seller and the buyer rarelymeet face-to-face. The on-line sellercannot readily guarantee that thebuyer meets all the qualifications andcomplies with the laws governing thesale of firearms.’’

The Internet Gun Trafficking Act of1999 would end the unlicensed sale offirearms using the Internet.

First, it would require anyone whooperates an Internet web-site which of-fers firearms for sale or otherwise fa-cilitates the sale of firearms posted orlisted on the web-site to become a fed-erally licensed firearms manufacturer,importer, or dealer. Currently, personswho operate web-sites that post classi-fied advertisements for the sale of hun-dreds of firearms need not be licensedunder federal law, even though suchsales may be intricately linked to theirtrade or business and provide themwith substantial profits. Requiringthese persons to secure a federal fire-arms license would, among otherthings, enable them to more activelymonitor firearms transactions facili-tated by their web-sites.

Second, it would require anyone whooperates an Internet web-site which of-fers firearms for sale or otherwise fa-cilitates the sale of firearms posted orlisted on the web-site to notify the Sec-retary of the Treasury of the address ofthe web-site. This requirement aims tofacilitate necessary law enforcementinvestigations of Internet firearmssales.

Third, it would require anyone whooperates an Internet web-site whichposts or lists firearms for sale on be-half of other persons to serve as a‘‘middleman’’ for any resulting guntransactions. Under the bill, the web-site operators in question would do thisby, first, prohibiting the posting of in-formation on these sites that would en-able prospective firearms sellers andbuyers to contact one another directly(such as phone numbers or e-mail ad-dresses), and thus bypass involvementby web-site operators, and, second, re-quiring that all firearms sold as a re-sult of being listed on their web-sitesbe shipped to them, as federally li-censed firearms dealers, rather than di-rectly to the buyers. Once the operatorof the web-site received a firearm fromthe seller, it would have to complywith federal firearms laws in transfer-ring the firearm to the buyer, includ-ing laws requiring that firearms beshipped to a licensed dealer in an unli-censed buyer’s state rather than di-rectly to an unlicensed buyer.

And fourth, it would prohibit unli-censed individuals who offer firearms

for sale on ‘‘gun show’’ web-sites fromshipping firearms sold as a result ofbeing listed on such web-sites to any-one other than the web-site operator.

Certainly, there is much to embraceabout the Internet. It facilitates com-mercial competition and places awealth of valuable and formerly inac-cessible information at the fingertipsof computer users. But as we praisethis important new medium of commu-nication and commerce, we cannot af-ford to ignore its potential for facili-tating illegal and dangerous conduct. Ibelieve that the Internet Gun Traffick-ing Act of 1999 is a measured and ap-propriate response to the challengesposed by the Internet to the enforce-ment of federal firearms laws. I askunanimous consent that the text of thebill be printed in the RECORD.

There being no objection, the bill wasordered to be printed in the RECORD, asfollows:

S. 637

Be it enacted by the Senate and House of Rep-resentatives of the United States of America inCongress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘InternetGun Trafficking Act of 1999’’.

SEC. 2. REGULATION OF INTERNET FIREARMSTRANSFERS.

(a) PROHIBITIONS.—Section 922 of title 18,United States Code, is amended by insertingafter subsection (y) the following:

‘‘(z) REGULATION OF INTERNET FIREARMS

TRANSFERS.—‘‘(1) IN GENERAL.—It shall be unlawful for

any person to operate an Internet website, ifa purpose of the website is to offer 1 or morefirearms for sale or exchange, or is to other-wise facilitate the sale or exchange of 1 ormore firearms posted or listed on thewebsite, unless—

‘‘(A) the person is licensed as a manufac-turer, importer, or dealer under section 923;

‘‘(B) the person notifies the Secretary ofthe Internet address of the website, and anyother information concerning the website asthe Secretary may require by regulation;and

‘‘(C) if any firearm posted or listed for saleor exchange on the website is not from thebusiness inventory or personal collection ofthat person—

‘‘(i) the person, as a term or condition forposting or listing the firearm for sale or ex-change on the website on behalf of a prospec-tive transferor, requires that, in the event ofany agreement to sell or exchange the fire-arm pursuant to that posting or listing, thefirearm be transferred to that person for dis-position in accordance with clause (iii);

‘‘(ii) the person prohibits the posting orlisting on the website of any information (in-cluding any name, nickname, telephonenumber, address, or electronic mail address)that is reasonably likely to enable the pro-spective transferor and prospective trans-feree to contact one another directly prior tothe shipment of the firearm to that personunder clause (i), except that this clause doesnot include any information relating solelyto the manufacturer, importer, model, cali-ber, gauge, physical attributes, operation,performance, or price of the firearm; and

‘‘(iii) with respect to each firearm receivedfrom a prospective transferor under clause(i), the person—

CONGRESSIONAL RECORD — SENATE S2777March 16, 1999‘‘(I) enters such information about the fire-

arm as the Secretary may require by regula-tion into a separate bound record;

‘‘(II) in transferring the firearm to anytransferee, complies with the requirementsof this chapter as if the firearm were beingtransferred from the business inventory ofthat person; and

‘‘(III) if the prospective transferor does notprovide the person with a certified copy of avalid firearms license issued to the prospec-tive transferor under this chapter, submitsto the Secretary a report of the transfer orother disposition of the firearm on a formspecified by the Secretary, which reportshall not include the name of, or any otheridentifying information relating to, thetransferor.

‘‘(2) TRANSFERS BY PERSONS OTHER THAN LI-CENSEES.—It shall be unlawful for any personwho is not licensed under section 923 totransfer a firearm pursuant to a posting orlisting of the firearm for sale or exchange onan Internet website described in paragraph(1) to any person other than the operator ofthe website.’’.

(b) PENALTIES.—Section 924(a) of title 18,United States Code, is amended by adding atthe end the following:

‘‘(7) Whoever willfully violates section922(z)(2) shall be fined under this title, im-prisoned not more than 2 years, or both.’’.

f

ADDITIONAL COSPONSORSS. 98

At the request of Mr. MCCAIN, thename of the Senator from Virginia [Mr.WARNER] was added as a cosponsor of S.98, a bill to authorize appropriationsfor the Surface Transportation Boardfor fiscal years 1999, 2000, 2001, and 2002,and for other purposes.

S. 115

At the request of Ms. SNOWE, thename of the Senator from New Jersey[Mr. LAUTENBERG] was added as a co-sponsor of S. 115, a bill to require thathealth plans provide coverage for aminimum hospital stay formastectomies and lymph node dissec-tion for the treatment of breast cancerand coverage for secondary consulta-tions.

S. 290

At the request of Mr. ABRAHAM, thenames of the Senator from Iowa [Mr.GRASSLEY] and the Senator from Ala-bama [Mr. SESSIONS] were added as co-sponsors of S. 290, a bill to establish anadoption awareness program, and forother purposes.

S. 322

At the request of Mr. CAMPBELL, thename of the Senator from Virginia [Mr.ROBB] was added as a cosponsor of S.322, a bill to amend title 4, UnitedStates Code, to add the Martin LutherKing, Jr. holiday to the list of days onwhich the flag should especially be dis-played.

S. 326

At the request of Mr. JEFFORDS, thename of the Senator from Montana[Mr. BURNS] was added as a cosponsorof S. 326, a bill to improve the accessand choice of patients to quality, af-fordable health care.

S. 331

At the request of Mr. JEFFORDS, thenames of the Senator from Washington

[Mr. GORTON] and the Senator fromMichigan [Mr. ABRAHAM] were added ascosponsors of S. 331, a bill to amend theSocial Security Act to expand theavailability of health care coverage forworking individuals with disabilities,to establish a Ticket to Work and Self-Sufficiency Program in the Social Se-curity Administration to provide suchindividuals with meaningful opportuni-ties to work, and for other purposes.

S. 346

At the request of Mrs. HUTCHISON, thename of the Senator from Pennsyl-vania [Mr. SANTORUM] was added as acosponsor of S. 346, A bill to amendtitle XIX of the Social Security Act toprohibit the recoupment of funds re-covered by States from one or more to-bacco manufacturers.

S. 414

At the request of Mr. GRASSLEY, thename of the Senator from Iowa [Mr.HARKIN] was added as a cosponsor of S.414, a bill to amend the Internal Reve-nue Code of 1986 to provide a 5-year ex-tension of the credit for producingelectricity from wind, and for otherpurposes.

S. 429

At the request of Mr. DURBIN, thename of the Senator from South Da-kota [Mr. JOHNSON] was added as a co-sponsor of S. 429, a bill to designate thelegal public holiday of ‘‘Washington’sBirthday’’ as ‘‘Presidents’ Day’’ inhonor of George Washington, AbrahamLincoln, and Franklin Roosevelt and inrecognition of the importance of theinstitution of the Presidency and thecontributions that Presidents havemade to the development of our Nationand the principles of freedom and de-mocracy.

S. 463

At the request of Mr. ABRAHAM, thenames of the Senator from Arkansas[Mr. HUTCHINSON], the Senator fromKansas [Mr. BROWNBACK], and the Sen-ator from Texas [Mrs. HUTCHISON] wereadded as cosponsors of S. 463, a bill toamend the Internal Revenue Code of1986 to provide for the designation ofrenewal communities, to provide taxincentives relating to such commu-nities, and for other purposes.

S. 472

At the request of Mr. GRASSLEY, thename of the Senator from Kansas [Mr.BROWNBACK] was added as a cosponsorof S. 472, a bill to amend title XVIII ofthe Social Security Act to provide cer-tain medicare beneficiaries with an ex-emption to the financial limitationsimposed on physical, speech-languagepathology, and occupational therapyservices under part B of the medicareprogram, and for other purposes.

S. 502

At the request of Mr. ASHCROFT, thenames of the Senator from Wyoming[Mr. ENZI], the Senator from Oklahoma[Mr. INHOFE], and the Senator fromWashington [Mr. GORTON] were addedas cosponsors of S. 502, a bill to protectsocial security.

S. 531

At the request of Mr. ABRAHAM, thenames of the Senator from Indiana[Mr. BAYH], the Senator from Indiana[Mr. LUGAR], the Senator from NorthDakota [Mr. DORGAN], the Senatorfrom West Virginia [Mr. ROCKEFELLER],the Senator from Kansas [Mr.BROWNBACK], and the Senator fromCalifornia [Mrs. BOXER] were added ascosponsors of S. 531, a bill to authorizethe President to award a gold medal onbehalf of the Congress to Rosa Parks inrecognition of her contributions to theNation.

S. 542

At the request of Mr. ABRAHAM, thename of the Senator from North Caro-lina [Mr. HELMS] was added as a co-sponsor of S. 542, a bill to amend theInternal Revenue Code of 1986 to ex-pand the deduction for computer dona-tions to schools and allow a tax creditfor donated computers.

S. 597

At the request of Mr. SMITH, thenames of the Senator from Minnesota[Mr. GRAMS] and the Senator from Ala-bama [Mr. SESSIONS] were added as co-sponsors of S. 597, a bill to amend sec-tion 922 of chapter 44 of title 28, UnitedStates Code, to protect the right ofcitizens under the Second Amendmentto the Constitution of the UnitedStates.

SENATE RESOLUTION 33

At the request of Mr. MCCAIN, thenames of the Senator from Utah [Mr.HATCH], the Senator from North Caro-lina [Mr. EDWARDS], the Senator fromDelaware [Mr. BIDEN], the Senatorfrom Nevada [Mr. REID], the Senatorfrom Indiana [Mr. LUGAR], and the Sen-ator from South Carolina [Mr. HOL-LINGS] were added as cosponsors of Sen-ate Resolution 33, a resolution des-ignating May 1999 as ‘‘National Mili-tary Appreciation Month.’’

SENATE RESOLUTION 34

At the request of Mr. TORRICELLI, thenames of the Senator from Florida [Mr.GRAHAM] and the Senator from Alaska[Mr. STEVENS] were added as cospon-sors of Senate Resolution 34, a resolu-tion designating the week beginningApril 30, 1999, as ‘‘National Youth Fit-ness Week.’’

SENATE RESOLUTION 47

At the request of Mr. MURKOWSKI, thenames of the Senator from Alaska [Mr.STEVENS], and the Senator from Con-necticut [Mr. LIEBERMAN] were addedas cosponsors of Senate Resolution 47,a resolution designating the week ofMarch 21 through March 27, 1999, as‘‘National Inhalants and PoisonsAwareness Week.’’

SENATE RESOLUTION 50

At the request of Mr. SPECTER, thename of the Senator from North Caro-lina [Mr. HELMS] was added as a co-sponsor of Senate Resolution 50, a reso-lution designating March 25, 1999, as‘‘Greek Independence Day: A Day ofCelebration of Greek and American De-mocracy.’’