One Hundred Ninth Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Tuesday,
the fourth day of January, two thousand and five
An Act
To amend title 11 of the United States Code, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.
(a) SHORT TITLE- This Act may be cited as the `Bankruptcy Abuse Prevention and Consumer Protection Act of 2005'.
(b) TABLE OF CONTENTS- The table of contents for this Act is as follows:
Sec. 1. Short title; references; table of contents.
TITLE I--NEEDS-BASED BANKRUPTCY
Sec. 101. Conversion.
Sec. 102. Dismissal or conversion.
Sec. 103. Sense of Congress and study.
Sec. 104. Notice of alternatives.
Sec. 105. Debtor financial management training test program.
Sec. 106. Credit counseling.
Sec. 107. Schedules of reasonable and necessary expenses.
TITLE II--ENHANCED CONSUMER PROTECTION
Subtitle A--Penalties for Abusive Creditor Practices
Sec. 201. Promotion of alternative dispute resolution.
Sec. 202. Effect of discharge.
Sec. 203. Discouraging abuse of reaffirmation agreement practices.
Sec. 204. Preservation of claims and defenses upon sale of predatory loans.
Sec. 205. GAO study and report on reaffirmation agreement process.
Subtitle B--Priority Child Support
Sec. 211. Definition of domestic support obligation.
Sec. 212. Priorities for claims for domestic support obligations.
Sec. 213. Requirements to obtain confirmation and discharge in cases involving domestic support obligations.
Sec. 214. Exceptions to automatic stay in domestic support obligation proceedings.
Sec. 215. Nondischargeability of certain debts for alimony, maintenance, and support.
Sec. 216. Continued liability of property.
Sec. 217. Protection of domestic support claims against preferential transfer motions.
Sec. 218. Disposable income defined.
Sec. 219. Collection of child support.
Sec. 220. Nondischargeability of certain educational benefits and loans.
Subtitle C--Other Consumer Protections
Sec. 221. Amendments to discourage abusive bankruptcy filings.
Sec. 222. Sense of Congress.
Sec. 223. Additional amendments to title 11, United States Code.
Sec. 224. Protection of retirement savings in bankruptcy.
Sec. 225. Protection of education savings in bankruptcy.
Sec. 226. Definitions.
Sec. 227. Restrictions on debt relief agencies.
Sec. 228. Disclosures.
Sec. 229. Requirements for debt relief agencies.
Sec. 230. GAO study.
Sec. 231. Protection of personally identifiable information.
Sec. 232. Consumer privacy ombudsman.
Sec. 233. Prohibition on disclosure of name of minor children.
Sec. 234. Protection of personal information.
TITLE III--DISCOURAGING BANKRUPTCY ABUSE
Sec. 301. Technical amendments.
Sec. 302. Discouraging bad faith repeat filings.
Sec. 303. Curbing abusive filings.
Sec. 304. Debtor retention of personal property security.
Sec. 305. Relief from the automatic stay when the debtor does not complete intended surrender of consumer debt collateral.
Sec. 306. Giving secured creditors fair treatment in chapter 13.
Sec. 307. Domiciliary requirements for exemptions.
Sec. 308. Reduction of homestead exemption for fraud.
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 bankruptcy discharges.
Sec. 313. Definition of household goods and antiques.
Sec. 314. Debt incurred to pay nondischargeable debts.
Sec. 315. Giving creditors fair notice in chapters 7 and 13 cases.
Sec. 316. Dismissal for failure to timely file schedules or provide required information.
Sec. 317. Adequate time to prepare for hearing on confirmation of the plan.
Sec. 318. Chapter 13 plans to have a 5-year duration in certain cases.
Sec. 319. Sense of Congress regarding expansion of rule 9011 of the Federal Rules of Bankruptcy Procedure.
Sec. 320. Prompt relief from stay in individual cases.
Sec. 321. Chapter 11 cases filed by individuals.
Sec. 322. Limitations on homestead exemption.
Sec. 323. Excluding employee benefit plan participant contributions and other property from the estate.
Sec. 324. Exclusive jurisdiction in matters involving bankruptcy professionals.
Sec. 325. United States trustee program filing fee increase.
Sec. 326. Sharing of compensation.
Sec. 327. Fair valuation of collateral.
Sec. 328. Defaults based on nonmonetary obligations.
Sec. 329. Clarification of postpetition wages and benefits.
Sec. 330. Delay of discharge during pendency of certain proceedings.
Sec. 331. Limitation on retention bonuses, severance pay, and certain other payments.
Sec. 332. Fraudulent involuntary bankruptcy.
TITLE IV--GENERAL AND SMALL BUSINESS BANKRUPTCY PROVISIONS
Subtitle A--General Business Bankruptcy Provisions
Sec. 401. Adequate protection for investors.
Sec. 402. Meetings of creditors and equity security holders.
Sec. 403. Protection of refinance of security interest.
Sec. 404. Executory contracts and unexpired leases.
Sec. 405. Creditors and equity security holders committees.
Sec. 406. Amendment to section 546 of title 11, United States Code.
Sec. 407. Amendments to section 330(a) of title 11, United States Code.
Sec. 408. Postpetition disclosure and solicitation.
Sec. 409. Preferences.
Sec. 410. Venue of certain proceedings.
Sec. 411. Period for filing plan under chapter 11.
Sec. 412. Fees arising from certain ownership interests.
Sec. 413. Creditor representation at first meeting of creditors.
Sec. 414. Definition of disinterested person.
Sec. 415. Factors for compensation of professional persons.
Sec. 416. Appointment of elected trustee.
Sec. 417. Utility service.
Sec. 418. Bankruptcy fees.
Sec. 419. More complete information regarding assets of the estate.
Subtitle B--Small Business Bankruptcy Provisions
Sec. 431. Flexible rules for disclosure statement and plan.
Sec. 432. Definitions.
Sec. 433. Standard form disclosure statement and plan.
Sec. 434. Uniform national reporting requirements.
Sec. 435. Uniform reporting rules and forms for small business cases.
Sec. 436. Duties in small business cases.
Sec. 437. Plan filing and confirmation deadlines.
Sec. 438. Plan confirmation deadline.
Sec. 439. Duties of the United States trustee.
Sec. 440. Scheduling conferences.
Sec. 441. Serial filer provisions.
Sec. 442. Expanded grounds for dismissal or conversion and appointment of trustee.
Sec. 443. Study of operation of title 11, United States Code, with respect to small businesses.
Sec. 444. Payment of interest.
Sec. 445. Priority for administrative expenses.
Sec. 446. Duties with respect to a debtor who is a plan administrator of an employee benefit plan.
Sec. 447. Appointment of committee of retired employees.
TITLE V--MUNICIPAL BANKRUPTCY PROVISIONS
Sec. 501. Petition and proceedings related to petition.
Sec. 502. Applicability of other sections to chapter 9.
TITLE VI--BANKRUPTCY DATA
Sec. 601. Improved bankruptcy statistics.
Sec. 602. Uniform rules for the collection of bankruptcy data.
Sec. 603. Audit procedures.
Sec. 604. Sense of Congress regarding availability of bankruptcy data.
TITLE VII--BANKRUPTCY TAX PROVISIONS
Sec. 701. Treatment of certain liens.
Sec. 702. Treatment of fuel tax claims.
Sec. 703. Notice of request for a determination of taxes.
Sec. 704. Rate of interest on tax claims.
Sec. 705. Priority of tax claims.
Sec. 706. Priority property taxes incurred.
Sec. 707. No discharge of fraudulent taxes in chapter 13.
Sec. 708. No discharge of fraudulent taxes in chapter 11.
Sec. 709. Stay of tax proceedings limited to prepetition taxes.
Sec. 710. Periodic payment of taxes in chapter 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.
Sec. 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.
Sec. 719. Special provisions related to the treatment of State and local taxes.
Sec. 720. Dismissal for failure to timely file tax returns.
TITLE VIII--ANCILLARY AND OTHER CROSS-BORDER CASES
Sec. 801. Amendment to add chapter 15 to title 11, United States Code.
Sec. 802. Other amendments to titles 11 and 28, United States Code.
TITLE IX--FINANCIAL CONTRACT PROVISIONS
Sec. 901. Treatment of certain agreements by conservators or receivers of insured depository institutions.
Sec. 902. Authority of the FDIC and NCUAB with respect to failed and failing institutions.
Sec. 903. Amendments relating to transfers of qualified financial contracts.
Sec. 904. Amendments relating to disaffirmance or repudiation of qualified financial contracts.
Sec. 905. Clarifying amendment relating to master agreements.
Sec. 906. Federal Deposit Insurance Corporation Improvement Act of 1991.
Sec. 907. Bankruptcy law amendments.
Sec. 908. Recordkeeping requirements.
Sec. 909. Exemptions from contemporaneous execution requirement.
Sec. 910. Damage measure.
Sec. 911. SIPC stay.
TITLE X--PROTECTION OF FAMILY FARMERS AND FAMILY FISHERMEN
Sec. 1001. Permanent reenactment of chapter 12.
Sec. 1002. Debt limit increase.
Sec. 1003. Certain claims owed to governmental units.
Sec. 1004. Definition of family farmer.
Sec. 1005. Elimination of requirement that family farmer and spouse
receive over 50 percent of income from farming operation in year prior
to bankruptcy.
Sec. 1006. Prohibition of retroactive assessment of disposable income.
Sec. 1007. Family fishermen.
TITLE XI--HEALTH CARE AND EMPLOYEE BENEFITS
Sec. 1101. Definitions.
Sec. 1102. Disposal of patient records.
Sec. 1103. Administrative expense claim for costs of closing a health care business and other administrative expenses.
Sec. 1104. Appointment of ombudsman to act as patient advocate.
Sec. 1105. Debtor in possession; duty of trustee to transfer patients.
Sec. 1106. Exclusion from program participation not subject to automatic stay.
TITLE XII--TECHNICAL AMENDMENTS
Sec. 1201. Definitions.
Sec. 1202. Adjustment of dollar amounts.
Sec. 1203. Extension of time.
Sec. 1204. Technical amendments.
Sec. 1205. Penalty for persons who negligently or fraudulently prepare bankruptcy petitions.
Sec. 1206. Limitation on compensation of professional persons.
Sec. 1207. Effect of conversion.
Sec. 1208. Allowance of administrative expenses.
Sec. 1209. Exceptions to discharge.
Sec. 1210. Effect of discharge.
Sec. 1211. Protection against discriminatory treatment.
Sec. 1212. Property of the estate.
Sec. 1213. Preferences.
Sec. 1214. Postpetition transactions.
Sec. 1215. Disposition of property of the estate.
Sec. 1216. General provisions.
Sec. 1217. Abandonment of railroad line.
Sec. 1218. Contents of plan.
Sec. 1219. Bankruptcy cases and proceedings.
Sec. 1220. Knowing disregard of bankruptcy law or rule.
Sec. 1221. Transfers made by nonprofit charitable corporations.
Sec. 1222. Protection of valid purchase money security interests.
Sec. 1223. Bankruptcy Judgeships.
Sec. 1224. Compensating trustees.
Sec. 1225. Amendment to section 362 of title 11, United States Code.
Sec. 1226. Judicial education.
Sec. 1227. Reclamation.
Sec. 1228. Providing requested tax documents to the court.
Sec. 1229. Encouraging creditworthiness.
Sec. 1230. Property no longer subject to redemption.
Sec. 1231. Trustees.
Sec. 1232. Bankruptcy forms.
Sec. 1233. Direct appeals of bankruptcy matters to courts of appeals.
Sec. 1234. Involuntary cases.
Sec. 1235. Federal election law fines and penalties as nondischargeable debt.
TITLE XIII--CONSUMER CREDIT DISCLOSURE
Sec. 1301. Enhanced disclosures under an open end credit plan.
Sec. 1302. Enhanced disclosure for credit extensions secured by a dwelling.
Sec. 1303. Disclosures related to `introductory rates'.
Sec. 1304. Internet-based credit card solicitations.
Sec. 1305. Disclosures related to late payment deadlines and penalties.
Sec. 1306. Prohibition on certain actions for failure to incur finance charges.
Sec. 1307. Dual use debit card.
Sec. 1308. Study of bankruptcy impact of credit extended to dependent students.
Sec. 1309. Clarification of clear and conspicuous.
TITLE XIV--PREVENTING CORPORATE BANKRUPTCY ABUSE
Sec. 1401. Employee wage and benefit priorities.
Sec. 1402. Fraudulent transfers and obligations.
Sec. 1403. Payment of insurance benefits to retired employees.
Sec. 1404. Debts nondischargeable if incurred in violation of securities fraud laws.
Sec. 1405. Appointment of trustee in cases of suspected fraud.
Sec. 1406. Effective date; application of amendments.
TITLE XV--GENERAL EFFECTIVE DATE; APPLICATION OF AMENDMENTS
Sec. 1501. Effective date; application of amendments.
Sec. 1502. Technical corrections.
TITLE I--NEEDS-BASED BANKRUPTCY
SEC. 101. CONVERSION.
Section 706(c) of title 11, United States Code, is amended by inserting `or consents to' 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 inserting the following:
`Sec. 707. Dismissal of a case or conversion to a case under chapter 11 or 13';
and
(2) in subsection (b)--
(A) by inserting `(1)' after `(b)';
(B) in paragraph (1), as so redesignated by subparagraph (A) of this paragraph--
(i) in the first sentence--
(I) by striking `but not at the request or suggestion of' and inserting
`trustee (or bankruptcy administrator, if any), or';
(II) by inserting `, or, with the debtor's consent, convert such a case
to a case under chapter 11 or 13 of this title,' after `consumer
debts'; and
(III) by striking `a substantial abuse' and inserting `an 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 an abuse of the provisions of this chapter, the court
shall presume abuse exists if the debtor's current monthly income
reduced by the amounts determined under clauses (ii), (iii), and (iv),
and multiplied by 60 is not less than the lesser of--
`(I) 25 percent of the debtor's nonpriority unsecured claims in the case, or $6,000, whichever is greater; or
`(II) $10,000.
`(ii)(I) The debtor's monthly expenses shall be the debtor's applicable
monthly expense amounts specified under the National Standards and
Local Standards, and the debtor's actual monthly expenses for the
categories specified as Other Necessary Expenses issued by the Internal
Revenue Service for the area in which the debtor resides, as in effect
on the date of the order for relief, for the debtor, the dependents of
the debtor, and the spouse of the debtor in a joint case, if the spouse
is not otherwise a dependent. Such expenses shall include reasonably
necessary health insurance, disability insurance, and health savings
account expenses for the debtor, the spouse of the debtor, or the
dependents of the debtor. Notwithstanding any other provision of this
clause, the monthly expenses of the debtor shall not include any
payments for debts. In addition, the debtor's monthly expenses shall
include the debtor's reasonably necessary expenses incurred to maintain
the safety of the debtor and the family of the debtor from family
violence as identified under section 309 of the Family Violence
Prevention and Services Act, or other applicable Federal law. The
expenses included in the debtor's monthly expenses described in the
preceding sentence shall be kept confidential by the court. In
addition, if it is demonstrated that it is reasonable and necessary,
the debtor's monthly expenses may also include an additional allowance
for food and clothing of up to 5 percent of the food and clothing
categories as specified by the National Standards issued by the
Internal Revenue Service.
`(II) In addition, the debtor's monthly expenses may include, if
applicable, the continuation of actual expenses paid by the debtor that
are reasonable and necessary for care and support of an elderly,
chronically ill, or disabled household member or member of the debtor's
immediate family (including parents, grandparents, siblings, children,
and grandchildren of the debtor, the dependents of the debtor, and the
spouse of the debtor in a joint case who is not a dependent) and who is
unable to pay for such reasonable and necessary expenses.
`(III) In addition, for a debtor eligible for chapter 13, the debtor's
monthly expenses may include the actual administrative expenses of
administering a chapter 13 plan for the district in which the debtor
resides, up to an amount of 10 percent of the projected plan payments,
as determined under schedules issued by the Executive Office for United
States Trustees.
`(IV) In addition, the debtor's monthly expenses may include the actual
expenses for each dependent child less than 18 years of age, not to
exceed $1,500 per year per child, to attend a private or public
elementary or secondary school if the debtor provides documentation of
such expenses and a detailed explanation of why such expenses are
reasonable and necessary, and why such expenses are not already
accounted for in the National Standards, Local Standards, or Other
Necessary Expenses referred to in subclause (I).
`(V) In addition, the debtor's monthly expenses may include an
allowance for housing and utilities, in excess of the allowance
specified by the Local Standards for housing and utilities issued by
the Internal Revenue Service, based on the actual expenses for home
energy costs if the debtor provides documentation of such actual
expenses and demonstrates that such actual expenses are reasonable and
necessary.
`(iii) The debtor's average monthly payments on account of secured debts shall be calculated as the sum of--
`(I) the total of all amounts scheduled as contractually due to secured
creditors in each month of the 60 months following the date of the
petition; and
`(II) any additional payments to secured creditors necessary for the
debtor, in filing a plan under chapter 13 of this title, to maintain
possession of the debtor's primary residence, motor vehicle, or other
property necessary for the support of the debtor and the debtor's
dependents, that serves as collateral for secured debts;
divided by 60.
`(iv) The debtor's expenses for payment of all priority claims
(including priority child support and alimony claims) shall be
calculated as the total amount of debts entitled to priority, divided
by 60.
`(B)(i) In any proceeding brought under this subsection, the
presumption of abuse may only be rebutted by demonstrating special
circumstances, such as a serious medical condition or a call or order
to active duty in the Armed Forces, to the extent such special
circumstances that justify additional expenses or adjustments of
current monthly income for which there is no reasonable alternative.
`(ii) In order to establish special circumstances, the debtor shall be
required to itemize each additional expense or adjustment of income and
to provide--
`(I) documentation for such expense or adjustment to income; and
`(II) a detailed explanation of the special circumstances that make
such expenses or adjustment to income necessary and reasonable.
`(iii) The debtor shall attest under oath to the accuracy of any
information provided to demonstrate that additional expenses or
adjustments to income are required.
`(iv) The presumption of abuse may only be rebutted if the additional
expenses or adjustments to income referred to in clause (i) cause the
product of the debtor's current monthly income reduced by the amounts
determined under clauses (ii), (iii), and (iv) of subparagraph (A) when
multiplied by 60 to be less than the lesser of--
`(I) 25 percent of the debtor's nonpriority unsecured claims, or $6,000, whichever is greater; or
`(II) $10,000.
`(C) As part of the schedule of current income and expenditures
required under section 521, the debtor shall include a statement of the
debtor's current monthly income, and the calculations that determine
whether a presumption arises under subparagraph (A)(i), that show how
each such amount is calculated.
`(D) Subparagraphs (A) through (C) shall not apply, and the court may
not dismiss or convert a case based on any form of means testing, if
the debtor is a disabled veteran (as defined in section 3741(1) of
title 38), and the indebtedness occurred primarily during a period
during which he or she was--
`(i) on active duty (as defined in section 101(d)(1) of title 10); or
`(ii) performing a homeland defense activity (as defined in section 901(1) of title 32).
`(3) In considering under paragraph (1) whether the granting of relief
would be an abuse of the provisions of this chapter in a case in which
the presumption in subparagraph (A)(i) of such paragraph does not arise
or is rebutted, the court shall consider--
`(A) whether the debtor filed the petition in bad faith; or
`(B) the totality of the circumstances (including whether the debtor
seeks to reject a personal services contract and the financial need for
such rejection as sought by the debtor) of the debtor's financial
situation demonstrates abuse.
`(4)(A) The court, on its own initiative or on the motion of a party in
interest, in accordance with the procedures described in rule 9011 of
the Federal Rules of Bankruptcy Procedure, may order the attorney for
the debtor to reimburse the trustee for all reasonable costs in
prosecuting a motion filed under section 707(b), including reasonable
attorneys' fees, if--
`(i) a trustee files a motion for dismissal or conversion under this subsection; and
`(ii) the court--
`(I) grants such motion; and
`(II) finds that the action of the attorney for the debtor in filing a
case under this chapter violated rule 9011 of the Federal Rules of
Bankruptcy Procedure.
`(B) If the court finds that the attorney for the debtor violated rule
9011 of the Federal Rules of Bankruptcy Procedure, the court, on its
own initiative or on the motion of a party in interest, in accordance
with such procedures, may order--
`(i) the assessment of an appropriate civil penalty against the attorney for the debtor; and
`(ii) the payment of such civil penalty to the trustee, the United States trustee (or the bankruptcy administrator, if any).
`(C) The signature of an attorney on a petition, pleading, or written
motion shall constitute a certification that the attorney has--
`(i) performed a reasonable investigation into the circumstances that
gave rise to the petition, pleading, or written motion; and
`(ii) determined that the petition, pleading, or written motion--
`(I) is well grounded in fact; and
`(II) is warranted by existing law or a good faith argument for the
extension, modification, or reversal of existing law and does not
constitute an abuse under paragraph (1).
`(D) The signature of an attorney on the petition shall constitute a
certification that the attorney has no knowledge after an inquiry that
the information in the schedules filed with such petition is incorrect.
`(5)(A) Except as provided in subparagraph (B) and subject to paragraph
(6), the court, on its own initiative or on the motion of a party in
interest, in accordance with the procedures described in rule 9011 of
the Federal Rules of Bankruptcy Procedure, may award a debtor all
reasonable costs (including reasonable attorneys' fees) in contesting a
motion filed by a party in interest (other than a trustee or United
States trustee (or bankruptcy administrator, if any)) under this
subsection if--
`(i) the court does not grant the motion; and
`(ii) the court finds that--
`(I) the position of the party that filed the motion violated rule 9011 of the Federal Rules of Bankruptcy Procedure; or
`(II) the attorney (if any) who filed the motion did not comply with
the requirements of clauses (i) and (ii) of paragraph (4)(C), and the
motion was made solely for the purpose of coercing a debtor into
waiving a right guaranteed to the debtor under this title.
`(B) A small business that has a claim of an aggregate amount less than
$1,000 shall not be subject to subparagraph (A)(ii)(I).
`(C) For purposes of this paragraph--
`(i) the term `small business' means an unincorporated business,
partnership, corporation, association, or organization that--
`(I) has fewer than 25 full-time employees as determined on the date on which the motion is filed; and
`(II) is engaged in commercial or business activity; and
`(ii) the number of employees of a wholly owned subsidiary of a corporation includes the employees of--
`(I) a parent corporation; and
`(II) any other subsidiary corporation of the parent corporation.
`(6) Only the judge or United States trustee (or bankruptcy
administrator, if any) may file a motion under section 707(b), if the
current monthly income of the debtor, or in a joint case, the debtor
and the debtor's spouse, as of the date of the order for relief, when
multiplied by 12, is equal to or less than--
`(A) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;
`(B) in the case of a debtor in a household of 2, 3, or 4 individuals,
the highest median family income of the applicable State for a family
of the same number or fewer individuals; or
`(C) in the case of a debtor in a household exceeding 4 individuals,
the highest median family income of the applicable State for a family
of 4 or fewer individuals, plus $525 per month for each individual in
excess of 4.
`(7)(A) No judge, United States trustee (or bankruptcy administrator,
if any), trustee, or other party in interest may file a motion under
paragraph (2) if the current monthly income of the debtor, including a
veteran (as that term is defined in section 101 of title 38), and the
debtor's spouse combined, as of the date of the order for relief when
multiplied by 12, is equal to or less than--
`(i) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;
`(ii) in the case of a debtor in a household of 2, 3, or 4 individuals,
the highest median family income of the applicable State for a family
of the same number or fewer individuals; or
`(iii) in the case of a debtor in a household exceeding 4 individuals,
the highest median family income of the applicable State for a family
of 4 or fewer individuals, plus $525 per month for each individual in
excess of 4.
`(B) In a case that is not a joint case, current monthly income of the
debtor's spouse shall not be considered for purposes of subparagraph
(A) if--
`(i)(I) the debtor and the debtor's spouse are separated under applicable nonbankruptcy law; or
`(II) the debtor and the debtor's spouse are living separate and apart,
other than for the purpose of evading subparagraph (A); and
`(ii) the debtor files a statement under penalty of perjury--
`(I) specifying that the debtor meets the requirement of subclause (I) or (II) of clause (i); and
`(II) disclosing the aggregate, or best estimate of the aggregate,
amount of any cash or money payments received from the debtor's spouse
attributed to the debtor's current monthly income.'.
(b) DEFINITION- Section 101 of title 11, United States Code, is amended by inserting after paragraph (10) the following:
`(10A) `current monthly income'--
`(A) means the average monthly income from all sources that the debtor
receives (or in a joint case the debtor and the debtor's spouse
receive) without regard to whether such income is taxable income,
derived during the 6-month period ending on--
`(i) the last day of the calendar month immediately preceding the date
of the commencement of the case if the debtor files the schedule of
current income required by section 521(a)(1)(B)(ii); or
`(ii) the date on which current income is determined by the court for
purposes of this title if the debtor does not file the schedule of
current income required by section 521(a)(1)(B)(ii); and
`(B) includes any amount paid by any entity other than the debtor (or
in a joint case the debtor and the debtor's spouse), on a regular basis
for the household expenses of the debtor or the debtor's dependents
(and in a joint case the debtor's spouse if not otherwise a dependent),
but excludes benefits received under the Social Security Act, payments
to victims of war crimes or crimes against humanity on account of their
status as victims of such crimes, and payments to victims of
international terrorism (as defined in section 2331 of title 18) or
domestic terrorism (as defined in section 2331 of title 18) on account
of their status as victims of such terrorism;'.
(c) UNITED STATES TRUSTEE AND BANKRUPTCY ADMINISTRATOR DUTIES- Section 704 of title 11, United States Code, is amended--
(1) by inserting `(a)' before `The trustee shall--'; and
(2) by adding at the end the following:
`(b)(1) With respect to a debtor who is an individual in a case under this chapter--
`(A) the United States trustee (or the bankruptcy administrator, if
any) shall review all materials filed by the debtor and, not later than
10 days after the date of the first meeting of creditors, file with the
court a statement as to whether the debtor's case would be presumed to
be an abuse under section 707(b); and
`(B) not later than 5 days after receiving a statement under
subparagraph (A), the court shall provide a copy of the statement to
all creditors.
`(2) The United States trustee (or bankruptcy administrator, if any)
shall, not later than 30 days after the date of filing a statement
under paragraph (1), either file a motion to dismiss or convert under
section 707(b) or file a statement setting forth the reasons the United
States trustee (or the bankruptcy administrator, if any) does not
consider such a motion to be appropriate, if the United States trustee
(or the bankruptcy administrator, if any) determines that the debtor's
case should be presumed to be an abuse under section 707(b) and the
product of the debtor's current monthly income, multiplied by 12 is not
less than--
`(A) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner; or
`(B) in the case of a debtor in a household of 2 or more individuals,
the highest median family income of the applicable State for a family
of the same number or fewer individuals.'.
(d) NOTICE- Section 342 of title 11, United States Code, is amended by adding at the end the following:
`(d) In a case under chapter 7 of this title in which the debtor is an
individual and in which the presumption of abuse arises under section
707(b), the clerk shall give written notice to all creditors not later
than 10 days after the date of the filing of the petition that the
presumption of abuse has arisen.'.
(e) NONLIMITATION OF INFORMATION- Nothing in this title shall limit the
ability of a creditor to provide information to a judge (except for
information communicated ex parte, unless otherwise permitted by
applicable law), United States trustee (or bankruptcy administrator, if
any), or trustee.
(f) DISMISSAL FOR CERTAIN CRIMES- Section 707 of title 11, United
States Code, is amended by adding at the end the following:
`(c)(1) In this subsection--
`(A) the term `crime of violence' has the meaning given such term in section 16 of title 18; and
`(B) the term `drug trafficking crime' has the meaning given such term in section 924(c)(2) of title 18.
`(2) Except as provided in paragraph (3), after notice and a hearing,
the court, on a motion by the victim of a crime of violence or a drug
trafficking crime, may when it is in the best interest of the victim
dismiss a voluntary case filed under this chapter by a debtor who is an
individual if such individual was convicted of such crime.
`(3) The court may not dismiss a case under paragraph (2) if the debtor
establishes by a preponderance of the evidence that the filing of a
case under this chapter is necessary to satisfy a claim for a domestic
support obligation.'.
(g) CONFIRMATION OF PLAN- Section 1325(a) of title 11, United States Code, is amended--
(1) in paragraph (5), by striking `and' at the end;
(2) in paragraph (6), by striking the period and inserting a semicolon; and
(3) by inserting after paragraph (6) the following:
`(7) the action of the debtor in filing the petition was in good faith;'.
(h) APPLICABILITY OF MEANS TEST TO CHAPTER 13- Section 1325(b) of title 11, United States Code, is amended--
(1) in paragraph (1)(B), by inserting `to unsecured creditors' after `to make payments'; and
(2) by striking paragraph (2) and inserting the following:
`(2) For purposes of this subsection, the term `disposable income'
means current monthly income received by the debtor (other than child
support payments, foster care payments, or disability payments for a
dependent child made in accordance with applicable nonbankruptcy law to
the extent reasonably necessary to be expended for such child) less
amounts reasonably necessary to be expended--
`(A)(i) for the maintenance or support of the debtor or a dependent of
the debtor, or for a domestic support obligation, that first becomes
payable after the date the petition is filed; and
`(ii) for charitable contributions (that meet the definition of
`charitable contribution' under section 548(d)(3) to a qualified
religious or charitable entity or organization (as defined in section
548(d)(4)) in an amount not to exceed 15 percent of gross income of the
debtor for the year in which the contributions are made; and
`(B) if the debtor is engaged in business, for the payment of
expenditures necessary for the continuation, preservation, and
operation of such business.
`(3) Amounts reasonably necessary to be expended under paragraph (2)
shall be determined in accordance with subparagraphs (A) and (B) of
section 707(b)(2), if the debtor has current monthly income, when
multiplied by 12, greater than--
`(A) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;
`(B) in the case of a debtor in a household of 2, 3, or 4 individuals,
the highest median family income of the applicable State for a family
of the same number or fewer individuals; or
`(C) in the case of a debtor in a household exceeding 4 individuals,
the highest median family income of the applicable State for a family
of 4 or fewer individuals, plus $525 per month for each individual in
excess of 4.'.
(i) SPECIAL ALLOWANCE FOR HEALTH INSURANCE- Section 1329(a) of title 11, United States Code, is amended--
(1) in paragraph (2) by striking `or' at the end;
(2) in paragraph (3) by striking the period at the end and inserting `; or'; and
(3) by adding at the end the following:
`(4) reduce amounts to be paid under the plan by the actual amount
expended by the debtor to purchase health insurance for the debtor (and
for any dependent of the debtor if such dependent does not otherwise
have health insurance coverage) if the debtor documents the cost of
such insurance and demonstrates that--
`(A) such expenses are reasonable and necessary;
`(B)(i) if the debtor previously paid for health insurance, the amount
is not materially larger than the cost the debtor previously paid or
the cost necessary to maintain the lapsed policy; or
`(ii) if the debtor did not have health insurance, the amount is not
materially larger than the reasonable cost that would be incurred by a
debtor who purchases health insurance, who has similar income,
expenses, age, and health status, and who lives in the same
geographical location with the same number of dependents who do not
otherwise have health insurance coverage; and
`(C) the amount is not otherwise allowed for purposes of determining disposable income under section 1325(b) of this title;
and upon request of any party in interest, files proof that a health insurance policy was purchased.'.
(j) ADJUSTMENT OF DOLLAR AMOUNTS- Section 104(b) of title 11, United
States Code, is amended by striking `and 523(a)(2)(C)' each place it
appears and inserting `523(a)(2)(C), 707(b), and 1325(b)(3)'.
(k) DEFINITION OF `MEDIAN FAMILY INCOME'- Section 101 of title 11,
United States Code, is amended by inserting after paragraph (39) the
following:
`(39A) `median family income' means for any year--
`(A) the median family income both calculated and reported by the Bureau of the Census in the then most recent year; and
`(B) if not so calculated and reported in the then current year,
adjusted annually after such most recent year until the next year in
which median family income is both calculated and reported by the
Bureau of the Census, to reflect the percentage change in the Consumer
Price Index for All Urban Consumers during the period of years
occurring after such most recent year and before such current year;'.
(k) CLERICAL AMENDMENT- The table of sections for chapter 7 of title
11, United States Code, is amended by striking the item relating to
section 707 and inserting the following:
`707. Dismissal of a case or conversion to a case under chapter 11 or 13.'.
SEC. 103. SENSE OF CONGRESS AND STUDY.
(a) SENSE OF CONGRESS- It is the sense of Congress that the Secretary
of the Treasury has the authority to alter the Internal Revenue Service
standards established to set guidelines for repayment plans as needed
to accommodate their use under section 707(b) of title 11, United
States Code.
(b) STUDY-
(1) IN GENERAL- Not later than 2 years after the date of enactment of
this Act, the Director of the Executive Office for United States
Trustees shall submit a report to the Committee on the Judiciary of the
Senate and the Committee on the Judiciary of the House of
Representatives containing the findings of the Director regarding the
utilization of Internal Revenue Service standards for determining--
(A) the current monthly expenses of a debtor under section 707(b) of title 11, United States Code; and
(B) the impact that the application of such standards has had on debtors and on the bankruptcy courts.
(2) RECOMMENDATION- The report under paragraph (1) may include
recommendations for amendments to title 11, United States Code, that
are consistent with the findings of the Director under paragraph (1).
SEC. 104. NOTICE OF ALTERNATIVES.
Section 342(b) of title 11, United States Code, is amended to read as follows:
`(b) Before the commencement of a case under this title by an
individual whose debts are primarily consumer debts, the clerk shall
give to such individual written notice containing--
`(1) a brief description of--
`(A) chapters 7, 11, 12, and 13 and the general purpose, benefits, and
costs of proceeding under each of those chapters; and
`(B) the types of services available from credit counseling agencies; and
`(2) statements specifying that--
`(A) a person who knowingly and fraudulently conceals assets or makes a
false oath or statement under penalty of perjury in connection with a
case under this title shall be subject to fine, imprisonment, or both;
and
`(B) all information supplied by a debtor in connection with a case
under this title is subject to examination by the Attorney General.'.
SEC. 105. DEBTOR FINANCIAL MANAGEMENT TRAINING TEST PROGRAM.
(a) DEVELOPMENT OF FINANCIAL MANAGEMENT AND TRAINING CURRICULUM AND
MATERIALS- The Director of the Executive Office for United States
Trustees (in this section referred to as the `Director') shall consult
with a wide range of individuals who are experts in the field of debtor
education, including trustees who serve in cases under chapter 13 of
title 11, United States Code, and who operate financial management
education programs for debtors, and shall develop a financial
management training curriculum and materials that can be used to
educate debtors who are individuals on how to better manage their
finances.
(b) TEST-
(1) SELECTION OF DISTRICTS- The Director shall select 6 judicial
districts of the United States in which to test the effectiveness of
the financial management training curriculum and materials developed
under subsection (a).
(2) USE- For an 18-month period beginning not later than 270 days after
the date of the enactment of this Act, such curriculum and materials
shall be, for the 6 judicial districts selected under paragraph (1),
used as the instructional course concerning personal financial
management for purposes of section 111 of title 11, United States Code.
(c) EVALUATION-
(1) IN GENERAL- During the 18-month period referred to in subsection (b), the Director shall evaluate the effectiveness of--
(A) the financial management training curriculum and materials developed under subsection (a); and
(B) a sample of existing consumer education programs such as those
described in the Report of the National Bankruptcy Review Commission
(October 20, 1997) that are representative of consumer education
programs carried out by the credit industry, by trustees serving under
chapter 13 of title 11, United States Code, and by consumer counseling
groups.
(2) REPORT- Not later than 3 months after concluding such evaluation,
the Director shall submit a report to the Speaker of the House of
Representatives and the President pro tempore of the Senate, for
referral to the appropriate committees of the Congress, containing the
findings of the Director regarding the effectiveness of such
curriculum, such materials, and such programs and their costs.
SEC. 106. CREDIT COUNSELING.
(a) WHO MAY BE A DEBTOR- Section 109 of title 11, United States Code, is amended by adding at the end the following:
`(h)(1) Subject to paragraphs (2) and (3), and notwithstanding any
other provision of this section, an individual may not be a debtor
under this title unless such individual has, during the 180-day period
preceding the date of filing of the petition by such individual,
received from an approved nonprofit budget and credit counseling agency
described in section 111(a) an individual or group briefing (including
a briefing conducted by telephone or on the Internet) that outlined the
opportunities for available credit counseling and assisted such
individual in performing a related budget analysis.
`(2)(A) Paragraph (1) shall not apply with respect to a debtor who
resides in a district for which the United States trustee (or the
bankruptcy administrator, if any) determines that the approved
nonprofit budget and credit counseling agencies for such district are
not reasonably able to provide adequate services to the additional
individuals who would otherwise seek credit counseling from such
agencies by reason of the requirements of paragraph (1).
`(B) The United States trustee (or the bankruptcy administrator, if
any) who makes a determination described in subparagraph (A) shall
review such determination not later than 1 year after the date of such
determination, and not less frequently than annually thereafter.
Notwithstanding the preceding sentence, a nonprofit budget and credit
counseling agency may be disapproved by the United States trustee (or
the bankruptcy administrator, if any) at any time.
`(3)(A) Subject to subparagraph (B), the requirements of paragraph (1)
shall not apply with respect to a debtor who submits to the court a
certification that--
`(i) describes exigent circumstances that merit a waiver of the requirements of paragraph (1);
`(ii) states that the debtor requested credit counseling services from
an approved nonprofit budget and credit counseling agency, but was
unable to obtain the services referred to in paragraph (1) during the
5-day period beginning on the date on which the debtor made that
request; and
`(iii) is satisfactory to the court.
`(B) With respect to a debtor, an exemption under subparagraph (A)
shall cease to apply to that debtor on the date on which the debtor
meets the requirements of paragraph (1), but in no case may the
exemption apply to that debtor after the date that is 30 days after the
debtor files a petition, except that the court, for cause, may order an
additional 15 days.
`(4) The requirements of paragraph (1) shall not apply with respect to
a debtor whom the court determines, after notice and hearing, is unable
to complete those requirements because of incapacity, disability, or
active military duty in a military combat zone. For the purposes of
this paragraph, incapacity means that the debtor is impaired by reason
of mental illness or mental deficiency so that he is incapable of
realizing and making rational decisions with respect to his financial
responsibilities; and `disability' means that the debtor is so
physically impaired as to be unable, after reasonable effort, to
participate in an in person, telephone, or Internet briefing required
under paragraph (1).'.
(b) CHAPTER 7 DISCHARGE- Section 727(a) of title 11, United States Code, is amended--
(1) in paragraph (9), by striking `or' at the end;
(2) in paragraph (10), by striking the period and inserting `; or'; and
(3) by adding at the end the following:
`(11) after filing the petition, the debtor failed to complete an
instructional course concerning personal financial management described
in section 111, except that this paragraph shall not apply with respect
to a debtor who is a person described in section 109(h)(4) or who
resides in a district for which the United States trustee (or the
bankruptcy administrator, if any) determines that the approved
instructional courses are not adequate to service the additional
individuals who would otherwise be required to complete such
instructional courses under this section (The United States trustee (or
the bankruptcy administrator, if any) who makes a determination
described in this paragraph shall review such determination not later
than 1 year after the date of such determination, and not less
frequently than annually thereafter.).'.
(c) CHAPTER 13 DISCHARGE- Section 1328 of title 11, United States Code, is amended by adding at the end the following:
`(g)(1) The court shall not grant a discharge under this section to a
debtor unless after filing a petition the debtor has completed an
instructional course concerning personal financial management described
in section 111.
`(2) Paragraph (1) shall not apply with respect to a debtor who is a
person described in section 109(h)(4) or who resides in a district for
which the United States trustee (or the bankruptcy administrator, if
any) determines that the approved instructional courses are not
adequate to service the additional individuals who would otherwise be
required to complete such instructional course by reason of the
requirements of paragraph (1).
`(3) The United States trustee (or the bankruptcy administrator, if
any) who makes a determination described in paragraph (2) shall review
such determination not later than 1 year after the date of such
determination, and not less frequently than annually thereafter.'.
(d) DEBTOR'S DUTIES- Section 521 of title 11, United States Code, is amended--
(1) by inserting `(a)' before `The debtor shall--'; and
(2) by adding at the end the following:
`(b) In addition to the requirements under subsection (a), a debtor who is an individual shall file with the court--
`(1) a certificate from the approved nonprofit budget and credit
counseling agency that provided the debtor services under section
109(h) describing the services provided to the debtor; and
`(2) a copy of the debt repayment plan, if any, developed under section
109(h) through the approved nonprofit budget and credit counseling
agency referred to in paragraph (1).'.
(e) GENERAL PROVISIONS-
(1) IN GENERAL- Chapter 1 of title 11, United States Code, is amended by adding at the end the following:
`(a) The clerk shall maintain a publicly available list of--
`(1) nonprofit budget and credit counseling agencies that provide 1 or
more services described in section 109(h) currently approved by the
United States trustee (or the bankruptcy administrator, if any); and
`(2) instructional courses concerning personal financial management
currently approved by the United States trustee (or the bankruptcy
administrator, if any), as applicable.
`(b) The United States trustee (or bankruptcy administrator, if any)
shall only approve a nonprofit budget and credit counseling agency or
an instructional course concerning personal financial management as
follows:
`(1) The United States trustee (or bankruptcy administrator, if any)
shall have thoroughly reviewed the qualifications of the nonprofit
budget and credit counseling agency or of the provider of the
instructional course under the standards set forth in this section, and
the services or instructional courses that will be offered by such
agency or such provider, and may require such agency or such provider
that has sought approval to provide information with respect to such
review.
`(2) The United States trustee (or bankruptcy administrator, if any)
shall have determined that such agency or such instructional course
fully satisfies the applicable standards set forth in this section.
`(3) If a nonprofit budget and credit counseling agency or
instructional course did not appear on the approved list for the
district under subsection (a) immediately before approval under this
section, approval under this subsection of such agency or such
instructional course shall be for a probationary period not to exceed 6
months.
`(4) At the conclusion of the applicable probationary period under
paragraph (3), the United States trustee (or bankruptcy administrator,
if any) may only approve for an additional 1-year period, and for
successive 1-year periods thereafter, an agency or instructional course
that has demonstrated during the probationary or applicable subsequent
period of approval that such agency or instructional course--
`(A) has met the standards set forth under this section during such period; and
`(B) can satisfy such standards in the future.
`(5) Not later than 30 days after any final decision under paragraph
(4), an interested person may seek judicial review of such decision in
the appropriate district court of the United States.
`(c)(1) The United States trustee (or the bankruptcy administrator, if
any) shall only approve a nonprofit budget and credit counseling agency
that demonstrates that it will provide qualified counselors, maintain
adequate provision for safekeeping and payment of client funds, provide
adequate counseling with respect to client credit problems, and deal
responsibly and effectively with other matters relating to the quality,
effectiveness, and financial security of the services it provides.
`(2) To be approved by the United States trustee (or the bankruptcy
administrator, if any), a nonprofit budget and credit counseling agency
shall, at a minimum--
`(A) have a board of directors the majority of which--
`(i) are not employed by such agency; and
`(ii) will not directly or indirectly benefit financially from the
outcome of the counseling services provided by such agency;
`(B) if a fee is charged for counseling services, charge a reasonable
fee, and provide services without regard to ability to pay the fee;
`(C) provide for safekeeping and payment of client funds, including an
annual audit of the trust accounts and appropriate employee bonding;
`(D) provide full disclosures to a client, including funding sources,
counselor qualifications, possible impact on credit reports, and any
costs of such program that will be paid by such client and how such
costs will be paid;
`(E) provide adequate counseling with respect to a client's credit
problems that includes an analysis of such client's current financial
condition, factors that caused such financial condition, and how such
client can develop a plan to respond to the problems without incurring
negative amortization of debt;
`(F) provide trained counselors who receive no commissions or bonuses
based on the outcome of the counseling services provided by such
agency, and who have adequate experience, and have been adequately
trained to provide counseling services to individuals in financial
difficulty, including the matters described in subparagraph (E);
`(G) demonstrate adequate experience and background in providing credit counseling; and
`(H) have adequate financial resources to provide continuing support
services for budgeting plans over the life of any repayment plan.
`(d) The United States trustee (or the bankruptcy administrator, if
any) shall only approve an instructional course concerning personal
financial management--
`(1) for an initial probationary period under subsection (b)(3) if the course will provide at a minimum--
`(A) trained personnel with adequate experience and training in providing effective instruction and services;
`(B) learning materials and teaching methodologies designed to assist
debtors in understanding personal financial management and that are
consistent with stated objectives directly related to the goals of such
instructional course;
`(C) adequate facilities situated in reasonably convenient locations at
which such instructional course is offered, except that such facilities
may include the provision of such instructional course by telephone or
through the Internet, if such instructional course is effective;
`(D) the preparation and retention of reasonable records (which shall
include the debtor's bankruptcy case number) to permit evaluation of
the effectiveness of such instructional course, including any
evaluation of satisfaction of instructional course requirements for
each debtor attending such instructional course, which shall be
available for inspection and evaluation by the Executive Office for
United States Trustees, the United States trustee (or the bankruptcy
administrator, if any), or the chief bankruptcy judge for the district
in which such instructional course is offered; and
`(E) if a fee is charged for the instructional course, charge a
reasonable fee, and provide services without regard to ability to pay
the fee.
`(2) for any 1-year period if the provider thereof has demonstrated
that the course meets the standards of paragraph (1) and, in addition--
`(A) has been effective in assisting a substantial number of debtors to understand personal financial management; and
`(B) is otherwise likely to increase substantially the debtor's understanding of personal financial management.
`(e) The district court may, at any time, investigate the
qualifications of a nonprofit budget and credit counseling agency
referred to in subsection (a), and request production of documents to
ensure the integrity and effectiveness of such agency. The district
court may, at any time, remove from the approved list under subsection
(a) a nonprofit budget and credit counseling agency upon finding such
agency does not meet the qualifications of subsection (b).
`(f) The United States trustee (or the bankruptcy administrator, if
any) shall notify the clerk that a nonprofit budget and credit
counseling agency or an instructional course is no longer approved, in
which case the clerk shall remove it from the list maintained under
subsection (a).
`(g)(1) No nonprofit budget and credit counseling agency may provide to
a credit reporting agency information concerning whether a debtor has
received or sought instruction concerning personal financial management
from such agency.
`(2) A nonprofit budget and credit counseling agency that willfully or
negligently fails to comply with any requirement under this title with
respect to a debtor shall be liable for damages in an amount equal to
the sum of--
`(A) any actual damages sustained by the debtor as a result of the violation; and
`(B) any court costs or reasonable attorneys' fees (as determined by
the court) incurred in an action to recover those damages.'.
(2) CLERICAL AMENDMENT- The table of sections for chapter 1 of title
11, United States Code, is amended by adding at the end the following:
(f) LIMITATION- Section 362 of title 11, United States Code, is amended by adding at the end the following:
`(i) If a case commenced under chapter 7, 11, or 13 is dismissed due to
the creation of a debt repayment plan, for purposes of subsection
(c)(3), any subsequent case commenced by the debtor under any such
chapter shall not be presumed to be filed not in good faith.
`(j) On request of a party in interest, the court shall issue an order
under subsection (c) confirming that the automatic stay has been
terminated.'.
SEC. 107. SCHEDULES OF REASONABLE AND NECESSARY EXPENSES.
For purposes of section 707(b) of title 11, United States Code, as
amended by this Act, the Director of the Executive Office for United
States Trustees shall, not later than 180 days after the date of
enactment of this Act, issue schedules of reasonable and necessary
administrative expenses of administering a chapter 13 plan for each
judicial district of the United States.
TITLE II--ENHANCED CONSUMER PROTECTION
Subtitle A--Penalties for Abusive Creditor Practices
SEC. 201. PROMOTION OF ALTERNATIVE DISPUTE RESOLUTION.
(a) REDUCTION OF CLAIM- Section 502 of title 11, United States Code, is amended by adding at the end the following:
`(k)(1) The court, on the motion of the debtor and after a hearing, may
reduce a claim filed under this section based in whole on an unsecured
consumer debt by not more than 20 percent of the claim, if--
`(A) the claim was filed by a creditor who unreasonably refused to
negotiate a reasonable alternative repayment schedule proposed on
behalf of the debtor by an approved nonprofit budget and credit
counseling agency described in section 111;
`(B) the offer of the debtor under subparagraph (A)--
`(i) was made at least 60 days before the date of the filing of the petition; and
`(ii) provided for payment of at least 60 percent of the amount of the
debt over a period not to exceed the repayment period of the loan, or a
reasonable extension thereof; and
`(C) no part of the debt under the alternative repayment schedule is nondischargeable.
`(2) The debtor shall have the burden of proving, by clear and convincing evidence, that--
`(A) the creditor unreasonably refused to consider the debtor's proposal; and
`(B) the proposed alternative repayment schedule was made prior to
expiration of the 60-day period specified in paragraph (1)(B)(i).'.
(b) LIMITATION ON AVOIDABILITY- Section 547 of title 11, United States Code, is amended by adding at the end the following:
`(h) The trustee may not avoid a transfer if such transfer was made as
a part of an alternative repayment schedule between the debtor and any
creditor of the debtor created by an approved nonprofit budget and
credit counseling agency.'.
SEC. 202. EFFECT OF DISCHARGE.
Section 524 of title 11, United States Code, is amended by adding at the end the following:
`(i) The willful failure of a creditor to credit payments received
under a plan confirmed under this title, unless the order confirming
the plan is revoked, the plan is in default, or the creditor has not
received payments required to be made under the plan in the manner
required by the plan (including crediting the amounts required under
the plan), shall constitute a violation of an injunction under
subsection (a)(2) if the act of the creditor to collect and failure to
credit payments in the manner required by the plan caused material
injury to the debtor.
`(j) Subsection (a)(2) does not operate as an injunction against an act
by a creditor that is the holder of a secured claim, if--
`(1) such creditor retains a security interest in real property that is the principal residence of the debtor;
`(2) such act is in the ordinary course of business between the creditor and the debtor; and
`(3) such act is limited to seeking or obtaining periodic payments
associated with a valid security interest in lieu of pursuit of in rem
relief to enforce the lien.'.
SEC. 203. DISCOURAGING ABUSE OF REAFFIRMATION AGREEMENT PRACTICES.
(a) IN GENERAL- Section 524 of title 11, United States Code, as amended section 202, is amended--
(1) in subsection (c), by striking paragraph (2) and inserting the following:
`(2) the debtor received the disclosures described in subsection (k) at
or before the time at which the debtor signed the agreement;'; and
(2) by adding at the end the following:
`(k)(1) The disclosures required under subsection (c)(2) shall consist
of the disclosure statement described in paragraph (3), completed as
required in that paragraph, together with the agreement specified in
subsection (c), statement, declaration, motion and order described,
respectively, in paragraphs (4) through (8), and shall be the only
disclosures required in connection with entering into such agreement.
`(2) Disclosures made under paragraph (1) shall be made clearly and
conspicuously and in writing. The terms `Amount Reaffirmed' and `Annual
Percentage Rate' shall be disclosed more conspicuously than other
terms, data or information provided in connection with this disclosure,
except that the phrases `Before agreeing to reaffirm a debt, review
these important disclosures' and `Summary of Reaffirmation Agreement'
may be equally conspicuous. Disclosures may be made in a different
order and may use terminology different from that set forth in
paragraphs (2) through (8), except that the terms `Amount Reaffirmed'
and `Annual Percentage Rate' must be used where indicated.
`(3) The disclosure statement required under this paragraph shall consist of the following:
`(A) The statement: `Part A: Before agreeing to reaffirm a debt, review these important disclosures:';
`(B) Under the heading `Summary of Reaffirmation Agreement', the
statement: `This Summary is made pursuant to the requirements of the
Bankruptcy Code';
`(C) The `Amount Reaffirmed', using that term, which shall be--
`(i) the total amount of debt that the debtor agrees to reaffirm by
entering into an agreement of the kind specified in subsection (c), and
`(ii) the total of any fees and costs accrued as of the date of the disclosure statement, related to such total amount.
`(D) In conjunction with the disclosure of the `Amount Reaffirmed', the statements--
`(i) `The amount of debt you have agreed to reaffirm'; and
`(ii) `Your credit agreement may obligate you to pay additional amounts
which may come due after the date of this disclosure. Consult your
credit agreement.'.
`(E) The `Annual Percentage Rate', using that term, which shall be disclosed as--
`(i) if, at the time the petition is filed, the debt is an extension of
credit under an open end credit plan, as the terms `credit' and `open
end credit plan' are defined in section 103 of the Truth in Lending
Act, then--
`(I) the annual percentage rate determined under paragraphs (5) and (6)
of section 127(b) of the Truth in Lending Act, as applicable, as
disclosed to the debtor in the most recent periodic statement prior to
entering into an agreement of the kind specified in subsection (c) or,
if no such periodic statement has been given to the debtor during the
prior 6 months, the annual percentage rate as it would have been so
disclosed at the time the disclosure statement is given to the debtor,
or to the extent this annual percentage rate is not readily available
or not applicable, then
`(II) the simple interest rate applicable to the amount reaffirmed as
of the date the disclosure statement is given to the debtor, or if
different simple interest rates apply to different balances, the simple
interest rate applicable to each such balance, identifying the amount
of each such balance included in the amount reaffirmed, or
`(III) if the entity making the disclosure elects, to disclose the
annual percentage rate under subclause (I) and the simple interest rate
under subclause (II); or
`(ii) if, at the time the petition is filed, the debt is an extension
of credit other than under an open end credit plan, as the terms
`credit' and `open end credit plan' are defined in section 103 of the
Truth in Lending Act, then--
`(I) the annual percentage rate under section 128(a)(4) of the Truth in
Lending Act, as disclosed to the debtor in the most recent disclosure
statement given to the debtor prior to the entering into an agreement
of the kind specified in subsection (c) with respect to the debt, or,
if no such disclosure statement was given to the debtor, the annual
percentage rate as it would have been so disclosed at the time the
disclosure statement is given to the debtor, or to the extent this
annual percentage rate is not readily available or not applicable, then
`(II) the simple interest rate applicable to the amount reaffirmed as
of the date the disclosure statement is given to the debtor, or if
different simple interest rates apply to different balances, the simple
interest rate applicable to each such balance, identifying the amount
of such balance included in the amount reaffirmed, or
`(III) if the entity making the disclosure elects, to disclose the
annual percentage rate under (I) and the simple interest rate under
(II).
`(F) If the underlying debt transaction was disclosed as a variable
rate transaction on the most recent disclosure given under the Truth in
Lending Act, by stating `The interest rate on your loan may be a
variable interest rate which changes from time to time, so that the
annual percentage rate disclosed here may be higher or lower.'.
`(G) If the debt is secured by a security interest which has not been
waived in whole or in part or determined to be void by a final order of
the court at the time of the disclosure, by disclosing that a security
interest or lien in goods or property is asserted over some or all of
the debts the debtor is reaffirming and listing the items and their
original purchase price that are subject to the asserted security
interest, or if not a purchase-money security interest then listing by
items or types and the original amount of the loan.
`(H) At the election of the creditor, a statement of the repayment schedule using 1 or a combination of the following--
`(i) by making the statement: `Your first payment in the amount of $XXX
is due on XXX but the future payment amount may be different. Consult
your reaffirmation agreement or credit agreement, as applicable.', and
stating the amount of the first payment and the due date of that
payment in the places provided;
`(ii) by making the statement: `Your payment schedule will be:', and
describing the repayment schedule with the number, amount, and due
dates or period of payments scheduled to repay the debts reaffirmed to
the extent then known by the disclosing party; or
`(iii) by describing the debtor's repayment obligations with reasonable
specificity to the extent then known by the disclosing party.
`(I) The following statement: `Note: When this disclosure refers to
what a creditor `may' do, it does not use the word `may' to give the
creditor specific permission. The word `may' is used to tell you what
might occur if the law permits the creditor to take the action. If you
have questions about your reaffirming a debt or what the law requires,
consult with the attorney who helped you negotiate this agreement
reaffirming a debt. If you don't have an attorney helping you, the
judge will explain the effect of your reaffirming a debt when the
hearing on the reaffirmation agreement is held.'.
`(J)(i) The following additional statements:
`Reaffirming a debt is a serious financial decision. The law requires
you to take certain steps to make sure the decision is in your best
interest. If these steps are not completed, the reaffirmation agreement
is not effective, even though you have signed it.
`1. Read the disclosures in this Part A carefully. Consider the
decision to reaffirm carefully. Then, if you want to reaffirm, sign the
reaffirmation agreement in Part B (or you may use a separate agreement
you and your creditor agree on).
`2. Complete and sign Part D and be sure you can afford to make the
payments you are agreeing to make and have received a copy of the
disclosure statement and a completed and signed reaffirmation
agreement.
`3. If you were represented by an attorney during the negotiation of
your reaffirmation agreement, the attorney must have signed the
certification in Part C.
`4. If you were not represented by an attorney during the negotiation
of your reaffirmation agreement, you must have completed and signed
Part E.
`5. The original of this disclosure must be filed with the court by you
or your creditor. If a separate reaffirmation agreement (other than the
one in Part B) has been signed, it must be attached.
`6. If you were represented by an attorney during the negotiation of
your reaffirmation agreement, your reaffirmation agreement becomes
effective upon filing with the court unless the reaffirmation is
presumed to be an undue hardship as explained in Part D.
`7. If you were not represented by an attorney during the negotiation
of your reaffirmation agreement, it will not be effective unless the
court approves it. The court will notify you of the hearing on your
reaffirmation agreement. You must attend this hearing in bankruptcy
court where the judge will review your reaffirmation agreement. The
bankruptcy court must approve your reaffirmation agreement as
consistent with your best interests, except that no court approval is
required if your reaffirmation agreement is for a consumer debt secured
by a mortgage, deed of trust, security deed, or other lien on your real
property, like your home.
`Your right to rescind (cancel) your reaffirmation agreement. You may
rescind (cancel) your reaffirmation agreement at any time before the
bankruptcy court enters a discharge order, or before the expiration of
the 60-day period that begins on the date your reaffirmation agreement
is filed with the court, whichever occurs later. To rescind (cancel)
your reaffirmation agreement, you must notify the creditor that your
reaffirmation agreement is rescinded (or canceled).
`What are your obligations if you reaffirm the debt? A reaffirmed debt
remains your personal legal obligation. It is not discharged in your
bankruptcy case. That means that if you default on your reaffirmed debt
after your bankruptcy case is over, your creditor may be able to take
your property or your wages. Otherwise, your obligations will be
determined by the reaffirmation agreement which may have changed the
terms of the original agreement. For example, if you are reaffirming an
open end credit agreement, the creditor may be permitted by that
agreement or applicable law to change the terms of that agreement in
the future under certain conditions.
`Are you required to enter into a reaffirmation agreement by any law?
No, you are not required to reaffirm a debt by any law. Only agree to
reaffirm a debt if it is in your best interest. Be sure you can afford
the payments you agree to make.
