The "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" in the 109th Congress
CRS Report for Congress
The “Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005”
th
in the 109 Congress
Updated May 11, 2005
Robin Jeweler
Legislative Attorney
American Law Division
Congressional Research Service ˜ The Library of Congress
The “Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005” in the 109th Congress
Summary
S. 256, the “Bankruptcy Abuse Prevention and Consumer Protection Act of
2005” (BAPCPA), 109th Congress, 1st Sess. (2005) was passed by the Senate with
several amendments on March 10, 2005. The House passed the Senate version,
without amendment, on April 14, 2005. The bill was signed into law, P.L. 109-8, by
President Bush on April 20, 2005. The new law addresses many areas of bankruptcy
practice, including consumer filings, small business bankruptcy, tax bankruptcy,
ancillary and cross-border cases, financial contract provisions, amendments to
chapter 12 governing family farmer reorganization, and health care and employee
benefits. This report surveys selected provisions of the new law.
Contents
In troduction ..................................................1
S. 256 in the Senate............................................1
S. 256 in the House.............................................4
Survey of Selected Provisions....................................4
The “Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005” in the
th
109 Congress
Introduction
After many years of deliberation and debate, Congress passed major bankruptcy
reform legislation. S. 256, 109th Cong., 1st Sess. (2005) was passed by the Senate
with several amendments on March 10, 2005. The Senate version was passed by the
House, without amendment, on April 14, 2005. The Bankruptcy Abuse Prevention
and Consumer Protection Act, P.L. 109-8, was presented to President Bush and
signed into law on April 20, 2005.
The U.S. Bankruptcy Code, 11 U.S.C. § 101 et seq., is divided into eight
chapters — chapters 1, 3, 5, 7, 9, 11, 12, and 13. Chapters 1, 3, and 5 govern general
procedures involving management and administration of the bankruptcy estate which
are applicable, as specified, to the operative chapters. Chapters 7 through 13, the
operative chapters, address the different forms of bankruptcy relief. Chapter 7
governs liquidation; chapter 11 governs business reorganization; chapter 12, family
farmer reorganization; and, chapter 13, consumer reorganization.
Also codified under Title 11 of the United States Code are the Rules of
Bankruptcy Court and officially authorized bankruptcy forms.
S. 256 in the Senate
The bill was reported favorably by the Senate Judiciary Committee on
February17, 2005, with several amendments. Among them are provisions which
!add health and disability insurance and health savings account
expenses for the debtor and dependents as allowable monthly
expenses under the means test;
!impose standards and limitations for court approval of executive
retention bonuses and severance pay. A bankruptcy court may not
approve a retention bonus unless the payment is essential to the
retention of the individual who has a bona fide job offer from
another business; the individual’s services are essential; and the
payment is not greater than either 10 times the amount of payments
made to non-managerial employees, or, if no such payments were
made, then 25 percent of executive compensation payments made
during the year before the bankruptcy filing. Severance payments
are limited as well. New § 331;
!makes nondischargeable any liability for violation of a federal
securities law regardless of whether the liability arises before,
during, or after the bankruptcy filing. New § 1404; and
!directs the U.S. Trustee to move for appointment of a chapter 11
bankruptcy trustee when there are reasonable grounds to suspect
members of the debtor’s governing body have participated in fraud,
dishonesty, or criminal conduct in the management of the debtor or
its public financial reporting. New § 1405.
The Senate took up consideration of the bill on March 1, 2005, and passed it by
a vote of 74 to 25 on March 10, 2005.1 Of 56 amendments offered, 8 were accepted.
Among floor amendments adopted were provisions:
!to amend the criteria to rebut the presumption of bankruptcy abuse
to specify that “special circumstances” may include a serious
medical condition or a call to active duty military service;2
!to add a new § 234 to the bill entitled “Protection of Personal
Information.” This provision would replace 11 U.S.C. § 107(b) and
amend 11 U.S.C. § 342(c) with language that substantially broadens
the authority of the bankruptcy court to protect personal information
about the debtor in bankruptcy documents;3
!to increase bankruptcy filing fees to support the U.S. Trustee System
Fund and new bankruptcy judgeships;4
!to add new monetary categories that are adjusted at three-year
intervals under 11 U.S.C. § 104. New categories include the value
of exemptible household goods, property that may be excluded from
the bankruptcy estate; property that may not be claimed as an
avoidable preference; and, the formula for determining whether a
chapter 13 debtor will be subject to a three or five-year
reorganization plan;5
!to add a new § 332 to the bill entitled the “Involuntary Bankruptcy
Improvement Act of 2005.” It would amend 11 U.S.C. § 303
governing involuntary bankruptcy filings to give debtors remedies
against involuntary filings made by creditors asserting false,
fictitious, or fraudulent statements;6
!to amend § 106 of the bill to liberalize the jurisdictional requirement
that a debtor receive credit counseling within 180 days prior to
filing. Allows the court to waive or postpone the requirement if the
debtor can demonstrate exigent circumstances. Amends 11 U.S.C.
§ 521 to submit a sworn statement asserting exigent circumstances.
1 Rollcall vote no. 44, 151 CONG. REC. S2474 (Daily ed. Mar. 10, 2005).
2 S.Amdt. 23.
3 S.Amdt. 26
4 S.Amdt. 48.
5 S.Amdt. 87.
6 S.Amdt. 91. Cf. H.R. 1529, 108th Cong., 1st Sess. (2003).
“Exigencies” include eviction, home foreclosure or utility shutoff
that would deprive the debtor of property or necessary services
before the debtor could obtain counseling; lack of transportation;
disability, or circumstances beyond the debtor’s control. Requires
that in order to be federally-approved, credit counseling agencies
must charge a reasonable fee and provide services without regard to
ability to pay the fee;7
!to exempt disabled veterans from the means test if indebtedness
occurs primarily during a period during which the debtor veteran
was on active duty or performing homeland defense activities;8 and,
!to amend 11 U.S.C. § 548 governing fraudulent transfers to provide
that a trustee may avoid a transfer made by a debtor within 10 years
of bankruptcy if the transfer is made to a self-settled trust such as an
asset protection trust if the debtor makes the transfer, is the
beneficiary of the trust, and makes the transfer with actual intent to
hinder, delay or defraud creditors.9
Many of the amendments that were not adopted had also been introduced in
previous congresses, such as amendments to regulate various credit extension
practices or to raise the minimum wage.10 The amendment sponsored by Senator
Schumer to prohibit the discharge of debts resulting from a debtor’s unlawful
interference with the provision of lawful goods or services, which had been
incorporated into Senate-passed bankruptcy bills in the 106th and 107th Congresses,
was defeated.11 Another amendment failed which would prohibit an investment
banker for any outstanding security of the debtor within five years of the filing from
being a “disinterested person.”12 Although investment bankers were not disinterested
persons under prior 11 U.S.C. § 101(14),§ 414 of P.L. 109-8 amends the Code to
allow them to be considered as such. The disinterested person standard was intended
to ensure that professionals who advise a company in bankruptcy have no conflicts
of interest.13 Only “disinterested persons” may provide professional services to the
debtor in the course of bankruptcy pursuant to 11 U.S.C. § 327(a).
7 S.Amdt. 92.
8 S.Amdt. 112.
9 S.Amdt. 121.
10 See, e.g., S. Amdts. 19, 31, 38, 40, and 44.
11 S.Amdt. 47.
12 S.Amdt. 83.
13 151 CONG. REC. S2328 (daily ed. March 9, 2005)(“If the bill is passed in its current form,
the investment banks that advised or underwrote securities for companies such as Enron or
WorldCom prior to bankruptcy, having advised or underwritten those securities, could then
be hired to represent the interests of the defrauded creditors during the bankruptcy
proceeding. Just think of this. The people who were involved in putting the creditors and the
investors and the people whose pension money was in there, the people who were involved
putting all their money at risk, can now be hired to represent their interest.” )(statement of
Sen. Sarbanes).
S. 256 in the House. The House Judiciary Committee reported S. 256
favorably on April 8, 2005.14 The bill passed the House without amendment on April
Survey of Selected Provisions
The BAPCPA addresses many areas of bankruptcy practice, including consumer
filings, small business bankruptcy, tax bankruptcy, ancillary and cross-border cases,
financial contract provisions, amendments to chapter 12 governing family farmer
reorganization, and health care and employee benefits.
The chart below surveys selected provisions of the new law.
Selected ProvisionsP.L. 109-8, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005.
Means test, 11 U.S.C. § § 704, 707:16
Implementation Would amend 11 U.S.C. § 707 to permit creditors, the
trustee, or any party in interest to challenge a debtor’s
eligibility to file under chapter 7. If indicated, the U.S.
trustee must file a statement that the debtor’s case is a
presumed abuse of chapter 7. § 102.
Definition of “currentExcludes Social Security benefits; payments to victims
monthly income”of war crimes or crimes against humanity; and
payments to victims of international terrorism . § 102.
14 See H.Rept. 109-31, Part 1, 109th Cong., 1st Sess. (2005).
15 Rollcall vote no. 108, 151 CONG. REC. H2076 (Daily ed., Apr. 14, 2005).
16 For more background on the means test, see CRS Report RS22058, Bankruptcy Reform:
The Means Test by Mark Jickling.
Selected ProvisionsP.L. 109-8, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005.
Presumed abuseDebtor presumed to be abusing chapter 7 if current
monthly income, excluding allowed deductions, secured
debt payments, and priority unsecured debt payments,
multiplied by 60, would permit a debtor to pay not less
than the lesser of (a) 25% of nonpriority unsecured debt
or $6,000 (or $100 a month), whichever is greater, or
(b) $10,000.
In addition to the means test, the court may find that the
debtor’s filing was in bad faith or that the totality of
the circumstances demonstrates abuse. § 102.
Calculation of permissibleExpenses to be calculated as specified under the
monthly living expensesNational 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. Expenses include reasonably necessary
health insurance, disability insurance, and health
savings account expenses for a debtor, the debtor’s
spouse, or dependents. A debtor may also subtract, if
reasonably necessary, an allowance of up to 5% of the
IRS food and clothing categories.
Individualized expenses may include debts incurred to
protect the debtor’s family from domestic violence;
actual expenses for the care and support of
nondependent, elderly, ill or disabled household or
family members; private or public school tuition of up
to $1,500 per year; administrative expenses for chapter
13 candidates; average monthly expenses for secured
and priority debts; actual expenses for housing and
utilities, if reasonably necessary; and, charitable
contributions of up to 15% of gross income.
Dollar amounts will be adjusted at three-year intervals
in accordance with the Consumer Price Index. § 102.
To rebut the presumptionA debtor must demonstrate and justify “special
of abusecircumstances” such as a serious medical condition or
active military service in order to adjust current
monthly income determination. § 102.
Selected ProvisionsP.L. 109-8, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005.
Safe harbor exemptionOnly the judge, U.S. trustee or bankruptcy
from the means testadministrator may bring an abuse motion if the debtor’s
current monthly income is less than the applicable state
median family income.
No party may make a motion to dismiss or convert the
debtor to chapter 13 under the means test if the debtor
(and spouse combined) have a monthly income equal to
or less than the state median household income reported
by the Bureau of the Census.
A disabled veteran whose indebtedness occurred
primarily during active duty or while performing
homeland defense is exempt from the means test. § 102.
IRS Living StandardsA chapter 13 debtor’s “disposable income” which may
applicable to chapter 13be directed to the repayment plan will be calculated in
reorganization planaccordance with IRS Living Standards if the debtor
meets the applicable means test for state median family
income.
A chapter 13 debtor may deduct from plan payments
the costs of health insurance; domestic support
obligations; charitable contributions of up to 15% of
gross income; and expenses necessary to operate a
business.
§ 102.
Attorney sanctions forIf a panel trustee brings a successful motion for
improper motion dismissal or conversion, counsel for the debtor may be
liable to reimburse the trustee for costs, attorneys’ fees,
and payment of a civil penalty if the court finds a
violation of Bankruptcy Rule 9011.
An attorney’s signature on the bankruptcy petition
certifies that the attorney has performed an
investigation into the circumstances that gave rise to the
petition; that the attorney has determined that the
petition is well grounded in fact and is warranted by
existing law; and that the attorney has no knowledge
after an inquiry that the information in accompanying
schedules is incorrect. § 102.
Restrictions on “debt reliefImposes sanctions on entities defined to be debt relief
agencies”agencies, including debtors’ bankruptcy attorneys, for
specified misrepresentations and misleading statements
or counsel. § 227.
Selected ProvisionsP.L. 109-8, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005.
Creditor sanctions for anThe court may award the debtor costs for contesting an
improper motionunsuccessful motion to convert if the court finds that
the motion violated Rule 9011, or was intended to
coerce the debtor into waiving rights under the
Bankruptcy Code. A small business creditor whose
claim is less than $1000 is not liable for sanctions.
§ 102.
Dismissal of filings byA crime victim or party in interest may request
persons convicted ofdismissal of the voluntary bankruptcy case of the
violent crimes or drugconvicted debtor. The court must grant the dismissal
traffickingunless the filing is necessary to satisfy a domestic
support obligation. § 102.
Selected consumer provisions
Mandatory creditDebtor must undergo credit counseling within 180 days
counselingof filing, and may not obtain a discharge until
completion of a personal financial management
instructional course.
The jurisdictional filing requirement may be waived or
postponed if the debtor certifies exigent circumstances
such as pending eviction, foreclosure, lack of
transportation, disability, or circumstances beyond the
debtor’s control.
The U.S. trustee or bankruptcy administrator for the
judicial district is directed to oversee and approve
nonprofit budget and credit counseling agencies. § 106.
Promotion of alternativeA creditor’s allowable claim may be reduced by 20% if
dispute resolutiona court finds that the creditor “unreasonably refused to
negotiate a reasonable alternative repayment schedule
proposed by an approved credit counseling agency that
provides repayment of at least 60% of the debt, and the
debtor can prove by “clear and convincing” evidence
that a creditor unreasonably refused to consider the
offer.” § 201.
Reaffirmation agreementsImposes enhanced requirements for approval of a
reaffirmation agreement when the debtor is not
represented by counsel but exempts credit unions from
creditor disclosure requirements; requires U.S.
Attorney and FBI to investigate abusive reaffirmation
practices. § 203.
Preserving defensesAmends 11 U.S.C. § 363 to add a new subsection
against predatory lenderspreserving defenses that a party to a consumer credit
transaction may have if the contract is sold by a debtor
in bankruptcy. § 204.
GAO reaffirmation studyRequires a study of reaffirmation practices and a report
to Congress. § 205.
Selected ProvisionsP.L. 109-8, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005.
Domestic support owed toWould move domestic support obligations to first
individuals andpriority, which is currently allocated to administrative
government units madeexpenses of the bankruptcy estate. Administrative
first priorityexpenses would become second priority.
However, if a trustee is appointed under chapter 7, 11,
12, or 13, the trustee’s expenses may be paid before
domestic support. § 212.
Trustee notification ofWould direct the trustee to notify a priority child
child support claim holderssupport recipient of the existence of a state child
support enforcement agency, and, upon discharge, the
existence of nondischargeable and reaffirmed debt.
§ 219.
Priority assigned to claimsA new § 507 tenth priority is created for unsecured
for liability incurred by theclaims for liability incurred by a debtor from operating
debtor DUIa vessel while under the influence of alcohol or drugs.
Claims of this nature are also nondischargeable. § 223.
Retirement savingsWould clarify and expand the law to provide that
exemption broadenedretirement accounts that are tax exempt under the
Internal Revenue Code are exempted from the debtor’s
estate up to a $1,000,000 cap, which may be increased
if “the interests of justice so require.” § 224.
Exemption for saving forSubject to certain IRS requirements, excludes funds up
postsecondary educationto $5000 per specified beneficiary made within a year
of filing in an education individual retirement account
and/or any funds used to purchase a tuition credit or
certificate under a qualified state tuition program. §225.
Protection of nonpublicProhibits the transfer by the debtor of personal
personal information andcustomer information unless approved by the court.
consumer privacyProvides for the appointment of a consumer privacy
ombudsmanombudsman if a debtor wishes to sell or lease such
information. §§ 231, 232.
Prohibition on disclosureDebtor may not be required to disclose the name of a
of identify of minorminor child in public records. U.S. trustee or auditor
childrenmay have access to nonpublic records maintained by the
court. § 233.
Lien stripping on securityChapter 13 debtors would not be permitted to bifurcate
interests in consumersecurity interests in an automobile purchased within
goods (cramdown)910 days (2½ years) before the filing; or in other
consumer goods purchased within one year of the filing.
§ 306.
Selected ProvisionsP.L. 109-8, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005.
Homestead exemptionDefinition of “debtor’s residence” includes mobile
homes or trailers. § 306.
Imposes lengthened residency requirements to qualify
for state exemption. § 307.
Reduces the value of the exemption if the value is
attributable to property that the debtor disposed of
within 10 years of bankruptcy with the intent to hinder,
delay or defraud a creditor. § 308.
Debtors’ electing a state homestead exemption may not
exempt any interest acquired within 1215 days (3.3
years) of filing which exceeds in the aggregate
$125,000, unless the value in excess of that amount
occurs from a transfer of residences within the same
state. Exempts family farmers from the limit.
Limitations may not apply to amounts reasonably
necessary to support the debtor and any dependents.
Imposes a firm $125,000 cap on an individual who is
convicted of specified felonies (including violations of
federal securities laws) or who commits criminal acts,
intentional torts, or willful or reckless misconduct that
caused serious physical injury or death within five years
preceding the bankruptcy filing. § 322.
Residential lease exceptedAdds new provisions permitting a landlord/lessor to
from the automatic staybypass the automatic stay to continue with a residential
eviction of a tenant/lessee. § 311.
Restrictions on chapter 7Extends time within which a debtor who has received a
and chapter 13 filings.chapter 7 discharge may not receive another from six to
eight years.
Amends chapter 13 to disallow discharge if the debtor
filed under chapters 7, 11, or 12 within four years prior
to the 13 filing, or under chapter 13, within two years of
the subsequent filing. § 312.
Definition of “householdDefines household goods to include clothing, furniture,
goods”appliances, 1 radio, 1 television, 1 VCR, other
electronic entertainment equipment with a market value
of under $500, linens, china, crockery, kitchenware,
educational materials used by minor dependent
children, medical equipment and supplies, furniture
used exclusively by minors and disabled or elderly
dependents, personal effects, 1 personal computer and
antiques and jewelry with a value less than $500.
§ 313.
Debtor’s duty to discloseModifies debtor filing requirements under 11 U.S.C. §
tax filings.521 to include federal tax returns. § 315.
Selected ProvisionsP.L. 109-8, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005.
Plan durationChapter 13 plans to have five year duration for families
whose monthly income is not less than the highest state
median family income. Families below the highest state
median income would have three year plans. § 318.
Wages withheld by anWithheld wages for contributions to employee benefit
employer for contributionsplans would be excluded from the debtor (employer’s)
to employee benefit plansestate. § 323.
Valuation of collateralA secured creditor’s allowable claim would be the retail
cost to replace the item without deduction for costs of
sale or marketing. Personal property’s replacement
value would be the price a retail merchant would charge
for like items. § 327.
Wages and benefitsMakes specified prepetition and postpetition wages and
awarded as back paybenefits awarded as back pay in a judicial proceeding a
high-priority administrative expense. § 329.
AuditThe Attorney General is directed to establish a
procedure to ensure random audits of no less than 1 out
of every 250 individual filings; the U.S. trustee is
authorized to enter into contracts with auditors, and to
take action when misstatements in the debtor’s petition
and schedules are identified. § 603.
Nondischargeable debts
Debts to government unitsDefines “domestic support obligation” to include debts
for domestic supportowed to or recoverable by a governmental unit. §§ 211,
Expanded definition ofAdds qualified educational loans as defined under §
student loan221 of the IRC to those educational loans that are
currently nondischargeable. § 220.
Loan repayments toMakes nondischargeable, i.e., allows an employer to
debtor’s retirement savingscontinue to withhold, loan repayments to debtor’s
or thrift plansavings/retirement plan from debtor’s wages. § 224(c).
Consumer debts presumed Consumer debts owed to a single creditor for more than
fraudulent$550 for “luxury goods” incurred within 90 days of
filing; and cash advances for more than $750 under an
open end credit plan within 70 days of filing are
presumed to be nondischargeable. § 310.
Debts incurred to payDebts incurred to a third party to pay a tax to a state or
nondischargeable debts arelocal government unit become nondischargeable.
nondischargeable§ 314.
Debts under chapter 7Under current law, some debts that are
made nondischargeablenondischargeable under chapter 7 can be partially paid
under chapter 13and subsequently discharged under chapter 13.
Amends 11 U.S.C. § 1328 to make more categories of
debt which are fully nondischargeable under chapter 7
fully nondischargeable under chapter 13 as well. § 314.
Selected ProvisionsP.L. 109-8, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005.
Expanded definition ofExpands the types of post-petition condo and
nondischargeablehomeowners association fees that are nondischargeable
condominium andby omitting requirement that in order to be
homeowners associationnondischargeable the debtor must reside in the
feesresidence postpetition. § 412.
FEC penaltiesFines and penalties under federal election law are made
nondischargeablenondischargeable. § 1235.
Liability for violation ofAmends 11 U.S.C. § 523(a)(19) which makes liability
securities lawsfor violation of securities laws nondischargeable to
nondischargeableprovide that the violations and judgments therefor may
occur prior to or after the bankruptcy filing. § 1404.
Selected ProvisionsP.L. 109-8, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005.
Consumer credit disclosure
Amendments to the Truth inTILA amended to require enhanced minimum payment
Lending Act (TILA)disclosures under an open end credit plan; enhanced
disclosures regarding the tax deductibility of credit
extensions which exceed the fair market value of a
dwelling for credit transactions secured by the
consumer’s dwelling; disclosures related to
introductory “teaser” rates; disclosures related to
Internet-based open end credit solicitations; and
disclosures related to late payment deadlines and
penalties. TILA would be amended to prohibit
termination of a credit account because the consumer
has not incurred finance charges. §§ 1301-1306.
Study of bankruptcy impactThe Board of Governors of the Federal Reserve is
of credit extended todirected to study bankruptcy impact of credit extensions
dependent studentsto students in postsecondary school. § 1308.
Consumer credit studiesThe Board of Governors of the Federal Reserve is
directed to study existing protections for consumers for
unauthorized use of a dual use debit card. § 1307.
Business bankruptcy
Limitation on executiveAmends 11 U.S.C. § 503 governing allowable expenses
retention bonuses andto impose standards and limitations for court approval
severance paymentsof executive retention bonuses and severance pay. A
bankruptcy court could not approve a retention bonus
unless the payment is essential to retain the individual
who has a bona fide job offer from another business;
the individual’s services are essential; and the payment
is not greater than either 10 times the amount of
payments made to non-managerial employees, or, if no
such payments were made, then 25 percent of executive
compensation payments made during the year before
the bankruptcy filing. Severance payments are limited
as well. § 331
Trustee to appoint retireeAmends 11 U.S.C. § 1114 to provide that in the event
committeesthat a retiree committee is appointed, the appointment
of members will be made by the U.S. Trustee, not the
court. § 447.
Increased employee wageIncreases the high-priority categories for employee
and benefit prioritywages and benefits from $4925 earned within 90 days
of filing to $10,000 earned within 180 days of filing. §
Retiree insurance benefitsAmends 11 U.S.C. § 1114 to allow the court to reinstate
retiree benefits that are modified by a debtor within 180
days prior to the bankruptcy filing unless the court
finds that the balance of equities supports such
modifications. § 1403.
Selected ProvisionsP.L. 109-8, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005.
U.S. Trustee to appointAmends 11 U.S.C. § 1104 to direct the U.S. Trustee to
chapter 11 trustee seek appointment of a trustee in a chapter 11 case if
there are reasonable grounds to suspect fraud,
dishonesty, or criminal conduct by the debtor’s
governing body in management of the debtor or its
public financial reporting. § 1405.
Avoidable preferencesAmends 11 U.S.C. § 547 to liberalize the rules for
defending against an avoidable transfer in the ordinary
course of business; creates a new preference exception
to aggregate transfers of less than $5,000. § 409.
Fraudulent transfersAmends 11 U.S.C. § 548 to increase the time period for
setting aside certain fraudulent transactions from one
year to two and expressly includes certain transfers
made pursuant to an employment contract.
Allows the avoidance of self-settled trusts such as asset
protection trusts created within ten years of filing when
the transfer was by the debtor, for the benefit of the
debtor, and was made with intent to hinder, delay or
defraud creditors. § 1402.
Small business bankruptcySubtitle B of Title IV has provisions defining a “small
business” for chapter 11 purposes as one with debts
under $2,000,000. The debtor’s period of exclusivity to
file a reorganization plan is 180 days. A plan and
disclosure statement must be filed within 300 days of
the initial filing.
A plan must be confirmed within 45 days of filing in
bankruptcy. § 438.
Provisions require establishment of uniform accounting
and reporting standards for small businesses. Grounds
for appointment of a trustee and the trustee’s general
supervisory duties are expanded, as are grounds for
dismissal or conversion of the case. §§ 431-442.
Health care businessDefines a broad variety of service-providing health care
bankruptcybusiness, including skilled nursing facilities, assisted-
living facilities and homes for the aged.
Provides for the disposition and disposal of patient
records and for the costs of closing the facility,
including the transfer of patients. Permits the court to
appoint a patient care ombudsman to monitor patient
care and represent the interest of patients. Excludes
participation in medicare from the automatic stay. §§
Selected ProvisionsP.L. 109-8, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005.
Trustee to appoint retireeAmends 11 U.S.C. § 1114 to provide that in the event
committeesthat a retiree committee is appointed, the appointment
of members will be made by the U.S. Trustee, not the
court. § 447.
Definition of “disinterestedAmends the 11 U.S.C. § 101(14) to omit investment
person”bankers for the debtor’s outstanding securities from the
group who may not be “disinterested.” Consequently,
such bankers may provide services to the debtor’s estate
pursuant to 11 U.S.C. § 327(a). § 414.
Chapter 11 corporateConfirmation of a plan under chapter 11 would not
nondischargeabilitydischarge a corporate debtor from debts under 11
U.S.C. § 523(a)(2) that are owed to a domestic
governmental unit for property obtained by false
pretenses or representations; or owed to an individual
under subchapter III of chapter 37 of Title 31, U.S.C.;
or any debt for taxes for which the debtor willfully
attempted to evade or made a fraudulent return. § 708.
Title X dealing withMakes chapter 12 permanent; includes jurisdictional
chapter 12 family farmersdebt limit in amount subject to readjustment in
accordance with CPI; subordinates certain high priority
unsecured claims owed to the government to
nonpriority claims. Measure to take effect upon
enactment, but will not apply to pending cases. §§
Raises jurisdictional debt limit of family farmers to
$3,237,000 and lowers percentage requirement of
income derived from farming and expands the time
frame for measuring farm income from one to three
years. §§ 1004, 1005.
Prohibits retroactive assessment of disposable income.
§ 1006
Amends chapter 12 to include “family fishermen.”
§ 1007.
Selected ProvisionsP.L. 109-8, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005.
General provisions
In forma pauperis filings Directs the Judicial Conference to prescribe procedures
for waiving bankruptcy fees for an individual debtor
under chapter 7 whose income is less than 150% of the
official poverty line and who is unable to pay the fee in
installments. § 418.
Bankruptcy judgeshipsCreates new temporary bankruptcy judgeships for
designated districts. § 1223.
Procedure to certifyEstablishes procedures to permit direct appeals from a
appeals from a bankruptcybankruptcy court to a court of appeals if the decision
court to a court of appealsinvolves a substantial question of law for which there is
no controlling decision; a question requiring resolution
of conflicting decisions; or, a matter of public
importance. §1233.
Involuntary BankruptcyAdds debtor protection to combat false, frivolous, or
fraudulent involuntary bankruptcy filings by creditors.
§ 332.
Makes technical corrections made to 11 U.S.C. § 303
dealing with involuntary bankruptcy. Measure applies
upon enactment, but not to pending cases. § 1234.
General effective date17Subject to express provisions otherwise in specified
titles, the new law will take effect 180 days after
enactment and will not apply to cases commenced
before the effective date. § 1501.
17 For more background, see CRS Report RS22135, Effective Dates of the Bankruptcy Abuse
Prevention and Consumer Protection Act, by Robin Jeweler.