Chapter 9 - Adjustment of Debts of A Municipality
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Chapter 9 - Adjustment of Debts of A Municipality
Chapter 9 - Adjustment of Debts of A Municipality
-CITE-
11 USC CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY 01/05/2009
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TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
-HEAD-
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
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SUBCHAPTER I - GENERAL PROVISIONS
Sec.
901. Applicability of other sections of this title.
902. Definitions for this chapter.
903. Reservation of State power to control municipalities.
904. Limitation on jurisdiction and powers of court.
SUBCHAPTER II - ADMINISTRATION
921. Petition and proceedings relating to petition.
922. Automatic stay of enforcement of claims against the
debtor.
923. Notice.
924. List of creditors.
925. Effect of list of claims.
926. Avoiding powers.
927. Limitation on recourse.
928. Post petition effect of security interest.
929. Municipal leases.
930. Dismissal.
SUBCHAPTER III - THE PLAN
941. Filing of plan.
942. Modification of plan.
943. Confirmation.
944. Effect of confirmation.
945. Continuing jurisdiction and closing of the case.
946. Effect of exchange of securities before the date of
the filing of the petition.
AMENDMENTS
1988 - Pub. L. 100-597, Sec. 11, Nov. 3, 1988, 102 Stat. 3030,
added items 927 to 929 and redesignated former item 927 as 930.
-End-
-CITE-
11 USC SUBCHAPTER I - GENERAL PROVISIONS 01/05/2009
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TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER I - GENERAL PROVISIONS
-HEAD-
SUBCHAPTER I - GENERAL PROVISIONS
-End-
-CITE-
11 USC Sec. 901 01/05/2009
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TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER I - GENERAL PROVISIONS
-HEAD-
Sec. 901. Applicability of other sections of this title
-STATUTE-
(a) Sections 301, 344, 347(b), 349, 350(b), 361, 362, 364(c),
364(d), 364(e), 364(f), 365, 366, 501, 502, 503, 504, 506,
507(a)(2), 509, 510, 524(a)(1), 524(a)(2), 544, 545, 546, 547, 548,
549(a), 549(c), 549(d), 550, 551, 552, 553, 555, 556, 557, 559,
560, 561, 562, 1102, 1103, 1109, 1111(b), 1122, 1123(a)(1),
1123(a)(2), 1123(a)(3), 1123(a)(4), 1123(a)(5), 1123(b), 1123(d),
1124, 1125, 1126(a), 1126(b), 1126(c), 1126(e), 1126(f), 1126(g),
1127(d), 1128, 1129(a)(2), 1129(a)(3), 1129(a)(6), 1129(a)(8),
1129(a)(10), 1129(b)(1), 1129(b)(2)(A), 1129(b)(2)(B), 1142(b),
1143, 1144, and 1145 of this title apply in a case under this
chapter.
(b) A term used in a section of this title made applicable in a
case under this chapter by subsection (a) of this section or
section 103(e) (!1) of this title has the meaning defined for such
term for the purpose of such applicable section, unless such term
is otherwise defined in section 902 of this title.
(c) A section made applicable in a case under this chapter by
subsection (a) of this section that is operative if the business of
the debtor is authorized to be operated is operative in a case
under this chapter.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2621; Pub. L. 98-353, title
III, Secs. 353, 490, July 10, 1984, 98 Stat. 361, 383; Pub. L. 100-
597, Sec. 3, Nov. 3, 1988, 102 Stat. 3028; Pub. L. 109-8, title V,
Sec. 502, title XII, Sec. 1216, title XV, Sec. 1502(a)(5), Apr. 20,
2005, 119 Stat. 118, 195, 216.)
-MISC1-
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTS
Chapter 9 of the House amendment represents a compromise between
chapter 9 of the House bill and 9 of the Senate amendment. In most
respects this chapter follows current law with respect to the
adjustment of debts of a municipality. Stylistic changes and minor
substantive revisions have been made in order to conform this
chapter with other new chapters of the bankruptcy code. There are
few major differences between the House bill and the Senate
amendment on this issue. Section 901 indicates the applicability of
other sections of title 11 in cases under chapter 9. Included are
sections providing for creditors' committees under sections 1102
and 1103.
HOUSE REPORT NO. 95-595
Section 901 makes applicable appropriate provisions of other
chapters of proposed title 11. The general rule set out in section
103(e) is that only the provisions of chapters 1 and 9 apply in a
chapter 9 case. Section 901 is the exception, and specifies other
provisions that do apply. They are as follows:
Sec. 301. Voluntary cases. Application of this section makes
clear, as under current chapter IX [chapter 9 of former title 11],
that a municipal case can be commenced only by the municipality
itself. There are no involuntary chapter 9 cases.
Sec. 344. Self-incrimination; immunity. Application of this
section is of no substantive effect for the administration of the
case, but merely provides that the general rules in part V [Sec.
6001 et seq.] of title 18 govern immunity.
Sec. 347(b). Unclaimed property. This provision currently appears
in section 96(d) of chapter IX [section 416(d) of former title 11].
Sec. 349. Effect of dismissal. This section governs the effect of
a dismissal of a chapter 9 case. It provides in substance that
rights that existed before the case that were disturbed by the
commencement of the case are reinstated. This section does not
concern grounds for dismissal, which are found in section 926.
Sec. 361. Adequate protection. Section 361 provides the general
standard for the protection of secured creditors whose property is
used in a case under title 11. Its importance lies in its
application to sections 362 and 364.
Sec. 362. Automatic stay. The automatic stay provisions of the
general portions of the title are incorporated into chapter 9.
There is an automatic stay provided in current Bankruptcy Act Sec.
85(e) [section 405(e) of former title 11]. The thrust of section
362 is the same as that of section 85(e), but, of course, its
application in chapter 9 is modernized and drafted to conform with
the stay generally applicable under the bankruptcy code. An
additional part of the automatic stay applicable only to municipal
cases is included in section 922.
Secs. 364(c), 364(d), 364(e). Obtaining credit. This section
governs the borrowing of money by a municipality in reorganization.
It is narrower than a comparable provision in current law, section
82(b)(2) [section 402(b)(2) of former title 11]. The difference
lies mainly in the removal under the bill of the authority of the
court to supervise borrowing by the municipality in instances in
which none of the special bankruptcy powers are involved. That is,
if a municipality could borrow money outside of the bankruptcy
court, then it should have the same authority in bankruptcy court,
under the doctrine of Ashton v. Cameron Water District No. 1, 298
U.S. 513 (1936) [Tex.1936, 56 S.Ct. 892, 80 L.Ed. 1309, 31
Am.Bankr.Rep.N.S. 96, rehearing denied 57 S.Ct. 5, 299 U.S. 619, 81
L.Ed. 457] and National League of Cities v. Usery, 426 U.S. 833
(1976) [Dist.Col.1976, 96 S.Ct. 2465, 49 L.Ed.2d 245, on remand 429
F. Supp. 703]. Only when the municipality needs special authority,
such as subordination of existing liens, or special priority for
the borrowed funds, will the court become involved in the
authorization.
Sec. 365. Executory contracts and unexpired leases. The
applicability of section 365 incorporates the general power of a
bankruptcy court to authorize the assumption or rejection of
executory contracts or unexpired leases found in other chapters of
the title. This section is comparable to section 82(b)(1) of
current law [section 402(b)(1) of former title 11].
Sec. 366. Utility service. This section gives a municipality the
same authority as any other debtor with respect to continuation of
utility service during the proceeding, provided adequate assurance
of future payment is provided. No comparable explicit provision is
found in current law, although the case law seems to support the
same result.
Sec. 501. Filing of proofs of claims. This section permits filing
of proofs of claims in a chapter 9 case. Note, however, that
section 924 permits listing of creditors' claims, as under chapter
11 and under section 85(b) of chapter IX [section 405(b) of former
title 11].
Sec. 502. Allowance of claims. This section applies the general
allowance rules to chapter 9 cases. This is no change from current
law.
Sec. 503. Administrative expenses. Administrative expenses as
defined in section 503 will be paid in a chapter 9 case, as
provided under section 89(1) of current law [section 409(1) of
former title 11].
Sec. 504. Sharing of compensation. There is no comparable
provision in current law. However, this provision applies generally
throughout the proposed law, and will not affect the progress of
the case, only the interrelations between attorneys and other
professionals that participate in the case.
Sec. 506. Determination of secured status. Section 506 specifies
that claims secured by a lien should be separated, to the extent
provided, into secured and unsecured claims. It applies generally.
Current law follows this result, though there is no explicit
provision.
Sec. 507(1). Priorities. Paragraph (1) of section 507 requires
that administrative expenses be paid first. This rule will apply in
chapter 9 cases. It is presently found in section 89(1) [section
409(1) of former title 11]. The two other priorities presently
found in section 89 have been deleted. The second for claims
arising within 3 months before the case is commenced, is deleted
from the statute, but may be within the court's equitable power to
award, under the case of Fosdick v. Schall, 99 U.S. 235 (1878) [25
L.Ed. 339]. Leaving the provision to the courts permits greater
flexibility, as under railroad cases, than an absolute three-month
rule. The third priority under current law, for claims which are
entitled to priority under the laws of the United States, is
deleted because of the proposed amendment to section 3466 of the
Revised Statutes [former 31 U.S.C. 191, see 31 U.S.C. 3713(a)]
contained in section 321(a) of title III of the bill, which
previously has given the United States an absolute first priority
in chapter X [chapter 10 of former title 11] and section 77
[section 205 of former title 11] cases. Because the priority rules
are regularized and brought together in the bankruptcy laws by this
bill, the need for incorporation of priorities elsewhere specified
is eliminated.
Sec. 509. Claims of codebtors. This section provides for the
treatment of sureties, guarantors, and codebtors. The general rule
of postponement found in the other chapters will apply in chapter
9. This section adopts current law.
Sec. 510. Subordination of claims. This section permits the court
to subordinate, on equitable grounds, any claim, and requires
enforcement of contractual subordination agreements, and
subordination of securities rescission claims. The section
recognizes the inherent equitable power of the court under current
law, and the practice followed with respect to contractual
provisions.
Sec. 547. Preferences. Incorporation of section 547 will permit
the debtor to recover preferences. This power will be used
primarily when those who gave the preferences have been replaced by
new municipal officers or when creditors coerced preferential
payments. Unlike Bankruptcy Act Sec. 85(h) [section 405(h) of
former title 11], the section does not permit the appointment of a
trustee for the purpose of pursuing preferences. Moreover, this
bill does not incorporate the other avoiding powers of a trustee
for chapter 9, found in current section 85(h).
Sec. 550. Liability of transfers. Incorporation of this section
is made necessary by the incorporation of the preference section,
and permits recovery by the debtor from a transferee of an avoided
preference.
Sec. 551. Automatic preservation of avoided transfer. Application
of section 551 requires preservation of any avoided preference for
the benefit of the estate.
Sec. 552. Postpetition effect of security interest. This section
will govern the applicability after the commencement of the case of
security interests granted by the debtor before the commencement of
the case.
Sec. 553. Setoff. Under current law, certain setoff is stayed.
Application of this section preserves that result, though the
setoffs that are permitted under section 553 are better defined
than under present law. Application of this section is necessary to
stay the setoff and to provide the offsetting creditor with the
protection to which he is entitled under present law.
Sec. 1122. Classification of claims. This section is derived from
current section 88(b) [section 408(b) of former title 11], and is
substantially similar.
Sec. 1123(a)(1)-(4), (b). Contents of plan. The general
provisions governing contents of a chapter 11 plan are made
applicable here, with two exceptions relating to the rights of
stockholders, which are not applicable in chapter 9 cases. This
section expands current law by specifying the contents of a plan in
some detail. Section 91 of current law [section 411 of former title
11] speaks only in general terms. The substance of the two sections
is substantially the same, however.
Sec. 1124. Impairment of claims. The confirmation standards
adopted in chapter 9 are the same as those of chapter 11. This
changes current chapter IX [chapter 9 of former title 11], which
requires compliance with the fair and equitable rule. The greater
flexibility of proposed chapter 11 is carried over into chapter 9,
for there appears to be no reason why the confirmation standards
for the two chapters should be different, or why the elimination of
the fair and equitable rule from corporate reorganizations should
not be followed in municipal debt adjustments. The current chapter
IX rule is based on the confirmation rules of current chapter X
[chapter 10 of former title 11]. The change in the latter suggests
a corresponding change in the former. Section 1124 is one part of
the new confirmation standard. It defines impairment, for use in
section 1129.
Sec. 1125. Postpetition disclosure and solicitation. The change
in the confirmation standard necessitates a corresponding change in
the disclosure requirements for solicitation of acceptances of a
plan. Under current chapter IX [chapter 9 of former title 11] there
is no disclosure requirement. Incorporation of section 1125 will
insure that creditors receive adequate information before they are
required to vote on a plan.
Sec. 1126(a), (b), (c), (e), (f), (g). Acceptance of plan.
Section 1126 incorporates the current chapter IX [chapter 9 of
former title 11] acceptance requirement: two-thirds in amount and a
majority in number, Bankruptcy Act Sec. 92 [section 412 of former
title 11]. Section 1125 permits exclusion of certain acceptances
from the computation if the acceptances were obtained in bad faith
or, unlike current law, if there is a conflict of interest
motivating the acceptance.
Sec. 1127(d). Modification of plan. This section governs the
change of a creditor's vote on the plan after a modification is
proposed. It is derived from current section 92(e) [section 412(e)
of former title 11].
Sec. 1128. Hearing on confirmation. This section requires a
hearing on the confirmation of the plan, and permits parties in
interest to object. It is the same as Bankruptcy Act Secs. 93 and
94(a) [sections 413 and 414(a) of former title 11], though the
provision, comparable to section 206 of current chapter X [section
606 of former title 11], permitting a labor organization to appear
and be heard on the economic soundness of the plan, has been
deleted as more appropriate for the Rules.
Sec. 1129(a)(2), (3), (8), (b)(1), (2). Confirmation of plan.
This section provides the boiler-plate language that the plan be
proposed in good faith and that it comply with the provisions of
the chapter, and also provides the financial standard for
confirmation, which replaces the fair and equitable rule. See Sec.
1124, supra.
Sec. 1142(b). Execution of plan. Derived from Bankruptcy Act Sec.
96(b) [section 416(b) of former title 11], this section permits the
court to order execution and delivery of instruments in order to
execute the plan.
Sec. 1143. Distribution. This section is the same in substance as
section 96(d) [section 416(d) of former title 11], which requires
presentment or delivery of securities within five years, and bars
creditors that do not act within that time.
Sec. 1144. Revocation of order of confirmation. This section
permits the court to revoke the order of confirmation and the
discharge if the confirmation of the plan was procured by fraud.
There is no comparable provision in current chapter IX [chapter 9
of former title 11].
-REFTEXT-
REFERENCES IN TEXT
Section 103(e) of this title, referred to in subsec. (b), was
redesignated section 103(f) and a new section 103(e) was added by
Pub. L. 106-554, Sec. 1(a)(5) [title I, Sec. 112(c)(5)(A)], Dec.
21, 2000, 114 Stat. 2763, 2763A-394.
-MISC2-
AMENDMENTS
2005 - Subsec. (a). Pub. L. 109-8, Sec. 1502(a)(5), substituted
"507(a)(2)" for "507(a)(1)".
Pub. L. 109-8, Sec. 1216, inserted "1123(d)," after "1123(b),".
Pub. L. 109-8, Sec. 502, inserted "555, 556," after "553," and
"559, 560, 561, 562," after "557,".
1988 - Subsec. (a). Pub. L. 100-597 inserted "1129(a)(6)," after
"1129(a)(3),".
1984 - Subsec. (a). Pub. L. 98-353 inserted "557," after "553,"
and substituted "1111(b)," for "1111(b)".
EFFECTIVE DATE OF 2005 AMENDMENT
Amendment by Pub. L. 109-8 effective 180 days after Apr. 20,
2005, and not applicable with respect to cases commenced under this
title before such effective date, except as otherwise provided, see
section 1501 of Pub. L. 109-8, set out as a note under section 101
of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not
applicable to any case commenced under this title before that date,
see section 12 of Pub. L. 100-597, set out as a note under section
101 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-353 effective with respect to cases filed
90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,
set out as a note under section 101 of this title.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
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11 USC Sec. 902 01/05/2009
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TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER I - GENERAL PROVISIONS
-HEAD-
Sec. 902. Definitions for this chapter
-STATUTE-
In this chapter -
(1) "property of the estate", when used in a section that is
made applicable in a case under this chapter by section 103(e)
(!1) or 901 of this title, means property of the debtor;
(2) "special revenues" means -
(A) receipts derived from the ownership, operation, or
disposition of projects or systems of the debtor that are
primarily used or intended to be used primarily to provide
transportation, utility, or other services, including the
proceeds of borrowings to finance the projects or systems;
(B) special excise taxes imposed on particular activities or
transactions;
(C) incremental tax receipts from the benefited area in the
case of tax-increment financing;
(D) other revenues or receipts derived from particular
functions of the debtor, whether or not the debtor has other
functions; or
(E) taxes specifically levied to finance one or more projects
or systems, excluding receipts from general property, sales, or
income taxes (other than tax-increment financing) levied to
finance the general purposes of the debtor;
(3) "special tax payer" means record owner or holder of legal
or equitable title to real property against which a special
assessment or special tax has been levied the proceeds of which
are the sole source of payment of an obligation issued by the
debtor to defray the cost of an improvement relating to such real
property;
(4) "special tax payer affected by the plan" means special tax
payer with respect to whose real property the plan proposes to
increase the proportion of special assessments or special taxes
referred to in paragraph (2) of this section assessed against
such real property; and
(5) "trustee", when used in a section that is made applicable
in a case under this chapter by section 103(e) (!1) or 901 of
this title, means debtor, except as provided in section 926 of
this title.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2622; Pub. L. 98-353, title
III, Sec. 491, July 10, 1984, 98 Stat. 383; Pub. L. 100-597, Sec.
4, Nov. 3, 1988, 102 Stat. 3028.)
-MISC1-
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTS
Section 902(2) of the Senate amendment is deleted since the
bankruptcy court will have jurisdiction over all cases under
chapter 9. The concept of a claim being materially and adversely
affected reflected in section 902(1) of the Senate amendment has
been deleted and replaced with the new concept of "impairment" set
forth in section 1124 of the House amendment and incorporated by
reference into chapter 9.
SENATE REPORT NO. 95-989
There are six definitions for use in chapter 9. Paragraph (1)
defines what claims are included in a chapter 9 case and adopts the
definition now found in section 81(1) [section 401(1) of former
title 11]. All claims against the petitioner generally will be
included, with one significant exception. Municipalities are
authorized, under section 103(c) of the Internal Revenue Code of
1954, as amended [title 26], to issue tax-exempt industrial
development revenue bonds to provide for the financing of certain
projects for privately owned companies. The bonds are sold on the
basis of the credit of the company on whose behalf they are issued,
and the principal, interest, and premium, if any, are payable
solely from payments made by the company to the trustee under the
bond indenture and do not constitute claims on the tax revenues or
other funds of the issuing municipalities. The municipality merely
acts as the vehicle to enable the bonds to be issued on a tax-
exempt basis. Claims that arise by virtue of these bonds are not
among the claims defined by this paragraph and amounts owed by
private companies to the holders of industrial development revenue
bonds are not to be included among the assets of the municipality
that would be affected by the plan. See Cong. Record, 94th Cong.,
1st Sess. H.R. 12073 (statement by Mr. Don Edwards, floor manager
of the bill in the House). Paragraph (2) defines the court which
means the federal district court or federal district judge before
which the case is pending. Paragraph (3) [enacted as (1)] specifies
that when the term "property of the estate" is used in a section in
another chapter made applicable in chapter 9 cases, the term means
"property of the debtor". Paragraphs (4) and (5) [enacted as (2)
and (3)] adopt the definition of "special taxpayer affected by the
plan" that appears in current sections 81(10) and 81(11) of the
Bankruptcy Act [section 401(10) and (11) of former title 11].
Paragraph (6) [enacted as (4)] provides that "trustee" means
"debtor" when used in conjunction with chapter 9.
HOUSE REPORT NO. 95-595
There are only four definitions for use only in chapter 9. The
first specifies that when the term "property of the estate" is used
in a section in another chapter made applicable in chapter 9 cases,
the term will mean "property of the debtor". Paragraphs (2) and (3)
adopt the definition of "special taxpayer affected by the plan"
that appears in current sections 81(10) and 81(11) [section 401(10)
and (11) of former title 11]. Paragraph (4) provides for "trustee"
the same treatment as provided for "property of the estate",
specifying that it means "debtor" when used in conjunction with
chapter 9.
-REFTEXT-
REFERENCES IN TEXT
Section 103(e) of this title, referred to in pars. (1) and (5),
was redesignated section 103(f) and a new section 103(e) was added
by Pub. L. 106-554, Sec. 1(a)(5) [title I, Sec. 112(c)(5)(A)], Dec.
21, 2000, 114 Stat. 2763, 2763A-394.
-MISC2-
AMENDMENTS
1988 - Pars. (2) to (5). Pub. L. 100-597 added par. (2) and
redesignated former pars. (2) to (4) as (3) to (5), respectively.
1984 - Par. (2). Pub. L. 98-353 substituted "legal or equitable
title to real property against which a special assessment or
special tax has been levied" for "title, legal or equitable, to
real property against which has been levied a special assessment or
special tax".
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not
applicable to any case commenced under this title before that date,
see section 12 of Pub. L. 100-597, set out as a note under section
101 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-353 effective with respect to cases filed
90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,
set out as a note under section 101 of this title.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
-CITE-
11 USC Sec. 903 01/05/2009
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TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER I - GENERAL PROVISIONS
-HEAD-
Sec. 903. Reservation of State power to control municipalities
-STATUTE-
This chapter does not limit or impair the power of a State to
control, by legislation or otherwise, a municipality of or in such
State in the exercise of the political or governmental powers of
such municipality, including expenditures for such exercise, but -
(1) a State law prescribing a method of composition of
indebtedness of such municipality may not bind any creditor that
does not consent to such composition; and
(2) a judgment entered under such a law may not bind a creditor
that does not consent to such composition.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2622; Pub. L. 98-353, title
III, Sec. 492, July 10, 1984, 98 Stat. 383.)
-MISC1-
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTS
Section 903 of the House amendment represents a stylistic
revision of section 903 of the Senate amendment. To the extent
section 903 of the House bill would have changed present law, such
section is rejected.
SENATE REPORT NO. 95-989
Section 903 is derived, with stylistic changes, from section 83
of current Chapter IX [section 403 of former title 11]. It sets
forth the primary authority of a State, through its constitution,
laws, and other powers, over its municipalities. The proviso in
section 83, prohibiting State composition procedures for
municipalities, is retained. Deletion of the provision would
"permit all States to enact their own versions of Chapter IX
[chapter 9 of former title 11]", Municipal Insolvency, 50
Am.Bankr.L.J. 55, 65, which would frustrate the constitutional
mandate of uniform bankruptcy laws. Constitution of the United
States, Art. I, Sec. 8.
This section provides that the municipality can consent to the
court's orders in regard to use of its income or property. It is
contemplated that such consent will be required by the court for
the issuance of certificates of indebtedness under section 364(c).
Such consent could extend to enforcement of the conditions attached
to the certificates or the municipal services to be provided during
the proceedings.
AMENDMENTS
1984 - Par. (2). Pub. L. 98-353 struck out "to" before "that does
not consent".
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-353 effective with respect to cases filed
90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,
set out as a note under section 101 of this title.
-End-
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11 USC Sec. 904 01/05/2009
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TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER I - GENERAL PROVISIONS
-HEAD-
Sec. 904. Limitation on jurisdiction and powers of court
-STATUTE-
Notwithstanding any power of the court, unless the debtor
consents or the plan so provides, the court may not, by any stay,
order, or decree, in the case or otherwise, interfere with -
(1) any of the political or governmental powers of the debtor;
(2) any of the property or revenues of the debtor; or
(3) the debtor's use or enjoyment of any income-producing
property.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2622.)
-MISC1-
HISTORICAL AND REVISION NOTES
SENATE REPORT NO. 95-989
This section adopts the policy of section 82(c) of current law
[section 402(c) of former title 11]. The only change in this
section from section 82(c) is to conform the section to the style
and cross-references of S. 2266.
HOUSE REPORT NO. 95-595
This section adopts the policy of section 82(c) of current law
[section 402(c) of former title 11]. The Usery case underlines the
need for this limitation on the court's powers. The only change in
this section from section 82(c) is to conform the section to the
style and cross-references of H.R. 8200. This section makes clear
that the court may not interfere with the choices a municipality
makes as to what services and benefits it will provide to its
inhabitants.
-End-
-CITE-
11 USC SUBCHAPTER II - ADMINISTRATION 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER II - ADMINISTRATION
-HEAD-
SUBCHAPTER II - ADMINISTRATION
-MISC1-
AMENDMENTS
1984 - Pub. L. 98-353, title III, Sec. 493, July 10, 1984, 98
Stat. 383, substituted "SUBCHAPTER" for "SUBCHAPER".
-End-
-CITE-
11 USC Sec. 921 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER II - ADMINISTRATION
-HEAD-
Sec. 921. Petition and proceedings relating to petition
-STATUTE-
(a) Notwithstanding sections 109(d) and 301 of this title, a case
under this chapter concerning an unincorporated tax or special
assessment district that does not have such district's own
officials is commenced by the filing under section 301 of this
title of a petition under this chapter by such district's governing
authority or the board or body having authority to levy taxes or
assessments to meet the obligations of such district.
(b) The chief judge of the court of appeals for the circuit
embracing the district in which the case is commenced shall
designate the bankruptcy judge to conduct the case.
(c) After any objection to the petition, the court, after notice
and a hearing, may dismiss the petition if the debtor did not file
the petition in good faith or if the petition does not meet the
requirements of this title.
(d) If the petition is not dismissed under subsection (c) of this
section, the court shall order relief under this chapter
notwithstanding section 301(b).
(e) The court may not, on account of an appeal from an order for
relief, delay any proceeding under this chapter in the case in
which the appeal is being taken; nor shall any court order a stay
of such proceeding pending such appeal. The reversal on appeal of a
finding of jurisdiction does not affect the validity of any debt
incurred that is authorized by the court under section 364(c) or
364(d) of this title.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2622; Pub. L. 98-353, title
III, Sec. 494, July 10, 1984, 98 Stat. 383; Pub. L. 109-8, title V,
Sec. 501(a), Apr. 20, 2005, 119 Stat. 118.)
-MISC1-
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTS
Section 905 of the Senate amendment is incorporated as section
921(b) of the House amendment with the difference that the chief
judge of the circuit embracing the district in which the case is
commenced designates a bankruptcy judge to conduct the case in lieu
of a district judge as under present law. It is intended that a
municipality may commence a case in any district in which the
municipality is located, as under present law. Section 906 of the
Senate amendment has been adopted in substance in section 109(c) of
the House amendment.
SENATE REPORT NO. 95-989
Section 905 [enacted as section 921(b)] adopts the procedures for
selection of the judge for the chapter 9 case as found in current
section 82(d) [section 402(d) of former title 11]. It is expected
that the large chapter 9 case might take up almost all the judicial
time of the presiding judge and involve very complex legal
questions. Selection should not be left to chance or the luck of
the draw. This provision will insure that calendar demands and
levels of experience can be considered in the selection of the
judge in a chapter 9 case.
HOUSE REPORT NO. 95-595
Subsection (a) is derived from section 85(a) [section 405(a) of
former title 11], second sentence, of current law. There is no
substantive change in the law. The subsection permits a
municipality that does not have its own officers to be moved into
chapter 9 by the action of the body or board that has authority to
levy taxes for the municipality.
Subsection (b) permits a party in interest to object to the
filing of the petition not later than 15 days after notice. This
provision tracks the third sentence of section 85(a) [section
405(a) of former title 11], except that the provision for
publication in section 85(a) is left to the Rules (see Rule 9-14),
and therefore the determinative date is left less definite.
Subsection (c) permits the court to dismiss a petition not filed
in good faith or not filed in compliance with the requirements of
the chapter. This provision is the fourth sentence of section 85(a)
[section 405(a) of former title 11].
Subsection (d) directs the court to order relief on the petition
if it does not dismiss the case under subsection (c).
Subsection (e) contains the fifth and sixth sentences of section
85(a) [section 405(a) of former title 11].
AMENDMENTS
2005 - Subsec. (d). Pub. L. 109-8 inserted "notwithstanding
section 301(b)" before period at end.
1984 - Subsec. (a). Pub. L. 98-353, Sec. 494(c), substituted
"109(d)" for "109(c)".
Subsec. (c). Pub. L. 98-353, Sec. 494(a), substituted "any" for
"an", and "petition if the debtor did not file the petition in good
faith" for "petition, if the debtor did not file the petition in
good faith,".
Subsec. (d). Pub. L. 98-353, Sec. 494(b), (d), redesignated
subsec. (e) as (d) and substituted "subsection (c)" for "subsection
(d)". No former subsec. (d) had been enacted.
Subsecs. (e), (f). Pub. L. 98-353, Sec. 494(b), redesignated
subsec. (f) as (e). Former subsec. (e) redesignated (d).
EFFECTIVE DATE OF 2005 AMENDMENT
Amendment by Pub. L. 109-8 effective 180 days after Apr. 20,
2005, and not applicable with respect to cases commenced under this
title before such effective date, except as otherwise provided, see
section 1501 of Pub. L. 109-8, set out as a note under section 101
of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-353 effective with respect to cases filed
90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,
set out as a note under section 101 of this title.
-End-
-CITE-
11 USC Sec. 922 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER II - ADMINISTRATION
-HEAD-
Sec. 922. Automatic stay of enforcement of claims against the
debtor
-STATUTE-
(a) A petition filed under this chapter operates as a stay, in
addition to the stay provided by section 362 of this title,
applicable to all entities, of -
(1) the commencement or continuation, including the issuance or
employment of process, of a judicial, administrative, or other
action or proceeding against an officer or inhabitant of the
debtor that seeks to enforce a claim against the debtor; and
(2) the enforcement of a lien on or arising out of taxes or
assessments owed to the debtor.
(b) Subsections (c), (d), (e), (f), and (g) of section 362 of
this title apply to a stay under subsection (a) of this section the
same as such subsections apply to a stay under section 362(a) of
this title.
(c) If the debtor provides, under section 362, 364, or 922 of
this title, adequate protection of the interest of the holder of a
claim secured by a lien on property of the debtor and if,
notwithstanding such protection such creditor has a claim arising
from the stay of action against such property under section 362 or
922 of this title or from the granting of a lien under section
364(d) of this title, then such claim shall be allowable as an
administrative expense under section 503(b) of this title.
(d) Notwithstanding section 362 of this title and subsection (a)
of this section, a petition filed under this chapter does not
operate as a stay of application of pledged special revenues in a
manner consistent with section 927 of this title to payment of
indebtedness secured by such revenues.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623; Pub. L. 98-353, title
III, Sec. 495, July 10, 1984, 98 Stat. 384; Pub. L. 100-597, Sec.
5, Nov. 3, 1988, 102 Stat. 3029.)
-MISC1-
HISTORICAL AND REVISION NOTES
HOUSE REPORT NO. 95-595
The automatic stay provided under section 362 of title 11 is
incomplete for a municipality, because there is the possibility of
action by a creditor against an officer or inhabitant of the
municipality to collect taxes due the municipality. Section
85(e)(1) of current chapter IX [section 405(e)(1) of former title
11] stays such actions. Section 922 carries over that protection
into the proposed chapter 9. Subsection (b) applies the provisions
for relief from the stay that apply generally in section 362 to the
stay under section 922.
AMENDMENTS
1988 - Subsecs. (c), (d). Pub. L. 100-597 added subsecs. (c) and
(d).
1984 - Subsec. (a)(1). Pub. L. 98-353 substituted "a judicial"
for "judicial", and "action or proceeding" for "proceeding".
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not
applicable to any case commenced under this title before that date,
see section 12 of Pub. L. 100-597, set out as a note under section
101 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-353 effective with respect to cases filed
90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,
set out as a note under section 101 of this title.
-End-
-CITE-
11 USC Sec. 923 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER II - ADMINISTRATION
-HEAD-
Sec. 923. Notice
-STATUTE-
There shall be given notice of the commencement of a case under
this chapter, notice of an order for relief under this chapter, and
notice of the dismissal of a case under this chapter. Such notice
shall also be published at least once a week for three successive
weeks in at least one newspaper of general circulation published
within the district in which the case is commenced, and in such
other newspaper having a general circulation among bond dealers and
bondholders as the court designates.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623.)
-MISC1-
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTS
Section 923 of the House amendment represents a compromise with
respect to the notice provisions contained in comparable provisions
of the House bill and Senate amendment. As a general matter, title
11 leaves most procedural issues to be determined by the Rules of
Bankruptcy Procedure. Section 923 of the House amendment contains
certain important aspects of procedure that have been retained from
present law. It is anticipated that the Rules of Bankruptcy
Procedure will adopt rules similar to the present rules for chapter
IX of the Bankruptcy Act [chapter 9 of former title 11].
HOUSE REPORT NO. 95-595
The notice provisions in section 923 are significantly more
sparse than those provided under section 85(d) of chapter IX
[section 405(d) of former title 11]. The exact contours of the
notice to be given under chapter 9 are left to the Rules. Because
the Rules deal with notice in a municipal case (Rule 9-14), and
because section 405(d) of title IV of the bill continues those
Rules in effect to the extent not inconsistent with the bill, the
notice provisions of current law and Rules would continue to apply.
-End-
-CITE-
11 USC Sec. 924 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER II - ADMINISTRATION
-HEAD-
Sec. 924. List of creditors
-STATUTE-
The debtor shall file a list of creditors.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623.)
-MISC1-
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTS
Section 924 of the House amendment is derived from section 924 of
the House bill with the location of the filing of the list of
creditors to be determined by the rules of bankruptcy procedure.
The detailed requirements of section 724 [probably should be "924"]
of the Senate bill are anticipated to be incorporated in the rules
of bankruptcy procedure.
SENATE REPORT NO. 95-989
This section adopts the provision presently contained in section
85(b) of Chapter IX [section 405(b) of former title 11]. A list of
creditors, as complete and accurate as practicable, must be filed
with the court.
HOUSE REPORT NO. 95-595
This section directs the debtor to file a list of creditors with
the court. A comparable provision is presently contained in section
85(b) of chapter IX [section 405(b) of former title 11]. The Rules,
in Rule 9-7, copy the provisions of section 85(b), with additional
matter. As noted above, section 405(d) of title IV will continue
those Rules in effect. Because the form, time of filing, and nature
of the list, are procedural matters that may call for some
flexibility, those details have been left to the Rules.
-End-
-CITE-
11 USC Sec. 925 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER II - ADMINISTRATION
-HEAD-
Sec. 925. Effect of list of claims
-STATUTE-
A proof of claim is deemed filed under section 501 of this title
for any claim that appears in the list filed under section 924 of
this title, except a claim that is listed as disputed, contingent,
or unliquidated.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623.)
-MISC1-
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTS
Section 925 of the Senate amendment regarding venue and fees has
been deleted.
SENATE REPORT NO. 95-989
Section 926 [enacted as section 925] follows the policy contained
in section 88(a) of the present Act [section 408(a) of former title
11], though certain details are left to the Rules. The language of
section 926 is the same as that of proposed 11 U.S.C. 1111, which
applies in chapter 11 cases. The list of creditors filed under
section 924 is given weight as prima facie evidence of the claims
listed (except claims that are listed as disputed, contingent, or
unliquidated), which are deemed filed under section 501, obviating
the need for listed creditors to file proofs of claim.
-End-
-CITE-
11 USC Sec. 926 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER II - ADMINISTRATION
-HEAD-
Sec. 926. Avoiding powers
-STATUTE-
(a) If the debtor refuses to pursue a cause of action under
section 544, 545, 547, 548, 549(a), or 550 of this title, then on
request of a creditor, the court may appoint a trustee to pursue
such cause of action.
(b) A transfer of property of the debtor to or for the benefit of
any holder of a bond or note, on account of such bond or note, may
not be avoided under section 547 of this title.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623; Pub. L. 100-597, Sec.
6, Nov. 3, 1988, 102 Stat. 3029.)
-MISC1-
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTS
Section 926 of the House amendment is derived from section 928 of
the Senate bill. The provision enables creditors to request the
court to appoint a trustee to pursue avoiding powers if the debtor
refuses to exercise those powers. Section 901 of the House
amendment makes a corresponding change to incorporate avoiding
powers included in the Senate amendment, but excluded from the
House bill.
SENATE REPORT NO. 95-989
This section [928 (enacted as section 926)] adopts current
section 85(h) [section 405(h) of former title 11] which provides
for a trustee to be appointed for the purpose of pursuing an action
under an avoiding power, if the debtor refuses to do so. This
section is necessary because a municipality might, by reason of
political pressure or desire for future good relations with a
particular creditor or class of creditors, make payments to such
creditors in the days preceding the petition to the detriment of
all other creditors. No change in the elected officials of such a
city would automatically occur upon filing of the petition, and it
might be very awkward for those same officials to turn around and
demand the return of the payments following the filing of the
petition. Hence, the need for a trustee for such purpose.
The general avoiding powers are incorporated by reference in
section 901 and are broader than under current law. Preference,
fraudulent conveyances, and other kinds of transfers will thus be
voidable.
Incorporated by reference also is the power to accept or reject
executory contracts and leases (section 365). Within the definition
of executory contracts are collective bargaining agreements between
the city and its employees. Such contracts may be rejected despite
contrary State laws. Courts should readily allow the rejection of
such contracts where they are burdensome, the rejection will aid in
the municipality's reorganization and in consideration of the
equities of each case. On the last point, "[e]quities in favor of
the city in chapter 9 will be far more compelling than the equities
in favor of the employer in chapter 11. Onerous employment
obligations may prevent a city from balancing its budget for some
time. The prospect of an unbalanced budget may preclude judicial
confirmation of the plan. Unless a city can reject its labor
contracts, lack of funds may force cutbacks in police, fire,
sanitation, and welfare services, imposing hardships on many
citizens. In addition, because cities in the past have often seemed
immune to the constraint of "profitability" faced by private
businesses, their wage contracts may be relatively more onerous
than those in the private sector." Executory Contracts and
Municipal Bankruptcy, 85 Yale L. J. 957, 965 (1976) (footnote
omitted). Rejection of the contracts may require the municipalities
to renegotiate such contracts by state collective bargaining laws.
It is intended that the power to reject collective bargaining
agreements will pre-empt state termination provisions, but not
state collective bargaining laws. Thus, a city would not be
required to maintain existing employment terms during the
renegotiation period.
AMENDMENTS
1988 - Pub. L. 100-597 designated existing provisions as subsec.
(a) and added subsec. (b).
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not
applicable to any case commenced under this title before that date,
see section 12 of Pub. L. 100-597, set out as a note under section
101 of this title.
-End-
-CITE-
11 USC Sec. 927 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER II - ADMINISTRATION
-HEAD-
Sec. 927. Limitation on recourse
-STATUTE-
The holder of a claim payable solely from special revenues of the
debtor under applicable nonbankruptcy law shall not be treated as
having recourse against the debtor on account of such claim
pursuant to section 1111(b) of this title.
-SOURCE-
(Added Pub. L. 100-597, Sec. 7(2), Nov. 3, 1988, 102 Stat. 3029.)
-MISC1-
PRIOR PROVISIONS
A prior section 927 was renumbered section 930 of this title.
EFFECTIVE DATE
Section effective Nov. 3, 1988, but not applicable to any case
commenced under this title before that date, see section 12 of Pub.
L. 100-597, set out as an Effective Date of 1988 Amendment note
under section 101 of this title.
-End-
-CITE-
11 USC Sec. 928 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER II - ADMINISTRATION
-HEAD-
Sec. 928. Post petition effect of security interest
-STATUTE-
(a) Notwithstanding section 552(a) of this title and subject to
subsection (b) of this section, special revenues acquired by the
debtor after the commencement of the case shall remain subject to
any lien resulting from any security agreement entered into by the
debtor before the commencement of the case.
(b) Any such lien on special revenues, other than municipal
betterment assessments, derived from a project or system shall be
subject to the necessary operating expenses of such project or
system, as the case may be.
-SOURCE-
(Added Pub. L. 100-597, Sec. 8, Nov. 3, 1988, 102 Stat. 3029.)
-MISC1-
EFFECTIVE DATE
Section effective Nov. 3, 1988, but not applicable to any case
commenced under this title before that date, see section 12 of Pub.
L. 100-597, set out as an Effective Date of 1988 Amendment note
under section 101 of this title.
-End-
-CITE-
11 USC Sec. 929 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER II - ADMINISTRATION
-HEAD-
Sec. 929. Municipal leases
-STATUTE-
A lease to a municipality shall not be treated as an executory
contract or unexpired lease for the purposes of section 365 or
502(b)(6) of this title solely by reason of its being subject to
termination in the event the debtor fails to appropriate rent.
-SOURCE-
(Added Pub. L. 100-597, Sec. 9, Nov. 3, 1988, 102 Stat. 3030.)
-MISC1-
EFFECTIVE DATE
Section effective Nov. 3, 1988, but not applicable to any case
commenced under this title before that date, see section 12 of Pub.
L. 100-597, set out as an Effective Date of 1988 Amendment note
under section 101 of this title.
-End-
-CITE-
11 USC Sec. 930 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER II - ADMINISTRATION
-HEAD-
Sec. 930. Dismissal
-STATUTE-
(a) After notice and a hearing, the court may dismiss a case
under this chapter for cause, including -
(1) want of prosecution;
(2) unreasonable delay by the debtor that is prejudicial to
creditors;
(3) failure to propose a plan within the time fixed under
section 941 of this title;
(4) if a plan is not accepted within any time fixed by the
court;
(5) denial of confirmation of a plan under section 943(b) of
this title and denial of additional time for filing another plan
or a modification of a plan; or
(6) if the court has retained jurisdiction after confirmation
of a plan -
(A) material default by the debtor with respect to a term of
such plan; or
(B) termination of such plan by reason of the occurrence of a
condition specified in such plan.
(b) The court shall dismiss a case under this chapter if
confirmation of a plan under this chapter is refused.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623, Sec. 927; Pub. L. 98-
353, title III, Sec. 496, July 10, 1984, 98 Stat. 384; renumbered
Sec. 930, Pub. L. 100-597, Sec. 7(1), Nov. 3, 1988, 102 Stat.
3029.)
-MISC1-
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTS
Section 927(b) of the House amendment is derived from section
927(b) of the Senate bill. The provision requires mandatory
dismissal if confirmation of a plan is refused.
The House amendment deletes section 929 of the Senate amendment
as unnecessary since the bankruptcy court has original exclusive
jurisdiction of all cases under chapter 9.
The House amendment deletes section 930 of the Senate amendment
and incorporates section 507(a)(1) by reference.
SENATE REPORT NO. 95-989
Section 927 conforms to section 98 of current law [section 418 of
former title 11]. The Section permits dismissal by the court for
unreasonable delay by the debtor, failure to propose a plan,
failure of acceptance of a plan, or default by the debtor under a
conformed plan. Mandatory dismissal is required if confirmation is
refused.
HOUSE REPORT NO. 95-595
Section 926 [enacted as section 927] generally conforms to
section 98(a) [section 418(a) of former title 11] of current law.
Stylistic changes have been made to conform the language with that
used in chapter 11, section 1112. The section permits dismissal by
the court for unreasonable delay by the debtor that is prejudicial
to creditors, failure to propose a plan, failure of confirmation of
a plan, or material default by the debtor under a confirmed plan.
The only significant change from current law lies in the second
ground. Currently, section 98(a)(2) provides for dismissal if a
proposed plan is not accepted, and section 98(b) requires dismissal
if an accepted plan is not confirmed. In order to provide greater
flexibility to the court, the debtor, and creditors, the bill
allows the court to permit the debtor to propose another plan if
the first plan is not confirmed. In that event the debtor need not,
as under current law, commence the case all over again. This could
provide savings in time and administrative expenses if a plan is
denied confirmation.
AMENDMENTS
1984 - Subsec. (b). Pub. L. 98-353 substituted "confirmation of a
plan under this chapter" for "confirmation".
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-353 effective with respect to cases filed
90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,
set out as a note under section 101 of this title.
-End-
-CITE-
11 USC SUBCHAPTER III - THE PLAN 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER III - THE PLAN
-HEAD-
SUBCHAPTER III - THE PLAN
-End-
-CITE-
11 USC Sec. 941 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER III - THE PLAN
-HEAD-
Sec. 941. Filing of plan
-STATUTE-
The debtor shall file a plan for the adjustment of the debtor's
debts. If such a plan is not filed with the petition, the debtor
shall file such a plan at such later time as the court fixes.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2624.)
-MISC1-
HISTORICAL AND REVISION NOTES
SENATE REPORT NO. 95-989
Section 941 gives the debtor the exclusive right to propose a
plan, and directs that the debtor propose one either with the
petition or within such time as the court directs. The section
follows section 90(a) of current law [section 410(a) of former
title 11].
-End-
-CITE-
11 USC Sec. 942 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER III - THE PLAN
-HEAD-
Sec. 942. Modification of plan
-STATUTE-
The debtor may modify the plan at any time before confirmation,
but may not modify the plan so that the plan as modified fails to
meet the requirements of this chapter. After the debtor files a
modification, the plan as modified becomes the plan.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2624.)
-MISC1-
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTS
The House amendment deletes section 942 of the Senate amendment
in favor of incorporating section 1125 by cross-reference.
Similarly, the House amendment does not incorporate section 944 or
945 of the Senate amendment since incorporation of several sections
in chapter 11 in section 901 is sufficient.
SENATE REPORT NO. 95-989
Section 942 permits the debtor to modify the plan at any time
before confirmation, as does section 90(a) of current law [section
410(a) of former title 11].
-End-
-CITE-
11 USC Sec. 943 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER III - THE PLAN
-HEAD-
Sec. 943. Confirmation
-STATUTE-
(a) A special tax payer may object to confirmation of a plan.
(b) The court shall confirm the plan if -
(1) the plan complies with the provisions of this title made
applicable by sections 103(e) (!1) and 901 of this title;
(2) the plan complies with the provisions of this chapter;
(3) all amounts to be paid by the debtor or by any person for
services or expenses in the case or incident to the plan have
been fully disclosed and are reasonable;
(4) the debtor is not prohibited by law from taking any action
necessary to carry out the plan;
(5) except to the extent that the holder of a particular claim
has agreed to a different treatment of such claim, the plan
provides that on the effective date of the plan each holder of a
claim of a kind specified in section 507(a)(2) of this title will
receive on account of such claim cash equal to the allowed amount
of such claim;
(6) any regulatory or electoral approval necessary under
applicable nonbankruptcy law in order to carry out any provision
of the plan has been obtained, or such provision is expressly
conditioned on such approval; and
(7) the plan is in the best interests of creditors and is
feasible.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2624; Pub. L. 98-353, title
III, Sec. 497, July 10, 1984, 98 Stat. 384; Pub. L. 100-597, Sec.
10, Nov. 3, 1988, 102 Stat. 3030; Pub. L. 109-8, title XV, Sec.
1502(a)(6), Apr. 20, 2005, 119 Stat. 216.)
-MISC1-
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTS
Section 943(a) of the House amendment makes clear that a special
taxpayer may object to confirmation of a plan. Section 943(b) of
the House amendment is derived from section 943 of the House bill
respecting confirmation of a plan under chapter 9. It must be
emphasized that these standards of confirmation are in addition to
standards in section 1129 that are made applicable to chapter 9 by
section 901 of the House amendment. In particular, if the
requirements of sections 1129(a)(8) are not complied with, then the
proponent may request application of section 1129(b). The court
will then be required to confirm the plan if it complies with the
"fair and equitable" test and is in the best interests of
creditors. The best interests of creditors test does not mean
liquidation value as under chapter XI of the Bankruptcy Act
[chapter 11 of former title 11]. In making such a determination, it
is expected that the court will be guided by standards set forth in
Kelley v. Everglades Drainage District, 319 U.S. 415 (1943)
[Fla.1943, 63 S.Ct. 1141, 87 L.Ed. 1485, rehearing denied 63 S.Ct.
1444, 320 U.S. 214, 87 L.Ed. 1851, motion denied 64 S.Ct 783, 321
U.S. 754, 88 L.Ed. 1054] and Fano v. Newport Heights Irrigation
Dist., 114 F.2d 563 (9th Cir. 1940), as under present law, the
bankruptcy court should make findings as detailed as possible to
support a conclusion that this test has been met. However, it must
be emphasized that unlike current law, the fair and equitable test
under section 1129(b) will not apply if section 1129(a)(8) has been
satisfied in addition to the other confirmation standards specified
in section 943 and incorporated by reference in section 901 of the
House amendment. To the extent that American United Mutual Life
Insurance Co. v. City of Avon Park, 311 U.S. 138 (1940) [Fla.1940,
61 S.Ct. 157, 85 L.Ed. 91, 136 A.L.R. 860, rehearing denied 61
S.Ct. 395, 311 U.S. 730, 85 L.Ed. 475] and other cases are to the
contrary, such cases are overruled to that extent.
SENATE REPORT NO. 95-989
Section 946 [enacted as section 943] is adopted from current
section 94 [section 414 of former title 11]. The test for
confirmation is whether or not the plan is fair and equitable and
feasible. The fair and equitable test tracts current chapter X
[chapter 10 of former title 11] and is known as the strict priority
rule. Creditors must be provided, under the plan, the going concern
value of their claims. The going concern value contemplates a
"comparison of revenues and expenditures taking into account the
taxing power and the extent to which tax increases are both
necessary and feasible" Municipal Insolvency, supra, at p. 64, and
is intended to provide more of a return to creditors than the
liquidation value if the city's assets could be liquidated like
those of a private corporation.
HOUSE REPORT NO. 95-595
In addition to the confirmation requirements incorporated from
section 1129 by section 901, this section specifies additional
requirements. Paragraph (1) requires compliance with the provisions
of the title made applicable in chapter 9 cases. This provision
follows section 94(b)(2) [section 414(b)(2) of former title 11].
Paragraph (2) requires compliance with the provisions of chapter 9,
as does section 94(b)(2). Paragraph (3) adopts section 94(b)(4),
requiring disclosure and reasonableness of all payments to be made
in connection with the plan or the case. Paragraph (4), copied from
section 92(b)(6) [probably should be "94(b)(6)" which was section
414(b)(6) of former title 11], requires that the debtor not be
prohibited by law from taking any action necessary to carry out the
plan. Paragraph (5) departs from current law by requiring that
administrative expenses be paid in full, but not necessarily in
cash. Finally, paragraph (6) requires that the plan be in the best
interest of creditors and feasible. The best interest test was
deleted in section 94(b)(1) of current chapter IX from previous
chapter IX [chapter 9 of former title 11] because it was redundant
with the fair and equitable rule. However, this bill proposes a new
confirmation standard generally for reorganization, one element of
which is the best interest of creditors test; see section
1129(a)(7). In that section, the test is phrased in terms of
liquidation of the debtor. Because that is not possible in a
municipal case, the test here is phrased in its more traditional
form, using the words of art "best interest of creditors." The best
interest of creditors test here is in addition to the financial
standards imposed on the plan by sections 1129(a)(8) and 1129(b),
just as those provisions are in addition to the comparable best
interest test in chapter 11, 11 U.S.C. 1129(a)(7). The feasibility
requirement, added in the revision of chapter IX last year, is
retained.
-REFTEXT-
REFERENCES IN TEXT
Section 103(e) of this title, referred to in subsec. (b)(1), was
redesignated section 103(f) and a new section 103(e) was added by
Pub. L. 106-554, Sec. 1(a)(5) [title I, Sec. 112(c)(5)(A)], Dec.
21, 2000, 114 Stat. 2763, 2763A-394.
-MISC2-
AMENDMENTS
2005 - Subsec. (b)(5). Pub. L. 109-8 substituted "507(a)(2)" for
"507(a)(1)".
1988 - Subsec. (b)(6), (7). Pub. L. 100-597 added par. (6) and
redesignated former par. (6) as (7).
1984 - Subsec. (b)(4). Pub. L. 98-353, Sec. 497(1), struck out
"to be taken" after "necessary".
Subsec. (b)(5). Pub. L. 98-353, Sec. 497(2), substituted
provisions requiring the plan to provide payment of cash in an
amount equal to the allowed amount of a claim except to the extent
that the holder of a particular claim has agreed to different
treatment of such claim, for provisions which required the plan to
provide for payment of property of a value equal to the allowed
amount of such claim except to the extent that the holder of a
particular claim has waived such payment on such claim.
EFFECTIVE DATE OF 2005 AMENDMENT
Amendment by Pub. L. 109-8 effective 180 days after Apr. 20,
2005, and not applicable with respect to cases commenced under this
title before such effective date, except as otherwise provided, see
section 1501 of Pub. L. 109-8, set out as a note under section 101
of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not
applicable to any case commenced under this title before that date,
see section 12 of Pub. L. 100-597, set out as a note under section
101 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-353 effective with respect to cases filed
90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,
set out as a note under section 101 of this title.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
-CITE-
11 USC Sec. 944 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER III - THE PLAN
-HEAD-
Sec. 944. Effect of confirmation
-STATUTE-
(a) The provisions of a confirmed plan bind the debtor and any
creditor, whether or not -
(1) a proof of such creditor's claim is filed or deemed filed
under section 501 of this title;
(2) such claim is allowed under section 502 of this title; or
(3) such creditor has accepted the plan.
(b) Except as provided in subsection (c) of this section, the
debtor is discharged from all debts as of the time when -
(1) the plan is confirmed;
(2) the debtor deposits any consideration to be distributed
under the plan with a disbursing agent appointed by the court;
and
(3) the court has determined -
(A) that any security so deposited will constitute, after
distribution, a valid legal obligation of the debtor; and
(B) that any provision made to pay or secure payment of such
obligation is valid.
(c) The debtor is not discharged under subsection (b) of this
section from any debt -
(1) excepted from discharge by the plan or order confirming the
plan; or
(2) owed to an entity that, before confirmation of the plan,
had neither notice nor actual knowledge of the case.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2624.)
-MISC1-
HISTORICAL AND REVISION NOTES
SENATE REPORT NO. 95-989
[Section 947] Subsection (a) [enacted as section 944(a)] makes
the provisions of a confirmed plan binding on the debtor and
creditors. It is derived from section 95(a) of chapter 9 [section
415(a) of former title 11].
Subsections (b) and (c) [enacted as section 944(b) and (c)]
provide for the discharge of a municipality. The discharge is
essentially the same as that granted under section 95(b) of the
Bankruptcy Act [section 415(b) of former title 11].
-End-
-CITE-
11 USC Sec. 945 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER III - THE PLAN
-HEAD-
Sec. 945. Continuing jurisdiction and closing of the case
-STATUTE-
(a) The court may retain jurisdiction over the case for such
period of time as is necessary for the successful implementation of
the plan.
(b) Except as provided in subsection (a) of this section, the
court shall close the case when administration of the case has been
completed.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2625; Pub. L. 98-353, title
III, Sec. 498, July 10, 1984, 98 Stat. 384.)
-MISC1-
HISTORICAL AND REVISION NOTES
SENATE REPORT NO. 95-989
Section 948 [enacted as section 945] permits the court to retain
jurisdiction over the case to ensure successful execution of the
plan. The provision is the same as that found in section 96(e) of
Chapter 9 of the present Act [section 416(e) of former title 11].
AMENDMENTS
1984 - Subsec. (a). Pub. L. 98-353 substituted "implementation"
for "execution".
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-353 effective with respect to cases filed
90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,
set out as a note under section 101 of this title.
-End-
-CITE-
11 USC Sec. 946 01/05/2009
-EXPCITE-
TITLE 11 - BANKRUPTCY
CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY
SUBCHAPTER III - THE PLAN
-HEAD-
Sec. 946. Effect of exchange of securities before the date of the
filing of the petition
-STATUTE-
The exchange of a new security under the plan for a claim covered
by the plan, whether such exchange occurred before or after the
date of the filing of the petition, does not limit or impair the
effectiveness of the plan or of any provision of this chapter. The
amount and number specified in section 1126(c) of this title
include the amount and number of claims formerly held by a creditor
that has participated in any such exchange.
-SOURCE-
(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2625.)
-MISC1-
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTS
The House amendment deletes section 950 of the Senate amendment
as unnecessary. The constitutionality of chapter 9 of the House
amendment is beyond doubt.
SENATE REPORT NO. 95-989
[Section 949] This section [enacted as section 946], which
follows section 97 of current law [section 417 of former title 11],
permits an exchange of a security before the case is filed to
constitute an acceptance of the plan if the exchange was under a
proposal that later becomes the plan.
-End-
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