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DIVORCE AND BANKRUPTCY – Northern District Judicial Conference presentation Hon. Roger Efremsky: Chief U.S. Bankruptcy Judge, No. Dist. of California – moderator Panelists: Hon. Neil W. Bason - U.S. Bankruptcy Judge, Central Dist. of California Marlene Weinstein - Panel Chapter 7 Trustee – Oakland Division I. JURISDICTIONAL ISSUES BETWEEN BANKRUPTCY AND FAMILY LAW

COURTS - EXCLUSIVE V. CONCURRENT - WHAT STATE COURT PROCEEDINGS ARE STAYED BY THE AUTOMATIC STAY - WHAT ISSUES CAN GO FORWARD WITHOUT RELIEF FROM STAY - DURATION OF THE AUTOMATIC STAY - VIOLATION OF THE AUTOMATIC STAY - WHAT ISSUES SHOULD BE SENT TO STATE COURT - REMOVAL ISSUES II. FILING ISSUES -WHEN SPOUSES ARE STILL TECHNICALLY MARRIED - NO MORE GENDER ISSUES - FILING BANKRUPTCY BEFORE FAMILY CASE IS FILED - FILING BANKRUPTCY BEFORE DIVORCE IS FINAL III. CHOOSING A CHAPTER -BENEFITS/PITFALLS OF CHAPTER 7 v. CHAPTER 13

Ability to discharge non-support obligations in Chapter 13 - Section 1328(a)

Issues regarding Domestic support obligations ("DSOs")

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- Section 1322(a)(2)&(4) - Section 1325(a)(8) - Section 1307(c)(11) - FAMILY LAW ISSUES ARISING IN CHAPTER 11 - Section 1129(a)(9)(B) - Section 1129(a)(14) - Sections 523(a)(5)&(15), and 1141(d)(2) - Section 1112(b)(4) -EFFECT OF ZACHARY v. CALIFORNIA BANK & TRUST (IN RE ZACHARY) ON CHAPTER 11 MATTERS IV. CHAPTER 7 ADMINISTRATION - THE DEBTOR’S PERSPECTIVE Exemption Issues - choice of exemption scheme (section 522, CCP 704.010 v. 703.140(b)) - using entire exemption - collecting DSOs from exempt property (section 522(c)(1)) - THE NON-FILING SPOUSE’S PERSPECTIVE - THE CHAPTER 7 TRUSTEE’S PERSPECTIVE - PROPERTY OF THE ESTATE UNDER SECTION 541 - Marriage of Valli, 58 Cal 4th 1396 - PREFERENCE ACTIONS, PRE-PETITION TRANSFERS, TRANSACTIONS, DETERMINATIONS BY STATE COURT - JUDICIAL LIEN SECURING DSO – section 522(f) - RIGHTS UNDER SECTIONS 547 AND 548 - DEFENSES TO PREFERENCE ACTIONS (section 547(c)(7)) - SECTION 363(g), (h) RIGHTS OF THE TRUSTEE - RIGHTS OF THE NON-DEBTOR UNDER SECTION 363(i) & (j) - DISTRIBUTION PRIORITIES (section 726(c) "waterfall")

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V. FAMILY COURT PERSPECTIVE - PROPERTY DIVISION - CUSTODY ISSUES - PROPERTY DETERMINATION - QUALIFIED DOMESTIC RELATIONS ORDERS - RETIREMENT ACCOUNT/PENSION ISSUES - RES JUDICATA/COLLATERAL ESTOPPEL ISSUES

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APPENDIX

Cases In re Marriage of Valli,

58 Cal 4th 1396 (2014) ................................................................................................................ 1

Zachary v. California Bank & Trust (In Re Zachary) 811 F.3d 1191 (2016) ................................................................................................................ 11

Statutes 11 U.S.C. § 1112........................................................................................................................... 17

11 U.S.C. § 1141........................................................................................................................... 20

11 U.S.C. § 1129........................................................................................................................... 23

11 U.S.C. § 1307........................................................................................................................... 28

11 U.S.C. § 1322........................................................................................................................... 30

11 U.S.C. § 1325........................................................................................................................... 33

11 U.S.C. § 1328........................................................................................................................... 37

11 U.S.C. § 363............................................................................................................................. 40

11 U.S.C. § 522............................................................................................................................. 45

11 U.S.C. § 523............................................................................................................................. 56

11 U.S.C. § 547............................................................................................................................. 62

11 U.S.C. § 548............................................................................................................................. 67

11 U.S.C. § 726............................................................................................................................. 71

C.C.P § 703.140 ........................................................................................................................... 74

C.C.P § 704.010 ........................................................................................................................... 78

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58 Cal.4th 1396Supreme Court of California

In re the MARRIAGE OF Frankie and Randy VALLI.Frankie VALLI, Respondent,

v.Randy VALLI, Appellant.

No. S193990.|

May 15, 2014.

SynopsisBackground: Husband filed petition for dissolution ofmarriage. The Superior Court, Los Angeles County, No.BD414038, Mark A. Juhas, J., entered property divisionorder finding that life insurance policy was communityproperty, and wife appealed. The Court of Appeal reversedand remanded. Husband petitioned for review. The SupremeCourt granted review, superseding the opinion of the Courtof Appeal.

Holdings: The Supreme Court, Kennard, J., held that:

[1] purchases made during the marriage are not exempt fromthe transmutation requirements for converting communityproperty to separate property, abrogating In re Marriage ofBrooks & Robinson, 169 Cal.App.4th 176, 86 Cal.Rptr.3d624, and

[2] life insurance policy bought with community assets wascommunity property.

Reversed and remanded.

Chin, J., filed concurring opinion, in which Corrigan and Liu,JJ., joined.

Attorneys and Law Firms

***455 Jaffe and Clemens, William S. Ryden, BeverlyHills, and Nancy Braden–Parker for Appellant.

***456 Garrett C. Dailey, Oakland; Walzer & Melcher,Peter Walzer and Christopher C. Melcher, Woodland Hills,for Respondent.

Charlotte K. Goldberg and Herma Hill Kay as Amici Curiaeon behalf of Respondent.

Grace Ganz Blumberg and Herma Hill Kay as Amici Curiaeon behalf of Respondent.

Sideman & Bancroft and Diana E. Richmond, San Francisco,for Northern California Chapter of the American Academy ofMatrimonial Lawyers and the Association of Certified FamilyLaw Specialists as Amici Curiae on behalf of Respondent.

Law Office of Kim W. Cheatum and Kim W. Cheatum, SanDiego, as Amici Curiae on behalf of Respondent.

KENNARD, J. *

*1399 **275 During a marriage the husband usedcommunity property funds to purchase an insurance policyon his life, naming his wife as the policy's only ownerand beneficiary. Upon dissolution of the marriage, is thelife insurance policy community property or the wife'sseparate property? We conclude that, unless the statutorytransmutation requirements have been met, the life insurancepolicy is community property. Because the Court of Appealreached a different conclusion, we reverse that court'sjudgment.

I

After a 20–year marriage, Frankie Valli (husband) and RandyValli (wife) separated in September 2004. Their three childrenwere minors at the time of separation but have since becomeadults. Before the separation, in March 2003, husband usedcommunity property funds from a joint bank account to buya $3.75 million insurance policy on his life, naming wife asthe sole owner and beneficiary. Until the parties separated,the policy premiums were likewise paid with communityproperty funds from a joint bank account.

At the marital dissolution proceeding, wife testified thatshe and husband, while he was in the hospital for “heartproblems,” had talked about buying a life insurance policy.Wife said that husband and their business manager, BarrySiegel, told her that they would make her the policy's owner.Husband testified that he “put everything in [wife's] name,figuring she would take care and give to the kids what theymight have coming” and that he had no plans to separate fromwife when he bought the policy.

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The trial court ruled that the insurance policy was communityproperty because it was acquired during marriage withcommunity funds. The court awarded the policy to husbandand ordered him to buy out wife's interest in the policy bypaying her $182,500, representing one-half of the policy'scash value **276 at the time of trial. The Court of Appealreversed, holding that the insurance policy was wife's separateproperty.

II

[1] [2] In a marital dissolution proceeding, a court'scharacterization of the parties' property—as communityproperty or separate property—determines the division of theproperty between the spouses. (In re Marriage of Benson(2005) 36 Cal.4th 1096, 1102, 32 Cal.Rptr.3d 471, 116P.3d 1152; *1400 In re Marriage of Haines (1995) 33Cal.App.4th 277, 291, 39 Cal.Rptr.2d 673.) Property that aspouse acquired before the marriage is that spouse's ***457separate property. (Fam.Code, § 770, subd. (a)(1).) Propertythat a spouse acquired during the marriage is communityproperty (id., § 760) unless it is (1) traceable to a separateproperty source (In re Marriage of Lucas (1980) 27 Cal.3d808, 815, 166 Cal.Rptr. 853, 614 P.2d 285; In re Marriageof Mix (1975) 14 Cal.3d 604, 610, 612, 122 Cal.Rptr. 79,536 P.2d 479), (2) acquired by gift or bequest (Fam.Code,§ 770, subd. (a)(2)), or (3) earned or accumulated while thespouses are living separate and apart (id., § 771, subd. (a)).A spouse's claim that property acquired during a marriage isseparate property must be proven by a preponderance of theevidence. (In re Marriage of Ettefagh (2007) 150 Cal.App.4th1578, 1591, 59 Cal.Rptr.3d 419; see Estate of Murphy (1976)15 Cal.3d 907, 917, 126 Cal.Rptr. 820, 544 P.2d 956 [aspouse asserting that property acquired by purchase during amarriage is separate property must prove that the property isnot community].)

Here, as mentioned earlier, husband during the marriage tookout a $3.75 million insurance policy on his life, designatingwife as the policy's sole owner and beneficiary. The partiesdo not dispute that the policy was purchased with communityproperty funds from a joint bank account. What they dodispute is the policy's characterization. Husband argues thatthe policy is community property because it was purchasedduring the marriage with community funds. (See Tyre v.Aetna Life Ins. Co. (1960) 54 Cal.2d 399, 402, 6 Cal.Rptr. 13,353 P.2d 725 [“A policy of insurance on the husband's life

is community property when the premiums have been paidwith community funds.”]; Grimm v. Grimm (1945) 26 Cal.2d173, 175, 157 P.2d 841 [same].) Wife argues that the policy isher separate property because husband arranged for the policyto be put solely in her name, thereby changing the policy'scharacter from community property to separate property.

[3] Married persons may, through a transfer or anagreement, transmute—that is, change—the character ofproperty from community to separate or from separate tocommunity. (Fam.Code, § 850.) A transmutation of property,however, “is not valid unless made in writing by an expressdeclaration that is made, joined in, consented to, or acceptedby the spouse whose interest in the property is adverselyaffected.” (Id., § 852, subd. (a).) To satisfy the requirementof an “express declaration,” a writing signed by the adverselyaffected spouse must expressly state that the character orownership of the property at issue is being changed. (Estateof MacDonald (1990) 51 Cal.3d 262, 272, 272 Cal.Rptr. 153,794 P.2d 911.) The “express declaration” requirement “doesnot apply to a gift between the spouses of clothing, wearingapparel, jewelry, or other tangible articles of a personal naturethat is used solely or principally by the spouse to whom thegift is *1401 made and that is not substantial in value takinginto account the circumstances of the marriage.” (Fam.Code,§ 852, subd. (c), italics added.)

Here, husband contends that because the express writtendeclaration requirement was not satisfied, his act of placingthe life insurance policy in wife's name did not transmutethe policy, which was purchased during the marriage withcommunity funds, into a separate property asset of wife.Wife argues that the transmutation requirements apply onlyto transactions between spouses, and not to one spouse'sacquisition of property from a third party. Here, sheargues, the only transaction was between husband and theinsurance company issuing the policy. Because there wasno interspousal transaction, in her view the transmutationrequirements do not apply.

***458 **277 The Legislature adopted the statutorytransmutation requirements in 1984 upon a recommendationof the California Law Revision Commission. (Estate ofMacDonald, supra, 51 Cal.3d at p. 268, 272 Cal.Rptr.153, 794 P.2d 911.) In its report to the Legislature, thecommission observed that under then existing law it was “‘quite easy for spouses to transmute both real and personalproperty’ ” because a transmutation could be proved byevidence of an oral agreement between the spouses or by “

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‘implications from the conduct of the spouses.’ ” (Id. at p.269, 272 Cal.Rptr. 153, 794 P.2d 911.) This “ ‘rule of easytransmutation ... generated extensive litigation in dissolutionproceedings' ” where it encouraged spouses “ ‘to transforma passing comment into an “agreement” or even to commitperjury by manufacturing an oral or implied transmutation.’” (Ibid.) As this court has concluded, therefore, in adoptingthe statutory transmutation requirements the Legislatureintended “to remedy problems which arose when courtsfound transmutations on the basis of evidence the Legislatureconsidered unreliable.” (Ibid.; accord, In re Marriage ofBenson, supra, 36 Cal.4th at p. 1106, 32 Cal.Rptr.3d 471,116 P.3d 1152 [the transmutation statute “blocks effortsto transmute marital property based on evidence—oral,behavioral, or documentary—that is easily manipulated andunreliable”].)

The distinction that wife here urges us to draw betweeninterspousal property transactions (which are subject to thetransmutation statutes) and property acquisitions from thirdparties (which would not be subject to those statutes evenwhen it has the claimed effect of changing communityproperty funds to a separate property asset or vice versa)bears no relation to these legislative concerns, and it producesarbitrary and irrational results that the Legislature could nothave intended. A few hypothetical examples illustrate thispoint.

Suppose a husband, shopping at a jewelry store, usescommunity funds to buy a particularly expensive diamondnecklace that is “substantial in value taking into accountthe circumstances of the marriage” *1402 Fam.Code, §852, subd. (c)), intending to give it to his wife a fewdays later as a birthday present. Because of the particularnecklace's value in comparison to the particular couple'sfinancial situation, the gift exception does not apply. Underthe analysis urged here by wife, the transmutation statuteswould not apply to the necklace's purchase because it wasa third party transaction with the jewelry store. But becausethe husband used community funds to buy the necklaceand did not immediately transfer title or possession to thewife, the purchase itself did not cause any transmutation,and the necklace would be community property at leastuntil the wife's birthday. On that day, the husband's act ofgiving the necklace to the wife, together with the wife's actof accepting the husband's gift, would be an interspousaltransaction to which the transmutation requirements wouldapply even under the analysis urged here by wife. Absentan express written declaration, therefore, the necklace would

remain community property even after the wife received it asa birthday gift from the husband.

Next, suppose that instead of buying the necklace for hiswife before her birthday, the husband, on his wife's birthday,promises to buy a diamond necklace of her choice. They goto a jewelry store, the wife selects a particular necklace thatis “substantial in value taking into account the circumstancesof the marriage” (Fam.Code, § 852, subd. (c)), the husbandpays for it with community funds, and they leave the storewith the wife wearing the ***459 new jewelry. In thisscenario, there would appear to be a single transaction, thejewelry store purchase. Under the analysis urged here bywife, the transmutation statutes would not apply to that singletransaction because it was a purchase from a third party, andthus no “express declaration” would be required to transmutethe community property funds to the wife's separate propertyasset.

For purposes of the transmutation statutes, it is difficult toconceive any justification for treating these two hypotheticalscenarios differently. Under either scenario, the husbandcould present evidence, in a later dissolution proceeding, thathe and the wife had discussed the advantages of diamonds**278 as an investment, that they had orally agreed the

necklace would eventually be passed on to their daughter,and that it was therefore understood between them thatalthough this very expensive necklace would be the wife'sto wear on special occasions, it would remain a communityasset. To rebut the husband's evidence, the wife could denyhaving any conversation with the husband about investing indiamonds or purchasing jewelry as a family legacy, and shecould present evidence of a contrary understanding that thenecklace was to be hers alone. If the transmutation statutesdid not apply, and in the absence of a writing expresslymemorializing the parties' understanding and intent, thetrial court in the dissolution proceeding would be obligedto base its decision regarding the necklace's character ascommunity or separate property on a difficult assessment ofthe spouses' credibility as *1403 witnesses. (See, e.g., In reMarriage of Steinberger (2001) 91 Cal.App.4th 1449, 1456,111 Cal.Rptr.2d 521.) Putting the trial court in such a positionis what the transmutation statutes were enacted to prevent.

One could argue, perhaps, that the second hypotheticalscenario, like the first, can and should be viewed astwo transactions—a purchase from a third party and aninterspousal giving of a gift—that are legally distinguishableeven though they occurred simultaneously. Adopting that

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approach, one would conclude that the interspousal gifttransaction was subject to the transmutation statutes in thesecond scenario just as in the first. But if the second jewelrygift scenario can be parsed into two simultaneous but legallyseparable transactions, then so here could husband's purchaseof the life insurance policy, with title taken in wife's name.If, as wife here claims, the effect of the policy purchase withmoney from a joint bank account was to convert communityproperty funds into her separate property asset, then thepurchase necessarily involved a gift from husband to wifebecause wife has never maintained that she gave husbandanything in exchange for his community interest in thepurchase money. If the policy was a gift by husband to wife,then the giving and receiving of that gift was an interspousaltransaction to which the transmutation statutes apply. (Cf.Burkle v. Burkle (2006) 141 Cal.App.4th 1029, 1036, fn. 5,46 Cal.Rptr.3d 562 [the elements of a gift include “ ‘delivery,either actual or symbolical’ ” and “ ‘acceptance, actual orimputed’ ”].)

This point can be further illustrated by another hypothetical.Suppose in this case husband had initially taken title to theinsurance policy jointly in his and wife's names, and thenon a later date, after receiving estate planning advice anddiscussing the matter with wife, he had instructed the insurerto transfer the title to wife's name alone. In that situation,where wife acquired sole title to the policy sometime afterthe policy's purchase, it appears that wife would concede thetransmutation statutes' applicability to any ***460 claimby her, in a marital dissolution proceeding, that the changein title changed the character of the policy from community

to separate property. 1 Therefore, under the analysis urgedhere by wife, whether the transmutation statutes apply tothe insurance policy depends upon the entirely fortuitouscircumstance of when she acquired sole title to the insurancepolicy, whether during the purchase or after the purchaseof the policy. We are unwilling to conclude *1404 theLegislature intended application of the transmutation statutesto turn on such fortuitous distinctions.

We recognize that some court decisions have stated thata transmutation requires an interspousal transaction andthat one spouse's acquisition of an asset from a thirdparty is therefore exempt from the statutory transmutationrestrictions. Those decisions are unpersuasive, however.

**279 The notion that third party transactions cannot betransmutations may be traced to the Court of Appeal's 1995decision in In re Marriage of Haines, supra, 33 Cal.App.4th

277, 39 Cal.Rptr.2d 673. There, the Court of Appeal said thata transmutation is “an interspousal transaction or agreementwhich works a change in the character of the property.” (Id.at p. 293, 39 Cal.Rptr.2d 673.) Referring to the wife'ssigning of a quitclaim deed conveying the family residenceto the husband during the marriage, the court concludedthat this was a transmutation subject to the statutory expressdeclaration requirement. (Ibid.) The court did not considerwhether any other transaction was a transmutation, and inparticular it did not consider whether one spouse's purchaseof property from a third party could be a transmutation.

The statement that a transmutation is “an interspousaltransaction or agreement” (In re Marriage of Haines,supra, 33 Cal.App.4th at p. 293, 39 Cal.Rptr.2d 673) waslater repeated in the Court of Appeal decisions in In reMarriage of Campbell (1999) 74 Cal.App.4th 1058, 1062,88 Cal.Rptr.2d 580 and In re Marriage of Cross (2001)94 Cal.App.4th 1143, 1147, 114 Cal.Rptr.2d 839 (Cross). But neither decision exempted a third party transactionfrom the transmutation requirements on the basis that it wasnot “interspousal.” Indeed, Cross said that the transmutationstatutes address situations such as “where a wife buys a carfor her husband with community property funds” (Cross,at pp. 1147–1148, 114 Cal.Rptr.2d 839), a typical thirdparty transaction. (See In re Marriage of Buie & Neighbors(2009) 179 Cal.App.4th 1170, 1173–1175, 102 Cal.Rptr.3d387 [applying transmutation statutes to a husband's purchaseof a car for himself using the wife's separate funds].) In2005, this court likewise stated that a transmutation is an“interspousal transaction” (In re Marriage of Benson, supra,36 Cal.4th 1096, 1100, 32 Cal.Rptr.3d 471, 116 P.3d 1152),but we did not consider whether this definition excludesspousal purchases during the marriage from third parties withcommunity funds.

The first decision to hold that a spousal purchase from athird party during a marriage was not subject to the statutory***461 transmutation requirements was In re Summers (9th

Cir.2003) 332 F.3d 1240, which was a bankruptcy proceedingrather than a marital dissolution proceeding. There, thefederal appellate court was attempting to construe and applyCalifornia law “to determine whether the requirements ofCalifornia's transmutation statute ... *1405 must be metwhen realty is transferred from a third party to spouses asjoint tenants.” (In re Summers, at p. 1242, citation omitted.)Relying on the statement by the California Court of Appealin Cross that a transmutation is an “ ‘interspousal transactionor agreement’ ” (Cross, supra, 94 Cal.App.4th at p. 1147,

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114 Cal.Rptr.2d 839), the federal court concluded “that thetransmutation requisites had no relevance to the conveyancein this case.” (In re Summers, at p. 1245, citation omitted.)

The year 2008 saw the first decision by a Californiastate appellate court exempting from the transmutationrequirements a spousal purchase from a third party: In reMarriage of Brooks & Robinson (2008) 169 Cal.App.4th 176,86 Cal.Rptr.3d 624. In that marital dissolution proceeding,the husband and the wife disputed ownership of residentialproperty they had purchased during the marriage, takingtitle solely in the wife's name. (Id. at pp. 179–180, 86Cal.Rptr.3d 624.) On appeal, the husband argued, amongother things, that the purchase of the property in the wife'sname alone was an attempted transmutation that was invalidbecause it did not comply with the statutory transmutationrequirements. (Id. at p. 191, 86 Cal.Rptr.3d 624.) Rejectingthe husband's argument, the Court of Appeal stated that therewere “no facts suggesting a transmutation, valid or otherwise”because the property “was acquired in [the wife's] name in atransaction with a third person, not through an interspousaltransaction.” (Ibid.)

[4] As mentioned earlier, these last two decisions (In reSummers, supra, 332 F.3d 1240; In re Marriage of Brooks &Robinson, supra, 169 Cal.App.4th 176, 86 Cal.Rptr.3d 624)are not persuasive insofar as they purport to exempt fromthe transmutation requirements purchases made by one orboth spouses from a third party during the marriage. **280Neither decision attempts to reconcile such an exemption withthe legislative purposes in enacting those requirements, whichwas to reduce excessive litigation, introduction of unreliableevidence, and incentives for perjury in marital dissolutionproceedings involving disputes regarding the characterizationof property. Nor does either decision attempt to find abasis for the purported exemption in the language of theapplicable transmutation statutes. Also, these decisions areinconsistent with three Court of Appeal decisions statingor holding that the transmutation requirements apply to onespouse's purchases from a third party during the marriage. (Inre Marriage of Buie & Neighbors, supra, 179 Cal.App.4that pp. 1173–1175, 102 Cal.Rptr.3d 387; Cross, supra, 94Cal.App.4th at pp. 1147–1148, 114 Cal.Rptr.2d 839; in rEmarriage OF steinberger, supra, 91 caL.app.4th at pp. 1463–1466, 111 Cal.Rptr.2d 521.)

[5] Our examination of the statutory language leads us toreject the purported exemption for spousal purchases fromthird parties. As we have said (ante, 171 Cal.Rptr.3d at p.

457, 324 P.3d at p. 276), the transmutation statutes provide anexpress exemption for gifts of relatively inexpensive personalitems. (Fam.Code, § 852, subd. (c).) Because spouses mostoften use community funds to purchase such gifts for eachother, the statutory exemption necessarily implies *1406that gifts not qualifying for the exemption (because they are“substantial in value” or because they are not items “of apersonal nature”) are ***462 transmutations subject to theexpress declaration requirement, notwithstanding that a great

many, if not most, involve purchases from third parties. 2

As mentioned, the Court of Appeal here concluded that thetransmutation statutes were “not relevant to this case” becausethe disputed life insurance policy “was acquired from a thirdparty and not through an interspousal transaction.” Afterstating that conclusion, which we have determined to beerroneous, the court added: “Moreover, [wife] did not contendin the trial court, and does not contend on appeal, that thepolicy is her separate property through transmutation. Instead,[wife] contends that the policy is her separate property byoperation of the form of title presumption.” Referring toEvidence Code section 662, which states that “[t]he ownerof the legal title to property is presumed to be the owner ofthe full beneficial title,” the Court of Appeal here assertedthat “because the form of title presumption applies ... atransmutation theory is not involved.”

[6] This reasoning by the Court of Appeal, we also conclude,is erroneous. We need not and do not decide here whetherEvidence Code section 662's form of title presumptionever applies in marital dissolution proceedings. Assumingfor the sake of argument that the title presumption maysometimes apply, it does not apply when it conflicts withthe transmutation statutes. (See In re Marriage of Barneson(1999) 69 Cal.App.4th 583, 593, 81 Cal.Rptr.2d 726.)

[7] For the reasons we have given, the transmutationrequirement of an express written declaration applies towife's claim, in this marital dissolution proceeding, thatthe life insurance policy husband purchased during themarriage with community funds is her separate property.Wife does not contend that she presented evidence at trialsufficient to satisfy the express declaration requirement,nor does our examination of the record disclose suchevidence. Husband never expressly declared in writing thathe gave up his community interest in the policy boughtwith community funds. Accordingly, we agree with the trialcourt's characterization of the insurance policy as communityproperty.

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**281 Because it concluded that the trial court had erred incharacterizing the policy as community property, the Court ofAppeal did not reach wife's *1407 contentions “that the trialcourt erred in awarding ownership solely to [husband] at thepolicy's cash value and that it abused its discretion in failingto maintain [wife] as a beneficiary on the policy as spousalsupport.” The Court of Appeal will address those contentionsby wife on remand.

DISPOSITION

The Court of Appeal's judgment is reversed and the matter isremanded to that court for further proceedings consistent withthis opinion.

WE CONCUR: CANTIL–SAKAUYE, C.J., BAXTER,WERDEGAR, CHIN, CORRIGAN, and LIU, JJ.

***463 CONCURRING OPINION BY CHIN, J.

Concurring Opinion by CHIN, J.I agree with the majority opinion, which I have signed. Iwrite separately to discuss a threshold question that has beenthe primary focus of the briefs of the parties and amicicuriae: What role, if any, does a common law rule codified inEvidence Code section 662 (section 662) have in determining,in an action between the spouses, whether property acquiredduring a marriage is community or separate?

Family Code section 760 provides: “Except as otherwiseprovided by statute, all property, real or personal, whereversituated, acquired by a married person during the marriagewhile domiciled in this state is community property.”Family Code section 802 refers to the “presumption thatproperty acquired during marriage is community property.”In combination, these statutes provide a presumption thatproperty acquired during the marriage is community property.(In re Marriage of Benson (2005) 36 Cal.4th 1096, 1103, 32Cal.Rptr.3d 471, 116 P.3d 1152.) (I will sometimes refer tothis presumption as the section 760 presumption.) It appearsthis presumption can be overcome by a preponderance of theevidence. (In re Marriage of Ettefagh (2007) 150 Cal.App.4th1578, 59 Cal.Rptr.3d 419.)

Although the section 760 presumption is rebuttable, notjust any evidence can overcome the presumption, but onlyevidence showing that another statute makes the propertysomething other than community property. “By its own terms,the definition of community property in section 760 applies‘[e]xcept as otherwise provided by statute.’ It thereforeexempts property defined as separate under other provisions.(E.g., [Fam.Code,] §§ 770 [property acquired by gift orinheritance], 771 [earnings and accumulations while livingseparate and apart].)” (In re Marriage of Benson, supra, 36Cal.4th at p. 1103, 32 Cal.Rptr.3d 471, 116 P.3d 1152.) Thus,the general rule is that property acquired during marriageis community unless the preponderance of the evidenceestablishes that a specifically enumerated statutory exemptionapplies to make it something else.

*1408 As applied here, this presumption means that the lifeinsurance policy is presumed to be community property, butthat the wife (wife) can overcome that presumption if she canshow, by a preponderance of the evidence, that some otherstatutory provision makes it her separate property. There is,or should be, nothing particularly complex or difficult aboutthis rule.

But wife, in arguing that the policy is her separate property,and the Court of Appeal, in so concluding, rely heavily on adifferent presumption found in the Evidence Code. Section662 provides: “The owner of the legal title to property ispresumed to be the owner of the full beneficial title. Thispresumption may be rebutted only by clear and convincingproof.” Because legal title in the policy was in wife's name,wife argues, and the Court of Appeal found, the policyis presumed to be her separate property, a presumptionrebuttable only by clear and convincing evidence.

Obviously, both presumptions cannot be given effect. The lifeinsurance policy cannot both be presumed to be communityproperty (because acquired during the marriage) and to bewife's separate property (because **282 placed in hername). One statutory presumption must yield to the other.

In my view, as in the view of all amici curiae to appear inthis case—law professors and attorneys specializing in thefield—the section 760 presumption controls in characterizingproperty acquired ***464 during the marriage in an actionbetween the spouses. Section 662 plays no role in such anaction. The detailed community property statutes found in theFamily Code, including section 760, are self-contained and

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are not affected by a statute found in the Evidence Code. Iexplain why.

California is, and always has been, a community propertystate. “The community property system originated incontinental Europe, came to Mexico from Spain, and becameCalifornia law through the treaty of 1848.” (11 Witkin,Summary of Cal. Law (10th ed. 2005) Community Property,§ 1, p. 529.) “From the inception of its statehood, Californiahas retained the community property law that predated itsadmission to the Union and consistently has provided asa general rule that property acquired by spouses duringmarriage, including earnings, is community property.” (In reMarriage of Bonds (2000) 24 Cal.4th 1, 12, 99 Cal.Rptr.2d252, 5 P.3d 815.) “The general theory is that the husband andwife form a sort of partnership, and that property acquiredduring the marriage by the labor or skill of either belongs toboth.” (11 Witkin, Summary of Cal. Law, supra, CommunityProperty, § 1, p. 529.)

The presumption, now codified in the Family Code,that property acquired during the marriage is community,is perhaps the most fundamental principle *1409 ofCalifornia's community property law. “ ‘This presumptionis fundamental in the community property system and is anintegral part of the community property law not only of thisstate but of other states and countries where the system isin operation.’ ” (11 Witkin, Summary of Cal. Law, supra,Community Property, § 15, p. 542, quoting Wilson v. Wilson(1946) 76 Cal.App.2d 119, 126, 172 P.2d 568.)

Section 662 may not nullify this fundamental presumptionwhenever, as is often the case, the contested property is in thename of one of the spouses. I agree with the amici curiae that,as the brief of the Northern California chapter of the AmericanAcademy of Matrimonial Lawyers and the Association ofCertified Family Law Specialists puts it, “section 662 has noplace in the characterization of property in actions betweenspouses.” As that brief further states, applying section 662to disputes between spouses “would subvert basic tenets ofCalifornia family law.”

This is not a recent concept. Nine years after Californiabecame a state, this court, in an opinion authored by JusticeField, rejected the argument that common law rules regardingtitle apply to the characterization of property acquired duringthe marriage. (Meyer v. Kinzer and Wife (1859) 12 Cal.247 (Meyer ).) In Meyer, the husband and wife sold certainproperty acquired during the marriage and received in return

a note and mortgage on the property that was in both thehusband's and wife's names. Later the husband, without thewife joining, assigned the note and mortgage to another party.The wife claimed that, because the mortgage was in her nameas well as her husband's, one-half of the note and mortgagewas her separate property. This court disagreed.

In concluding that the mortgage was community property,this court cited statutory provisions including, as relevanthere, a provision substantially similar to section 760: “ ‘[A]llproperty acquired after marriage, by either husband or wife,except such as may be acquired by gift, bequest, devise ordescent, shall be common property....’ ” (Meyer, supra, 12Cal. at p. 251.) The court explained that these provisions“are borrowed from the Spanish law, and there is hardly anyanalogy between them and the doctrines of the common lawin respect to the rights of property consequent upon marriage.The statute ***465 proceeds upon the theory that themarriage, in respect to property acquired during its existence,is a community of which each spouse is a member.... To thecommunity all acquisitions by either, whether made jointlyor separately, belong. No form of transfer or mere intent ofparties can overcome this positive rule of law.” (Ibid., italicsadded.)

**283 Absent proof that the purchase was made withseparate funds of either spouse, the Meyer court explained,the presumption that property acquired *1410 after marriageis community property “was absolute and conclusive, and itmade no difference whether the conveyance was taken in thename of one or the other, or in the names of both.” (Meyer,supra, 12 Cal. at p. 252.) The court quoted with approvalan opinion from Louisiana, another community propertystate, that involved, as does this case, property purchasedduring the marriage but placed in the wife's name: “ ‘Allproperty acquired by either spouse during the existence ofthe community, the law presumes to belong to it.... If thewife sets up a separate claim, she must make legal proofof it. The title being in her name does not raise even apresumption in her favor.’ ” (Id. at p. 253, italics added byMeyer.) The opinion additionally explained that “commonlaw authorities are entirely inapplicable under our system.The statute prescribes the effect of the acquisition of propertyby either spouse, and its operation cannot be defeated orevaded by the form of the conveyance, or the intention of thehusband, in taking it in the name of his wife. In every formthe community character of the property continues.” (Id. at p.255, italics added.)

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As relevant here, these principles still generally apply. Thestatutes governing California's community property law arefound in the Family Code; a statute outside of the communityproperty law, such as Evidence Code section 662, cannotnullify those statutes. This circumstance was recognizedwhen section 662 was enacted. (Stats.1965, ch. 299, § 2,p. 1297.) The Law Revision Commission comment to thatsection states that it “codifies a common law presumptionrecognized in the California cases.” (Cal. Law Revision Com.com., 29B pt. 2 West's Ann. Evid.Code (1995 ed.) foll. §662, p. 210.) But California's community property law has nocommon law roots. It derives from the European continent,not England. In its comment, the Law Revision Commissioncited Olson v. Olson (1935) 4 Cal.2d 434, 49 P.2d 827. (SeePeople v. Semaan (2007) 42 Cal.4th 79, 88, 64 Cal.Rptr.3d1, 163 P.3d 949 [recognizing “that § 662 codifies the ruleof Olson v. Olson ”].) But that case indicates the commonlaw presumption does not apply in the marital context: “Thedeed of gift, a written instrument, signed and acknowledgedby appellant, and unimpaired by any presumption of undueinfluence arising out of a marital relation between the parties[(the parties were not married at the critical time)], wasentitled to the full credit given to it by the trial court....” (Olsonv. Olson, at p. 438, 49 P.2d 827, italics added.) Neitherthe common law rule nor section 662, which codified thatrule, ever applied to characterizing property acquired duringmarriage in actions between the spouses.

Section 662's purpose is to promote the public policy in favorof “the stability of titles to property.” (Evid.Code, § 605; seeIn re Marriage of Haines (1995) 33 Cal.App.4th 277, 294, 39Cal.Rptr.2d 673 (Haines ).) That policy is largely irrelevantto characterizing property acquired during the marriage in anaction between the spouses. Haines is instructive. The Haines*1411 court held that section 662 “must yield to” another

presumption within California's community property law—“the presumption arising from the requirement ***466that a husband and wife occupy a confidential relationshipin their transactions with each other.” (Haines, at p. 283, 39Cal.Rptr.2d 673; see Fam.Code, § 721.)

Haines explained that section 662's “presumption is based onpromoting the public ‘policy ... in favor of the stability oftitles to property.’ (See [Evid.Code,] § 605.) ‘Allegations ...that legal title does not represent beneficial ownership have ...been historically disfavored because society and the courtshave a reluctance to tamper with duly executed instrumentsand documents of legal title.’ [Citation.] [¶] Section 662is concerned primarily with the stability of titles, which

obviously is an important legal concept that protects partiesto a real property transaction, as well as creditors. Here,however, our focus is on characterization of marital propertyas effected by a transmutation by quitclaim deed. The issueis how property should be divided between spouses upondissolution. This case does not involve third parties nor doesit place at risk the rights of a creditor.... Thus, concernsof stability of **284 title are lessened in characterizationproblems arising from transmutations that do not involvethird parties or the rights of creditors.” (Haines, supra, 33Cal.App.4th at pp. 294–295, 39 Cal.Rptr.2d 673, fn. omitted.)

The presumption of undue influence exists to protectmarried persons. (Haines, supra, 33 Cal.App.4th at p.301, 39 Cal.Rptr.2d 673.) “[A]pplication of section 662in such situations can significantly weaken protections theLegislature intended to provide for spouses who are takenadvantage of in interspousal transactions. This cannot be inkeeping with the intent of the Legislature.... Application ofsection 662 would ... in effect ... abrogate the protectionsafforded to married persons under” what is now FamilyCode section 721, subdivision (b). (Haines, at p. 301, 39Cal.Rptr.2d 673, citation omitted.) Accordingly, the Hainescourt “conclude [d] that application of section 662 is improperwhen it is in conflict with the presumption of undueinfluence .... Any other result would abrogate the protectionsafforded to married persons and denigrate the public policy ofthe state that seeks to promote and protect the vital institutionof marriage.” (Id. at p. 302, 39 Cal.Rptr.2d 673; see In reMarriage of Fossum (2011) 192 Cal.App.4th 336, 344–345,121 Cal.Rptr.3d 195 [following Haines ]; In re Marriage ofDelaney (2003) 111 Cal.App.4th 991, 997, 4 Cal.Rptr.3d 378[following Haines ].)

What Haines said about the presumption regarding undueinfluence applies just as much, if not more so, to the morefundamental presumption that property acquired during themarriage is community. Section 662 may not abrogate themore fundamental presumption just as it may not abrogatethe less fundamental presumption. Much property acquiredduring marriage is in the name of one of the spouses,such as salaries, stock options, retirement *1412 benefits,and the like. Applying section 662 to all such property—and concluding that it is separate property unless shownto be otherwise by clear and convincing evidence—wouldlargely nullify the presumption that property acquired duringmarriage is community.

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In concluding that section 662 applies, the Court of Appealrelied heavily on two cases: In re Marriage of Lucas (1980)27 Cal.3d 808, 166 Cal.Rptr. 853, 614 P.2d 285 (Lucas ) andIn re Marriage of Brooks & Robinson (2008) 169 Cal.App.4th176, 86 Cal.Rptr.3d 624 (Brooks ). Neither case supports theconclusion.

In Lucas, this court was concerned primarily with deciding“the proper method of determining separate and communityproperty interests in a single family dwelling acquired duringthe marriage with ***467 both separate property andcommunity property funds.” (Lucas, supra, 27 Cal.3d at p.811, 166 Cal.Rptr. 853, 614 P.2d 285.) Most of the opinionconcerns the characterization of a house in which title was inthe form of joint tenancy. Although it discusses presumptionsat length, Lucas never cites section 662 even though thatsection had been enacted long before the opinion. Rather, itdiscusses two statutory presumptions, both of which used tobe found in Civil Code former section 5110 and are now foundin two separate sections of the Family Code. (Fam.Code, §§760, 2581.) One is the familiar presumption that propertyacquired during marriage is community property. (Id., §760.) The other is a presumption, found in a statute withinthe community property law and fully consistent with thegeneral presumption, that specifically governs real propertydesignated as a joint tenancy. (Lucas, at p. 814, 166 Cal.Rptr.853, 614 P.2d 285.) As quoted in Lucas, that statute provided:“ ‘When a single-family residence of a husband and wife isacquired by them during marriage as joint tenants, for thepurpose of the division of such property upon dissolutionof marriage or legal separation only, the presumption is thatsuch single-family residence is the community property ofthe husband and wife.’ ” (Id. at p. 814, fn. 2, 166 Cal.Rptr.853, 614 P.2d 285, quoting Civ. Code, former § 5110 [seenow Fam.Code, § 2581].) Both of these presumptions favor afinding of community property, and thus they are compatible.

Significantly, the statutory presumption regarding property inthe form of joint tenancy applies “[f]or the purpose of divisionof property on dissolution of marriage.” (Fam.Code, § 2581;see Civ. Code, former § 5110.) This language suggeststhat rules that apply to an action between the spouses tocharacterize **285 property acquired during the marriagedo not necessarily apply to a dispute between a spouse and athird party.

Thus, the form-of-title presumption the Lucas court discussedis a specific statutory presumption found within California'scommunity property law, not the more general presumption

found in section 662. That this is so is made *1413 clear laterin the opinion when the court stated that certain “evidenceand findings are insufficient to rebut the presumption arisingfrom title set forth in Civil Code section 5110 [(i.e., currentFam.Code, § 2581)].” (Lucas, supra, 27 Cal.3d at p. 815, 166Cal.Rptr. 853, 614 P.2d 285, italics added.) Lucas does notaddress section 662's role in an action between the spouses.

Brooks also did not present this question. At the appellatelevel, the dispute in Brooks, supra, 169 Cal.App.4th 176,86 Cal.Rptr.3d 624, did not involve an action between thespouses. Rather, on appeal, the sole dispute was between athird party, to whom the wife had sold certain real property,and the husband, who claimed an interest in the property andsought to set aside the sale. The wife did not even appearin the appeal. The Court of Appeal used section 662 to helpresolve the dispute in favor of the third party, whom the trialcourt found to be a bona fide purchaser who had purchasedthe property without knowing of any community propertyclaim the husband might have had. The Court of Appeal notedthat the trial “court did not expressly determine whether theProperty was a community property asset.” (Brooks, at pp.182–183, 86 Cal.Rptr.3d 624.) Rather, the trial court hadmerely held that the third party was a bona fide purchaser and,as such, “ ‘takes it[s] title free of any unknown communityproperty claim [the husband] may have with respect to theProperty.’ ” (Id. at p. 183, 86 Cal.Rptr.3d 624.) The Court ofAppeal agreed with this conclusion. It ***468 emphasizedsection 662's purpose of promoting the stability of titles toproperty. (Id. at p. 185, 86 Cal.Rptr.3d 624.) Unlike in thecase of an action between the spouses, this policy does play arole in a dispute between a spouse and an innocent third partypurchaser.

The Brooks court stressed that the appeal “does not involvea division of the community estate between [husband andwife]. Whether [the wife] might be obligated to reimburse[the husband] for his contributions to the Property was notbefore the trial court and is not an issue on appeal.” (Brooks,supra, 169 Cal.App.4th at p. 188, 86 Cal.Rptr.3d 624.)Accordingly, Brooks concerned the rights of a third party thatpurchased property in good faith not knowing of any possiblecommunity property claims. Brooks might have been correctto apply section 662 to an action between one of the spousesand a third party bona fide purchaser. That question is notimplicated here, and I express no opinion on it. To the extentBrooks said anything suggesting section 662 would apply toan action between the spouses, it mistakenly relied on Lucas,

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supra, 27 Cal.3d 808, 166 Cal.Rptr. 853, 614 P.2d 285, andis, accordingly, unpersuasive.

In short, the statutes in the Family Code governingcommunity property, including the section 760 presumption,are sufficient unto themselves. Evidence Code section 662'scommon law presumption does not nullify the communityproperty statutes. All property acquired during the marriageis presumed to be community property. Evidence that certainproperty is in the *1414 name of one spouse might,depending on the circumstances, be relevant to help overcomethe presumption if and only if it demonstrates that one ofthe statutory exemptions to the presumption applies. But

that evidence does not itself reverse the presumption. Futurecourts resolving disputes over how to characterize propertyacquired during the marriage in an action between the spousesshould apply the community property statutes found in theFamily Code and not section 662.

WE CONCUR: CORRIGAN, and LIU, JJ.

All Citations

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Footnotes* Retired Associate Justice of the Supreme Court, assigned by the Chief Justice pursuant to article VI, section 6 of the

California Constitution.

1 Wife here might argue that instructing the insurance company to transfer title after the policy's purchase would be a thirdparty transaction, like the initial purchase of the policy, because it could be done without her knowledge or participation.If we were to accept that argument, however, the result would be drawing an arbitrary distinction between assets as towhich title transfers are always made through a third party, such as the insurance company here, and assets such asreal property, as to which title transfers are normally made by deed or similar conveyances between the affected parties.

2 Enactment of the transmutation statutes (Fam.Code, §§ 850–853) abrogated earlier judicial decisions that wereinconsistent with the statutory requirements. One such decision was In re Marriage of Lucas, supra, 27 Cal.3d 808, 166Cal.Rptr. 853, 614 P.2d 285, in which this court upheld a trial court's characterization of a motor home acquired during amarriage as entirely the wife's separate property. From the husband's failure to object when title was taken in the wife'sname alone the trial court inferred that the husband had made a gift to the wife of his interest in community funds usedto purchase the motor home. (In re Marriage of Lucas, at pp. 817–818, 166 Cal.Rptr. 853, 614 P.2d 285.) That portionof the decision is no longer good law.

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811 F.3d 1191United States Court of Appeals,

Ninth Circuit.

David K. ZACHARY; AnnmarieS. Snorsky, Debtors–Appellants,

v.CALIFORNIA BANK &

TRUST, Respondent–Appellee.

No. 13–16402.|

Argued and Submitted Oct. 21, 2015.|

Filed Jan. 28, 2016.

SynopsisBackground: Unsecured creditor objected to proposed planof reorganization on grounds that it violated the so-calledabsolute priority rule. The United States Bankruptcy Courtfor the Eastern District of California, Thomas C. Holman, J.,sustained the objection, and debtors' appeal was certified fordirect appeal.

[Holding:] The Court of Appeals, Hurwitz, Circuit Judge,held that, as a matter of first impression in the circuit, theabsolute priority rule continues to apply in individual Chapter11 reorganizations after the amendments to the BankruptcyCode enacted as part of the Bankruptcy Abuse Prevention andConsumer Protection Act of 2005 (BAPCPA), overruling Inre Friedman, 466 B.R. 471, and abrogating In re Anderson,2012 WL 3133895, and In re Shat, 424 B.R. 854.

Affirmed.

Attorneys and Law Firms

*1192 Gregg W. Koechlein (argued), Reno, NV, forDebtors–Appellants.

Matthew D. Murphey (argued), Penelope Parmes, MartinW. Taylor, Meghan Canty Sherrill, Troutman Sanders LLP,Irvine, CA, for Respondent–Appellee.

*1193 Appeal from the United States Bankruptcy Courtfor the Eastern District of California, Thomas C. Holman,Bankruptcy Judge, Presiding. D.C. No. 2:11–bk–42866.

Before: RICHARD A. PAEZ, MARY H. MURGUIA, andANDREW D. HURWITZ, Circuit Judges.

OPINION

HURWITZ, Circuit Judge:

This case presents an arcane but important question of firstimpression in this Circuit: Does the absolute priority rulecontinue to apply in individual chapter 11 reorganizationsafter the amendments to the Bankruptcy Code enacted aspart of the Bankruptcy Abuse Prevention and ConsumerProtection Act of 2005 (“BAPCPA”)? We hold that it does.

I. Factual and Procedural BackgroundIn September 2011, David K. Zachary and Annmarie S.Snorsky (“Debtors”) filed a joint voluntary individual chapter11 petition. The Debtors' operative plan of reorganizationplaced their largest unsecured creditor, California Bank &Trust (“California Bank”), into its own class of unsecuredcreditors and proposed to pay it $5,000 on its claim of nearly$2,000,000. California Bank's claim was thus “impairedunder the plan.” 11 U.S.C. § 1129(a)(8)(B).

California Bank objected, arguing that the plan violated theso-called absolute priority rule of 11 U.S.C. § 1129(b)(2)(B)(ii). The bankruptcy judge, disagreeing with the NinthCircuit Bankruptcy Appellate Panel (“BAP”) opinion in Inre Friedman, 466 B.R. 471 (9th Cir. BAP 2012), sustainedthe objection, holding that “the absolute priority rule stillprevails” in individual chapter 11 bankruptcies after the

enactment of BAPCPA. 1

Debtors filed a timely notice of appeal of the bankruptcycourt's order sustaining California Bank's objection to theirplan. The bankruptcy court certified the appeal, and this Courtauthorized a direct appeal. 28 U.S.C. § 158(a), (d)(2)(A).

II. Discussion[1] [2] We review “de novo the bankruptcy court's and

the BAP's interpretations of the bankruptcy statute.” In reBoyajian, 564 F.3d 1088, 1090 (9th Cir.2009). “A party

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contending that legislative action changed settled law hasthe burden of showing that the legislature intended such achange.” Green v. Bock Laundry Mach. Co., 490 U.S. 504,521, 109 S.Ct. 1981, 104 L.Ed.2d 557 (1989).

A. Individual chapter 11 bankruptciesand the absolute priority rule.

[3] [4] “Individual debtors have two basic options underthe Code.” Ice House Am., LLC v. Cardin, 751 F.3d 734,736 (6th Cir.2014). They can either liquidate their non-exempt assets under chapter 7, or file for reorganizationunder chapters 11 or 13. See 11 U.S.C. §§ 701–84, 1101–46,1301–30. A chapter 13 reorganization, however, is onlyavailable to individual debtors whose debts fall below certainlimits. See 11 U.S.C. § 109(e). Individual *1194 debtorswith more debt can only file for reorganization under chapter11, which is “used primarily by debtors with ongoingbusinesses.” Toibb v. Radloff, 501 U.S. 157, 163, 111 S.Ct.2197, 115 L.Ed.2d 145 (1991) (emphasis omitted).

[5] An individual filing under chapter 11 may confirm aplan of reorganization in one of two ways. The first is bysatisfying the bankruptcy court that a plan complies with eachof the sixteen paragraphs in 11 U.S.C. § 1129(a). Under thispath, “[o]f particular note is the requirement of obtaining theconsent of each class of creditor as required by paragraph(8) of § 1129(a).” In re Friedman, 466 B.R. at 480. Absentunanimous approval of the plan by each class of creditors, adebtor must pursue the second path to confirmation.

[6] Under the second path, a debtor can obtain confirmationby satisfying the bankruptcy court that, notwithstanding anycreditor's objections, the plan is “fair and equitable” to eachcreditor class. 11 U.S.C. § 1129(b)(1), (2). Because this“nonconsensual method of confirmation” is obtained overcreditor objection, it is known as a “cramdown.” In reFriedman, 466 B.R. at 480. A debtor may cram down a planonly if it complies with the absolute priority rule in § 1129(b)(2)(B)(ii). Put another way, a bankruptcy judge may find thata debtor's plan is “fair and equitable” to an objecting creditoronly if the plan complies with the absolute priority rule.

[7] The absolute priority rule is a “judicially createdconcept,” with its genesis in “early twentieth-century railroadcases.” In re Friedman, 466 B.R. at 478. It arose from theBankruptcy Code's statutory requirement, now codified in 11U.S.C. § 1129(b)(2), that a reorganization plan be “fair and

equitable” to each class of creditors. The rule “provides that adissenting class of unsecured creditors must be provided for infull before any junior class can receive or retain any propertyunder a reorganization plan.” Norwest Bank Worthington v.Ahlers, 485 U.S. 197, 202, 108 S.Ct. 963, 99 L.Ed.2d 169(1988) (alteration omitted) (quoting In re Ahlers, 794 F.2d388, 401 (8th Cir.1986)). “The U.S. Supreme Court adoptedthe absolute priority rule to prevent deals between seniorcreditors and equity holders that would impose unfair termson unsecured creditors.” In re Friedman, 466 B.R. at 478;see also N. Pac. Ry. Co. v. Boyd, 228 U.S. 482, 503–04, 33S.Ct. 554, 57 L.Ed. 931 (1913). The rule later “gained expressstatutory force, and was incorporated into Chapter 11 of theBankruptcy Code adopted in 1978” as 11 U.S.C. § 1129(b)(2)(B)(ii). Norwest, 485 U.S. at 202, 108 S.Ct. 963.

Before the adoption of BAPCPA in 2005, it was clear that“no Chapter 11 reorganization plan can be confirmed over thecreditors' legitimate objections (absent certain conditions notrelevant here) if it fails to comply with the absolute priorityrule.” Id. At that time, the absolute priority rule provided:

[T]he condition that a plan be fair and equitable withrespect to a class [of creditors] includes the followingrequirements:

....

(B) With respect to a class of unsecured claims—

(i) the plan provides that each holder of a claim ofsuch class receive or retain on account of such claimproperty of a value, as of the effective date of the plan,equal to the allowed amount of such claim; or

(ii) the holder of any claim or interest that is juniorto the claims of such class will not receive or retainunder the plan on account of such junior claim orinterest any property.

*1195 11 U.S.C. § 1129(b)(2)(B)(ii) (1994) (emphasisadded). Thus, under the pre-BAPCPA Bankruptcy Code, itwas clear that “every unsecured creditor must be paid in fullbefore the debtor can retain ‘any property’ under a plan.” IceHouse, 751 F.3d at 737 (quoting 11 U.S.C. § 1129(b)(2)(B)(ii)).

B. Amendment of the absolutepriority rule by BAPCPA.

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[8] Three provisions of the post-BAPCPA Bankruptcy Codeintertwine to implement the absolute priority rule. First, §541, which was not altered by BAPCPA, defines an estatein bankruptcy as “comprised of all” the property enumeratedin that section, “wherever located and by whomever held,”including “all legal or equitable interests of the debtor inproperty as of the commencement of the case.” 11 U.S.C.§ 541(a), (a)(1) (emphasis added). Under this section, the“property of the estate,” and, therefore, the property subject tothe absolute priority rule in chapter 11 cases, is “the propertythe debtor owned ‘as of the commencement of the case.’ ” IceHouse, 751 F.3d at 737–38 (quoting 11 U.S.C. § 541(a)(1)).

The second relevant provision is § 1115, which was added in2005 by BAPCPA. Pub.L. No. 109–8, § 321, 119 Stat. 23,94–95 (2005). Section 1115, which only applies to individualchapter 11 proceedings, adds to the § 541 “property of theestate” certain property obtained by the debtor “after thecommencement of the case”:

In a case in which the debtor is an individual, property ofthe estate includes, in addition to the property specified insection 541—

(1) all property of the kind specified in section 541 thatthe debtor acquires after the commencement of the casebut before the case is closed, dismissed, or converted toa case under chapter 7, 12, or 13, whichever occurs first;and

(2) earnings from services performed by the debtor afterthe commencement of the case but before the case isclosed, dismissed, or converted to a case under chapter7, 12, or 13, whichever occurs first.

11 U.S.C. § 1115(a) (emphasis added).

Finally, BAPCPA amended the absolutely priority rule itself,adding the underscored language to § 1129(b)(2)(B)(ii):

[T]he condition that a plan be fair and equitable withrespect to a class [of creditors] includes the followingrequirements:

....

(B) With respect to a class of unsecured claims—

(i) the plan provides that each holder of a claim ofsuch class receive or retain on account of such claim

property of a value, as of the effective date of the plan,equal to the allowed amount of such claim; or

(ii) the holder of any claim or interest that is juniorto the claims of such class will not receive or retainunder the plan on account of such junior claim orinterest any property, except that in a case in which thedebtor is an individual, the debtor may retain propertyincluded in the estate under section 1115, subject tothe requirements of subsection (a)(14) of this section.

Pub.L. No. 109–8, § 321, 119 Stat. 23, 95 (emphasis added).

The new clauses in subsection (B)(ii) plainly create anexception to the absolute priority rule that applies only to achapter 11 “case in which the debtor is an individual.” 11U.S.C. § 1129(b)(2)(B)(ii). But the question is, what is theexception's scope? Or, put another way, what property mayan individual chapter 11 debtor retain “without running afoulof the absolute priority *1196 rule”? In re Friedman, 466B.R. at 487 (Jury, Bankr. J., dissenting).

C. Post–BAPCPA case law.

[9] “A significant split of authorities has developednationally among the bankruptcy courts” regarding theanswer to this question. In re Maharaj, 681 F.3d 558, 563 (4thCir.2012) (describing division). Two conflicting positionshave emerged: the “broad view” and the “narrow view.” Id.

Courts applying the broad view hold that

by including in § 1129(b)(2)(B)(ii) a cross-reference to § 1115(which in turn references § 541, theprovision that defines the propertyof a bankruptcy estate), Congressintended to include the entirety ofthe bankruptcy estate as property thatthe individual debtor may retain, thuseffectively abrogating the absolutepriority rule in Chapter 11 forindividual debtors.

Id. Under this view, an individual debtor is entitledto retain most prepetition and postpetition property andnonetheless cram down a plan over an unsecured creditor'sobjection. See, e.g., In re Friedman, 466 B.R. at 482; In reAnderson, No. 11–61845–11, 2012 WL 3133895, at *7 n. 6

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(Bankr.D.Mont. Aug. 1, 2012); In re Shat, 424 B.R. 854, 868(Bankr.D.Nev.2010); In re Roedemeier, 374 B.R. 264, 276(Bankr.D.Kan.2007).

[10] Courts applying the narrow view instead hold “that theBAPCPA amendments merely have the effect of allowingindividual Chapter 11 debtors to retain property and earningsacquired after the commencement of the case that wouldotherwise be excluded under § 541(a)(6) & (7).” In reMaharaj, 681 F.3d at 563. Under this view, an individualdebtor may not cram down a plan that would permit the debtorto retain prepetition property that is not excluded from theestate by § 541, but may cram down a plan that permits thedebtor to retain only postpetition property.

A split panel of the Ninth Circuit BAP accepted the broadview in In re Friedman, 466 B.R. at 484. But, all of oursister circuits that have considered the issue have adopted

the narrow view, 2 as have a sizeable majority of the district,

bankruptcy appellate, and bankruptcy courts. 3 We todayagree with our sister circuits and overrule In re Friedman.

*1197 D. Interpretation of the BAPCPA amendments.

BAPCPA added § 1115 as an entirely new provision ofthe Bankruptcy Code. That section “expands the definitionof ‘property of the estate’ in Chapter 11 cases to include,for the first time, property obtained by the debtor ‘afterthe commencement of the case.’ And all of that property,absent some other amendment to the Code, would be subjectto the absolute-priority rule.” Ice House, 751 F.3d at 738(quoting 11 U.S.C. § 1115(a)(1), (2)). The new languagein § 1129(b)(2)(B)(ii) added by BAPCPA obviously creates“an exception to the absolute-priority rule,” but less obviousis “the exception's scope.” Id. The key to that question isdetermining what the word “included” means in the phraseof § 1129(b)(2)(B)(ii) stating that “the debtor may retainproperty included in the estate under section 1115.”

The Friedman majority determined:

“Included” is not a word of limitation. To limit the scopeof estate property in §§ 1129 and 1115 would require thestatute to read “included, except for the property set out inSection 541” (in the case of § 1129(b)(2)(B)(ii)), and “inaddition to, but not inclusive of the property described inSection 541” (in the case of § 1115).

466 B.R. at 482 (footnote omitted). In contrast, the SixthCircuit's opinion in Ice House held:

The critical language in § 1129(b)(2)(B)(ii) is that “thedebtor may retain property included in the estate undersection 1115.” And the key word within that language is“included.” “Include” is a transitive verb, which meansit “shows action, either upon someone or something.”Shertzer, Elements of Grammar 26 (1986). The actiondescribed by “include” is either “to take in as a part, anelement, or a member” (first definition) or “to contain asa subsidiary or subordinate element” (second definition).The American Heritage Dictionary 913 (3d ed.1992). Thefirst definition (“to take in”) describes genuine action—grabbing something and making a part of a larger whole—whereas the second definition (“to contain”) lends itself,more dryly, to a description of things that are already there—“the duties of a fiduciary include....” The first definitionis plainly the better fit in § 1129(b)(2)(B)(ii): convertedinto the active voice, § 1129(b)(2)(B)(ii) refers to propertythat § 1115 includes in the estate, which naturally readsas “property that § 1115 takes into the estate,” rather thanas “property that § 1115 contains in the estate.” Thus—employing this definition and converted into the activevoice— § 1129(b)(2)(B)(ii) provides that “the debtor mayretain property that § 1115 takes into the estate.”

Ice House, 751 F.3d at 738–39 (alterations omitted). Underthis reading, “what § 1115 takes into the estate is property‘that the debtor acquires after the commencement of the case,’” and it is only “that property” that “ ‘the debtor may retain’when his unsecured creditors are not fully paid.” Id. at 739(quoting 11 U.S.C. §§ 1115(a), 1129(b)(2)(B)(ii)) (internalpunctuation omitted).

We agree with the Sixth Circuit. Section 1115 and the newclauses in § 1129(b)(2)(B)(ii) were both added by BAPCPA.Reading these two provisions as defining a new class ofproperty that is exempt from the absolute priority rule nicely

harmonizes the new provisions. 4 *1198 See In re Lively,717 F.3d 406, 409 (5th Cir.2013) (“[W]e are inclined toagree with the bankruptcy court in this case that the ‘narrow’interpretation is unambiguous and correct.”).

The history of the absolute priority rule also strongly supportsthe narrow view. Congress repealed the absolute priorityrule in 1952, only to reinstate it in 1978, demonstrating thatwhen it intends to abrogate the rule, it knows how to do soexplicitly. Compare H.R.Rep. No. 822320 (1952), reprinted

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in 1952 U.S.C.C.A.N. 1960, 1981–82, with Bankruptcy Codeof 1978, Pub.L. No. 95–598, § 1129, 92 Stat. 2549, 2635–38

(codified in scattered sections of 11 and 28 U.S.C.). 5 Moreimportantly, the Supreme Court has expressly warned againstfinding implied repeal of provisions of the Bankruptcy Code.United Sav. Ass'n of Tex. v. Timbers of Inwood Forest Assocs.,Ltd., 484 U.S. 365, 380, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988)(“Such a major change in the existing rules would not likelyhave been made without specific provision in the text of thestatute; it is most improbable that it would have been madewithout even any mention in the legislative history.”) (citationomitted); see also In re Maharaj, 681 F.3d at 571 (“The canonagainst implied repeal is particularly strong in the field ofbankruptcy law.”).

Courts adopting the broad view have stressed that “Congressin adopting BAPCPA's individual debtor chapter 11provisions borrowed provisions from chapter *1199 13,”which does not have an absolute priority rule. In re Friedman,466 B.R. at 483 (comparing, inter alia, §§ 1123(a)(8) and1322(a)(1), §§ 1141(d)(5)(A) and 1328(a), and §§ 1127(e)and 1329(a)); see also In re Shat, 424 B.R. at 868 (noting “thehost of change[s] to chapter 11 with respect to individuals,all made with the goal of shaping an individual's chapter 11case to look like a chapter 13 case”); In re Roedemeier, 374B.R. at 275 (“Many of the BAPCPA's changes to Chapter 11apply only to individual debtors and are clearly drawn fromthe Chapter 13 model.”). But if the BAPCPA amendmentswere intended to abrogate the absolute priority rule forchapter 11 individual debtors, Congress could have achievedthat goal in a far more straightforward manner. Instead ofadding language to § 1129(b)(2)(B)(ii), Congress simplycould have made that provision inapplicable to individualchapter 11 reorganizations. See In re Lively, 717 F.3d at 410(describing broad view as “a startling, and most indirect, wayfor Congress to have effected partial implicit repeal of thevery provision that the section amended”). Or Congress couldhave raised the debt limits for chapter 13 cases, usheringmore individuals into that regime. See In re Maharaj, 681F.3d at 573 (“Congress could have effected the changes thatDebtors argue it sought in a far less awkward and convoluted

manner by simply raising the Chapter 13 debt limits andmaking additional individuals eligible to proceed under thatchapter.”); see also Midlantic Nat'l Bank v. N.J. Dep't ofEnvtl. Prot., 474 U.S. 494, 501, 106 S.Ct. 755, 88 L.Ed.2d859 (1986) (“The normal rule of statutory construction is thatif Congress intends for legislation to change the interpretationof a judicially created concept, it makes that intent specific.The Court has followed this rule with particular care inconstruing the scope of bankruptcy codifications.”) (citationomitted).

[11] We acknowledge that retaining the absolute priorityrule in chapter 11 cases works a “double whammy” ona debtor because, under the BAPCPA amendments to §1129(a)(15), he “must dedicate at least five years' disposableincome to the payment of unsecured creditors, and—unlike adebtor in Chapter 13—is also subject to the absolute-priorityrule (and thus cannot retain any pre-petition property) if hedoes not pay those creditors in full.” Ice House, 751 F.3dat 740. But the broad view could exact a heavy penaltyon a “crammed down” creditor, as this case illustrates.Our task is not to balance the equities, however, but tointerpret the Bankruptcy Code. See Norwest, 485 U.S. at209, 108 S.Ct. 963 (noting that relief from any unfairness inthe statutory scheme “cannot come from a misconstructionof the applicable bankruptcy laws, but rather, only fromaction by Congress”). We conclude today that the BAPCPAamendments do not impliedly repeal the long-standingabsolute priority rule.

CONCLUSION

The order of the bankruptcy court sustaining CaliforniaBank's objection to the Debtors' plan is AFFIRMED.

All Citations

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Footnotes1 Debtors argue that In re Windmill Farms, Inc., 70 B.R. 618 (9th Cir. BAP 1987), rev'd on other grounds, 841 F.2d 1467,

1474 (9th Cir.1988), “held that BAP decisions were binding on all bankruptcy courts in this circuit,” and the bankruptcycourt here was required to follow In re Friedman. Because we must today address the continued applicability of theabsolute priority rule regardless of the precedential effect of BAP opinions, we pretermit consideration of the issue. Cf.

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Bank of Maui v. Estate Analysis, Inc., 904 F.2d 470, 472 (9th Cir.1990) (O'Scannlain, J., specially concurring) (discussingneed for judicial council action to make BAP decisions binding on all bankruptcy courts within the circuit).

2 See Ice House, 751 F.3d at 740 (“We therefore hold that the absolute-priority rule continues to apply to pre-petitionproperty of individual debtors in Chapter 11 cases.”); In re Lively, 717 F.3d 406, 410 (5th Cir.2013) (“The absolute priorityrule, in particular, has been a cornerstone of equitable distribution for Chapter 11 creditors for over a century. We mustpresume Congress was well aware of that rule and, in the absence of a clearer directive, modified § 1129(b)(2)(B)(ii)in order to refine it, not reverse it, for individual debtors.”); In re Stephens, 704 F.3d 1279, 1287 (10th Cir.2013) (“[W]edecline to find an implied repeal [of the absolute priority rule] here.”); In re Maharaj, 681 F.3d at 575 (“[W]e believe thatCongress did not intend to abrogate the absolute priority rule for individual Chapter 11 debtors.”).

3 See, e.g., In re Woodward, 537 B.R. 894, 901 (8th Cir. BAP 2015); In re Brown, 505 B.R. 638, 648–49 (E.D.Pa.2014);In re Tucker, 479 B.R. 873, 877–78 (Bankr.D.Or.2012); In re Arnold, 471 B.R. 578, 613–14 (Bankr.C.D.Cal.2012); In reBorton, No. 09–00196–TLM, 2011 WL 5439285, at *4 (Bankr.D.Idaho Nov. 9, 2011); In re Kamell, 451 B.R. 505, 512(Bankr.C.D.Cal.2011); In re Draiman, 450 B.R. 777, 821 (Bankr.N.D.Ill.2011); In re Stephens, 445 B.R. 816, 820–21(Bankr.S.D.Tex.2011); In re Karlovich, 456 B.R. 677, 682 (Bankr.S.D.Cal.2010); and In re Gbadebo, 431 B.R. 222, 230(Bankr.N.D.Cal.2010). But see, e.g., In re Friedman, 466 B.R. at 482; In re Anderson, 2012 WL 3133895, at *7 n. 6; Inre Shat, 424 B.R. at 868; and In re Roedemeier, 374 B.R. at 276.

4 Some courts and commentators have suggested that the cross-reference in the second new clause in § 1129(b)(2)(B)(ii) to § 1129(a)(14), a provision involving domestic support obligations, is a scrivener's error and was meant to refer to §1129(a)(15), which involves a new “best efforts” requirement added to chapter 11 by BAPCPA. See, e.g., In re Lucarelli,517 B.R. 42, 47 n. 2 (Bankr.D.Conn.2014); In re Lively, 467 B.R. 884, 890 n. 3 (Bankr.S.D.Tex.2012); In re Shat, 424 B.R.at 860 n. 21; Ralph Brubaker, The Absolute Priority Rule for Individual Chapter 11 Debtors: To Be or Not to Be?, 32 No.10 Bankr.L. Letter, at 5 (Oct. 2012) (“[A]s all fully recognize, the cross-reference in the absolute priority rule amendmentto § 1129(a)(14) (dealing with full payment of domestic support obligations) was obviously a drafting error.”). We neednot decide that issue today. We note that although the reference to (a)(14) may have been a scrivener's error, it is “notan entirely absurd mixup.... One could easily assume that Congress wished to protect domestic support creditors by notallowing a debtor to keep any postpetition earnings—a form of Section 1115 property—so long as any domestic supportobligation was not current.” In re Shat, 424 B.R. at 860 n. 21.

5 The legislative history of the BAPCPA also bolsters the view that Congress did not intend to repeal the absolute priorityrule. The Judiciary Committee Report describes “various consumer protection reforms” in BAPCPA, such as penalizing “acreditor who unreasonably refuses to negotiate” and requiring certain credit solicitations to “include enhanced consumerdisclosures.” H.R.Rep. No. 109–31(I), pt. 1, at 2 (2005), reprinted in 2005 U.S.C.C.A.N. 88, 89. But this list of protectionsdoes not include any supposed repeal of the absolute priority rule. It seems unlikely that Congress would address acornerstone rule of bankruptcy practice “in the most oblique way possible, and yet omit any mention of this remedyfrom the legislative history.” In re Maharaj, 681 F.3d at 575; see also Dewsnup v. Timm, 502 U.S. 410, 419, 112 S.Ct.773, 116 L.Ed.2d 903 (1992) (“Furthermore, this Court has been reluctant to accept arguments that would interpret the[Bankruptcy] Code, however vague the particular language under consideration might be, to effect a major change inpre-Code practice that is not the subject of at least some discussion in the legislative history.”); In re Bonner Mall P'ship,2 F.3d 899, 913 (9th Cir.1993) (“Where the text of the Code does not unambiguously abrogate pre-Code practice, courtsshould presume that Congress intended it to continue unless the legislative history dictates a contrary result.”) (citingDewsnup, 502 U.S. at 419, 112 S.Ct. 773). It also seems unlikely that Congress would facilitate cramdowns, typicallyobjected to by creditors, in an act designed “to correct perceived abuses of the bankruptcy system.” Ransom v. FIA CardServs., 562 U.S. 61, 64, 131 S.Ct. 716, 178 L.Ed.2d 603 (2011) (quoting Milavetz, Gallop & Milavetz, P.A. v. UnitedStates, 559 U.S. 229, 231–32, 130 S.Ct. 1324, 176 L.Ed.2d 79 (2010)); see also In re Friedman, 466 B.R. at 490 (Jury,Bankr. J., dissenting) (“[T]he purpose behind BAPCPA was to have debtors pay more, not less.”).

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016

§ 1112. Conversion or dismissal, 11 USCA § 1112

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KeyCite Yellow Flag - Negative Treatment

Proposed Legislation

United States Code AnnotatedTitle 11. Bankruptcy (Refs & Annos)

Chapter 11. Reorganization (Refs & Annos)Subchapter I. Officers and Administration (Refs & Annos)

11 U.S.C.A. § 1112

§ 1112. Conversion or dismissal

Effective: December 22, 2010Currentness

(a) The debtor may convert a case under this chapter to a case under chapter 7 of this title unless--

(1) the debtor is not a debtor in possession;

(2) the case originally was commenced as an involuntary case under this chapter; or

(3) the case was converted to a case under this chapter other than on the debtor's request.

(b)(1) Except as provided in paragraph (2) and subsection (c), on request of a party in interest, and after notice and a hearing,the court shall convert a case under this chapter to a case under chapter 7 or dismiss a case under this chapter, whichever is inthe best interests of creditors and the estate, for cause unless the court determines that the appointment under section 1104(a)of a trustee or an examiner is in the best interests of creditors and the estate.

(2) The court may not convert a case under this chapter to a case under chapter 7 or dismiss a case under this chapter if thecourt finds and specifically identifies unusual circumstances establishing that converting or dismissing the case is not in thebest interests of creditors and the estate, and the debtor or any other party in interest establishes that--

(A) there is a reasonable likelihood that a plan will be confirmed within the timeframes established in sections 1121(e) and1129(e) of this title, or if such sections do not apply, within a reasonable period of time; and

(B) the grounds for converting or dismissing the case include an act or omission of the debtor other than under paragraph(4)(A)--

(i) for which there exists a reasonable justification for the act or omission; and

(ii) that will be cured within a reasonable period of time fixed by the court.

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(3) The court shall commence the hearing on a motion under this subsection not later than 30 days after filing of the motion, andshall decide the motion not later than 15 days after commencement of such hearing, unless the movant expressly consents to acontinuance for a specific period of time or compelling circumstances prevent the court from meeting the time limits establishedby this paragraph.

(4) For purposes of this subsection, the term ‘cause’ includes--

(A) substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation;

(B) gross mismanagement of the estate;

(C) failure to maintain appropriate insurance that poses a risk to the estate or to the public;

(D) unauthorized use of cash collateral substantially harmful to 1 or more creditors;

(E) failure to comply with an order of the court;

(F) unexcused failure to satisfy timely any filing or reporting requirement established by this title or by any rule applicableto a case under this chapter;

(G) failure to attend the meeting of creditors convened under section 341(a) or an examination ordered under rule 2004 ofthe Federal Rules of Bankruptcy Procedure without good cause shown by the debtor;

(H) failure timely to provide information or attend meetings reasonably requested by the United States trustee (or thebankruptcy administrator, if any);

(I) failure timely to pay taxes owed after the date of the order for relief or to file tax returns due after the date of the orderfor relief;

(J) failure to file a disclosure statement, or to file or confirm a plan, within the time fixed by this title or by order of the court;

(K) failure to pay any fees or charges required under chapter 123 of title 28;

(L) revocation of an order of confirmation under section 1144;

(M) inability to effectuate substantial consummation of a confirmed plan;

(N) material default by the debtor with respect to a confirmed plan;

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(O) termination of a confirmed plan by reason of the occurrence of a condition specified in the plan; and

(P) failure of the debtor to pay any domestic support obligation that first becomes payable after the date of the filing ofthe petition.

(c) The court may not convert a case under this chapter to a case under chapter 7 of this title if the debtor is a farmer or acorporation that is not a moneyed, business, or commercial corporation, unless the debtor requests such conversion.

(d) The court may convert a case under this chapter to a case under chapter 12 or 13 of this title only if--

(1) the debtor requests such conversion;

(2) the debtor has not been discharged under section 1141(d) of this title; and

(3) if the debtor requests conversion to chapter 12 of this title, such conversion is equitable.

(e) Except as provided in subsections (c) and (f), the court, on request of the United States trustee, may convert a case under thischapter to a case under chapter 7 of this title or may dismiss a case under this chapter, whichever is in the best interest of creditorsand the estate if the debtor in a voluntary case fails to file, within fifteen days after the filing of the petition commencing suchcase or such additional time as the court may allow, the information required by paragraph (1) of section 521(a), including alist containing the names and addresses of the holders of the twenty largest unsecured claims (or of all unsecured claims if thereare fewer than twenty unsecured claims), and the approximate dollar amounts of each of such claims.

(f) Notwithstanding any other provision of this section, a case may not be converted to a case under another chapter of this titleunless the debtor may be a debtor under such chapter.

CREDIT(S)(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2630; Pub.L. 98-353, Title III, § 505, July 10, 1984, 98 Stat. 384; Pub.L. 99-554, Title

II, §§ 224, 256, Oct. 27, 1986, 100 Stat. 3102, 3114; Pub.L. 103-394, Title II, § 217(c), Oct. 22, 1994, 108 Stat. 4127; Pub.L.109-8, Title IV, § 442(a), Apr. 20, 2005, 119 Stat. 115; Pub.L. 111-327, § 2(a)(33), Dec. 22, 2010, 124 Stat. 3561.)

Notes of Decisions (849)

11 U.S.C.A. § 1112, 11 USCA § 1112Current through P.L. 114-114 (excluding 114-94, 114-95 and 114-113) approved 12-28-2015

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019

§ 1141. Effect of confirmation, 11 USCA § 1141

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1

United States Code AnnotatedTitle 11. Bankruptcy (Refs & Annos)

Chapter 11. Reorganization (Refs & Annos)Subchapter III. Postconfirmation Matters (Refs & Annos)

11 U.S.C.A. § 1141

§ 1141. Effect of confirmation

Effective: December 22, 2010Currentness

(a) Except as provided in subsections (d)(2) and (d)(3) of this section, the provisions of a confirmed plan bind the debtor, anyentity issuing securities under the plan, any entity acquiring property under the plan, and any creditor, equity security holder,or general partner in the debtor, whether or not the claim or interest of such creditor, equity security holder, or general partneris impaired under the plan and whether or not such creditor, equity security holder, or general partner has accepted the plan.

(b) Except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the propertyof the estate in the debtor.

(c) Except as provided in subsections (d)(2) and (d)(3) of this section and except as otherwise provided in the plan or in theorder confirming the plan, after confirmation of a plan, the property dealt with by the plan is free and clear of all claims andinterests of creditors, equity security holders, and of general partners in the debtor.

(d)(1) Except as otherwise provided in this subsection, in the plan, or in the order confirming the plan, the confirmation ofa plan--

(A) discharges the debtor from any debt that arose before the date of such confirmation, and any debt of a kind specified insection 502(g), 502(h), or 502(i) of this title, whether or not--

(i) a proof of the claim based on such debt is filed or deemed filed under section 501 of this title;

(ii) such claim is allowed under section 502 of this title; or

(iii) the holder of such claim has accepted the plan; and

(B) terminates all rights and interests of equity security holders and general partners provided for by the plan.

(2) A discharge under this chapter does not discharge a debtor who is an individual from any debt excepted from dischargeunder section 523 of this title.

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(3) The confirmation of a plan does not discharge a debtor if--

(A) the plan provides for the liquidation of all or substantially all of the property of the estate;

(B) the debtor does not engage in business after consummation of the plan; and

(C) the debtor would be denied a discharge under section 727(a) of this title if the case were a case under chapter 7 of this title.

(4) The court may approve a written waiver of discharge executed by the debtor after the order for relief under this chapter.

(5) In a case in which the debtor is an individual--

(A) unless after notice and a hearing the court orders otherwise for cause, confirmation of the plan does not discharge anydebt provided for in the plan until the court grants a discharge on completion of all payments under the plan;

(B) at any time after the confirmation of the plan, and after notice and a hearing, the court may grant a discharge to the debtorwho has not completed payments under the plan if--

(i) the value, as of the effective date of the plan, of property actually distributed under the plan on account of each allowedunsecured claim is not less than the amount that would have been paid on such claim if the estate of the debtor had beenliquidated under chapter 7 on such date;

(ii) modification of the plan under section 1127 is not practicable; and

(iii) subparagraph (C) permits the court to grant a discharge; and

(C) the court may grant a discharge if, after notice and a hearing held not more than 10 days before the date of the entry ofthe order granting the discharge, the court finds that there is no reasonable cause to believe that--

(i) section 522(q)(1) may be applicable to the debtor; and

(ii) there is pending any proceeding in which the debtor may be found guilty of a felony of the kind described in section522(q)(1)(A) or liable for a debt of the kind described in section 522(q)(1)(B);

and if the requirements of subparagraph (A) or (B) are met.

(6) Notwithstanding paragraph (1), the confirmation of a plan does not discharge a debtor that is a corporation from any debt--

021

§ 1141. Effect of confirmation, 11 USCA § 1141

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(A) of a kind specified in paragraph (2)(A) or (2)(B) of section 523(a) that is owed to a domestic governmental unit, or owedto a person as the result of an action filed under subchapter III of chapter 37 of title 31 or any similar State statute; or

(B) for a tax or customs duty with respect to which the debtor--

(i) made a fraudulent return; or

(ii) willfully attempted in any manner to evade or to defeat such tax or such customs duty.

CREDIT(S)(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2638; Pub.L. 98-353, Title III, § 513, July 10, 1984, 98 Stat. 387; Pub.L. 109-8, Title

III, §§ 321(d), 330(b), Title VII, § 708, Apr. 20, 2005, 119 Stat. 95, 101, 126; Pub.L. 111-327, § 2(a)(36), Dec. 22, 2010, 124Stat. 3561.)

Notes of Decisions (622)

11 U.S.C.A. § 1141, 11 USCA § 1141Current through P.L. 114-114 (excluding 114-94, 114-95 and 114-113) approved 12-28-2015

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022

§ 1129. Confirmation of plan, 11 USCA § 1129

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1

KeyCite Yellow Flag - Negative Treatment

Proposed Legislation

United States Code AnnotatedTitle 11. Bankruptcy (Refs & Annos)

Chapter 11. Reorganization (Refs & Annos)Subchapter II. The Plan (Refs & Annos)

11 U.S.C.A. § 1129

§ 1129. Confirmation of plan

Effective: December 22, 2010Currentness

(a) The court shall confirm a plan only if all of the following requirements are met:

(1) The plan complies with the applicable provisions of this title.

(2) The proponent of the plan complies with the applicable provisions of this title.

(3) The plan has been proposed in good faith and not by any means forbidden by law.

(4) Any payment made or to be made by the proponent, by the debtor, or by a person issuing securities or acquiring propertyunder the plan, for services or for costs and expenses in or in connection with the case, or in connection with the plan andincident to the case, has been approved by, or is subject to the approval of, the court as reasonable.

(5)(A)(i) The proponent of the plan has disclosed the identity and affiliations of any individual proposed to serve, afterconfirmation of the plan, as a director, officer, or voting trustee of the debtor, an affiliate of the debtor participating in a jointplan with the debtor, or a successor to the debtor under the plan; and

(ii) the appointment to, or continuance in, such office of such individual, is consistent with the interests of creditors andequity security holders and with public policy; and

(B) the proponent of the plan has disclosed the identity of any insider that will be employed or retained by the reorganizeddebtor, and the nature of any compensation for such insider.

(6) Any governmental regulatory commission with jurisdiction, after confirmation of the plan, over the rates of the debtorhas approved any rate change provided for in the plan, or such rate change is expressly conditioned on such approval.

(7) With respect to each impaired class of claims or interests--

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§ 1129. Confirmation of plan, 11 USCA § 1129

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(A) each holder of a claim or interest of such class--

(i) has accepted the plan; or

(ii) will receive or retain under the plan on account of such claim or interest property of a value, as of the effective dateof the plan, that is not less than the amount that such holder would so receive or retain if the debtor were liquidatedunder chapter 7 of this title on such date; or

(B) if section 1111(b)(2) of this title applies to the claims of such class, each holder of a claim of such class will receiveor retain under the plan on account of such claim property of a value, as of the effective date of the plan, that is not lessthan the value of such holder's interest in the estate's interest in the property that secures such claims.

(8) With respect to each class of claims or interests--

(A) such class has accepted the plan; or

(B) such class is not impaired under the plan.

(9) Except to the extent that the holder of a particular claim has agreed to a different treatment of such claim, the plan providesthat--

(A) with respect to a claim of a kind specified in section 507(a)(2) or 507(a)(3) of this title, on the effective date of theplan, the holder of such claim will receive on account of such claim cash equal to the allowed amount of such claim;

(B) with respect to a class of claims of a kind specified in section 507(a)(1), 507(a)(4), 507(a)(5), 507(a)(6), or 507(a)(7)of this title, each holder of a claim of such class will receive--

(i) if such class has accepted the plan, deferred cash payments of a value, as of the effective date of the plan, equal tothe allowed amount of such claim; or

(ii) if such class has not accepted the plan, cash on the effective date of the plan equal to the allowed amount of suchclaim;

(C) with respect to a claim of a kind specified in section 507(a)(8) of this title, the holder of such claim will receive onaccount of such claim regular installment payments in cash--

(i) of a total value, as of the effective date of the plan, equal to the allowed amount of such claim;

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(ii) over a period ending not later than 5 years after the date of the order for relief under section 301, 302, or 303; and

(iii) in a manner not less favorable than the most favored nonpriority unsecured claim provided for by the plan (otherthan cash payments made to a class of creditors under section 1122(b)); and

(D) with respect to a secured claim which would otherwise meet the description of an unsecured claim of a governmentalunit under section 507(a)(8), but for the secured status of that claim, the holder of that claim will receive on account ofthat claim, cash payments, in the same manner and over the same period, as prescribed in subparagraph (C).

(10) If a class of claims is impaired under the plan, at least one class of claims that is impaired under the plan has acceptedthe plan, determined without including any acceptance of the plan by any insider.

(11) Confirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization,of the debtor or any successor to the debtor under the plan, unless such liquidation or reorganization is proposed in the plan.

(12) All fees payable under section 1930 of title 28, as determined by the court at the hearing on confirmation of the plan,have been paid or the plan provides for the payment of all such fees on the effective date of the plan.

(13) The plan provides for the continuation after its effective date of payment of all retiree benefits, as that term is definedin section 1114 of this title, at the level established pursuant to subsection (e)(1)(B) or (g) of section 1114 of this title, at anytime prior to confirmation of the plan, for the duration of the period the debtor has obligated itself to provide such benefits.

(14) If the debtor is required by a judicial or administrative order, or by statute, to pay a domestic support obligation, thedebtor has paid all amounts payable under such order or such statute for such obligation that first become payable after thedate of the filing of the petition.

(15) In a case in which the debtor is an individual and in which the holder of an allowed unsecured claim objects to theconfirmation of the plan--

(A) the value, as of the effective date of the plan, of the property to be distributed under the plan on account of such claimis not less than the amount of such claim; or

(B) the value of the property to be distributed under the plan is not less than the projected disposable income of the debtor(as defined in section 1325(b)(2)) to be received during the 5-year period beginning on the date that the first payment isdue under the plan, or during the period for which the plan provides payments, whichever is longer.

(16) All transfers of property under the plan shall be made in accordance with any applicable provisions of nonbankruptcylaw that govern the transfer of property by a corporation or trust that is not a moneyed, business, or commercial corporationor trust.

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§ 1129. Confirmation of plan, 11 USCA § 1129

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(b)(1) Notwithstanding section 510(a) of this title, if all of the applicable requirements of subsection (a) of this section otherthan paragraph (8) are met with respect to a plan, the court, on request of the proponent of the plan, shall confirm the plannotwithstanding the requirements of such paragraph if the plan does not discriminate unfairly, and is fair and equitable, withrespect to each class of claims or interests that is impaired under, and has not accepted, the plan.

(2) For the purpose of this subsection, the condition that a plan be fair and equitable with respect to a class includes the followingrequirements:

(A) With respect to a class of secured claims, the plan provides--

(i)(I) that the holders of such claims retain the liens securing such claims, whether the property subject to such liens isretained by the debtor or transferred to another entity, to the extent of the allowed amount of such claims; and

(II) that each holder of a claim of such class receive on account of such claim deferred cash payments totaling at leastthe allowed amount of such claim, of a value, as of the effective date of the plan, of at least the value of such holder'sinterest in the estate's interest in such property;

(ii) for the sale, subject to section 363(k) of this title, of any property that is subject to the liens securing such claims, freeand clear of such liens, with such liens to attach to the proceeds of such sale, and the treatment of such liens on proceedsunder clause (i) or (iii) of this subparagraph; or

(iii) for the realization by such holders of the indubitable equivalent of such claims.

(B) With respect to a class of unsecured claims--

(i) the plan provides that each holder of a claim of such class receive or retain on account of such claim property of a value,as of the effective date of the plan, equal to the allowed amount of such claim; or

(ii) the holder of any claim or interest that is junior to the claims of such class will not receive or retain under the planon account of such junior claim or interest any property, except that in a case in which the debtor is an individual, thedebtor may retain property included in the estate under section 1115, subject to the requirements of subsection (a)(14)of this section.

(C) With respect to a class of interests--

(i) the plan provides that each holder of an interest of such class receive or retain on account of such interest property of avalue, as of the effective date of the plan, equal to the greatest of the allowed amount of any fixed liquidation preference towhich such holder is entitled, any fixed redemption price to which such holder is entitled, or the value of such interest; or

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(ii) the holder of any interest that is junior to the interests of such class will not receive or retain under the plan on accountof such junior interest any property.

(c) Notwithstanding subsections (a) and (b) of this section and except as provided in section 1127(b) of this title, the court mayconfirm only one plan, unless the order of confirmation in the case has been revoked under section 1144 of this title. If therequirements of subsections (a) and (b) of this section are met with respect to more than one plan, the court shall consider thepreferences of creditors and equity security holders in determining which plan to confirm.

(d) Notwithstanding any other provision of this section, on request of a party in interest that is a governmental unit, the courtmay not confirm a plan if the principal purpose of the plan is the avoidance of taxes or the avoidance of the application ofsection 5 of the Securities Act of 1933. In any hearing under this subsection, the governmental unit has the burden of proofon the issue of avoidance.

(e) In a small business case, the court shall confirm a plan that complies with the applicable provisions of this title and that isfiled in accordance with section 1121(e) not later than 45 days after the plan is filed unless the time for confirmation is extendedin accordance with section 1121(e)(3).

CREDIT(S)(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2635; Pub.L. 98-353, Title III, § 512, July 10, 1984, 98 Stat. 386; Pub.L. 99-554, Title

II, §§ 225, 283(v), Oct. 27, 1986, 100 Stat. 3102, 3118; Pub.L. 100-334, § 2(b), June 16, 1988, 102 Stat. 613; Pub.L. 103-394,Title III, § 304(h)(7), Title V, § 501(d)(32), Oct. 22, 1994, 108 Stat. 4134, 4146; Pub.L. 109-8, Title II, § 213(1), Title III, §321(c), Title IV, § 438, Title VII, § 710, Title XII, § 1221(b), Title XV, § 1502(a)(8), Apr. 20, 2005, 119 Stat. 52, 95, 113, 127,196, 216; Pub.L. 111-327, § 2(a)(35), Dec. 22, 2010, 124 Stat. 3561.)

Notes of Decisions (1823)

11 U.S.C.A. § 1129, 11 USCA § 1129Current through P.L. 114-114 (excluding 114-94, 114-95 and 114-113) approved 12-28-2015

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

027

§ 1307. Conversion or dismissal, 11 USCA § 1307

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1

United States Code AnnotatedTitle 11. Bankruptcy (Refs & Annos)

Chapter 13. Adjustment of Debts of an Individual with Regular Income (Refs & Annos)Subchapter I. Officers, Administration, and the Estate (Refs & Annos)

11 U.S.C.A. § 1307

§ 1307. Conversion or dismissal

Effective: December 22, 2010Currentness

(a) The debtor may convert a case under this chapter to a case under chapter 7 of this title at any time. Any waiver of the rightto convert under this subsection is unenforceable.

(b) On request of the debtor at any time, if the case has not been converted under section 706, 1112, or 1208 of this title, thecourt shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable.

(c) Except as provided in subsection (f) of this section, on request of a party in interest or the United States trustee and afternotice and a hearing, the court may convert a case under this chapter to a case under chapter 7 of this title, or may dismiss acase under this chapter, whichever is in the best interests of creditors and the estate, for cause, including--

(1) unreasonable delay by the debtor that is prejudicial to creditors;

(2) nonpayment of any fees and charges required under chapter 123 of title 28;

(3) failure to file a plan timely under section 1321 of this title;

(4) failure to commence making timely payments under section 1326 of this title;

(5) denial of confirmation of a plan under section 1325 of this title and denial of a request made for additional time for filinganother plan or a modification of a plan;

(6) material default by the debtor with respect to a term of a confirmed plan;

(7) revocation of the order of confirmation under section 1330 of this title, and denial of confirmation of a modified planunder section 1329 of this title;

(8) termination of a confirmed plan by reason of the occurrence of a condition specified in the plan other than completionof payments under the plan;

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(9) only on request of the United States trustee, failure of the debtor to file, within fifteen days, or such additional time asthe court may allow, after the filing of the petition commencing such case, the information required by paragraph (1) ofsection 521(a);

(10) only on request of the United States trustee, failure to timely file the information required by paragraph (2) of section521(a); or

(11) failure of the debtor to pay any domestic support obligation that first becomes payable after the date of the filing ofthe petition.

(d) Except as provided in subsection (f) of this section, at any time before the confirmation of a plan under section 1325 of thistitle, on request of a party in interest or the United States trustee and after notice and a hearing, the court may convert a caseunder this chapter to a case under chapter 11 or 12 of this title.

(e) Upon the failure of the debtor to file a tax return under section 1308, on request of a party in interest or the United Statestrustee and after notice and a hearing, the court shall dismiss a case or convert a case under this chapter to a case under chapter7 of this title, whichever is in the best interest of the creditors and the estate.

(f) The court may not convert a case under this chapter to a case under chapter 7, 11, or 12 of this title if the debtor is a farmer,unless the debtor requests such conversion.

(g) Notwithstanding any other provision of this section, a case may not be converted to a case under another chapter of thistitle unless the debtor may be a debtor under such chapter.

CREDIT(S)(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2647; Pub.L. 98-353, Title III, §§ 315, 527, July 10, 1984, 98 Stat. 356, 389; Pub.L.

99-554, Title II, §§ 229, 257(v), Oct. 27, 1986, 100 Stat. 3103, 3116; Pub.L. 109-8, Title II, § 213(7), Title VII, § 716(c), Apr.20, 2005, 119 Stat. 53, 130; Pub.L. 111-327, § 2(a)(41), Dec. 22, 2010, 124 Stat. 3562.)

Notes of Decisions (441)

11 U.S.C.A. § 1307, 11 USCA § 1307Current through P.L. 114-114 (excluding 114-94, 114-95 and 114-113) approved 12-28-2015

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

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§ 1322. Contents of plan, 11 USCA § 1322

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KeyCite Yellow Flag - Negative Treatment

Proposed Legislation

United States Code AnnotatedTitle 11. Bankruptcy (Refs & Annos)

Chapter 13. Adjustment of Debts of an Individual with Regular Income (Refs & Annos)Subchapter II. The Plan

11 U.S.C.A. § 1322

§ 1322. Contents of plan

Effective: December 22, 2010Currentness

(a) The plan--

(1) shall provide for the submission of all or such portion of future earnings or other future income of the debtor to thesupervision and control of the trustee as is necessary for the execution of the plan;

(2) shall provide for the full payment, in deferred cash payments, of all claims entitled to priority under section 507 of thistitle, unless the holder of a particular claim agrees to a different treatment of such claim;

(3) if the plan classifies claims, shall provide the same treatment for each claim within a particular class; and

(4) notwithstanding any other provision of this section, may provide for less than full payment of all amounts owed for aclaim entitled to priority under section 507(a)(1)(B) only if the plan provides that all of the debtor's projected disposableincome for a 5-year period beginning on the date that the first payment is due under the plan will be applied to make paymentsunder the plan.

(b) Subject to subsections (a) and (c) of this section, the plan may--

(1) designate a class or classes of unsecured claims, as provided in section 1122 of this title, but may not discriminate unfairlyagainst any class so designated; however, such plan may treat claims for a consumer debt of the debtor if an individual isliable on such consumer debt with the debtor differently than other unsecured claims;

(2) modify the rights of holders of secured claims, other than a claim secured only by a security interest in real propertythat is the debtor's principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of anyclass of claims;

(3) provide for the curing or waiving of any default;

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(4) provide for payments on any unsecured claim to be made concurrently with payments on any secured claim or any otherunsecured claim;

(5) notwithstanding paragraph (2) of this subsection, provide for the curing of any default within a reasonable time andmaintenance of payments while the case is pending on any unsecured claim or secured claim on which the last payment isdue after the date on which the final payment under the plan is due;

(6) provide for the payment of all or any part of any claim allowed under section 1305 of this title;

(7) subject to section 365 of this title, provide for the assumption, rejection, or assignment of any executory contract orunexpired lease of the debtor not previously rejected under such section;

(8) provide for the payment of all or part of a claim against the debtor from property of the estate or property of the debtor;

(9) provide for the vesting of property of the estate, on confirmation of the plan or at a later time, in the debtor or in anyother entity;

(10) provide for the payment of interest accruing after the date of the filing of the petition on unsecured claims that arenondischargeable under section 1328(a), except that such interest may be paid only to the extent that the debtor has disposableincome available to pay such interest after making provision for full payment of all allowed claims; and

(11) include any other appropriate provision not inconsistent with this title.

(c) Notwithstanding subsection (b)(2) and applicable nonbankruptcy law--

(1) a default with respect to, or that gave rise to, a lien on the debtor's principal residence may be cured under paragraph(3) or (5) of subsection (b) until such residence is sold at a foreclosure sale that is conducted in accordance with applicablenonbankruptcy law; and

(2) in a case in which the last payment on the original payment schedule for a claim secured only by a security interest inreal property that is the debtor's principal residence is due before the date on which the final payment under the plan is due,the plan may provide for the payment of the claim as modified pursuant to section 1325(a)(5) of this title.

(d)(1) If the current monthly income of the debtor and the debtor's spouse combined, when multiplied by 12, is not less than--

(A) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;

(B) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable Statefor a family of the same number or fewer individuals; or

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(C) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State

for a family of 4 or fewer individuals, plus $675 1 per month for each individual in excess of 4,

the plan may not provide for payments over a period that is longer than 5 years.

(2) If the current monthly income of the debtor and the debtor's spouse combined, when multiplied by 12, is less than--

(A) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;

(B) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable Statefor a family of the same number or fewer individuals; or

(C) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State

for a family of 4 or fewer individuals, plus $675 1 per month for each individual in excess of 4,

the plan may not provide for payments over a period that is longer than 3 years, unless the court, for cause, approves a longerperiod, but the court may not approve a period that is longer than 5 years.

(e) Notwithstanding subsection (b)(2) of this section and sections 506(b) and 1325(a)(5) of this title, if it is proposed in a planto cure a default, the amount necessary to cure the default, shall be determined in accordance with the underlying agreementand applicable nonbankruptcy law.

(f) A plan may not materially alter the terms of a loan described in section 362(b)(19) and any amounts required to repay suchloan shall not constitute “disposable income” under section 1325.

CREDIT(S)(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2648; Pub.L. 98-353, Title III, §§ 316, 528, July 10, 1984, 98 Stat. 356, 389; Pub.L.

103-394, Title III, §§ 301, 305(c), Oct. 22, 1994, 108 Stat. 4131, 4134; Pub.L. 109-8, Title II, §§ 213(8), (9), 224(d), Title III,§ 318(1), Apr. 20, 2005, 119 Stat. 53, 65, 93; Pub.L. 111-327, § 2(a)(43), Dec. 22, 2010, 124 Stat. 3562.)

Notes of Decisions (1468)

Footnotes1 Dollar amount as adjusted by the Judicial Conference of the United States. See Adjustment of Dollar Amounts notes set out under

this section and 11 U.S.C.A. § 104.

11 U.S.C.A. § 1322, 11 USCA § 1322Current through P.L. 114-114 (excluding 114-94, 114-95 and 114-113) approved 12-28-2015

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

032

§ 1325. Confirmation of plan, 11 USCA § 1325

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1

KeyCite Yellow Flag - Negative Treatment

Proposed Legislation

United States Code AnnotatedTitle 11. Bankruptcy (Refs & Annos)

Chapter 13. Adjustment of Debts of an Individual with Regular Income (Refs & Annos)Subchapter II. The Plan

11 U.S.C.A. § 1325

§ 1325. Confirmation of plan

Effective: December 22, 2010Currentness

(a) Except as provided in subsection (b), the court shall confirm a plan if--

(1) the plan complies with the provisions of this chapter and with the other applicable provisions of this title;

(2) any fee, charge, or amount required under chapter 123 of title 28, or by the plan, to be paid before confirmation, hasbeen paid;

(3) the plan has been proposed in good faith and not by any means forbidden by law;

(4) the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowedunsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated underchapter 7 of this title on such date;

(5) with respect to each allowed secured claim provided for by the plan--

(A) the holder of such claim has accepted the plan;

(B)(i) the plan provides that--

(I) the holder of such claim retain the lien securing such claim until the earlier of--

(aa) the payment of the underlying debt determined under nonbankruptcy law; or

(bb) discharge under section 1328; and

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(II) if the case under this chapter is dismissed or converted without completion of the plan, such lien shall also beretained by such holder to the extent recognized by applicable nonbankruptcy law;

(ii) the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim isnot less than the allowed amount of such claim; and

(iii) if--

(I) property to be distributed pursuant to this subsection is in the form of periodic payments, such payments shall bein equal monthly amounts; and

(II) the holder of the claim is secured by personal property, the amount of such payments shall not be less than anamount sufficient to provide to the holder of such claim adequate protection during the period of the plan; or

(C) the debtor surrenders the property securing such claim to such holder;

(6) the debtor will be able to make all payments under the plan and to comply with the plan;

(7) the action of the debtor in filing the petition was in good faith;

(8) the debtor has paid all amounts that are required to be paid under a domestic support obligation and that first becomepayable after the date of the filing of the petition if the debtor is required by a judicial or administrative order, or by statute,to pay such domestic support obligation; and

(9) the debtor has filed all applicable Federal, State, and local tax returns as required by section 1308.

For purposes of paragraph (5), section 506 shall not apply to a claim described in that paragraph if the creditor has a purchasemoney security interest securing the debt that is the subject of the claim, the debt was incurred within the 910-day periodpreceding the date of the filing of the petition, and the collateral for that debt consists of a motor vehicle (as defined in section30102 of title 49) acquired for the personal use of the debtor, or if collateral for that debt consists of any other thing of value,if the debt was incurred during the 1-year period preceding that filing.

(b)(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may notapprove the plan unless, as of the effective date of the plan--

(A) the value of the property to be distributed under the plan on account of such claim is not less than the amount of suchclaim; or

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§ 1325. Confirmation of plan, 11 USCA § 1325

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(B) the plan provides that all of the debtor's projected disposable income to be received in the applicable commitment periodbeginning on the date that the first payment is due under the plan will be applied to make payments to unsecured creditorsunder the plan.

(2) For purposes of this subsection, the term “disposable income” means current monthly income received by the debtor(other than child support payments, foster care payments, or disability payments for a dependent child made in accordancewith applicable nonbankruptcy law to the extent reasonably necessary to be expended for such child) less amounts reasonablynecessary to be expended--

(A)(i) for the maintenance or support of the debtor or a dependent of the debtor, or for a domestic support obligation, thatfirst becomes payable after the date the petition is filed; and

(ii) for charitable contributions (that meet the definition of “charitable contribution” under section 548(d)(3)) to a qualifiedreligious or charitable entity or organization (as defined in section 548(d)(4)) in an amount not to exceed 15 percent of grossincome of the debtor for the year in which the contributions are made; and

(B) if the debtor is engaged in business, for the payment of expenditures necessary for the continuation, preservation, andoperation of such business.

(3) Amounts reasonably necessary to be expended under paragraph (2), other than subparagraph (A)(ii) of paragraph (2), shallbe determined in accordance with subparagraphs (A) and (B) of section 707(b)(2), if the debtor has current monthly income,when multiplied by 12, greater than--

(A) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;

(B) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable Statefor a family of the same number or fewer individuals; or

(C) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State

for a family of 4 or fewer individuals, plus $675 1 per month for each individual in excess of 4.

(4) For purposes of this subsection, the “applicable commitment period”--

(A) subject to subparagraph (B), shall be--

(i) 3 years; or

(ii) not less than 5 years, if the current monthly income of the debtor and the debtor's spouse combined, when multipliedby 12, is not less than--

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(I) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;

(II) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicableState for a family of the same number or fewer individuals; or

(III) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable

State for a family of 4 or fewer individuals, plus $675 1 per month for each individual in excess of 4; and

(B) may be less than 3 or 5 years, whichever is applicable under subparagraph (A), but only if the plan provides for paymentin full of all allowed unsecured claims over a shorter period.

(c) After confirmation of a plan, the court may order any entity from whom the debtor receives income to pay all or any partof such income to the trustee.

CREDIT(S)(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2649; Pub.L. 98-353, Title III, §§ 317, 530, July 10, 1984, 98 Stat. 356, 389; Pub.L.

99-554, Title II, § 283(y), Oct. 27, 1986, 100 Stat. 3118; Pub.L. 105-183, § 4(a), June 19, 1998, 112 Stat. 518; Pub.L. 109-8,Title I, § 102(g), (h), Title II, § 213(10), Title III, §§ 306(a), (b), 309(c)(1), 318(2), (3), Title VII, § 716(a), Apr. 20, 2005,119 Stat. 33, 53, 80, 83, 93 129; Pub.L. 109-439, § 2, Dec. 20, 2006, 120 Stat. 3285; Pub.L. 111-327, § 2(a)(44), Dec. 22,2010, 124 Stat. 3562.)

Notes of Decisions (2250)

Footnotes1 Dollar amount as adjusted by the Judicial Conference of the United States. See Adjustment of Dollar Amounts notes set out under

this section and 11 U.S.C.A. § 104.

11 U.S.C.A. § 1325, 11 USCA § 1325Current through P.L. 114-114 (excluding 114-94, 114-95 and 114-113) approved 12-28-2015

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

036

§ 1328. Discharge, 11 USCA § 1328

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1

KeyCite Yellow Flag - Negative Treatment

Proposed Legislation

United States Code AnnotatedTitle 11. Bankruptcy (Refs & Annos)

Chapter 13. Adjustment of Debts of an Individual with Regular Income (Refs & Annos)Subchapter II. The Plan

11 U.S.C.A. § 1328

§ 1328. Discharge

Currentness

(a) Subject to subsection (d), as soon as practicable after completion by the debtor of all payments under the plan, and in the caseof a debtor who is required by a judicial or administrative order, or by statute, to pay a domestic support obligation, after suchdebtor certifies that all amounts payable under such order or such statute that are due on or before the date of the certification(including amounts due before the petition was filed, but only to the extent provided for by the plan) have been paid, unless thecourt approves a written waiver of discharge executed by the debtor after the order for relief under this chapter, the court shallgrant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title, except any debt--

(1) provided for under section 1322(b)(5);

(2) of the kind specified in section 507(a)(8)(C) or in paragraph (1)(B), (1)(C), (2), (3), (4), (5), (8), or (9) of section 523(a);

(3) for restitution, or a criminal fine, included in a sentence on the debtor's conviction of a crime; or

(4) for restitution, or damages, awarded in a civil action against the debtor as a result of willful or malicious injury by thedebtor that caused personal injury to an individual or the death of an individual.

(b) Subject to subsection (d), at any time after the confirmation of the plan and after notice and a hearing, the court may granta discharge to a debtor that has not completed payments under the plan only if--

(1) the debtor's failure to complete such payments is due to circumstances for which the debtor should not justly be heldaccountable;

(2) the value, as of the effective date of the plan, of property actually distributed under the plan on account of each allowedunsecured claim is not less than the amount that would have been paid on such claim if the estate of the debtor had beenliquidated under chapter 7 of this title on such date; and

(3) modification of the plan under section 1329 of this title is not practicable.

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§ 1328. Discharge, 11 USCA § 1328

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(c) A discharge granted under subsection (b) of this section discharges the debtor from all unsecured debts provided for by theplan or disallowed under section 502 of this title, except any debt--

(1) provided for under section 1322(b)(5) of this title; or

(2) of a kind specified in section 523(a) of this title.

(d) Notwithstanding any other provision of this section, a discharge granted under this section does not discharge the debtorfrom any debt based on an allowed claim filed under section 1305(a)(2) of this title if prior approval by the trustee of the debtor'sincurring such debt was practicable and was not obtained.

(e) On request of a party in interest before one year after a discharge under this section is granted, and after notice and a hearing,the court may revoke such discharge only if--

(1) such discharge was obtained by the debtor through fraud; and

(2) the requesting party did not know of such fraud until after such discharge was granted.

(f) Notwithstanding subsections (a) and (b), the court shall not grant a discharge of all debts provided for in the plan or disallowedunder section 502, if the debtor has received a discharge--

(1) in a case filed under chapter 7, 11, or 12 of this title during the 4-year period preceding the date of the order for reliefunder this chapter, or

(2) in a case filed under chapter 13 of this title during the 2-year period preceding the date of such order.

(g)(1) The court shall not grant a discharge under this section to a debtor unless after filing a petition the debtor has completedan instructional course concerning personal financial management described in section 111.

(2) Paragraph (1) shall not apply with respect to a debtor who is a person described in section 109(h)(4) or who resides in adistrict for which the United States trustee (or the bankruptcy administrator, if any) determines that the approved instructionalcourses are not adequate to service the additional individuals who would otherwise be required to complete such instructionalcourse by reason of the requirements of paragraph (1).

(3) The United States trustee (or the bankruptcy administrator, if any) who makes a determination described in paragraph (2)shall review such determination not later than 1 year after the date of such determination, and not less frequently than annuallythereafter.

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(h) The court may not grant a discharge under this chapter unless the court after notice and a hearing held not more than 10days before the date of the entry of the order granting the discharge finds that there is no reasonable cause to believe that--

(1) section 522(q)(1) may be applicable to the debtor; and

(2) there is pending any proceeding in which the debtor may be found guilty of a felony of the kind described in section522(q)(1)(A) or liable for a debt of the kind described in section 522(q)(1)(B).

CREDIT(S)(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2650; Pub.L. 98-353, Title III, § 532, July 10, 1984, 98 Stat. 389; Pub.L. 101-508,

Title III, § 3007(b)(1), Nov. 5, 1990, 104 Stat. 1388-28; Pub.L. 101-581, §§ 2(b), 3, Nov. 15, 1990, 104 Stat. 2865; Pub.L.101-647, Title XXXI, §§ 3102(b), 3103, Nov. 29, 1990, 104 Stat. 4916; Pub.L. 103-394, Title III, § 302, Title V, § 501(d)(38),Oct. 22, 1994, 108 Stat. 4132, 4147; Pub.L. 109-8, Title I, § 106(c), Title II, § 213(11), Title III, §§ 312(2), 314(b), 330(d),Title VII, § 707, Apr. 20, 2005, 119 Stat. 38, 53, 87, 88, 102, 126.)

Notes of Decisions (280)

11 U.S.C.A. § 1328, 11 USCA § 1328Current through P.L. 114-114 (excluding 114-94, 114-95 and 114-113) approved 12-28-2015

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

039

§ 363. Use, sale, or lease of property, 11 USCA § 363

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1

KeyCite Yellow Flag - Negative Treatment

Proposed Legislation

United States Code AnnotatedTitle 11. Bankruptcy (Refs & Annos)

Chapter 3. Case Administration (Refs & Annos)Subchapter IV. Administrative Powers

11 U.S.C.A. § 363

§ 363. Use, sale, or lease of property

Effective: December 22, 2010Currentness

(a) In this section, “cash collateral” means cash, negotiable instruments, documents of title, securities, deposit accounts, orother cash equivalents whenever acquired in which the estate and an entity other than the estate have an interest and includesthe proceeds, products, offspring, rents, or profits of property and the fees, charges, accounts or other payments for the use oroccupancy of rooms and other public facilities in hotels, motels, or other lodging properties subject to a security interest asprovided in section 552(b) of this title, whether existing before or after the commencement of a case under this title.

(b)(1) The trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, propertyof the estate, except that if the debtor in connection with offering a product or a service discloses to an individual a policyprohibiting the transfer of personally identifiable information about individuals to persons that are not affiliated with the debtorand if such policy is in effect on the date of the commencement of the case, then the trustee may not sell or lease personallyidentifiable information to any person unless--

(A) such sale or such lease is consistent with such policy; or

(B) after appointment of a consumer privacy ombudsman in accordance with section 332, and after notice and a hearing, thecourt approves such sale or such lease--

(i) giving due consideration to the facts, circumstances, and conditions of such sale or such lease; and

(ii) finding that no showing was made that such sale or such lease would violate applicable nonbankruptcy law.

(2) If notification is required under subsection (a) of section 7A of the Clayton Act in the case of a transaction under thissubsection, then--

(A) notwithstanding subsection (a) of such section, the notification required by such subsection to be given by the debtorshall be given by the trustee; and

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(B) notwithstanding subsection (b) of such section, the required waiting period shall end on the 15th day after the date ofthe receipt, by the Federal Trade Commission and the Assistant Attorney General in charge of the Antitrust Division of theDepartment of Justice, of the notification required under such subsection (a), unless such waiting period is extended--

(i) pursuant to subsection (e)(2) of such section, in the same manner as such subsection (e)(2) applies to a cash tender offer;

(ii) pursuant to subsection (g)(2) of such section; or

(iii) by the court after notice and a hearing.

(c)(1) If the business of the debtor is authorized to be operated under section 721, 1108, 1203, 1204, or 1304 of this title andunless the court orders otherwise, the trustee may enter into transactions, including the sale or lease of property of the estate,in the ordinary course of business, without notice or a hearing, and may use property of the estate in the ordinary course ofbusiness without notice or a hearing.

(2) The trustee may not use, sell, or lease cash collateral under paragraph (1) of this subsection unless--

(A) each entity that has an interest in such cash collateral consents; or

(B) the court, after notice and a hearing, authorizes such use, sale, or lease in accordance with the provisions of this section.

(3) Any hearing under paragraph (2)(B) of this subsection may be a preliminary hearing or may be consolidated with a hearingunder subsection (e) of this section, but shall be scheduled in accordance with the needs of the debtor. If the hearing underparagraph (2)(B) of this subsection is a preliminary hearing, the court may authorize such use, sale, or lease only if there is areasonable likelihood that the trustee will prevail at the final hearing under subsection (e) of this section. The court shall actpromptly on any request for authorization under paragraph (2)(B) of this subsection.

(4) Except as provided in paragraph (2) of this subsection, the trustee shall segregate and account for any cash collateral in thetrustee's possession, custody, or control.

(d) The trustee may use, sell, or lease property under subsection (b) or (c) of this section--

(1) in the case of a debtor that is a corporation or trust that is not a moneyed business, commercial corporation, or trust, onlyin accordance with nonbankruptcy law applicable to the transfer of property by a debtor that is such a corporation or trust; and

(2) only to the extent not inconsistent with any relief granted under subsection (c), (d), (e), or (f) of section 362.

(e) Notwithstanding any other provision of this section, at any time, on request of an entity that has an interest in property used,sold, or leased, or proposed to be used, sold, or leased, by the trustee, the court, with or without a hearing, shall prohibit or

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condition such use, sale, or lease as is necessary to provide adequate protection of such interest. This subsection also appliesto property that is subject to any unexpired lease of personal property (to the exclusion of such property being subject to anorder to grant relief from the stay under section 362).

(f) The trustee may sell property under subsection (b) or (c) of this section free and clear of any interest in such property ofan entity other than the estate, only if--

(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;

(2) such entity consents;

(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all lienson such property;

(4) such interest is in bona fide dispute; or

(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.

(g) Notwithstanding subsection (f) of this section, the trustee may sell property under subsection (b) or (c) of this section freeand clear of any vested or contingent right in the nature of dower or curtesy.

(h) Notwithstanding subsection (f) of this section, the trustee may sell both the estate's interest, under subsection (b) or (c) ofthis section, and the interest of any co-owner in property in which the debtor had, at the time of the commencement of the case,an undivided interest as a tenant in common, joint tenant, or tenant by the entirety, only if--

(1) partition in kind of such property among the estate and such co-owners is impracticable;

(2) sale of the estate's undivided interest in such property would realize significantly less for the estate than sale of suchproperty free of the interests of such co-owners;

(3) the benefit to the estate of a sale of such property free of the interests of co-owners outweighs the detriment, if any, tosuch co-owners; and

(4) such property is not used in the production, transmission, or distribution, for sale, of electric energy or of natural orsynthetic gas for heat, light, or power.

(i) Before the consummation of a sale of property to which subsection (g) or (h) of this section applies, or of property of theestate that was community property of the debtor and the debtor's spouse immediately before the commencement of the case,the debtor's spouse, or a co-owner of such property, as the case may be, may purchase such property at the price at which suchsale is to be consummated.

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(j) After a sale of property to which subsection (g) or (h) of this section applies, the trustee shall distribute to the debtor's spouseor the co-owners of such property, as the case may be, and to the estate, the proceeds of such sale, less the costs and expenses, notincluding any compensation of the trustee, of such sale, according to the interests of such spouse or co-owners, and of the estate.

(k) At a sale under subsection (b) of this section of property that is subject to a lien that secures an allowed claim, unless thecourt for cause orders otherwise the holder of such claim may bid at such sale, and, if the holder of such claim purchases suchproperty, such holder may offset such claim against the purchase price of such property.

(l) Subject to the provisions of section 365, the trustee may use, sell, or lease property under subsection (b) or (c) of thissection, or a plan under chapter 11, 12, or 13 of this title may provide for the use, sale, or lease of property, notwithstandingany provision in a contract, a lease, or applicable law that is conditioned on the insolvency or financial condition of the debtor,on the commencement of a case under this title concerning the debtor, or on the appointment of or the taking possession bya trustee in a case under this title or a custodian, and that effects, or gives an option to effect, a forfeiture, modification, ortermination of the debtor's interest in such property.

(m) The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or leaseof property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased suchproperty in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such saleor lease were stayed pending appeal.

(n) The trustee may avoid a sale under this section if the sale price was controlled by an agreement among potential biddersat such sale, or may recover from a party to such agreement any amount by which the value of the property sold exceeds theprice at which such sale was consummated, and may recover any costs, attorneys' fees, or expenses incurred in avoiding suchsale or recovering such amount. In addition to any recovery under the preceding sentence, the court may grant judgment forpunitive damages in favor of the estate and against any such party that entered into such an agreement in willful disregard ofthis subsection.

(o) Notwithstanding subsection (f), if a person purchases any interest in a consumer credit transaction that is subject to theTruth in Lending Act or any interest in a consumer credit contract (as defined in section 433.1 of title 16 of the Code of FederalRegulations (January 1, 2004), as amended from time to time), and if such interest is purchased through a sale under this section,then such person shall remain subject to all claims and defenses that are related to such consumer credit transaction or suchconsumer credit contract, to the same extent as such person would be subject to such claims and defenses of the consumer hadsuch interest been purchased at a sale not under this section.

(p) In any hearing under this section--

(1) the trustee has the burden of proof on the issue of adequate protection; and

(2) the entity asserting an interest in property has the burden of proof on the issue of the validity, priority, or extent of suchinterest.

CREDIT(S)

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§ 363. Use, sale, or lease of property, 11 USCA § 363

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(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2572; Pub.L. 98-353, Title III, § 442, July 10, 1984, 98 Stat. 371; Pub.L. 99-554, TitleII, § 257(k), Oct. 27, 1986, 100 Stat. 3115; Pub.L. 103-394, Title I, § 109, Title II, §§ 214(b), 219(c), Title V, § 501(d)(8), Oct.22, 1994, 108 Stat. 4113, 4126, 4129, 4144; Pub.L. 109-8, Title II, §§ 204, 231(a), Title XII, § 1221(a), Apr. 20, 2005, 119Stat. 49, 72, 195; Pub.L. 111-327, § 2(a)(13), Dec. 22, 2010, 124 Stat. 3559.)

Notes of Decisions (1441)

11 U.S.C.A. § 363, 11 USCA § 363Current through P.L. 114-114 (excluding 114-94, 114-95 and 114-113) approved 12-28-2015

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

044

§ 522. Exemptions, 11 USCA § 522

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1

KeyCite Yellow Flag - Negative Treatment

Unconstitutional or Preempted Prior Version Limited on Constitutional Grounds by In re Pontius, Bkrtcy.W.D.Mich., Dec. 22, 2009

KeyCite Yellow Flag - Negative Treatment Proposed Legislation

United States Code AnnotatedTitle 11. Bankruptcy (Refs & Annos)

Chapter 5. Creditors, the Debtor, and the Estate (Refs & Annos)Subchapter II. Debtor's Duties and Benefits

11 U.S.C.A. § 522

§ 522. Exemptions

Effective: December 22, 2010Currentness

(a) In this section--

(1) “dependent” includes spouse, whether or not actually dependent; and

(2) “value” means fair market value as of the date of the filing of the petition or, with respect to property that becomesproperty of the estate after such date, as of the date such property becomes property of the estate.

(b)(1) Notwithstanding section 541 of this title, an individual debtor may exempt from property of the estate the property listedin either paragraph (2) or, in the alternative, paragraph (3) of this subsection. In joint cases filed under section 302 of this titleand individual cases filed under section 301 or 303 of this title by or against debtors who are husband and wife, and whoseestates are ordered to be jointly administered under Rule 1015(b) of the Federal Rules of Bankruptcy Procedure, one debtormay not elect to exempt property listed in paragraph (2) and the other debtor elect to exempt property listed in paragraph (3) ofthis subsection. If the parties cannot agree on the alternative to be elected, they shall be deemed to elect paragraph (2), wheresuch election is permitted under the law of the jurisdiction where the case is filed.

(2) Property listed in this paragraph is property that is specified under subsection (d), unless the State law that is applicable tothe debtor under paragraph (3)(A) specifically does not so authorize.

(3) Property listed in this paragraph is--

(A) subject to subsections (o) and (p), any property that is exempt under Federal law, other than subsection (d) of this section,or State or local law that is applicable on the date of the filing of the petition to the place in which the debtor's domicile hasbeen located for the 730 days immediately preceding the date of the filing of the petition or if the debtor's domicile has notbeen located in a single State for such 730-day period, the place in which the debtor's domicile was located for 180 daysimmediately preceding the 730-day period or for a longer portion of such 180-day period than in any other place;

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(B) any interest in property in which the debtor had, immediately before the commencement of the case, an interest as atenant by the entirety or joint tenant to the extent that such interest as a tenant by the entirety or joint tenant is exempt fromprocess under applicable nonbankruptcy law; and

(C) retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under section 401,403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986.

If the effect of the domiciliary requirement under subparagraph (A) is to render the debtor ineligible for any exemption, thedebtor may elect to exempt property that is specified under subsection (d).

(4) For purposes of paragraph (3)(C) and subsection (d)(12), the following shall apply:

(A) If the retirement funds are in a retirement fund that has received a favorable determination under section 7805 of theInternal Revenue Code of 1986, and that determination is in effect as of the date of the filing of the petition in a case underthis title, those funds shall be presumed to be exempt from the estate.

(B) If the retirement funds are in a retirement fund that has not received a favorable determination under such section 7805,those funds are exempt from the estate if the debtor demonstrates that--

(i) no prior determination to the contrary has been made by a court or the Internal Revenue Service; and

(ii)(I) the retirement fund is in substantial compliance with the applicable requirements of the Internal Revenue Code of1986; or

(II) the retirement fund fails to be in substantial compliance with the applicable requirements of the Internal Revenue Codeof 1986 and the debtor is not materially responsible for that failure.

(C) A direct transfer of retirement funds from 1 fund or account that is exempt from taxation under section 401, 403, 408,408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986, under section 401(a)(31) of the Internal Revenue Codeof 1986, or otherwise, shall not cease to qualify for exemption under paragraph (3)(C) or subsection (d)(12) by reason ofsuch direct transfer.

(D)(i) Any distribution that qualifies as an eligible rollover distribution within the meaning of section 402(c) of the InternalRevenue Code of 1986 or that is described in clause (ii) shall not cease to qualify for exemption under paragraph (3)(C) orsubsection (d)(12) by reason of such distribution.

(ii) A distribution described in this clause is an amount that--

(I) has been distributed from a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457,or 501(a) of the Internal Revenue Code of 1986; and

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(II) to the extent allowed by law, is deposited in such a fund or account not later than 60 days after the distribution ofsuch amount.

(c) Unless the case is dismissed, property exempted under this section is not liable during or after the case for any debt of thedebtor that arose, or that is determined under section 502 of this title as if such debt had arisen, before the commencementof the case, except--

(1) a debt of a kind specified in paragraph (1) or (5) of section 523(a) (in which case, notwithstanding any provision ofapplicable nonbankruptcy law to the contrary, such property shall be liable for a debt of a kind specified in such paragraph);

(2) a debt secured by a lien that is--

(A)(i) not avoided under subsection (f) or (g) of this section or under section 544, 545, 547, 548, 549, or 724(a) of thistitle; and

(ii) not void under section 506(d) of this title; or

(B) a tax lien, notice of which is properly filed;

(3) a debt of a kind specified in section 523(a)(4) or 523(a)(6) of this title owed by an institution-affiliated party of an insureddepository institution to a Federal depository institutions regulatory agency acting in its capacity as conservator, receiver,or liquidating agent for such institution; or

(4) a debt in connection with fraud in the obtaining or providing of any scholarship, grant, loan, tuition, discount, award, orother financial assistance for purposes of financing an education at an institution of higher education (as that term is definedin section 101 of the Higher Education Act of 1965 (20 U.S.C. 1001)).

(d) The following property may be exempted under subsection (b)(2) of this section:

(1) The debtor's aggregate interest, not to exceed $22,975 1 in value, in real property or personal property that the debtor or adependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtoruses as a residence, or in a burial plot for the debtor or a dependent of the debtor.

(2) The debtor's interest, not to exceed $3,675 1 in value, in one motor vehicle.

(3) The debtor's interest, not to exceed $575 1 in value in any particular item or $12,250 1 in aggregate value, in householdfurnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments, that are heldprimarily for the personal, family, or household use of the debtor or a dependent of the debtor.

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(4) The debtor's aggregate interest, not to exceed $1,550 1 in value, in jewelry held primarily for the personal, family, orhousehold use of the debtor or a dependent of the debtor.

(5) The debtor's aggregate interest in any property, not to exceed in value $1,225 1 plus up to $11,500 1 of any unused amountof the exemption provided under paragraph (1) of this subsection.

(6) The debtor's aggregate interest, not to exceed $2,300 1 in value, in any implements, professional books, or tools, of thetrade of the debtor or the trade of a dependent of the debtor.

(7) Any unmatured life insurance contract owned by the debtor, other than a credit life insurance contract.

(8) The debtor's aggregate interest, not to exceed in value $12,250 1 less any amount of property of the estate transferred inthe manner specified in section 542(d) of this title, in any accrued dividend or interest under, or loan value of, any unmaturedlife insurance contract owned by the debtor under which the insured is the debtor or an individual of whom the debtor isa dependent.

(9) Professionally prescribed health aids for the debtor or a dependent of the debtor.

(10) The debtor's right to receive--

(A) a social security benefit, unemployment compensation, or a local public assistance benefit;

(B) a veterans' benefit;

(C) a disability, illness, or unemployment benefit;

(D) alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and anydependent of the debtor;

(E) a payment under a stock bonus, pension, profitsharing, annuity, or similar plan or contract on account of illness,disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependentof the debtor, unless--

(i) such plan or contract was established by or under the auspices of an insider that employed the debtor at the time thedebtor's rights under such plan or contract arose;

(ii) such payment is on account of age or length of service; and

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(iii) such plan or contract does not qualify under section 401(a), 403(a), 403(b), or 408 of the Internal Revenue Codeof 1986.

(11) The debtor's right to receive, or property that is traceable to--

(A) an award under a crime victim's reparation law;

(B) a payment on account of the wrongful death of an individual of whom the debtor was a dependent, to the extentreasonably necessary for the support of the debtor and any dependent of the debtor;

(C) a payment under a life insurance contract that insured the life of an individual of whom the debtor was a dependenton the date of such individual's death, to the extent reasonably necessary for the support of the debtor and any dependentof the debtor;

(D) a payment, not to exceed $22,975, 1 on account of personal bodily injury, not including pain and suffering orcompensation for actual pecuniary loss, of the debtor or an individual of whom the debtor is a dependent; or

(E) a payment in compensation of loss of future earnings of the debtor or an individual of whom the debtor is or was adependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.

(12) Retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under section 401,403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986.

(e) A waiver of an exemption executed in favor of a creditor that holds an unsecured claim against the debtor is unenforceablein a case under this title with respect to such claim against property that the debtor may exempt under subsection (b) of thissection. A waiver by the debtor of a power under subsection (f) or (h) of this section to avoid a transfer, under subsection (g)or (i) of this section to exempt property, or under subsection (i) of this section to recover property or to preserve a transfer, isunenforceable in a case under this title.

(f)(1) Notwithstanding any waiver of exemptions but subject to paragraph (3), the debtor may avoid the fixing of a lien on aninterest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitledunder subsection (b) of this section, if such lien is--

(A) a judicial lien, other than a judicial lien that secures a debt of a kind that is specified in section 523(a)(5); or

(B) a nonpossessory, nonpurchase-money security interest in any--

(i) household furnishings, household goods, wearing apparel, appliances, books, animals, crops, musical instruments, orjewelry that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor;

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(ii) implements, professional books, or tools, of the trade of the debtor or the trade of a dependent of the debtor; or

(iii) professionally prescribed health aids for the debtor or a dependent of the debtor.

(2)(A) For the purposes of this subsection, a lien shall be considered to impair an exemption to the extent that the sum of--

(i) the lien;

(ii) all other liens on the property; and

(iii) the amount of the exemption that the debtor could claim if there were no liens on the property;

exceeds the value that the debtor's interest in the property would have in the absence of any liens.

(B) In the case of a property subject to more than 1 lien, a lien that has been avoided shall not be considered in making thecalculation under subparagraph (A) with respect to other liens.

(C) This paragraph shall not apply with respect to a judgment arising out of a mortgage foreclosure.

(3) In a case in which State law that is applicable to the debtor--

(A) permits a person to voluntarily waive a right to claim exemptions under subsection (d) or prohibits a debtor from claimingexemptions under subsection (d); and

(B) either permits the debtor to claim exemptions under State law without limitation in amount, except to the extent that thedebtor has permitted the fixing of a consensual lien on any property or prohibits avoidance of a consensual lien on propertyotherwise eligible to be claimed as exempt property;

the debtor may not avoid the fixing of a lien on an interest of the debtor or a dependent of the debtor in property if the lien isa nonpossessory, nonpurchase-money security interest in implements, professional books, or tools of the trade of the debtor ora dependent of the debtor or farm animals or crops of the debtor or a dependent of the debtor to the extent the value of such

implements, professional books, tools of the trade, animals, and crops exceeds $6,225 1 .

(4)(A) Subject to subparagraph (B), for purposes of paragraph (1)(B), the term “household goods” means--

(i) clothing;

(ii) furniture;

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(iii) appliances;

(iv) 1 radio;

(v) 1 television;

(vi) 1 VCR;

(vii) linens;

(viii) china;

(ix) crockery;

(x) kitchenware;

(xi) educational materials and educational equipment primarily for the use of minor dependent children of the debtor;

(xii) medical equipment and supplies;

(xiii) furniture exclusively for the use of minor children, or elderly or disabled dependents of the debtor;

(xiv) personal effects (including the toys and hobby equipment of minor dependent children and wedding rings) of the debtorand the dependents of the debtor; and

(xv) 1 personal computer and related equipment.

(B) The term “household goods” does not include--

(i) works of art (unless by or of the debtor, or any relative of the debtor);

(ii) electronic entertainment equipment with a fair market value of more than $650 1 in the aggregate (except 1 television,1 radio, and 1 VCR);

(iii) items acquired as antiques with a fair market value of more than $650 1 in the aggregate;

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(iv) jewelry with a fair market value of more than $650 1 in the aggregate (except wedding rings); and

(v) a computer (except as otherwise provided for in this section), motor vehicle (including a tractor or lawn tractor), boat, ora motorized recreational device, conveyance, vehicle, watercraft, or aircraft.

(g) Notwithstanding sections 550 and 551 of this title, the debtor may exempt under subsection (b) of this section property thatthe trustee recovers under section 510(c)(2), 542, 543, 550, 551, or 553 of this title, to the extent that the debtor could haveexempted such property under subsection (b) of this section if such property had not been transferred, if--

(1)(A) such transfer was not a voluntary transfer of such property by the debtor; and

(B) the debtor did not conceal such property; or

(2) the debtor could have avoided such transfer under subsection (f)(1)(B) of this section.

(h) The debtor may avoid a transfer of property of the debtor or recover a setoff to the extent that the debtor could have exemptedsuch property under subsection (g)(1) of this section if the trustee had avoided such transfer, if--

(1) such transfer is avoidable by the trustee under section 544, 545, 547, 548, 549, or 724(a) of this title or recoverable bythe trustee under section 553 of this title; and

(2) the trustee does not attempt to avoid such transfer.

(i)(1) If the debtor avoids a transfer or recovers a setoff under subsection (f) or (h) of this section, the debtor may recover inthe manner prescribed by, and subject to the limitations of, section 550 of this title, the same as if the trustee had avoided suchtransfer, and may exempt any property so recovered under subsection (b) of this section.

(2) Notwithstanding section 551 of this title, a transfer avoided under section 544, 545, 547, 548, 549, or 724(a) of this title,under subsection (f) or (h) of this section, or property recovered under section 553 of this title, may be preserved for the benefitof the debtor to the extent that the debtor may exempt such property under subsection (g) of this section or paragraph (1) ofthis subsection.

(j) Notwithstanding subsections (g) and (i) of this section, the debtor may exempt a particular kind of property under subsections(g) and (i) of this section only to the extent that the debtor has exempted less property in value of such kind than that to whichthe debtor is entitled under subsection (b) of this section.

(k) Property that the debtor exempts under this section is not liable for payment of any administrative expense except--

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(1) the aliquot share of the costs and expenses of avoiding a transfer of property that the debtor exempts under subsection(g) of this section, or of recovery of such property, that is attributable to the value of the portion of such property exemptedin relation to the value of the property recovered; and

(2) any costs and expenses of avoiding a transfer under subsection (f) or (h) of this section, or of recovery of property undersubsection (i)(1) of this section, that the debtor has not paid.

(l) The debtor shall file a list of property that the debtor claims as exempt under subsection (b) of this section. If the debtor doesnot file such a list, a dependent of the debtor may file such a list, or may claim property as exempt from property of the estateon behalf of the debtor. Unless a party in interest objects, the property claimed as exempt on such list is exempt.

(m) Subject to the limitation in subsection (b), this section shall apply separately with respect to each debtor in a joint case.

(n) For assets in individual retirement accounts described in section 408 or 408A of the Internal Revenue Code of 1986, otherthan a simplified employee pension under section 408(k) of such Code or a simple retirement account under section 408(p) ofsuch Code, the aggregate value of such assets exempted under this section, without regard to amounts attributable to rollovercontributions under section 402(c), 402(e)(6), 403(a)(4), 403(a)(5), and 403(b)(8) of the Internal Revenue Code of 1986, and

earnings thereon, shall not exceed $1,245,475 1 in a case filed by a debtor who is an individual, except that such amount maybe increased if the interests of justice so require.

(o) For purposes of subsection (b)(3)(A), and notwithstanding subsection (a), the value of an interest in--

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

(2) a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence;

(3) a burial plot for the debtor or a dependent of the debtor; or

(4) real or personal property that the debtor or a dependent of the debtor claims as a homestead;

shall be reduced to the extent that such value is attributable to any portion of any property that the debtor disposed of in the10-year period ending on the date of the filing of the petition with the intent to hinder, delay, or defraud a creditor and thatthe debtor could not exempt, or that portion that the debtor could not exempt, under subsection (b), if on such date the debtorhad held the property so disposed of.

(p)(1) Except as provided in paragraph (2) of this subsection and sections 544 and 548, as a result of electing under subsection(b)(3)(A) to exempt property under State or local law, a debtor may not exempt any amount of interest that was acquired by

the debtor during the 1215-day period preceding the date of the filing of the petition that exceeds in the aggregate $155,675 1

in value in--

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(A) real or personal property that the debtor or a dependent of the debtor uses as a residence;

(B) a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence;

(C) a burial plot for the debtor or a dependent of the debtor; or

(D) real or personal property that the debtor or dependent of the debtor claims as a homestead.

(2)(A) The limitation under paragraph (1) shall not apply to an exemption claimed under subsection (b)(3)(A) by a familyfarmer for the principal residence of such farmer.

(B) For purposes of paragraph (1), any amount of such interest does not include any interest transferred from a debtor's previousprincipal residence (which was acquired prior to the beginning of such 1215-day period) into the debtor's current principalresidence, if the debtor's previous and current residences are located in the same State.

(q)(1) As a result of electing under subsection (b)(3)(A) to exempt property under State or local law, a debtor may not exemptany amount of an interest in property described in subparagraphs (A), (B), (C), and (D) of subsection (p)(1) which exceeds

in the aggregate $155,675 1 if--

(A) the court determines, after notice and a hearing, that the debtor has been convicted of a felony (as defined in section3156 of title 18), which under the circumstances, demonstrates that the filing of the case was an abuse of the provisions ofthis title; or

(B) the debtor owes a debt arising from--

(i) any violation of the Federal securities laws (as defined in section 3(a)(47) of the Securities Exchange Act of 1934), anyState securities laws, or any regulation or order issued under Federal securities laws or State securities laws;

(ii) fraud, deceit, or manipulation in a fiduciary capacity or in connection with the purchase or sale of any security registeredunder section 12 or 15(d) of the Securities Exchange Act of 1934 or under section 6 of the Securities Act of 1933;

(iii) any civil remedy under section 1964 of title 18; or

(iv) any criminal act, intentional tort, or willful or reckless misconduct that caused serious physical injury or death toanother individual in the preceding 5 years.

(2) Paragraph (1) shall not apply to the extent the amount of an interest in property described in subparagraphs (A), (B), (C),and (D) of subsection (p)(1) is reasonably necessary for the support of the debtor and any dependent of the debtor.

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CREDIT(S)(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2586; Pub.L. 98-353, Title III, §§ 306, 453, July 10, 1984, 98 Stat. 353, 375; Pub.L.

99-554, Title II, § 283(i), Oct. 27, 1986, 100 Stat. 3117; Pub.L. 101-647, Title XXV, § 2522(b), Nov. 29, 1990, 104 Stat. 4866;Pub.L. 103-394, Title I, § 108(d), Title III, §§ 303, 304(d), 310, Title V, § 501(d)(12), Oct. 22, 1994, 108 Stat. 4112, 4132, 4133,4137, 4145; Pub.L. 106-420, § 4, Nov. 1, 2000, 114 Stat. 1868; Pub.L. 109-8, Title II, §§ 216, 224(a), (e)(1), Title III, §§ 307,308, 313(a), 322(a), Apr. 20, 2005, 119 Stat. 55, 62, 65, 81, 87, 96; Pub.L. 111-327, § 2(a)(17), Dec. 22, 2010, 124 Stat. 3559.)

Notes of Decisions (3088)

Footnotes1 Dollar amount as adjusted by the Judicial Conference of the United States. See Adjustment of Dollar Amounts notes set out under

this section and 11 U.S.C.A. § 104.

11 U.S.C.A. § 522, 11 USCA § 522Current through P.L. 114-114 (excluding 114-94, 114-95 and 114-113) approved 12-28-2015

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055

§ 523. Exceptions to discharge, 11 USCA § 523

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KeyCite Yellow Flag - Negative Treatment

Proposed Legislation

United States Code AnnotatedTitle 11. Bankruptcy (Refs & Annos)

Chapter 5. Creditors, the Debtor, and the Estate (Refs & Annos)Subchapter II. Debtor's Duties and Benefits

11 U.S.C.A. § 523

§ 523. Exceptions to discharge

Effective: December 22, 2010Currentness

<Notes of Decisions for 11 USCA § 523 are displayed in multiple documents.>

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtorfrom any debt--

(1) for a tax or a customs duty--

(A) of the kind and for the periods specified in section 507(a)(3) or 507(a)(8) of this title, whether or not a claim for suchtax was filed or allowed;

(B) with respect to which a return, or equivalent report or notice, if required--

(i) was not filed or given; or

(ii) was filed or given after the date on which such return, report, or notice was last due, under applicable law or underany extension, and after two years before the date of the filing of the petition; or

(C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeatsuch tax;

(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by--

(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider'sfinancial condition;

(B) use of a statement in writing--

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(i) that is materially false;

(ii) respecting the debtor's or an insider's financial condition;

(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and

(iv) that the debtor caused to be made or published with intent to deceive; or

(C)(i) for purposes of subparagraph (A)--

(I) consumer debts owed to a single creditor and aggregating more than $650 1 for luxury goods or services incurred byan individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable;and

(II) cash advances aggregating more than $925 1 that are extensions of consumer credit under an open end credit planobtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to benondischargeable; and

(ii) for purposes of this subparagraph--

(I) the terms “consumer”, “credit”, and “open end credit plan” have the same meanings as in section 103 of the Truthin Lending Act; and

(II) the term “luxury goods or services” does not include goods or services reasonably necessary for the support ormaintenance of the debtor or a dependent of the debtor;

(3) neither listed nor scheduled under section 521(a)(1) of this title, with the name, if known to the debtor, of the creditorto whom such debt is owed, in time to permit--

(A) if such debt is not of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim,unless such creditor had notice or actual knowledge of the case in time for such timely filing; or

(B) if such debt is of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim andtimely request for a determination of dischargeability of such debt under one of such paragraphs, unless such creditor hadnotice or actual knowledge of the case in time for such timely filing and request;

(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny;

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(5) for a domestic support obligation;

(6) for willful and malicious injury by the debtor to another entity or to the property of another entity;

(7) to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is notcompensation for actual pecuniary loss, other than a tax penalty--

(A) relating to a tax of a kind not specified in paragraph (1) of this subsection; or

(B) imposed with respect to a transaction or event that occurred before three years before the date of the filing of the petition;

(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and thedebtor's dependents, for--

(A)(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made underany program funded in whole or in part by a governmental unit or nonprofit institution; or

(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or

(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal RevenueCode of 1986, incurred by a debtor who is an individual;

(9) for death or personal injury caused by the debtor's operation of a motor vehicle, vessel, or aircraft if such operation wasunlawful because the debtor was intoxicated from using alcohol, a drug, or another substance;

(10) that was or could have been listed or scheduled by the debtor in a prior case concerning the debtor under this title orunder the Bankruptcy Act in which the debtor waived discharge, or was denied a discharge under section 727(a)(2), (3), (4),(5), (6), or (7) of this title, or under section 14c(1), (2), (3), (4), (6), or (7) of such Act;

(11) provided in any final judgment, unreviewable order, or consent order or decree entered in any court of the United Statesor of any State, issued by a Federal depository institutions regulatory agency, or contained in any settlement agreemententered into by the debtor, arising from any act of fraud or defalcation while acting in a fiduciary capacity committed withrespect to any depository institution or insured credit union;

(12) for malicious or reckless failure to fulfill any commitment by the debtor to a Federal depository institutions regulatoryagency to maintain the capital of an insured depository institution, except that this paragraph shall not extend any suchcommitment which would otherwise be terminated due to any act of such agency;

(13) for any payment of an order of restitution issued under title 18, United States Code;

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(14) incurred to pay a tax to the United States that would be nondischargeable pursuant to paragraph (1);

(14A) incurred to pay a tax to a governmental unit, other than the United States, that would be nondischargeable underparagraph (1);

(14B) incurred to pay fines or penalties imposed under Federal election law;

(15) to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by thedebtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order ofa court of record, or a determination made in accordance with State or territorial law by a governmental unit;

(16) for a fee or assessment that becomes due and payable after the order for relief to a membership association with respectto the debtor's interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in ahomeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest insuch unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for amembership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequentbankruptcy case;

(17) for a fee imposed on a prisoner by any court for the filing of a case, motion, complaint, or appeal, or for other costsand expenses assessed with respect to such filing, regardless of an assertion of poverty by the debtor under subsection (b)or (f)(2) of section 1915 of title 28 (or a similar non-Federal law), or the debtor's status as a prisoner, as defined in section1915(h) of title 28 (or a similar non-Federal law);

(18) owed to a pension, profit-sharing, stock bonus, or other plan established under section 401, 403, 408, 408A, 414, 457,or 501(c) of the Internal Revenue Code of 1986, under--

(A) a loan permitted under section 408(b)(1) of the Employee Retirement Income Security Act of 1974, or subject tosection 72(p) of the Internal Revenue Code of 1986; or

(B) a loan from a thrift savings plan permitted under subchapter III of chapter 84 of title 5, that satisfies the requirementsof section 8433(g) of such title;

but nothing in this paragraph may be construed to provide that any loan made under a governmental plan under section414(d), or a contract or account under section 403(b), of the Internal Revenue Code of 1986 constitutes a claim or a debtunder this title; or

(19) that--

(A) is for--

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(i) the violation of any of the Federal securities laws (as that term is defined in section 3(a)(47) of the Securities ExchangeAct of 1934), any of the State securities laws, or any regulation or order issued under such Federal or State securitieslaws; or

(ii) common law fraud, deceit, or manipulation in connection with the purchase or sale of any security; and

(B) results, before, on, or after the date on which the petition was filed, from--

(i) any judgment, order, consent order, or decree entered in any Federal or State judicial or administrative proceeding;

(ii) any settlement agreement entered into by the debtor; or

(iii) any court or administrative order for any damages, fine, penalty, citation, restitutionary payment, disgorgementpayment, attorney fee, cost, or other payment owed by the debtor.

For purposes of this subsection, the term “return” means a return that satisfies the requirements of applicable nonbankruptcylaw (including applicable filing requirements). Such term includes a return prepared pursuant to section 6020(a) of the InternalRevenue Code of 1986, or similar State or local law, or a written stipulation to a judgment or a final order entered by anonbankruptcy tribunal, but does not include a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986,or a similar State or local law.

(b) Notwithstanding subsection (a) of this section, a debt that was excepted from discharge under subsection (a)(1), (a)(3), or (a)(8) of this section, under section 17a(1), 17a(3), or 17a(5) of the Bankruptcy Act, under section 439A of the Higher EducationAct of 1965, or under section 733(g) of the Public Health Service Act in a prior case concerning the debtor under this title, orunder the Bankruptcy Act, is dischargeable in a case under this title unless, by the terms of subsection (a) of this section, suchdebt is not dischargeable in the case under this title.

(c)(1) Except as provided in subsection (a)(3)(B) of this section, the debtor shall be discharged from a debt of a kind specifiedin paragraph (2), (4), or (6) of subsection (a) of this section, unless, on request of the creditor to whom such debt is owed, andafter notice and a hearing, the court determines such debt to be excepted from discharge under paragraph (2), (4), or (6), asthe case may be, of subsection (a) of this section.

(2) Paragraph (1) shall not apply in the case of a Federal depository institutions regulatory agency seeking, in its capacityas conservator, receiver, or liquidating agent for an insured depository institution, to recover a debt described in subsection(a)(2), (a)(4), (a)(6), or (a)(11) owed to such institution by an institution-affiliated party unless the receiver, conservator, orliquidating agent was appointed in time to reasonably comply, or for a Federal depository institutions regulatory agency actingin its corporate capacity as a successor to such receiver, conservator, or liquidating agent to reasonably comply, with subsection(a)(3)(B) as a creditor of such institution-affiliated party with respect to such debt.

(d) If a creditor requests a determination of dischargeability of a consumer debt under subsection (a)(2) of this section, andsuch debt is discharged, the court shall grant judgment in favor of the debtor for the costs of, and a reasonable attorney's fee

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for, the proceeding if the court finds that the position of the creditor was not substantially justified, except that the court shallnot award such costs and fees if special circumstances would make the award unjust.

(e) Any institution-affiliated party of an insured depository institution shall be considered to be acting in a fiduciary capacitywith respect to the purposes of subsection (a)(4) or (11).

CREDIT(S)(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2590; Pub.L. 96-56, § 3, Aug. 14, 1979, 93 Stat. 387; Pub.L. 97-35, Title XXIII, §

2334(b), Aug. 13, 1981, 95 Stat. 863; Pub.L. 98-353, Title III, §§ 307, 371, 454, July 10, 1984, 98 Stat. 353, 364, 375; Pub.L.99-554, Title II, §§ 257(n), 281, 283(j), Oct. 27, 1986, 100 Stat. 3115 to 3117; Pub.L. 101-581, § 2(a), Nov. 15, 1990, 104 Stat.2865; Pub.L. 101-647, Title XXV, § 2522(a), Title XXXI, § 3102(a), Title XXXVI, § 3621, Nov. 29, 1990, 104 Stat. 4865,4916, 4964; Pub.L. 103-322, Title XXXII, § 320934, Sept. 13, 1994, 108 Stat. 2135; Pub.L. 103-394, Title II, § 221, Title III,§§ 304(e), (h)(3), 306, 309, Title V, § 501(d)(13), Oct. 22, 1994, 108 Stat. 4129, 4133 to 4135, 4137, 4145; Pub.L. 104-134,Title I, § 101[(a)] [Title VIII, § 804(b)], Apr. 26, 1996, 110 Stat. 1321, 1321-74; renumbered Title I Pub.L. 104-140, § 1(a),May 2, 1996, 110 Stat. 1327; amended Pub.L. 104-193, Title III, § 374(a), Aug. 22, 1996, 110 Stat. 2255; Pub.L. 105-244,Title IX, § 971(a), Oct. 7, 1998, 112 Stat. 1837; Pub.L. 107-204, Title VIII, § 803, July 30, 2002, 116 Stat. 801; Pub.L. 109-8,Title II, §§ 215, 220, 224(c), Title III, §§ 301, 310, 314(a), Title IV, § 412, Title VII, § 714, Title XII, §§ 1209, 1235, TitleXIV, § 1404(a), Title XV, § 1502(a)(2), Apr. 20, 2005, 119 Stat. 54, 59, 64, 75, 84, 88, 107, 128, 194, 204, 215, 216; Pub.L.111-327, § 2(a)(18), Dec. 22, 2010, 124 Stat. 3559.)

Notes of Decisions (941)

Footnotes1 Dollar amount as adjusted by the Judicial Conference of the United States. See Adjustment of Dollar Amounts notes set out under

this section and 11 U.S.C.A. § 104.

11 U.S.C.A. § 523, 11 USCA § 523Current through P.L. 114-114 (excluding 114-94, 114-95 and 114-113) approved 12-28-2015

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

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KeyCite Yellow Flag - Negative Treatment

Proposed Legislation

United States Code AnnotatedTitle 11. Bankruptcy (Refs & Annos)

Chapter 5. Creditors, the Debtor, and the Estate (Refs & Annos)Subchapter III. The Estate (Refs & Annos)

11 U.S.C.A. § 547

§ 547. Preferences

Effective: April 1, 2010Currentness

(a) In this section--

(1) “inventory” means personal property leased or furnished, held for sale or lease, or to be furnished under a contract forservice, raw materials, work in process, or materials used or consumed in a business, including farm products such as cropsor livestock, held for sale or lease;

(2) “new value” means money or money's worth in goods, services, or new credit, or release by a transferee of propertypreviously transferred to such transferee in a transaction that is neither void nor voidable by the debtor or the trustee under anyapplicable law, including proceeds of such property, but does not include an obligation substituted for an existing obligation;

(3) “receivable” means right to payment, whether or not such right has been earned by performance; and

(4) a debt for a tax is incurred on the day when such tax is last payable without penalty, including any extension.

(b) Except as provided in subsections (c) and (i) of this section, the trustee may avoid any transfer of an interest of the debtorin property--

(1) to or for the benefit of a creditor;

(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;

(3) made while the debtor was insolvent;

(4) made--

(A) on or within 90 days before the date of the filing of the petition; or

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(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of suchtransfer was an insider; and

(5) that enables such creditor to receive more than such creditor would receive if--

(A) the case were a case under chapter 7 of this title;

(B) the transfer had not been made; and

(C) such creditor received payment of such debt to the extent provided by the provisions of this title.

(c) The trustee may not avoid under this section a transfer--

(1) to the extent that such transfer was--

(A) intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneousexchange for new value given to the debtor; and

(B) in fact a substantially contemporaneous exchange;

(2) to the extent that such transfer was in payment of a debt incurred by the debtor in the ordinary course of business orfinancial affairs of the debtor and the transferee, and such transfer was--

(A) made in the ordinary course of business or financial affairs of the debtor and the transferee; or

(B) made according to ordinary business terms;

(3) that creates a security interest in property acquired by the debtor--

(A) to the extent such security interest secures new value that was--

(i) given at or after the signing of a security agreement that contains a description of such property as collateral;

(ii) given by or on behalf of the secured party under such agreement;

(iii) given to enable the debtor to acquire such property; and

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(iv) in fact used by the debtor to acquire such property; and

(B) that is perfected on or before 30 days after the debtor receives possession of such property;

(4) to or for the benefit of a creditor, to the extent that, after such transfer, such creditor gave new value to or for the benefitof the debtor--

(A) not secured by an otherwise unavoidable security interest; and

(B) on account of which new value the debtor did not make an otherwise unavoidable transfer to or for the benefit ofsuch creditor;

(5) that creates a perfected security interest in inventory or a receivable or the proceeds of either, except to the extent thatthe aggregate of all such transfers to the transferee caused a reduction, as of the date of the filing of the petition and to theprejudice of other creditors holding unsecured claims, of any amount by which the debt secured by such security interestexceeded the value of all security interests for such debt on the later of--

(A)(i) with respect to a transfer to which subsection (b)(4)(A) of this section applies, 90 days before the date of the filingof the petition; or

(ii) with respect to a transfer to which subsection (b)(4)(B) of this section applies, one year before the date of the filingof the petition; or

(B) the date on which new value was first given under the security agreement creating such security interest;

(6) that is the fixing of a statutory lien that is not avoidable under section 545 of this title;

(7) to the extent such transfer was a bona fide payment of a debt for a domestic support obligation;

(8) if, in a case filed by an individual debtor whose debts are primarily consumer debts, the aggregate value of all propertythat constitutes or is affected by such transfer is less than $600; or

(9) if, in a case filed by a debtor whose debts are not primarily consumer debts, the aggregate value of all property that

constitutes or is affected by such transfer is less than $6,225 1 .

(d) The trustee may avoid a transfer of an interest in property of the debtor transferred to or for the benefit of a surety tosecure reimbursement of such a surety that furnished a bond or other obligation to dissolve a judicial lien that would have been

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avoidable by the trustee under subsection (b) of this section. The liability of such surety under such bond or obligation shall bedischarged to the extent of the value of such property recovered by the trustee or the amount paid to the trustee.

(e)(1) For the purposes of this section--

(A) a transfer of real property other than fixtures, but including the interest of a seller or purchaser under a contract for thesale of real property, is perfected when a bona fide purchaser of such property from the debtor against whom applicable lawpermits such transfer to be perfected cannot acquire an interest that is superior to the interest of the transferee; and

(B) a transfer of a fixture or property other than real property is perfected when a creditor on a simple contract cannot acquirea judicial lien that is superior to the interest of the transferee.

(2) For the purposes of this section, except as provided in paragraph (3) of this subsection, a transfer is made--

(A) at the time such transfer takes effect between the transferor and the transferee, if such transfer is perfected at, or within30 days after, such time, except as provided in subsection (c)(3)(B);

(B) at the time such transfer is perfected, if such transfer is perfected after such 30 days; or

(C) immediately before the date of the filing of the petition, if such transfer is not perfected at the later of--

(i) the commencement of the case; or

(ii) 30 days after such transfer takes effect between the transferor and the transferee.

(3) For the purposes of this section, a transfer is not made until the debtor has acquired rights in the property transferred.

(f) For the purposes of this section, the debtor is presumed to have been insolvent on and during the 90 days immediatelypreceding the date of the filing of the petition.

(g) For the purposes of this section, the trustee has the burden of proving the avoidability of a transfer under subsection (b) ofthis section, and the creditor or party in interest against whom recovery or avoidance is sought has the burden of proving thenonavoidability of a transfer under subsection (c) of this section.

(h) The trustee may not avoid a transfer if such transfer was made as a part of an alternative repayment schedule between thedebtor and any creditor of the debtor created by an approved nonprofit budget and credit counseling agency.

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§ 547. Preferences, 11 USCA § 547

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(i) If the trustee avoids under subsection (b) a transfer made between 90 days and 1 year before the date of the filing of thepetition, by the debtor to an entity that is not an insider for the benefit of a creditor that is an insider, such transfer shall beconsidered to be avoided under this section only with respect to the creditor that is an insider.

CREDIT(S)(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2597; Pub.L. 98-353, Title III, §§ 310, 462, July 10, 1984, 98 Stat. 355, 377; Pub.L.

99-554, Title II, § 283(m), Oct. 27, 1986, 100 Stat. 3117; Pub.L. 103-394, Title II, § 203, Title III, § 304(f), Oct. 22, 1994,108 Stat. 4121, 4133; Pub.L. 109-8, Title II, §§ 201(b), 217, Title IV, §§ 403, 409, Title XII, § 1213(a), 1222, Apr. 20, 2005,119 Stat. 42, 55, 104, 106, 194, 196.)

Notes of Decisions (3682)

Footnotes1 Dollar amount as adjusted by the Judicial Conference of the United States. See Adjustment of Dollar Amounts notes set out under

this section and 11 U.S.C.A. § 104.

11 U.S.C.A. § 547, 11 USCA § 547Current through P.L. 114-114 (excluding 114-94, 114-95 and 114-113) approved 12-28-2015

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

066

§ 548. Fraudulent transfers and obligations, 11 USCA § 548

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1

KeyCite Yellow Flag - Negative Treatment

Proposed Legislation

United States Code AnnotatedTitle 11. Bankruptcy (Refs & Annos)

Chapter 5. Creditors, the Debtor, and the Estate (Refs & Annos)Subchapter III. The Estate (Refs & Annos)

11 U.S.C.A. § 548

§ 548. Fraudulent transfers and obligations

Currentness

(a)(1) The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract)of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under anemployment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing ofthe petition, if the debtor voluntarily or involuntarily--

(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which thedebtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; or

(B)(i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and

(ii)(I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a resultof such transfer or obligation;

(II) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any propertyremaining with the debtor was an unreasonably small capital;

(III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor's ability to pay assuch debts matured; or

(IV) made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, underan employment contract and not in the ordinary course of business.

(2) A transfer of a charitable contribution to a qualified religious or charitable entity or organization shall not be considered tobe a transfer covered under paragraph (1)(B) in any case in which--

(A) the amount of that contribution does not exceed 15 percent of the gross annual income of the debtor for the year in whichthe transfer of the contribution is made; or

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(B) the contribution made by a debtor exceeded the percentage amount of gross annual income specified in subparagraph(A), if the transfer was consistent with the practices of the debtor in making charitable contributions.

(b) The trustee of a partnership debtor may avoid any transfer of an interest of the debtor in property, or any obligation incurredby the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, to a general partner inthe debtor, if the debtor was insolvent on the date such transfer was made or such obligation was incurred, or became insolventas a result of such transfer or obligation.

(c) Except to the extent that a transfer or obligation voidable under this section is voidable under section 544, 545, or 547 ofthis title, a transferee or obligee of such a transfer or obligation that takes for value and in good faith has a lien on or may retainany interest transferred or may enforce any obligation incurred, as the case may be, to the extent that such transferee or obligeegave value to the debtor in exchange for such transfer or obligation.

(d)(1) For the purposes of this section, a transfer is made when such transfer is so perfected that a bona fide purchaser from thedebtor against whom applicable law permits such transfer to be perfected cannot acquire an interest in the property transferredthat is superior to the interest in such property of the transferee, but if such transfer is not so perfected before the commencementof the case, such transfer is made immediately before the date of the filing of the petition.

(2) In this section--

(A) “value” means property, or satisfaction or securing of a present or antecedent debt of the debtor, but does not include anunperformed promise to furnish support to the debtor or to a relative of the debtor;

(B) a commodity broker, forward contract merchant, stockbroker, financial institution, financial participant, or securitiesclearing agency that receives a margin payment, as defined in section 101, 741, or 761 of this title, or settlement payment,as defined in section 101 or 741 of this title, takes for value to the extent of such payment;

(C) a repo participant or financial participant that receives a margin payment, as defined in section 741 or 761 of this title,or settlement payment, as defined in section 741 of this title, in connection with a repurchase agreement, takes for value tothe extent of such payment;

(D) a swap participant or financial participant that receives a transfer in connection with a swap agreement takes for valueto the extent of such transfer; and

(E) a master netting agreement participant that receives a transfer in connection with a master netting agreement or anyindividual contract covered thereby takes for value to the extent of such transfer, except that, with respect to a transfer underany individual contract covered thereby, to the extent that such master netting agreement participant otherwise did not take(or is otherwise not deemed to have taken) such transfer for value.

(3) In this section, the term “charitable contribution” means a charitable contribution, as that term is defined in section 170(c)of the Internal Revenue Code of 1986, if that contribution--

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(A) is made by a natural person; and

(B) consists of--

(i) a financial instrument (as that term is defined in section 731(c)(2)(C) of the Internal Revenue Code of 1986); or

(ii) cash.

(4) In this section, the term “qualified religious or charitable entity or organization” means--

(A) an entity described in section 170(c)(1) of the Internal Revenue Code of 1986; or

(B) an entity or organization described in section 170(c)(2) of the Internal Revenue Code of 1986.

(e)(1) In addition to any transfer that the trustee may otherwise avoid, the trustee may avoid any transfer of an interest of thedebtor in property that was made on or within 10 years before the date of the filing of the petition, if--

(A) such transfer was made to a self-settled trust or similar device;

(B) such transfer was by the debtor;

(C) the debtor is a beneficiary of such trust or similar device; and

(D) the debtor made such transfer with actual intent to hinder, delay, or defraud any entity to which the debtor was or became,on or after the date that such transfer was made, indebted.

(2) For the purposes of this subsection, a transfer includes a transfer made in anticipation of any money judgment, settlement,civil penalty, equitable order, or criminal fine incurred by, or which the debtor believed would be incurred by--

(A) any violation of the securities laws (as defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C.78c(a)(47))), any State securities laws, or any regulation or order issued under Federal securities laws or State securitieslaws; or

(B) fraud, deceit, or manipulation in a fiduciary capacity or in connection with the purchase or sale of any security registeredunder section 12 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78l and 78o(d)) or under section 6 of theSecurities Act of 1933 (15 U.S.C. 77f).

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CREDIT(S)(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2600; Pub.L. 97-222, § 5, July 27, 1982, 96 Stat. 236; Pub.L. 98-353, Title III, §§

394, 463, July 10, 1984, 98 Stat. 365, 378; Pub.L. 99-554, Title II, § 283(n), Oct. 27, 1986, 100 Stat. 3117; Pub.L. 101-311,Title I, § 104, Title II, § 204, June 25, 1990, 104 Stat. 268, 269; Pub.L. 103-394, Title V, § 501(b)(5), Oct. 22, 1994, 108 Stat.4142; Pub.L. 105-183, §§ 2, 3(a), June 19, 1998, 112 Stat. 517; Pub.L. 109-8, Title IX, § 907(f), (o)(4) to (6), Title XIV, §1402, Apr. 20, 2005, 119 Stat. 177, 182, 214.)

Notes of Decisions (1945)

11 U.S.C.A. § 548, 11 USCA § 548Current through P.L. 114-114 (excluding 114-94, 114-95 and 114-113) approved 12-28-2015

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

070

§ 726. Distribution of property of the estate, 11 USCA § 726

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1

KeyCite Yellow Flag - Negative Treatment

Proposed Legislation

United States Code AnnotatedTitle 11. Bankruptcy (Refs & Annos)

Chapter 7. Liquidation (Refs & Annos)Subchapter II. Collection, Liquidation, and Distribution of the Estate (Refs & Annos)

11 U.S.C.A. § 726

§ 726. Distribution of property of the estate

Effective: December 22, 2010Currentness

(a) Except as provided in section 510 of this title, property of the estate shall be distributed--

(1) first, in payment of claims of the kind specified in, and in the order specified in, section 507 of this title, proof of whichis timely filed under section 501 of this title or tardily filed on or before the earlier of--

(A) the date that is 10 days after the mailing to creditors of the summary of the trustee's final report; or

(B) the date on which the trustee commences final distribution under this section;

(2) second, in payment of any allowed unsecured claim, other than a claim of a kind specified in paragraph (1), (3), or (4)of this subsection, proof of which is--

(A) timely filed under section 501(a) of this title;

(B) timely filed under section 501(b) or 501(c) of this title; or

(C) tardily filed under section 501(a) of this title, if--

(i) the creditor that holds such claim did not have notice or actual knowledge of the case in time for timely filing of aproof of such claim under section 501(a) of this title; and

(ii) proof of such claim is filed in time to permit payment of such claim;

(3) third, in payment of any allowed unsecured claim proof of which is tardily filed under section 501(a) of this title, otherthan a claim of the kind specified in paragraph (2)(C) of this subsection;

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§ 726. Distribution of property of the estate, 11 USCA § 726

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(4) fourth, in payment of any allowed claim, whether secured or unsecured, for any fine, penalty, or forfeiture, or for multiple,exemplary, or punitive damages, arising before the earlier of the order for relief or the appointment of a trustee, to the extentthat such fine, penalty, forfeiture, or damages are not compensation for actual pecuniary loss suffered by the holder of suchclaim;

(5) fifth, in payment of interest at the legal rate from the date of the filing of the petition, on any claim paid under paragraph(1), (2), (3), or (4) of this subsection; and

(6) sixth, to the debtor.

(b) Payment on claims of a kind specified in paragraph (1), (2), (3), (4), (5), (6), (7), (8), (9), or (10) of section 507(a) of this title,or in paragraph (2), (3), (4), or (5) of subsection (a) of this section, shall be made pro rata among claims of the kind specified ineach such particular paragraph, except that in a case that has been converted to this chapter under section 1112, 1208, or 1307of this title, a claim allowed under section 503(b) of this title incurred under this chapter after such conversion has priority overa claim allowed under section 503(b) of this title incurred under any other chapter of this title or under this chapter before suchconversion and over any expenses of a custodian superseded under section 543 of this title.

(c) Notwithstanding subsections (a) and (b) of this section, if there is property of the kind specified in section 541(a)(2) of thistitle, or proceeds of such property, in the estate, such property or proceeds shall be segregated from other property of the estate,and such property or proceeds and other property of the estate shall be distributed as follows:

(1) Claims allowed under section 503 of this title shall be paid either from property of the kind specified in section 541(a)(2)of this title, or from other property of the estate, as the interest of justice requires.

(2) Allowed claims, other than claims allowed under section 503 of this title, shall be paid in the order specified in subsection(a) of this section, and, with respect to claims of a kind specified in a particular paragraph of section 507 of this title orsubsection (a) of this section, in the following order and manner:

(A) First, community claims against the debtor or the debtor's spouse shall be paid from property of the kind specified insection 541(a)(2) of this title, except to the extent that such property is solely liable for debts of the debtor.

(B) Second, to the extent that community claims against the debtor are not paid under subparagraph (A) of this paragraph,such community claims shall be paid from property of the kind specified in section 541(a)(2) of this title that is solelyliable for debts of the debtor.

(C) Third, to the extent that all claims against the debtor including community claims against the debtor are not paid undersubparagraph (A) or (B) of this paragraph such claims shall be paid from property of the estate other than property of thekind specified in section 541(a)(2) of this title.

(D) Fourth, to the extent that community claims against the debtor or the debtor's spouse are not paid under subparagraph(A), (B), or (C) of this paragraph, such claims shall be paid from all remaining property of the estate.

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§ 726. Distribution of property of the estate, 11 USCA § 726

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CREDIT(S)(Pub.L. 95-598, Nov. 6, 1978, 92 Stat. 2608; Pub.L. 98-353, Title III, § 479, July 10, 1984, 98 Stat. 381; Pub.L. 99-554, Title

II, §§ 257(r), 283(s), Oct. 27, 1986, 100 Stat. 3115, 3118; Pub.L. 103-394, Title II, § 213(b), Title III, § 304(h)(5), Title V, §501(d)(24), Oct. 22, 1994, 108 Stat. 4126, 4134, 4146; Pub.L. 109-8, Title VII, § 713, Title XII, § 1215, Apr. 20, 2005, 119Stat. 128, 195; Pub.L. 111-327, § 2(a)(28), Dec. 22, 2010, 124 Stat. 3560.)

Notes of Decisions (268)

11 U.S.C.A. § 726, 11 USCA § 726Current through P.L. 114-114 (excluding 114-94, 114-95 and 114-113) approved 12-28-2015

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

073

§ 703.140. Federal bankruptcy; applicable exemptions, CA CIV PRO § 703.140

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1

KeyCite Red Flag - Severe Negative Treatment

Unconstitutional or Preempted Held Unconstitutional by In re Regevig, Bkrtcy.D.Ariz., June 24, 2008

KeyCite Yellow Flag - Negative Treatment Proposed Legislation

West's Annotated California CodesCode of Civil Procedure (Refs & Annos)

Part 2. Of Civil Actions (Refs & Annos)Title 9. Enforcement of Judgments (Refs & Annos)

Division 2. Enforcement of Money Judgments (Refs & Annos)Chapter 4. Exemptions (Refs & Annos)

Article 1. General Provisions (Refs & Annos)

West's Ann.Cal.C.C.P. § 703.140

§ 703.140. Federal bankruptcy; applicable exemptions

Effective: January 1, 2013Currentness

(a) In a case under Title 11 of the United States Code, all of the exemptions provided by this chapter, including the homesteadexemption, other than the provisions of subdivision (b) are applicable regardless of whether there is a money judgment againstthe debtor or whether a money judgment is being enforced by execution sale or any other procedure, but the exemptions providedby subdivision (b) may be elected in lieu of all other exemptions provided by this chapter, as follows:

(1) If a husband and wife are joined in the petition, they jointly may elect to utilize the applicable exemption provisions ofthis chapter other than the provisions of subdivision (b), or to utilize the applicable exemptions set forth in subdivision (b),but not both.

(2) If the petition is filed individually, and not jointly, for a husband or a wife, the exemptions provided by this chapter otherthan the provisions of subdivision (b) are applicable, except that, if both the husband and the wife effectively waive in writingthe right to claim, during the period the case commenced by filing the petition is pending, the exemptions provided by theapplicable exemption provisions of this chapter, other than subdivision (b), in any case commenced by filing a petition foreither of them under Title 11 of the United States Code, then they may elect to instead utilize the applicable exemptions setforth in subdivision (b).

(3) If the petition is filed for an unmarried person, that person may elect to utilize the applicable exemption provisions of thischapter other than subdivision (b), or to utilize the applicable exemptions set forth in subdivision (b), but not both.

(b) The following exemptions may be elected as provided in subdivision (a):

(1) The debtor's aggregate interest, not to exceed twenty-four thousand sixty dollars ($24,060) in value, in real property orpersonal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that thedebtor or a dependent of the debtor uses as a residence.

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(2) The debtor's interest, not to exceed four thousand eight hundred dollars ($4,800) in value, in one or more motor vehicles.

(3) The debtor's interest, not to exceed six hundred dollars ($600) in value in any particular item, in household furnishings,household goods, wearing apparel, appliances, books, animals, crops, or musical instruments, that are held primarily for thepersonal, family, or household use of the debtor or a dependent of the debtor.

(4) The debtor's aggregate interest, not to exceed one thousand four hundred twenty-five dollars ($1,425) in value, in jewelryheld primarily for the personal, family, or household use of the debtor or a dependent of the debtor.

(5) The debtor's aggregate interest, not to exceed in value one thousand two hundred eighty dollars ($1,280) plus any unusedamount of the exemption provided under paragraph (1), in any property.

(6) The debtor's aggregate interest, not to exceed seven thousand one hundred seventy-five dollars ($7,175) in value, in anyimplements, professional books, or tools of the trade of the debtor or the trade of a dependent of the debtor.

(7) Any unmatured life insurance contract owned by the debtor, other than a credit life insurance contract.

(8) The debtor's aggregate interest, not to exceed in value twelve thousand eight hundred sixty dollars ($12,860), in any accrueddividend or interest under, or loan value of, any unmatured life insurance contract owned by the debtor under which the insuredis the debtor or an individual of whom the debtor is a dependent.

(9) Professionally prescribed health aids for the debtor or a dependent of the debtor.

(10) The debtor's right to receive any of the following:

(A) A social security benefit, unemployment compensation, or a local public assistance benefit.

(B) A veterans' benefit.

(C) A disability, illness, or unemployment benefit.

(D) Alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and anydependent of the debtor.

(E) A payment under a stock bonus, pension, profit-sharing, annuity, or similar plan or contract on account of illness, disability,death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor,unless all of the following apply:

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(i) That plan or contract was established by or under the auspices of an insider that employed the debtor at the time the debtor'srights under the plan or contract arose.

(ii) The payment is on account of age or length of service.

(iii) That plan or contract does not qualify under Section 401(a), 403(a), 403(b), 408, or 408A of the Internal Revenue Codeof 1986.

(11) The debtor's right to receive, or property that is traceable to, any of the following:

(A) An award under a crime victim's reparation law.

(B) A payment on account of the wrongful death of an individual of whom the debtor was a dependent, to the extent reasonablynecessary for the support of the debtor and any dependent of the debtor.

(C) A payment under a life insurance contract that insured the life of an individual of whom the debtor was a dependent on thedate of that individual's death, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.

(D) A payment, not to exceed twenty-four thousand sixty dollars ($24,060), on account of personal bodily injury of the debtoror an individual of whom the debtor is a dependent.

(E) A payment in compensation of loss of future earnings of the debtor or an individual of whom the debtor is or was a dependent,to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.

Credits(Added by Stats.1984, c. 218, § 2. Amended by Stats.1993, c. 1111 (S.B.651), § 1, eff. Oct. 11, 1993; Stats.1995, c. 196(S.B.832), § 1, eff. July 31, 1995; Stats.1999, c. 98 (S.B.469), § 1; Stats.2000, c. 135 (A.B.2539), § 15; Stats.2001, c. 42(A.B.1704), § 1; Stats.2003, c. 379 (A.B.182), § 3; Stats.2012, c. 678 (A.B.929), § 1.)

Editors' Notes

EXPLANATORY NOTE

<For a list of the amounts of exemptions as adjusted by the Judicial Council and required by Code of Civil Procedure§ 703.150, which authorizes the Judicial Council to publish cost-of-living adjustments every three years, see theJudicial Council Form reproduced under Code of Civil Procedure § 703.150.>

LAW REVISION COMMISSION COMMENTS

1995 Amendment

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Section 703.140 is amended to conform to the amounts in the federal Bankruptcy Code and to correct references to sections inthe Internal Revenue Code. See 11 U.S.C. § 522. [25 Cal.L.Rev.Comm. Reports 1 (1995)].

2003 Amendment

Section 703.140 is amended to delete subdivision (c), which is superseded by the automatic cost-of-living adjustment providedin Section 703.150. [33 Cal.L.Rev.Commn. Reports 132 (2003)].

OFFICIAL FORMS

2015 Electronic Update

<Mandatory and optional Forms adopted and approved by the Judicial Council are set out in West's California JudicialCouncil Forms Pamphlet.>

Notes of Decisions (90)

West's Ann. Cal. C.C.P. § 703.140, CA CIV PRO § 703.140Current with urgency legislation through Ch. 2 of 2016 Reg.Sess. and Ch. 1 of 2015-2016 2nd Ex.Sess.

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

077

§ 704.010. Motor vehicles; equity and proceeds of sale or..., CA CIV PRO § 704.010

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1

KeyCite Yellow Flag - Negative Treatment

Proposed Legislation

West's Annotated California CodesCode of Civil Procedure (Refs & Annos)

Part 2. Of Civil Actions (Refs & Annos)Title 9. Enforcement of Judgments (Refs & Annos)

Division 2. Enforcement of Money Judgments (Refs & Annos)Chapter 4. Exemptions (Refs & Annos)

Article 3. Exempt Property (Refs & Annos)

West's Ann.Cal.C.C.P. § 704.010

§ 704.010. Motor vehicles; equity and proceeds of sale or insurance

Effective: January 1, 2004Currentness

(a) Any combination of the following is exempt in the amount of two thousand three hundred dollars ($2,300):

(1) The aggregate equity in motor vehicles.

(2) The proceeds of an execution sale of a motor vehicle.

(3) The proceeds of insurance or other indemnification for the loss, damage, or destruction of a motor vehicle.

(b) Proceeds exempt under subdivision (a) are exempt for a period of 90 days after the time the proceeds are actually receivedby the judgment debtor.

(c) For the purpose of determining the equity, the fair market value of a motor vehicle shall be determined by reference to usedcar price guides customarily used by California automobile dealers unless the motor vehicle is not listed in such price guides.

(d) If the judgment debtor has only one motor vehicle and it is sold at an execution sale, the proceeds of the execution sale areexempt in the amount of two thousand three hundred dollars ($2,300) without making a claim. The levying officer shall consultand may rely upon the records of the Department of Motor Vehicles in determining whether the judgment debtor has only onemotor vehicle. In the case covered by this subdivision, the exemption provided by subdivision (a) is not available.

Credits(Added by Stats.1982, c. 1364, p. 5154, § 2, operative July 1, 1983. Amended by Stats.1995, c. 196 (S.B.832), § 2, eff. July31, 1995; Stats.2003, c. 379 (A.B.182), § 5.)

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Editors' Notes

EXPLANATORY NOTE

<For the current amount of exemption under this section, as adjusted by the Judicial Council and required by Codeof Civil Procedure § 703.150, which authorizes the Judicial Council to publish cost-of-living adjustments every threeyears, see the Judicial Council Form reproduced under Code of Civil Procedure § 703.150.>

LAW REVISION COMMISSION COMMENTS

1995 Amendment

Section 704.010 is amended to increase the exemption amounts from $1,200 to $1,900. [25 Cal.L.Rev.Comm. Reports 707(1995)].

2003 Amendment

Section 704.010 is amended to adjust the exemption amount for cost-of-living increases since the section was last amended in1995. See 1995 Cal. Stat. ch. 196, § 2. Adjusted amounts were determined by applying the California Consumer Price Index(August 2002) for all urban consumers and rounding to the nearest $25. For future automatic triennial adjustments, see Section703.150. [33 Cal.L.Rev.Commn. Reports 134 (2003)].

LEGISLATIVE COMMITTEE COMMENTS--ASSEMBLY

1982 Addition

Section 704.010 supersedes subdivisions (a), (d), and (e) of former Section 690.2.

Subdivision (a) increases the motor vehicle exemption from $500 to $1,200, which is the same amount as is provided in theBankruptcy Code. See 11 U.S.C. § 522(d) (2) (Supp. III 1979). Paragraph (1) of subdivision (a) applies the exemption to thejudgment debtor's total equity in motor vehicles. Paragraph (2) continues the exemption for execution sale proceeds providedby former Section 690.2(e). Paragraph (3) provides a new exemption for insurance proceeds. Cf. Houghton v. Lee, 50 Cal. 101,103 (1875) (exemption of proceeds from insurance of homestead).

Subdivision (b) continues the exemption period of former Section 690.2(e).

Subdivision (c) continues a portion of former Section 690.2(a).

Subdivision (d) supersedes a portion of former Section 690.2(d) and makes clear that an exemption of proceeds is allowedwithout a claim where there is only one motor vehicle. See also Section 703.030 (waiver of exemption). Section 701.810 requiresdistribution of the exempt proceeds to the judgment debtor before any distribution is made to the judgment creditor. See alsoSection 701.620 (sale price must exceed proceeds exemption). [16 Cal.L.Rev.Comm. Reports 1399 (1982) ].

OFFICIAL FORMS

2015 Electronic Update

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<Mandatory and optional Forms adopted and approved by the Judicial Council are set out in West's California JudicialCouncil Forms Pamphlet.>

Notes of Decisions (7)

West's Ann. Cal. C.C.P. § 704.010, CA CIV PRO § 704.010Current with urgency legislation through Ch. 2 of 2016 Reg.Sess. and Ch. 1 of 2015-2016 2nd Ex.Sess.

End of Document © 2016 Thomson Reuters. No claim to original U.S. Government Works.

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