Consumer Bankruptcy Reform Act of 1998

TABLE OF CONTENTS:

Title I: Needs Based Bankruptcy

Title II: Enhanced Procedural Protections for Consumers

Title III: Improved Procedures for Efficient Administration

of the Bankruptcy System

Title IV: Technical Corrections

Consumer Bankruptcy Reform Act of 1997 - Title I: Needs Based Bankruptcy - Repeals the prohibition against conversion by the court without the debtor's request of a Chapter 7 (Liquidation) case to a case under Chapter 13 (Debt adjustment of an individual with income).

(Sec. 102) Revamps dismissal guidelines for a Chapter 7 case to provide for: (1) conversion to Chapter 13 with or without the debtor's consent; (2) a motion for dismissal by a party in interest; and (3) repeal of the presumption in favor of granting the relief requested by the debtor.

Requires the court to consider whether: (1) the debtor can repay at least 20 percent of nonpriority unsecured debts; (2) the debtor has filed in bad faith; (3) the debtor made good-faith efforts, before filing, to negotiate an alternative repayment schedule or to use alternative methods of dispute resolution; and (4) the debtor's creditors have unreasonably refused to engage in such alternative methods of dispute resolution or to negotiate an alternative repayment schedule.

Directs the court to order debtor's counsel to reimburse the legal fees of the panel trustee if the trustee's motion for dismissal or conversion has been granted. Subjects counsel to a civil penalty for violation of certain bankruptcy rules.

Requires the court to award a debtor all reasonable costs in successfully contesting a dismissal motion brought by a party in interest if: (1) the party's position was not substantially justified; or (2) the party brought the motion solely to coerce the debtor into waiving a guaranteed right.

Title II: Enhanced Procedural Protections for Consumers - Directs the court to award legal fees and punitive damages (treble actual damages, up to $5,000) to a debtor if the court: (1) disallows a creditor's claim, or finds that either the claim or the creditor's position is not substantially justified; or (2) finds that specified violations by the creditor have harmed the debtor.

Title III: Improved Procedures for Efficient Administration of the Bankruptcy System - Revises procedural guidelines to mandate: (1) written notice of nonprofit debt counseling services to the individual consumer debtor before commencement of a case; and (2) specified additional disclosures to the court and to the creditor regarding the debtor's financial status (including tax returns).

(Sec. 301) Allows creditors to request and receive a debtor's petition, schedules, and statement of affairs, including any chapter 13 debt adjustment plan.

(Sec. 302) States that, with respect to conditions for court approval of a debt adjustment plan, a claim holder may retain the lien securing such claim until the underlying debt is fully paid.

(Sec. 303) Revises automatic stay guidelines to terminate a stay with respect to a debt or lease if the debtor has made repeat filings in bad faith. Establishes a rebuttable presumption that certain cases have been filed in bad faith.

(Sec. 304) Sets forth a deadline within which the debtor must file a debt adjustment plan.

(Sec. 305) Revises requirements governing a stay of action against a codebtor who did not receive the consideration for a claim to provide a maximum 30-day automatic stay to the extent that the creditor proceeds against: (1) the individual that received the consideration; or (2) the property not in the possession of the debtor that secures that claim.

(Sec. 306) Amends the Federal judicial code to mandate the compilation of bankruptcy statistics for individual debtors with primarily consumer debts seeking relief under chapters 7, 11 (Reorganization), and 13. Directs the Administrative Office of the United States Courts to compile and make such statistics public and to report them annually to the Congress.

(Sec. 307) Requires each U.S. trustee to report to the Attorney General on audit results performed by independent certified or licensed public accountants on bankruptcy petitions and schedules. Requires the Attorney General to establish random audits of individual cases.

(Sec. 308) Authorizes a creditor holding a consumer debt to participate in a meeting of creditors in a chapter 7 or 13 case, either alone or in conjunction with an attorney.

(Sec. 309) Prescribes notice procedures for chapter 7 and chapter 13 creditors.

(Sec. 310) Revises requirements governing the effects of conversion from chapter 13 to another chapter. Declares that: (1) valuations of property and of allowed secured claims in a chapter 13 case shall not apply in a case converted to chapter 7; and (2) with respect to cases converted from chapter 13, the claim of any creditor holding security as of the date of the petition shall continue to be secured by that security unless the full amount determined under applicable non-bankruptcy law has been fully paid as of the conversion date.

(Sec. 311) Revises automatic stay guidelines to provide that in the case of an individual filing under chapters 7, 11, or 13, the automatic stay shall terminate 60 days after a request for its release by a party in interest, unless the court or the parties agree to a longer time.

(Sec. 312) Provides for automatic dismissal if a chapter 7 debtor fails to furnish all mandatory information, or fails to timely file the requisite schedules. Requires the court to order dismissal within five days of a request by a party in interest for the debtor's failure to timely submit requisite documentation.

(Sec. 313) Prohibits a Chapter 13 confirmation hearing from being held less than 20 days after the first meeting of creditors if there is an objection.

Title IV: Technical Corrections - Makes technical corrections to Federal bankruptcy, criminal, and judiciary law. Redefines single asset real estate to exclude family farms and to repeal the $4 million ceiling on the amount of noncontingent, liquidated secured debts on such property. Defines the term "transfer" to include: (1) creation of a lien; (2) retention of title as a security interest; (3) foreclosure of the debtor's equity of redemption; and (4) every mode of disposing of property or parting with an interest in property.

(Sec. 402) Requires triennial adjustment of the $5,000 value of certain implements, professional books, tools of the trade, farm animals, and crops which a debtor may exempt from the property of the estate (protecting it from creditors' liens).

(Sec. 406) Provides that a trustee or a creditors' and equity security holders' committee may pay a professional person they employ on a fixed or percentage fee basis, as well as on other bases already permitted.

(Sec. 409) Precludes an automatic stay of any transfer that is not avoidable in: (1) cases where the trustee serves as lien creditor and successor to certain creditors and purchasers; and (2) postpetition transactions.

(Sec. 410) Modifies guidelines governing assumption by the bankruptcy trustee of certain executory contracts and unexpired leases with specified defaults. Permits a trustee to assume an unexpired lease of real property without first curing a default arising from any failure to perform nonmonetary obligations under the lease if it is impossible to cure the default by performing nonmonetary acts at and after the time of assumption. Permits a trustee to assume an executory contract without first curing a default arising from such a failure if: (1) it is impossible to cure the default by performing nonmonetary acts at and after the time of assumption; and (2) the court determines, based on the equities of the case, that the default should not be cured at and after such time.

Repeals: (1) the prohibition against trustee assumption or assignment of unexpired leases of aircraft facilities unless all such leases are assumed or assigned; and (2) the deemed rejection of such a lease if the trustee does not assume or reject it.

(Sec. 412) Excludes from compensable professional services any expenses incurred by an individual member of a creditors' and equity security holders' committee.

(Sec. 414) Revises the prohibition against debtor avoidance of certain judicial liens in connection with a liability designated as, and actually in the nature of, alimony, maintenance, or support.

(Sec. 415) Declares nondischargeable in bankruptcy a debt for death or personal injury caused by the debtor's operation of a watercraft or aircraft while intoxicated from alcohol, a drug, or other substance. Limits the nondischargeability of fees imposed by a court to fees so imposed on a prisoner.

(Sec. 420) Revises guidelines governing preferences to provide that, if the trustee avoids a security interest given between 90 days and one year before the date of the filing of the petition, by the debtor to a non-insider for the benefit of a creditor that is an insider, then such security interest shall be considered to be avoided only with respect to the insider creditor.

(Sec. 423) Revises setoff recovery rules to exclude from recovery by a trustee setoffs by swap participants.

(Sec. 426) Requires the U.S. trustee in a chapter 11 (Reorganization) case to file a report certifying the election of an eligible, disinterested trustee at a meeting of creditors. Declares that upon such filing: (1) the trustee elected shall be considered to have been selected and appointed; and (2) the service shall terminate of any trustee previously appointed to fill the term of specified ineligible or incapacitated trustees.

(Sec. 432) Amends the Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986, with respect to judicial districts for Alabama and North Carolina, to postpone: (1) from October 1, 2002, until October 1, 2012, the effective date of specified amendments relating to United States Trustees; and (2) from October 1, 2003, until October 1, 2013, the effective date of its amendments relating to Trustee duties as well as quarterly fees paid to them in chapter 11 cases.