Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

One Hundred Ninth Congress

of the

United States of America

AT THE FIRST SESSION

Begun and held at the City of Washington on Tuesday,

the fourth day of January, two thousand and five

An Act

To amend title 11 of the United States Code, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Bankruptcy Abuse Prevention and Consumer Protection Act of 2005'.

(b) TABLE OF CONTENTS- The table of contents for this Act is as follows:

Sec. 1. Short title; references; table of contents.

TITLE I--NEEDS-BASED BANKRUPTCY

Sec. 101. Conversion.

Sec. 102. Dismissal or conversion.

Sec. 103. Sense of Congress and study.

Sec. 104. Notice of alternatives.

Sec. 105. Debtor financial management training test program.

Sec. 106. Credit counseling.

Sec. 107. Schedules of reasonable and necessary expenses.

TITLE II--ENHANCED CONSUMER PROTECTION

Subtitle A--Penalties for Abusive Creditor Practices

Sec. 201. Promotion of alternative dispute resolution.

Sec. 202. Effect of discharge.

Sec. 203. Discouraging abuse of reaffirmation agreement practices.

Sec. 204. Preservation of claims and defenses upon sale of predatory loans.

Sec. 205. GAO study and report on reaffirmation agreement process.

Subtitle B--Priority Child Support

Sec. 211. Definition of domestic support obligation.

Sec. 212. Priorities for claims for domestic support obligations.

Sec. 213. Requirements to obtain confirmation and discharge in cases involving domestic support obligations.

Sec. 214. Exceptions to automatic stay in domestic support obligation proceedings.

Sec. 215. Nondischargeability of certain debts for alimony, maintenance, and support.

Sec. 216. Continued liability of property.

Sec. 217. Protection of domestic support claims against preferential transfer motions.

Sec. 218. Disposable income defined.

Sec. 219. Collection of child support.

Sec. 220. Nondischargeability of certain educational benefits and loans.

Subtitle C--Other Consumer Protections

Sec. 221. Amendments to discourage abusive bankruptcy filings.

Sec. 222. Sense of Congress.

Sec. 223. Additional amendments to title 11, United States Code.

Sec. 224. Protection of retirement savings in bankruptcy.

Sec. 225. Protection of education savings in bankruptcy.

Sec. 226. Definitions.

Sec. 227. Restrictions on debt relief agencies.

Sec. 228. Disclosures.

Sec. 229. Requirements for debt relief agencies.

Sec. 230. GAO study.

Sec. 231. Protection of personally identifiable information.

Sec. 232. Consumer privacy ombudsman.

Sec. 233. Prohibition on disclosure of name of minor children.

Sec. 234. Protection of personal information.

TITLE III--DISCOURAGING BANKRUPTCY ABUSE

Sec. 301. Technical amendments.

Sec. 302. Discouraging bad faith repeat filings.

Sec. 303. Curbing abusive filings.

Sec. 304. Debtor retention of personal property security.

Sec. 305. Relief from the automatic stay when the debtor does not complete intended surrender of consumer debt collateral.

Sec. 306. Giving secured creditors fair treatment in chapter 13.

Sec. 307. Domiciliary requirements for exemptions.

Sec. 308. Reduction of homestead exemption for fraud.

Sec. 309. Protecting secured creditors in chapter 13 cases.

Sec. 310. Limitation on luxury goods.

Sec. 311. Automatic stay.

Sec. 312. Extension of period between bankruptcy discharges.

Sec. 313. Definition of household goods and antiques.

Sec. 314. Debt incurred to pay nondischargeable debts.

Sec. 315. Giving creditors fair notice in chapters 7 and 13 cases.

Sec. 316. Dismissal for failure to timely file schedules or provide required information.

Sec. 317. Adequate time to prepare for hearing on confirmation of the plan.

Sec. 318. Chapter 13 plans to have a 5-year duration in certain cases.

Sec. 319. Sense of Congress regarding expansion of rule 9011 of the Federal Rules of Bankruptcy Procedure.

Sec. 320. Prompt relief from stay in individual cases.

Sec. 321. Chapter 11 cases filed by individuals.

Sec. 322. Limitations on homestead exemption.

Sec. 323. Excluding employee benefit plan participant contributions and other property from the estate.

Sec. 324. Exclusive jurisdiction in matters involving bankruptcy professionals.

Sec. 325. United States trustee program filing fee increase.

Sec. 326. Sharing of compensation.

Sec. 327. Fair valuation of collateral.

Sec. 328. Defaults based on nonmonetary obligations.

Sec. 329. Clarification of postpetition wages and benefits.

Sec. 330. Delay of discharge during pendency of certain proceedings.

Sec. 331. Limitation on retention bonuses, severance pay, and certain other payments.

Sec. 332. Fraudulent involuntary bankruptcy.

TITLE IV--GENERAL AND SMALL BUSINESS BANKRUPTCY PROVISIONS

Subtitle A--General Business Bankruptcy Provisions

Sec. 401. Adequate protection for investors.

Sec. 402. Meetings of creditors and equity security holders.

Sec. 403. Protection of refinance of security interest.

Sec. 404. Executory contracts and unexpired leases.

Sec. 405. Creditors and equity security holders committees.

Sec. 406. Amendment to section 546 of title 11, United States Code.

Sec. 407. Amendments to section 330(a) of title 11, United States Code.

Sec. 408. Postpetition disclosure and solicitation.

Sec. 409. Preferences.

Sec. 410. Venue of certain proceedings.

Sec. 411. Period for filing plan under chapter 11.

Sec. 412. Fees arising from certain ownership interests.

Sec. 413. Creditor representation at first meeting of creditors.

Sec. 414. Definition of disinterested person.

Sec. 415. Factors for compensation of professional persons.

Sec. 416. Appointment of elected trustee.

Sec. 417. Utility service.

Sec. 418. Bankruptcy fees.

Sec. 419. More complete information regarding assets of the estate.

Subtitle B--Small Business Bankruptcy Provisions

Sec. 431. Flexible rules for disclosure statement and plan.

Sec. 432. Definitions.

Sec. 433. Standard form disclosure statement and plan.

Sec. 434. Uniform national reporting requirements.

Sec. 435. Uniform reporting rules and forms for small business cases.

Sec. 436. Duties in small business cases.

Sec. 437. Plan filing and confirmation deadlines.

Sec. 438. Plan confirmation deadline.

Sec. 439. Duties of the United States trustee.

Sec. 440. Scheduling conferences.

Sec. 441. Serial filer provisions.

Sec. 442. Expanded grounds for dismissal or conversion and appointment of trustee.

Sec. 443. Study of operation of title 11, United States Code, with respect to small businesses.

Sec. 444. Payment of interest.

Sec. 445. Priority for administrative expenses.

Sec. 446. Duties with respect to a debtor who is a plan administrator of an employee benefit plan.

Sec. 447. Appointment of committee of retired employees.

TITLE V--MUNICIPAL BANKRUPTCY PROVISIONS

Sec. 501. Petition and proceedings related to petition.

Sec. 502. Applicability of other sections to chapter 9.

TITLE VI--BANKRUPTCY DATA

Sec. 601. Improved bankruptcy statistics.

Sec. 602. Uniform rules for the collection of bankruptcy data.

Sec. 603. Audit procedures.

Sec. 604. Sense of Congress regarding availability of bankruptcy data.

TITLE VII--BANKRUPTCY TAX PROVISIONS

Sec. 701. Treatment of certain liens.

Sec. 702. Treatment of fuel tax claims.

Sec. 703. Notice of request for a determination of taxes.

Sec. 704. Rate of interest on tax claims.

Sec. 705. Priority of tax claims.

Sec. 706. Priority property taxes incurred.

Sec. 707. No discharge of fraudulent taxes in chapter 13.

Sec. 708. No discharge of fraudulent taxes in chapter 11.

Sec. 709. Stay of tax proceedings limited to prepetition taxes.

Sec. 710. Periodic payment of taxes in chapter 11 cases.

Sec. 711. Avoidance of statutory tax liens prohibited.

Sec. 712. Payment of taxes in the conduct of business.

Sec. 713. Tardily filed priority tax claims.

Sec. 714. Income tax returns prepared by tax authorities.

Sec. 715. Discharge of the estate's liability for unpaid taxes.

Sec. 716. Requirement to file tax returns to confirm chapter 13 plans.

Sec. 717. Standards for tax disclosure.

Sec. 718. Setoff of tax refunds.

Sec. 719. Special provisions related to the treatment of State and local taxes.

Sec. 720. Dismissal for failure to timely file tax returns.

TITLE VIII--ANCILLARY AND OTHER CROSS-BORDER CASES

Sec. 801. Amendment to add chapter 15 to title 11, United States Code.

Sec. 802. Other amendments to titles 11 and 28, United States Code.

TITLE IX--FINANCIAL CONTRACT PROVISIONS

Sec. 901. Treatment of certain agreements by conservators or receivers of insured depository institutions.

Sec. 902. Authority of the FDIC and NCUAB with respect to failed and failing institutions.

Sec. 903. Amendments relating to transfers of qualified financial contracts.

Sec. 904. Amendments relating to disaffirmance or repudiation of qualified financial contracts.

Sec. 905. Clarifying amendment relating to master agreements.

Sec. 906. Federal Deposit Insurance Corporation Improvement Act of 1991.

Sec. 907. Bankruptcy law amendments.

Sec. 908. Recordkeeping requirements.

Sec. 909. Exemptions from contemporaneous execution requirement.

Sec. 910. Damage measure.

Sec. 911. SIPC stay.

TITLE X--PROTECTION OF FAMILY FARMERS AND FAMILY FISHERMEN

Sec. 1001. Permanent reenactment of chapter 12.

Sec. 1002. Debt limit increase.

Sec. 1003. Certain claims owed to governmental units.

Sec. 1004. Definition of family farmer.

Sec. 1005. Elimination of requirement that family farmer and spouse receive over 50 percent of income from farming operation in year prior to bankruptcy.

Sec. 1006. Prohibition of retroactive assessment of disposable income.

Sec. 1007. Family fishermen.

TITLE XI--HEALTH CARE AND EMPLOYEE BENEFITS

Sec. 1101. Definitions.

Sec. 1102. Disposal of patient records.

Sec. 1103. Administrative expense claim for costs of closing a health care business and other administrative expenses.

Sec. 1104. Appointment of ombudsman to act as patient advocate.

Sec. 1105. Debtor in possession; duty of trustee to transfer patients.

Sec. 1106. Exclusion from program participation not subject to automatic stay.

TITLE XII--TECHNICAL AMENDMENTS

Sec. 1201. Definitions.

Sec. 1202. Adjustment of dollar amounts.

Sec. 1203. Extension of time.

Sec. 1204. Technical amendments.

Sec. 1205. Penalty for persons who negligently or fraudulently prepare bankruptcy petitions.

Sec. 1206. Limitation on compensation of professional persons.

Sec. 1207. Effect of conversion.

Sec. 1208. Allowance of administrative expenses.

Sec. 1209. Exceptions to discharge.

Sec. 1210. Effect of discharge.

Sec. 1211. Protection against discriminatory treatment.

Sec. 1212. Property of the estate.

Sec. 1213. Preferences.

Sec. 1214. Postpetition transactions.

Sec. 1215. Disposition of property of the estate.

Sec. 1216. General provisions.

Sec. 1217. Abandonment of railroad line.

Sec. 1218. Contents of plan.

Sec. 1219. Bankruptcy cases and proceedings.

Sec. 1220. Knowing disregard of bankruptcy law or rule.

Sec. 1221. Transfers made by nonprofit charitable corporations.

Sec. 1222. Protection of valid purchase money security interests.

Sec. 1223. Bankruptcy Judgeships.

Sec. 1224. Compensating trustees.

Sec. 1225. Amendment to section 362 of title 11, United States Code.

Sec. 1226. Judicial education.

Sec. 1227. Reclamation.

Sec. 1228. Providing requested tax documents to the court.

Sec. 1229. Encouraging creditworthiness.

Sec. 1230. Property no longer subject to redemption.

Sec. 1231. Trustees.

Sec. 1232. Bankruptcy forms.

Sec. 1233. Direct appeals of bankruptcy matters to courts of appeals.

Sec. 1234. Involuntary cases.

Sec. 1235. Federal election law fines and penalties as nondischargeable debt.

TITLE XIII--CONSUMER CREDIT DISCLOSURE

Sec. 1301. Enhanced disclosures under an open end credit plan.

Sec. 1302. Enhanced disclosure for credit extensions secured by a dwelling.

Sec. 1303. Disclosures related to `introductory rates'.

Sec. 1304. Internet-based credit card solicitations.

Sec. 1305. Disclosures related to late payment deadlines and penalties.

Sec. 1306. Prohibition on certain actions for failure to incur finance charges.

Sec. 1307. Dual use debit card.

Sec. 1308. Study of bankruptcy impact of credit extended to dependent students.

Sec. 1309. Clarification of clear and conspicuous.

TITLE XIV--PREVENTING CORPORATE BANKRUPTCY ABUSE

Sec. 1401. Employee wage and benefit priorities.

Sec. 1402. Fraudulent transfers and obligations.

Sec. 1403. Payment of insurance benefits to retired employees.

Sec. 1404. Debts nondischargeable if incurred in violation of securities fraud laws.

Sec. 1405. Appointment of trustee in cases of suspected fraud.

Sec. 1406. Effective date; application of amendments.

TITLE XV--GENERAL EFFECTIVE DATE; APPLICATION OF AMENDMENTS

Sec. 1501. Effective date; application of amendments.

Sec. 1502. Technical corrections.

TITLE I--NEEDS-BASED BANKRUPTCY

SEC. 101. CONVERSION.

Section 706(c) of title 11, United States Code, is amended by inserting `or consents to' after `requests'.

SEC. 102. DISMISSAL OR CONVERSION.

(a) IN GENERAL- Section 707 of title 11, United States Code, is amended--

(1) by striking the section heading and inserting the following:

`Sec. 707. Dismissal of a case or conversion to a case under chapter 11 or 13';

and

(2) in subsection (b)--

(A) by inserting `(1)' after `(b)';

(B) in paragraph (1), as so redesignated by subparagraph (A) of this paragraph--

(i) in the first sentence--

(I) by striking `but not at the request or suggestion of' and inserting `trustee (or bankruptcy administrator, if any), or';

(II) by inserting `, or, with the debtor's consent, convert such a case to a case under chapter 11 or 13 of this title,' after `consumer debts'; and

(III) by striking `a substantial abuse' and inserting `an abuse'; and

(ii) by striking the next to last sentence; and

`(2)(A)(i) In considering under paragraph (1) whether the granting of relief would be an abuse of the provisions of this chapter, the court shall presume abuse exists if the debtor's current monthly income reduced by the amounts determined under clauses (ii), (iii), and (iv), and multiplied by 60 is not less than the lesser of--

`(I) 25 percent of the debtor's nonpriority unsecured claims in the case, or $6,000, whichever is greater; or

`(II) $10,000.

`(ii)(I) The debtor's monthly expenses shall be the debtor's applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor's actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides, as in effect on the date of the order for relief, for the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case, if the spouse is not otherwise a dependent. Such expenses shall include reasonably necessary health insurance, disability insurance, and health savings account expenses for the debtor, the spouse of the debtor, or the dependents of the debtor. Notwithstanding any other provision of this clause, the monthly expenses of the debtor shall not include any payments for debts. In addition, the debtor's monthly expenses shall include the debtor's reasonably necessary expenses incurred to maintain the safety of the debtor and the family of the debtor from family violence as identified under section 309 of the Family Violence Prevention and Services Act, or other applicable Federal law. The expenses included in the debtor's monthly expenses described in the preceding sentence shall be kept confidential by the court. In addition, if it is demonstrated that it is reasonable and necessary, the debtor's monthly expenses may also include an additional allowance for food and clothing of up to 5 percent of the food and clothing categories as specified by the National Standards issued by the Internal Revenue Service.

`(II) In addition, the debtor's monthly expenses may include, if applicable, the continuation of actual expenses paid by the debtor that are reasonable and necessary for care and support of an elderly, chronically ill, or disabled household member or member of the debtor's immediate family (including parents, grandparents, siblings, children, and grandchildren of the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case who is not a dependent) and who is unable to pay for such reasonable and necessary expenses.

`(III) In addition, for a debtor eligible for chapter 13, the debtor's monthly expenses may include the actual administrative expenses of administering a chapter 13 plan for the district in which the debtor resides, up to an amount of 10 percent of the projected plan payments, as determined under schedules issued by the Executive Office for United States Trustees.

`(IV) In addition, the debtor's monthly expenses may include the actual expenses for each dependent child less than 18 years of age, not to exceed $1,500 per year per child, to attend a private or public elementary or secondary school if the debtor provides documentation of such expenses and a detailed explanation of why such expenses are reasonable and necessary, and why such expenses are not already accounted for in the National Standards, Local Standards, or Other Necessary Expenses referred to in subclause (I).

`(V) In addition, the debtor's monthly expenses may include an allowance for housing and utilities, in excess of the allowance specified by the Local Standards for housing and utilities issued by the Internal Revenue Service, based on the actual expenses for home energy costs if the debtor provides documentation of such actual expenses and demonstrates that such actual expenses are reasonable and necessary.

`(iii) The debtor's average monthly payments on account of secured debts shall be calculated as the sum of--

`(I) the total of all amounts scheduled as contractually due to secured creditors in each month of the 60 months following the date of the petition; and

`(II) any additional payments to secured creditors necessary for the debtor, in filing a plan under chapter 13 of this title, to maintain possession of the debtor's primary residence, motor vehicle, or other property necessary for the support of the debtor and the debtor's dependents, that serves as collateral for secured debts;

divided by 60.

`(iv) The debtor's expenses for payment of all priority claims (including priority child support and alimony claims) shall be calculated as the total amount of debts entitled to priority, divided by 60.

`(B)(i) In any proceeding brought under this subsection, the presumption of abuse may only be rebutted by demonstrating special circumstances, such as a serious medical condition or a call or order to active duty in the Armed Forces, to the extent such special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.

`(ii) In order to establish special circumstances, the debtor shall be required to itemize each additional expense or adjustment of income and to provide--

`(I) documentation for such expense or adjustment to income; and

`(II) a detailed explanation of the special circumstances that make such expenses or adjustment to income necessary and reasonable.

`(iii) The debtor shall attest under oath to the accuracy of any information provided to demonstrate that additional expenses or adjustments to income are required.

`(iv) The presumption of abuse may only be rebutted if the additional expenses or adjustments to income referred to in clause (i) cause the product of the debtor's current monthly income reduced by the amounts determined under clauses (ii), (iii), and (iv) of subparagraph (A) when multiplied by 60 to be less than the lesser of--

`(I) 25 percent of the debtor's nonpriority unsecured claims, or $6,000, whichever is greater; or

`(II) $10,000.

`(C) As part of the schedule of current income and expenditures required under section 521, the debtor shall include a statement of the debtor's current monthly income, and the calculations that determine whether a presumption arises under subparagraph (A)(i), that show how each such amount is calculated.

`(D) Subparagraphs (A) through (C) shall not apply, and the court may not dismiss or convert a case based on any form of means testing, if the debtor is a disabled veteran (as defined in section 3741(1) of title 38), and the indebtedness occurred primarily during a period during which he or she was--

`(i) on active duty (as defined in section 101(d)(1) of title 10); or

`(ii) performing a homeland defense activity (as defined in section 901(1) of title 32).

`(3) In considering under paragraph (1) whether the granting of relief would be an abuse of the provisions of this chapter in a case in which the presumption in subparagraph (A)(i) of such paragraph does not arise or is rebutted, the court shall consider--

`(A) whether the debtor filed the petition in bad faith; or

`(B) the totality of the circumstances (including whether the debtor seeks to reject a personal services contract and the financial need for such rejection as sought by the debtor) of the debtor's financial situation demonstrates abuse.

`(4)(A) The court, on its own initiative or on the motion of a party in interest, in accordance with the procedures described in rule 9011 of the Federal Rules of Bankruptcy Procedure, may order the attorney for the debtor to reimburse the trustee for all reasonable costs in prosecuting a motion filed under section 707(b), including reasonable attorneys' fees, if--

`(i) a trustee files a motion for dismissal or conversion under this subsection; and

`(ii) the court--

`(I) grants such motion; and

`(II) finds that the action of the attorney for the debtor in filing a case under this chapter violated rule 9011 of the Federal Rules of Bankruptcy Procedure.

`(B) If the court finds that the attorney for the debtor violated rule 9011 of the Federal Rules of Bankruptcy Procedure, the court, on its own initiative or on the motion of a party in interest, in accordance with such procedures, may order--

`(i) the assessment of an appropriate civil penalty against the attorney for the debtor; and

`(ii) the payment of such civil penalty to the trustee, the United States trustee (or the bankruptcy administrator, if any).

`(C) The signature of an attorney on a petition, pleading, or written motion shall constitute a certification that the attorney has--

`(i) performed a reasonable investigation into the circumstances that gave rise to the petition, pleading, or written motion; and

`(ii) determined that the petition, pleading, or written motion--

`(I) is well grounded in fact; and

`(II) is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law and does not constitute an abuse under paragraph (1).

`(D) The signature of an attorney on the petition shall constitute a certification that the attorney has no knowledge after an inquiry that the information in the schedules filed with such petition is incorrect.

`(5)(A) Except as provided in subparagraph (B) and subject to paragraph (6), the court, on its own initiative or on the motion of a party in interest, in accordance with the procedures described in rule 9011 of the Federal Rules of Bankruptcy Procedure, may award a debtor all reasonable costs (including reasonable attorneys' fees) in contesting a motion filed by a party in interest (other than a trustee or United States trustee (or bankruptcy administrator, if any)) under this subsection if--

`(i) the court does not grant the motion; and

`(ii) the court finds that--

`(I) the position of the party that filed the motion violated rule 9011 of the Federal Rules of Bankruptcy Procedure; or

`(II) the attorney (if any) who filed the motion did not comply with the requirements of clauses (i) and (ii) of paragraph (4)(C), and the motion was made solely for the purpose of coercing a debtor into waiving a right guaranteed to the debtor under this title.

`(B) A small business that has a claim of an aggregate amount less than $1,000 shall not be subject to subparagraph (A)(ii)(I).

`(C) For purposes of this paragraph--

`(i) the term `small business' means an unincorporated business, partnership, corporation, association, or organization that--

`(I) has fewer than 25 full-time employees as determined on the date on which the motion is filed; and

`(II) is engaged in commercial or business activity; and

`(ii) the number of employees of a wholly owned subsidiary of a corporation includes the employees of--

`(I) a parent corporation; and

`(II) any other subsidiary corporation of the parent corporation.

`(6) Only the judge or United States trustee (or bankruptcy administrator, if any) may file a motion under section 707(b), if the current monthly income of the debtor, or in a joint case, the debtor and the debtor's spouse, as of the date of the order for relief, when multiplied by 12, is equal to or less than--

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

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

`(C) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State for a family of 4 or fewer individuals, plus $525 per month for each individual in excess of 4.

`(7)(A) No judge, United States trustee (or bankruptcy administrator, if any), trustee, or other party in interest may file a motion under paragraph (2) if the current monthly income of the debtor, including a veteran (as that term is defined in section 101 of title 38), and the debtor's spouse combined, as of the date of the order for relief when multiplied by 12, is equal to or less than--

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

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

`(iii) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State for a family of 4 or fewer individuals, plus $525 per month for each individual in excess of 4.

`(B) In a case that is not a joint case, current monthly income of the debtor's spouse shall not be considered for purposes of subparagraph (A) if--

`(i)(I) the debtor and the debtor's spouse are separated under applicable nonbankruptcy law; or

`(II) the debtor and the debtor's spouse are living separate and apart, other than for the purpose of evading subparagraph (A); and

`(ii) the debtor files a statement under penalty of perjury--

`(I) specifying that the debtor meets the requirement of subclause (I) or (II) of clause (i); and

`(II) disclosing the aggregate, or best estimate of the aggregate, amount of any cash or money payments received from the debtor's spouse attributed to the debtor's current monthly income.'.

(b) DEFINITION- Section 101 of title 11, United States Code, is amended by inserting after paragraph (10) the following:

`(10A) `current monthly income'--

`(A) means the average monthly income from all sources that the debtor receives (or in a joint case the debtor and the debtor's spouse receive) without regard to whether such income is taxable income, derived during the 6-month period ending on--

`(i) the last day of the calendar month immediately preceding the date of the commencement of the case if the debtor files the schedule of current income required by section 521(a)(1)(B)(ii); or

`(ii) the date on which current income is determined by the court for purposes of this title if the debtor does not file the schedule of current income required by section 521(a)(1)(B)(ii); and

`(B) includes any amount paid by any entity other than the debtor (or in a joint case the debtor and the debtor's spouse), on a regular basis for the household expenses of the debtor or the debtor's dependents (and in a joint case the debtor's spouse if not otherwise a dependent), but excludes benefits received under the Social Security Act, payments to victims of war crimes or crimes against humanity on account of their status as victims of such crimes, and payments to victims of international terrorism (as defined in section 2331 of title 18) or domestic terrorism (as defined in section 2331 of title 18) on account of their status as victims of such terrorism;'.

(1) by inserting `(a)' before `The trustee shall--'; and

(2) by adding at the end the following:

`(b)(1) With respect to a debtor who is an individual in a case under this chapter--

`(A) the United States trustee (or the bankruptcy administrator, if any) shall review all materials filed by the debtor and, not later than 10 days after the date of the first meeting of creditors, file with the court a statement as to whether the debtor's case would be presumed to be an abuse under section 707(b); and

`(B) not later than 5 days after receiving a statement under subparagraph (A), the court shall provide a copy of the statement to all creditors.

`(2) The United States trustee (or bankruptcy administrator, if any) shall, not later than 30 days after the date of filing a statement under paragraph (1), either file a motion to dismiss or convert under section 707(b) or file a statement setting forth the reasons the United States trustee (or the bankruptcy administrator, if any) does not consider such a motion to be appropriate, if the United States trustee (or the bankruptcy administrator, if any) determines that the debtor's case should be presumed to be an abuse under section 707(b) and the product of the debtor's current monthly income, multiplied by 12 is not less than--

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

`(B) in the case of a debtor in a household of 2 or more individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals.'.

(d) NOTICE- Section 342 of title 11, United States Code, is amended by adding at the end the following:

`(d) In a case under chapter 7 of this title in which the debtor is an individual and in which the presumption of abuse arises under section 707(b), the clerk shall give written notice to all creditors not later than 10 days after the date of the filing of the petition that the presumption of abuse has arisen.'.

(e) NONLIMITATION OF INFORMATION- Nothing in this title shall limit the ability of a creditor to provide information to a judge (except for information communicated ex parte, unless otherwise permitted by applicable law), United States trustee (or bankruptcy administrator, if any), or trustee.

(f) DISMISSAL FOR CERTAIN CRIMES- Section 707 of title 11, United States Code, is amended by adding at the end the following:

`(c)(1) In this subsection--

`(A) the term `crime of violence' has the meaning given such term in section 16 of title 18; and

`(B) the term `drug trafficking crime' has the meaning given such term in section 924(c)(2) of title 18.

`(2) Except as provided in paragraph (3), after notice and a hearing, the court, on a motion by the victim of a crime of violence or a drug trafficking crime, may when it is in the best interest of the victim dismiss a voluntary case filed under this chapter by a debtor who is an individual if such individual was convicted of such crime.

`(3) The court may not dismiss a case under paragraph (2) if the debtor establishes by a preponderance of the evidence that the filing of a case under this chapter is necessary to satisfy a claim for a domestic support obligation.'.

(g) CONFIRMATION OF PLAN- Section 1325(a) of title 11, United States Code, is amended--

(1) in paragraph (5), by striking `and' at the end;

(2) in paragraph (6), by striking the period and inserting a semicolon; and

(3) by inserting after paragraph (6) the following:

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

(h) APPLICABILITY OF MEANS TEST TO CHAPTER 13- Section 1325(b) of title 11, United States Code, is amended--

(1) in paragraph (1)(B), by inserting `to unsecured creditors' after `to make payments'; and

(2) by striking paragraph (2) and inserting the following:

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

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

`(ii) for charitable contributions (that meet the definition of `charitable contribution' under section 548(d)(3) to a qualified religious or charitable entity or organization (as defined in section 548(d)(4)) in an amount not to exceed 15 percent of gross income of the debtor for the year in which the contributions are made; and

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

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

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

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

(i) SPECIAL ALLOWANCE FOR HEALTH INSURANCE- Section 1329(a) of title 11, United States Code, is amended--

(1) in paragraph (2) by striking `or' at the end;

(2) in paragraph (3) by striking the period at the end and inserting `; or'; and

(3) by adding at the end the following:

`(4) reduce amounts to be paid under the plan by the actual amount expended by the debtor to purchase health insurance for the debtor (and for any dependent of the debtor if such dependent does not otherwise have health insurance coverage) if the debtor documents the cost of such insurance and demonstrates that--

`(A) such expenses are reasonable and necessary;

`(B)(i) if the debtor previously paid for health insurance, the amount is not materially larger than the cost the debtor previously paid or the cost necessary to maintain the lapsed policy; or

`(ii) if the debtor did not have health insurance, the amount is not materially larger than the reasonable cost that would be incurred by a debtor who purchases health insurance, who has similar income, expenses, age, and health status, and who lives in the same geographical location with the same number of dependents who do not otherwise have health insurance coverage; and

`(C) the amount is not otherwise allowed for purposes of determining disposable income under section 1325(b) of this title;

and upon request of any party in interest, files proof that a health insurance policy was purchased.'.

(j) ADJUSTMENT OF DOLLAR AMOUNTS- Section 104(b) of title 11, United States Code, is amended by striking `and 523(a)(2)(C)' each place it appears and inserting `523(a)(2)(C), 707(b), and 1325(b)(3)'.

(k) DEFINITION OF `MEDIAN FAMILY INCOME'- Section 101 of title 11, United States Code, is amended by inserting after paragraph (39) the following:

`(39A) `median family income' means for any year--

`(A) the median family income both calculated and reported by the Bureau of the Census in the then most recent year; and

`(B) if not so calculated and reported in the then current year, adjusted annually after such most recent year until the next year in which median family income is both calculated and reported by the Bureau of the Census, to reflect the percentage change in the Consumer Price Index for All Urban Consumers during the period of years occurring after such most recent year and before such current year;'.

(k) CLERICAL AMENDMENT- The table of sections for chapter 7 of title 11, United States Code, is amended by striking the item relating to section 707 and inserting the following:

`707. Dismissal of a case or conversion to a case under chapter 11 or 13.'.

SEC. 103. SENSE OF CONGRESS AND STUDY.

(a) SENSE OF CONGRESS- It is the sense of Congress that the Secretary of the Treasury has the authority to alter the Internal Revenue Service standards established to set guidelines for repayment plans as needed to accommodate their use under section 707(b) of title 11, United States Code.

(b) STUDY-

(1) IN GENERAL- Not later than 2 years after the date of enactment of this Act, the Director of the Executive Office for United States Trustees shall submit a report to the Committee on the Judiciary of the Senate and the Committee on the Judiciary of the House of Representatives containing the findings of the Director regarding the utilization of Internal Revenue Service standards for determining--

(A) the current monthly expenses of a debtor under section 707(b) of title 11, United States Code; and

(B) the impact that the application of such standards has had on debtors and on the bankruptcy courts.

(2) RECOMMENDATION- The report under paragraph (1) may include recommendations for amendments to title 11, United States Code, that are consistent with the findings of the Director under paragraph (1).

SEC. 104. NOTICE OF ALTERNATIVES.

Section 342(b) of title 11, United States Code, is amended to read as follows:

`(b) Before the commencement of a case under this title by an individual whose debts are primarily consumer debts, the clerk shall give to such individual written notice containing--

`(1) a brief description of--

`(A) chapters 7, 11, 12, and 13 and the general purpose, benefits, and costs of proceeding under each of those chapters; and

`(B) the types of services available from credit counseling agencies; and

`(2) statements specifying that--

`(A) a person who knowingly and fraudulently conceals assets or makes a false oath or statement under penalty of perjury in connection with a case under this title shall be subject to fine, imprisonment, or both; and

`(B) all information supplied by a debtor in connection with a case under this title is subject to examination by the Attorney General.'.

SEC. 105. DEBTOR FINANCIAL MANAGEMENT TRAINING TEST PROGRAM.

(a) DEVELOPMENT OF FINANCIAL MANAGEMENT AND TRAINING CURRICULUM AND MATERIALS- The Director of the Executive Office for United States Trustees (in this section referred to as the `Director') shall consult with a wide range of individuals who are experts in the field of debtor education, including trustees who serve in cases under chapter 13 of title 11, United States Code, and who operate financial management education programs for debtors, and shall develop a financial management training curriculum and materials that can be used to educate debtors who are individuals on how to better manage their finances.

(b) TEST-

(1) SELECTION OF DISTRICTS- The Director shall select 6 judicial districts of the United States in which to test the effectiveness of the financial management training curriculum and materials developed under subsection (a).

(2) USE- For an 18-month period beginning not later than 270 days after the date of the enactment of this Act, such curriculum and materials shall be, for the 6 judicial districts selected under paragraph (1), used as the instructional course concerning personal financial management for purposes of section 111 of title 11, United States Code.

(1) IN GENERAL- During the 18-month period referred to in subsection (b), the Director shall evaluate the effectiveness of--

(A) the financial management training curriculum and materials developed under subsection (a); and

(B) a sample of existing consumer education programs such as those described in the Report of the National Bankruptcy Review Commission (October 20, 1997) that are representative of consumer education programs carried out by the credit industry, by trustees serving under chapter 13 of title 11, United States Code, and by consumer counseling groups.

(2) REPORT- Not later than 3 months after concluding such evaluation, the Director shall submit a report to the Speaker of the House of Representatives and the President pro tempore of the Senate, for referral to the appropriate committees of the Congress, containing the findings of the Director regarding the effectiveness of such curriculum, such materials, and such programs and their costs.

SEC. 106. CREDIT COUNSELING.

(a) WHO MAY BE A DEBTOR- Section 109 of title 11, United States Code, is amended by adding at the end the following:

`(h)(1) Subject to paragraphs (2) and (3), and notwithstanding any other provision of this section, an individual may not be a debtor under this title unless such individual has, during the 180-day period preceding the date of filing of the petition by such individual, received from an approved nonprofit budget and credit counseling agency described in section 111(a) an individual or group briefing (including a briefing conducted by telephone or on the Internet) that outlined the opportunities for available credit counseling and assisted such individual in performing a related budget analysis.

`(2)(A) Paragraph (1) shall not apply with respect to a debtor who resides in a district for which the United States trustee (or the bankruptcy administrator, if any) determines that the approved nonprofit budget and credit counseling agencies for such district are not reasonably able to provide adequate services to the additional individuals who would otherwise seek credit counseling from such agencies by reason of the requirements of paragraph (1).

`(B) The United States trustee (or the bankruptcy administrator, if any) who makes a determination described in subparagraph (A) shall review such determination not later than 1 year after the date of such determination, and not less frequently than annually thereafter. Notwithstanding the preceding sentence, a nonprofit budget and credit counseling agency may be disapproved by the United States trustee (or the bankruptcy administrator, if any) at any time.

`(3)(A) Subject to subparagraph (B), the requirements of paragraph (1) shall not apply with respect to a debtor who submits to the court a certification that--

`(i) describes exigent circumstances that merit a waiver of the requirements of paragraph (1);

`(ii) states that the debtor requested credit counseling services from an approved nonprofit budget and credit counseling agency, but was unable to obtain the services referred to in paragraph (1) during the 5-day period beginning on the date on which the debtor made that request; and

`(iii) is satisfactory to the court.

`(B) With respect to a debtor, an exemption under subparagraph (A) shall cease to apply to that debtor on the date on which the debtor meets the requirements of paragraph (1), but in no case may the exemption apply to that debtor after the date that is 30 days after the debtor files a petition, except that the court, for cause, may order an additional 15 days.

`(4) The requirements of paragraph (1) shall not apply with respect to a debtor whom the court determines, after notice and hearing, is unable to complete those requirements because of incapacity, disability, or active military duty in a military combat zone. For the purposes of this paragraph, incapacity means that the debtor is impaired by reason of mental illness or mental deficiency so that he is incapable of realizing and making rational decisions with respect to his financial responsibilities; and `disability' means that the debtor is so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone, or Internet briefing required under paragraph (1).'.

(b) CHAPTER 7 DISCHARGE- Section 727(a) of title 11, United States Code, is amended--

(1) in paragraph (9), by striking `or' at the end;

(2) in paragraph (10), by striking the period and inserting `; or'; and

(3) by adding at the end the following:

`(11) after filing the petition, the debtor failed to complete an instructional course concerning personal financial management described in section 111, except that this paragraph shall not apply with respect to a debtor who is a person described in section 109(h)(4) or who resides in a district for which the United States trustee (or the bankruptcy administrator, if any) determines that the approved instructional courses are not adequate to service the additional individuals who would otherwise be required to complete such instructional courses under this section (The United States trustee (or the bankruptcy administrator, if any) who makes a determination described in this paragraph shall review such determination not later than 1 year after the date of such determination, and not less frequently than annually thereafter.).'.

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

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

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

(d) DEBTOR'S DUTIES- Section 521 of title 11, United States Code, is amended--

(1) by inserting `(a)' before `The debtor shall--'; and

(2) by adding at the end the following:

`(b) In addition to the requirements under subsection (a), a debtor who is an individual shall file with the court--

`(1) a certificate from the approved nonprofit budget and credit counseling agency that provided the debtor services under section 109(h) describing the services provided to the debtor; and

`(2) a copy of the debt repayment plan, if any, developed under section 109(h) through the approved nonprofit budget and credit counseling agency referred to in paragraph (1).'.

(e) GENERAL PROVISIONS-

(1) IN GENERAL- Chapter 1 of title 11, United States Code, is amended by adding at the end the following:

`Sec. 111. Nonprofit budget and credit counseling agencies; financial management instructional courses

`(a) The clerk shall maintain a publicly available list of--

`(1) nonprofit budget and credit counseling agencies that provide 1 or more services described in section 109(h) currently approved by the United States trustee (or the bankruptcy administrator, if any); and

`(2) instructional courses concerning personal financial management currently approved by the United States trustee (or the bankruptcy administrator, if any), as applicable.

`(b) The United States trustee (or bankruptcy administrator, if any) shall only approve a nonprofit budget and credit counseling agency or an instructional course concerning personal financial management as follows:

`(1) The United States trustee (or bankruptcy administrator, if any) shall have thoroughly reviewed the qualifications of the nonprofit budget and credit counseling agency or of the provider of the instructional course under the standards set forth in this section, and the services or instructional courses that will be offered by such agency or such provider, and may require such agency or such provider that has sought approval to provide information with respect to such review.

`(2) The United States trustee (or bankruptcy administrator, if any) shall have determined that such agency or such instructional course fully satisfies the applicable standards set forth in this section.

`(3) If a nonprofit budget and credit counseling agency or instructional course did not appear on the approved list for the district under subsection (a) immediately before approval under this section, approval under this subsection of such agency or such instructional course shall be for a probationary period not to exceed 6 months.

`(4) At the conclusion of the applicable probationary period under paragraph (3), the United States trustee (or bankruptcy administrator, if any) may only approve for an additional 1-year period, and for successive 1-year periods thereafter, an agency or instructional course that has demonstrated during the probationary or applicable subsequent period of approval that such agency or instructional course--

`(A) has met the standards set forth under this section during such period; and

`(B) can satisfy such standards in the future.

`(5) Not later than 30 days after any final decision under paragraph (4), an interested person may seek judicial review of such decision in the appropriate district court of the United States.

`(c)(1) The United States trustee (or the bankruptcy administrator, if any) shall only approve a nonprofit budget and credit counseling agency that demonstrates that it will provide qualified counselors, maintain adequate provision for safekeeping and payment of client funds, provide adequate counseling with respect to client credit problems, and deal responsibly and effectively with other matters relating to the quality, effectiveness, and financial security of the services it provides.

`(2) To be approved by the United States trustee (or the bankruptcy administrator, if any), a nonprofit budget and credit counseling agency shall, at a minimum--

`(A) have a board of directors the majority of which--

`(i) are not employed by such agency; and

`(ii) will not directly or indirectly benefit financially from the outcome of the counseling services provided by such agency;

`(B) if a fee is charged for counseling services, charge a reasonable fee, and provide services without regard to ability to pay the fee;

`(C) provide for safekeeping and payment of client funds, including an annual audit of the trust accounts and appropriate employee bonding;

`(D) provide full disclosures to a client, including funding sources, counselor qualifications, possible impact on credit reports, and any costs of such program that will be paid by such client and how such costs will be paid;

`(E) provide adequate counseling with respect to a client's credit problems that includes an analysis of such client's current financial condition, factors that caused such financial condition, and how such client can develop a plan to respond to the problems without incurring negative amortization of debt;

`(F) provide trained counselors who receive no commissions or bonuses based on the outcome of the counseling services provided by such agency, and who have adequate experience, and have been adequately trained to provide counseling services to individuals in financial difficulty, including the matters described in subparagraph (E);

`(G) demonstrate adequate experience and background in providing credit counseling; and

`(H) have adequate financial resources to provide continuing support services for budgeting plans over the life of any repayment plan.

`(d) The United States trustee (or the bankruptcy administrator, if any) shall only approve an instructional course concerning personal financial management--

`(1) for an initial probationary period under subsection (b)(3) if the course will provide at a minimum--

`(A) trained personnel with adequate experience and training in providing effective instruction and services;

`(B) learning materials and teaching methodologies designed to assist debtors in understanding personal financial management and that are consistent with stated objectives directly related to the goals of such instructional course;

`(C) adequate facilities situated in reasonably convenient locations at which such instructional course is offered, except that such facilities may include the provision of such instructional course by telephone or through the Internet, if such instructional course is effective;

`(D) the preparation and retention of reasonable records (which shall include the debtor's bankruptcy case number) to permit evaluation of the effectiveness of such instructional course, including any evaluation of satisfaction of instructional course requirements for each debtor attending such instructional course, which shall be available for inspection and evaluation by the Executive Office for United States Trustees, the United States trustee (or the bankruptcy administrator, if any), or the chief bankruptcy judge for the district in which such instructional course is offered; and

`(E) if a fee is charged for the instructional course, charge a reasonable fee, and provide services without regard to ability to pay the fee.

`(2) for any 1-year period if the provider thereof has demonstrated that the course meets the standards of paragraph (1) and, in addition--

`(A) has been effective in assisting a substantial number of debtors to understand personal financial management; and

`(B) is otherwise likely to increase substantially the debtor's understanding of personal financial management.

`(e) The district court may, at any time, investigate the qualifications of a nonprofit budget and credit counseling agency referred to in subsection (a), and request production of documents to ensure the integrity and effectiveness of such agency. The district court may, at any time, remove from the approved list under subsection (a) a nonprofit budget and credit counseling agency upon finding such agency does not meet the qualifications of subsection (b).

`(f) The United States trustee (or the bankruptcy administrator, if any) shall notify the clerk that a nonprofit budget and credit counseling agency or an instructional course is no longer approved, in which case the clerk shall remove it from the list maintained under subsection (a).

`(g)(1) No nonprofit budget and credit counseling agency may provide to a credit reporting agency information concerning whether a debtor has received or sought instruction concerning personal financial management from such agency.

`(2) A nonprofit budget and credit counseling agency that willfully or negligently fails to comply with any requirement under this title with respect to a debtor shall be liable for damages in an amount equal to the sum of--

`(A) any actual damages sustained by the debtor as a result of the violation; and

`(B) any court costs or reasonable attorneys' fees (as determined by the court) incurred in an action to recover those damages.'.

(2) CLERICAL AMENDMENT- The table of sections for chapter 1 of title 11, United States Code, is amended by adding at the end the following:

`111. Nonprofit budget and credit counseling agencies; financial management instructional courses.'.

(f) LIMITATION- Section 362 of title 11, United States Code, is amended by adding at the end the following:

`(i) If a case commenced under chapter 7, 11, or 13 is dismissed due to the creation of a debt repayment plan, for purposes of subsection (c)(3), any subsequent case commenced by the debtor under any such chapter shall not be presumed to be filed not in good faith.

`(j) On request of a party in interest, the court shall issue an order under subsection (c) confirming that the automatic stay has been terminated.'.

SEC. 107. SCHEDULES OF REASONABLE AND NECESSARY EXPENSES.

For purposes of section 707(b) of title 11, United States Code, as amended by this Act, the Director of the Executive Office for United States Trustees shall, not later than 180 days after the date of enactment of this Act, issue schedules of reasonable and necessary administrative expenses of administering a chapter 13 plan for each judicial district of the United States.

TITLE II--ENHANCED CONSUMER PROTECTION

Subtitle A--Penalties for Abusive Creditor Practices

SEC. 201. PROMOTION OF ALTERNATIVE DISPUTE RESOLUTION.

(a) REDUCTION OF CLAIM- Section 502 of title 11, United States Code, is amended by adding at the end the following:

`(k)(1) The court, on the motion of the debtor and after a hearing, may reduce a claim filed under this section based in whole on an unsecured consumer debt by not more than 20 percent of the claim, if--

`(A) the claim was filed by a creditor who unreasonably refused to negotiate a reasonable alternative repayment schedule proposed on behalf of the debtor by an approved nonprofit budget and credit counseling agency described in section 111;

`(B) the offer of the debtor under subparagraph (A)--

`(i) was made at least 60 days before the date of the filing of the petition; and

`(ii) provided for payment of at least 60 percent of the amount of the debt over a period not to exceed the repayment period of the loan, or a reasonable extension thereof; and

`(C) no part of the debt under the alternative repayment schedule is nondischargeable.

`(2) The debtor shall have the burden of proving, by clear and convincing evidence, that--

`(A) the creditor unreasonably refused to consider the debtor's proposal; and

`(B) the proposed alternative repayment schedule was made prior to expiration of the 60-day period specified in paragraph (1)(B)(i).'.

(b) LIMITATION ON AVOIDABILITY- Section 547 of title 11, United States Code, is amended by adding at the end the following:

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

SEC. 202. EFFECT OF DISCHARGE.

Section 524 of title 11, United States Code, is amended by adding at the end the following:

`(i) The willful failure of a creditor to credit payments received under a plan confirmed under this title, unless the order confirming the plan is revoked, the plan is in default, or the creditor has not received payments required to be made under the plan in the manner required by the plan (including crediting the amounts required under the plan), shall constitute a violation of an injunction under subsection (a)(2) if the act of the creditor to collect and failure to credit payments in the manner required by the plan caused material injury to the debtor.

`(j) Subsection (a)(2) does not operate as an injunction against an act by a creditor that is the holder of a secured claim, if--

`(1) such creditor retains a security interest in real property that is the principal residence of the debtor;

`(2) such act is in the ordinary course of business between the creditor and the debtor; and

`(3) such act is limited to seeking or obtaining periodic payments associated with a valid security interest in lieu of pursuit of in rem relief to enforce the lien.'.

SEC. 203. DISCOURAGING ABUSE OF REAFFIRMATION AGREEMENT PRACTICES.

(a) IN GENERAL- Section 524 of title 11, United States Code, as amended section 202, is amended--

(1) in subsection (c), by striking paragraph (2) and inserting the following:

`(2) the debtor received the disclosures described in subsection (k) at or before the time at which the debtor signed the agreement;'; and

(2) by adding at the end the following:

`(k)(1) The disclosures required under subsection (c)(2) shall consist of the disclosure statement described in paragraph (3), completed as required in that paragraph, together with the agreement specified in subsection (c), statement, declaration, motion and order described, respectively, in paragraphs (4) through (8), and shall be the only disclosures required in connection with entering into such agreement.

`(2) Disclosures made under paragraph (1) shall be made clearly and conspicuously and in writing. The terms `Amount Reaffirmed' and `Annual Percentage Rate' shall be disclosed more conspicuously than other terms, data or information provided in connection with this disclosure, except that the phrases `Before agreeing to reaffirm a debt, review these important disclosures' and `Summary of Reaffirmation Agreement' may be equally conspicuous. Disclosures may be made in a different order and may use terminology different from that set forth in paragraphs (2) through (8), except that the terms `Amount Reaffirmed' and `Annual Percentage Rate' must be used where indicated.

`(3) The disclosure statement required under this paragraph shall consist of the following:

`(A) The statement: `Part A: Before agreeing to reaffirm a debt, review these important disclosures:';

`(B) Under the heading `Summary of Reaffirmation Agreement', the statement: `This Summary is made pursuant to the requirements of the Bankruptcy Code';

`(C) The `Amount Reaffirmed', using that term, which shall be--

`(i) the total amount of debt that the debtor agrees to reaffirm by entering into an agreement of the kind specified in subsection (c), and

`(ii) the total of any fees and costs accrued as of the date of the disclosure statement, related to such total amount.

`(D) In conjunction with the disclosure of the `Amount Reaffirmed', the statements--

`(i) `The amount of debt you have agreed to reaffirm'; and

`(ii) `Your credit agreement may obligate you to pay additional amounts which may come due after the date of this disclosure. Consult your credit agreement.'.

`(E) The `Annual Percentage Rate', using that term, which shall be disclosed as--

`(i) if, at the time the petition is filed, the debt is an extension of credit under an open end credit plan, as the terms `credit' and `open end credit plan' are defined in section 103 of the Truth in Lending Act, then--

`(I) the annual percentage rate determined under paragraphs (5) and (6) of section 127(b) of the Truth in Lending Act, as applicable, as disclosed to the debtor in the most recent periodic statement prior to entering into an agreement of the kind specified in subsection (c) or, if no such periodic statement has been given to the debtor during the prior 6 months, the annual percentage rate as it would have been so disclosed at the time the disclosure statement is given to the debtor, or to the extent this annual percentage rate is not readily available or not applicable, then

`(II) the simple interest rate applicable to the amount reaffirmed as of the date the disclosure statement is given to the debtor, or if different simple interest rates apply to different balances, the simple interest rate applicable to each such balance, identifying the amount of each such balance included in the amount reaffirmed, or

`(III) if the entity making the disclosure elects, to disclose the annual percentage rate under subclause (I) and the simple interest rate under subclause (II); or

`(ii) if, at the time the petition is filed, the debt is an extension of credit other than under an open end credit plan, as the terms `credit' and `open end credit plan' are defined in section 103 of the Truth in Lending Act, then--

`(I) the annual percentage rate under section 128(a)(4) of the Truth in Lending Act, as disclosed to the debtor in the most recent disclosure statement given to the debtor prior to the entering into an agreement of the kind specified in subsection (c) with respect to the debt, or, if no such disclosure statement was given to the debtor, the annual percentage rate as it would have been so disclosed at the time the disclosure statement is given to the debtor, or to the extent this annual percentage rate is not readily available or not applicable, then

`(III) if the entity making the disclosure elects, to disclose the annual percentage rate under (I) and the simple interest rate under (II).

`(F) If the underlying debt transaction was disclosed as a variable rate transaction on the most recent disclosure given under the Truth in Lending Act, by stating `The interest rate on your loan may be a variable interest rate which changes from time to time, so that the annual percentage rate disclosed here may be higher or lower.'.

`(G) If the debt is secured by a security interest which has not been waived in whole or in part or determined to be void by a final order of the court at the time of the disclosure, by disclosing that a security interest or lien in goods or property is asserted over some or all of the debts the debtor is reaffirming and listing the items and their original purchase price that are subject to the asserted security interest, or if not a purchase-money security interest then listing by items or types and the original amount of the loan.

`(H) At the election of the creditor, a statement of the repayment schedule using 1 or a combination of the following--

XXX

`(ii) by making the statement: `Your payment schedule will be:', and describing the repayment schedule with the number, amount, and due dates or period of payments scheduled to repay the debts reaffirmed to the extent then known by the disclosing party; or

`(iii) by describing the debtor's repayment obligations with reasonable specificity to the extent then known by the disclosing party.

`(I) The following statement: `Note: When this disclosure refers to what a creditor `may' do, it does not use the word `may' to give the creditor specific permission. The word `may' is used to tell you what might occur if the law permits the creditor to take the action. If you have questions about your reaffirming a debt or what the law requires, consult with the attorney who helped you negotiate this agreement reaffirming a debt. If you don't have an attorney helping you, the judge will explain the effect of your reaffirming a debt when the hearing on the reaffirmation agreement is held.'.

`(J)(i) The following additional statements:

`Reaffirming a debt is a serious financial decision. The law requires you to take certain steps to make sure the decision is in your best interest. If these steps are not completed, the reaffirmation agreement is not effective, even though you have signed it.

`1. Read the disclosures in this Part A carefully. Consider the decision to reaffirm carefully. Then, if you want to reaffirm, sign the reaffirmation agreement in Part B (or you may use a separate agreement you and your creditor agree on).

`2. Complete and sign Part D and be sure you can afford to make the payments you are agreeing to make and have received a copy of the disclosure statement and a completed and signed reaffirmation agreement.

`3. If you were represented by an attorney during the negotiation of your reaffirmation agreement, the attorney must have signed the certification in Part C.

`4. If you were not represented by an attorney during the negotiation of your reaffirmation agreement, you must have completed and signed Part E.

`5. The original of this disclosure must be filed with the court by you or your creditor. If a separate reaffirmation agreement (other than the one in Part B) has been signed, it must be attached.

`6. If you were represented by an attorney during the negotiation of your reaffirmation agreement, your reaffirmation agreement becomes effective upon filing with the court unless the reaffirmation is presumed to be an undue hardship as explained in Part D.

`7. If you were not represented by an attorney during the negotiation of your reaffirmation agreement, it will not be effective unless the court approves it. The court will notify you of the hearing on your reaffirmation agreement. You must attend this hearing in bankruptcy court where the judge will review your reaffirmation agreement. The bankruptcy court must approve your reaffirmation agreement as consistent with your best interests, except that no court approval is required if your reaffirmation agreement is for a consumer debt secured by a mortgage, deed of trust, security deed, or other lien on your real property, like your home.

`Your right to rescind (cancel) your reaffirmation agreement. You may rescind (cancel) your reaffirmation agreement at any time before the bankruptcy court enters a discharge order, or before the expiration of the 60-day period that begins on the date your reaffirmation agreement is filed with the court, whichever occurs later. To rescind (cancel) your reaffirmation agreement, you must notify the creditor that your reaffirmation agreement is rescinded (or canceled).

`What are your obligations if you reaffirm the debt? A reaffirmed debt remains your personal legal obligation. It is not discharged in your bankruptcy case. That means that if you default on your reaffirmed debt after your bankruptcy case is over, your creditor may be able to take your property or your wages. Otherwise, your obligations will be determined by the reaffirmation agreement which may have changed the terms of the original agreement. For example, if you are reaffirming an open end credit agreement, the creditor may be permitted by that agreement or applicable law to change the terms of that agreement in the future under certain conditions.

`Are you required to enter into a reaffirmation agreement by any law? No, you are not required to reaffirm a debt by any law. Only agree to reaffirm a debt if it is in your best interest. Be sure you can afford the payments you agree to make.

`What if your creditor has a security interest or lien? Your bankruptcy discharge does not eliminate any lien on your property. A `lien' is often referred to as a security interest, deed of trust, mortgage or security deed. Even if you do not reaffirm and your personal liability on the debt is discharged, because of the lien your creditor may still have the right to take the security property if you do not pay the debt or default on it. If the lien is on an item of personal property that is exempt under your State's law or that the trustee has abandoned, you may be able to redeem the item rather than reaffirm the debt. To redeem, you make a single payment to the creditor equal to the current value of the security property, as agreed by the parties or determined by the court.'.

`(ii) In the case of a reaffirmation under subsection (m)(2), numbered paragraph 6 in the disclosures required by clause (i) of this subparagraph shall read as follows:

`6. If you were represented by an attorney during the negotiation of your reaffirmation agreement, your reaffirmation agreement becomes effective upon filing with the court.'.

`(4) The form of such agreement required under this paragraph shall consist of the following:

`Part B: Reaffirmation Agreement. I (we) agree to reaffirm the debts arising under the credit agreement described below.

`Brief description of credit agreement:

`Description of any changes to the credit agreement made as part of this reaffirmation agreement:

`Signature: Date:

`Borrower:

`Co-borrower, if also reaffirming these debts:

`Accepted by creditor:

`Date of creditor acceptance:'.

`(5) The declaration shall consist of the following:

`(A) The following certification:

`Part C: Certification by Debtor's Attorney (If Any).

`I hereby certify that (1) this agreement represents a fully informed and voluntary agreement by the debtor; (2) this agreement does not impose an undue hardship on the debtor or any dependent of the debtor; and (3) I have fully advised the debtor of the legal effect and consequences of this agreement and any default under this agreement.

`Signature of Debtor's Attorney: Date:'.

`(B) If a presumption of undue hardship has been established with respect to such agreement, such certification shall state that in the opinion of the attorney, the debtor is able to make the payment.

`(C) In the case of a reaffirmation agreement under subsection (m)(2), subparagraph (B) is not applicable.

`(6)(A) The statement in support of such agreement, which the debtor shall sign and date prior to filing with the court, shall consist of the following:

`Part D: Debtor's Statement in Support of Reaffirmation Agreement.

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`2. I received a copy of the Reaffirmation Disclosure Statement in Part A and a completed and signed reaffirmation agreement.'.

`(B) Where the debtor is represented by an attorney and is reaffirming a debt owed to a creditor defined in section 19(b)(1)(A)(iv) of the Federal Reserve Act, the statement of support of the reaffirmation agreement, which the debtor shall sign and date prior to filing with the court, shall consist of the following:

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