To amend title 11, United States Code, to increase the amount of unsecured claims for salaries and wages given priority in bankruptcy, to provide for cash payments to retirees to compensate for lost health insurance benefits resulting from the bankruptcy of their former employer, and for other purposes.

February 9, 2005

Mr. ROCKEFELLER (for himself and Mr. LEAHY) introduced the following bill; which was read twice and referred to the Committee on the Judiciary

To amend title 11, United States Code, to increase the amount of unsecured claims for salaries and wages given priority in bankruptcy, to provide for cash payments to retirees to compensate for lost health insurance benefits resulting from the bankruptcy of their former employer, 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.

This Act may be cited as the `Bankruptcy Fairness Act'.

SEC. 2. FAIR TREATMENT OF COMPENSATION IN BANKRUPTCY.

(a) Increased Priority Claim Amount for Employee Wages and Benefits- Section 507(a) of title 11, United States Code, is amended--

(1) in paragraph (3)--

(A) by striking `$4,925' and inserting `$15,000'; and

(B) by striking `within 90 days'; and

(2) in paragraph (4)(B)(i), by striking `$4,925' and inserting `$15,000'.

(b) Recovery of Excessive Compensation- Section 547 of title 11, United States Code, is amended by adding at the end the following:

`(h) The court, on motion of a party of interest, may avoid any transfer of compensation made to a present or former employee, officer, or member of the board of directors of the debtor on or within 90 days before the date of the filing of the petition that the court finds, after notice and a hearing, to be--

`(1) out of the ordinary course of business; or

`(2) unjust enrichment.'.

SEC. 3. PAYMENT OF INSURANCE BENEFITS OF RETIREES.

(a) In General- Section 1114(j) of title 11, United States Code, is amended to read as follows:

`(j)(1) No claim for retiree benefits shall be limited by section 502(b)(7).

`(2)(A) Each retiree whose benefits are modified pursuant to subsection (e)(1) or (g) shall have a claim in an amount equal to the value of the benefits lost as a result of such modification. Such claim shall be reduced by the amount paid by the debtor under subparagraph (B).

`(B)(i) In accordance with section 1129(a)(13)(B), the debtor shall pay the retiree with a claim under subparagraph (A) an amount equal to the cost of 18 months of premiums on behalf of the retiree and the dependents of the retiree under section 602(3) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1162(3)), which amount shall not exceed the amount of the claim under subparagraph (A).

`(ii) If a retiree under clause (i) is not eligible for continuation coverage (as defined in section 602 of the Employee Retirement Income Security Act of 1974), the Secretary of Labor shall determine the amount to be paid by the debtor to the retiree based on the 18-month cost of a comparable health insurance plan.

`(C) Any amount of the claim under subparagraph (A) that is not paid under subparagraph (B) shall be a general unsecured claim.'.

(b) Confirmation of Plan- Section 1129(a)(13) of title 11, United States Code, is amended to read as follows:

`(13) The plan provides--

`(A) for the continuation after its effective date of the payment of all retiree benefits (as defined in section 1114), at the level established pursuant to subsection (e)(1) or (g) of section 1114, at any time before the confirmation of the plan, for the duration of the period the debtor has obligated itself to provide such benefits; and

`(B) that the holder of a claim under section 1114(j)(2)(A) shall receive from the debtor, on the effective date of the plan, cash equal to the amount calculated under section 1114(j)(2)(B).'.

(c) Rulemaking- The Secretary of Labor shall promulgate rules and regulations to carry out the amendments made by this section.

END