-CITE-

11 USC CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

.

-HEAD-

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

-MISC1-

SUBCHAPTER I - GENERAL PROVISIONS

Sec.

901. Applicability of other sections of this title.

902. Definitions for this chapter.

903. Reservation of State power to control municipalities.

904. Limitation on jurisdiction and powers of court.

SUBCHAPTER II - ADMINISTRATION

921. Petition and proceedings relating to petition.

922. Automatic stay of enforcement of claims against the debtor.

923. Notice.

924. List of creditors.

925. Effect of list of claims.

926. Avoiding powers.

927. Limitation on recourse.

928. Post petition effect of security interest.

929. Municipal leases.

930. Dismissal.

SUBCHAPTER III - THE PLAN

941. Filing of plan.

942. Modification of plan.

943. Confirmation.

944. Effect of confirmation.

945. Continuing jurisdiction and closing of the case.

946. Effect of exchange of securities before the date of the filing

of the petition.

AMENDMENTS

1988 - Pub. L. 100-597, Sec. 11, Nov. 3, 1988, 102 Stat. 3030,

added items 927 to 929 and redesignated former item 927 as 930.

-SECREF-

CHAPTER REFERRED TO IN OTHER SECTIONS

This chapter is referred to in sections 101, 103, 109, 347, 362,

365, 502, 503 of this title; title 28 section 1930.

-CITE-

11 USC SUBCHAPTER I - GENERAL PROVISIONS 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER I - GENERAL PROVISIONS

.

-HEAD-

SUBCHAPTER I - GENERAL PROVISIONS

-CITE-

11 USC Sec. 901 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER I - GENERAL PROVISIONS

-HEAD-

Sec. 901. Applicability of other sections of this title

-STATUTE-

(a) Sections 301, 344, 347(b), 349, 350(b), 361, 362, 364(c),

364(d), 364(e), 364(f), 365, 366, 501, 502, 503, 504, 506,

507(a)(1), 509, 510, 524(a)(1), 524(a)(2), 544, 545, 546, 547, 548,

549(a), 549(c), 549(d), 550, 551, 552, 553, 557, 1102, 1103, 1109,

1111(b), 1122, 1123(a)(1), 1123(a)(2), 1123(a)(3), 1123(a)(4),

1123(a)(5), 1123(b), 1124, 1125, 1126(a), 1126(b), 1126(c),

1126(e), 1126(f), 1126(g), 1127(d), 1128, 1129(a)(2), 1129(a)(3),

1129(a)(6), 1129(a)(8), 1129(a)(10), 1129(b)(1), 1129(b)(2)(A),

1129(b)(2)(B), 1142(b), 1143, 1144, and 1145 of this title apply in

a case under this chapter.

(b) A term used in a section of this title made applicable in a

case under this chapter by subsection (a) of this section or

section 103(e) (FOOTNOTE 1) of this title has the meaning defined

for such term for the purpose of such applicable section, unless

such term is otherwise defined in section 902 of this title.

(FOOTNOTE 1) See References in Text note below.

(c) A section made applicable in a case under this chapter by

subsection (a) of this section that is operative if the business of

the debtor is authorized to be operated is operative in a case

under this chapter.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2621; Pub. L. 98-353, title

III, Sec. 353, 490, July 10, 1984, 98 Stat. 361, 383; Pub. L.

100-597, Sec. 3, Nov. 3, 1988, 102 Stat. 3028.)

-MISC1-

HISTORICAL AND REVISION NOTES

LEGISLATIVE STATEMENTS

Chapter 9 of the House amendment represents a compromise between

chapter 9 of the House bill and 9 of the Senate amendment. In most

respects this chapter follows current law with respect to the

adjustment of debts of a municipality. Stylistic changes and minor

substantive revisions have been made in order to conform this

chapter with other new chapters of the bankruptcy code. There are

few major differences between the House bill and the Senate

amendment on this issue. Section 901 indicates the applicability

of other sections of title 11 in cases under chapter 9. Included

are sections providing for creditors' committees under sections

1102 and 1103.

HOUSE REPORT NO. 95-595

Section 901 makes applicable appropriate provisions of other

chapters of proposed title 11. The general rule set out in section

103(e) is that only the provisions of chapters 1 and 9 apply in a

chapter 9 case. Section 901 is the exception, and specifies other

provisions that do apply. They are as follows:

Sec. 301. Voluntary cases. Application of this section makes

clear, as under current chapter IX (chapter 9 of former title 11),

that a municipal case can be commenced only by the municipality

itself. There are no involuntary chapter 9 cases.

Sec. 344. Self-incrimination; immunity. Application of this

section is of no substantive effect for the administration of the

case, but merely provides that the general rules in part V (Sec.

6001 et seq.) of title 18 govern immunity.

Sec. 347(b). Unclaimed property. This provision currently

appears in section 96(d) of chapter IX (section 416(d) of former

title 11).

Sec. 349. Effect of dismissal. This section governs the effect

of a dismissal of a chapter 9 case. It provides in substance that

rights that existed before the case that were disturbed by the

commencement of the case are reinstated. This section does not

concern grounds for dismissal, which are found in section 926.

Sec. 361. Adequate protection. Section 361 provides the general

standard for the protection of secured creditors whose property is

used in a case under title 11. Its importance lies in its

application to sections 362 and 364.

Sec. 362. Automatic stay. The automatic stay provisions of the

general portions of the title are incorporated into chapter 9.

There is an automatic stay provided in current Bankruptcy Act Sec.

85(e) (section 405(e) of former title 11). The thrust of section

362 is the same as that of section 85(e), but, of course, its

application in chapter 9 is modernized and drafted to conform with

the stay generally applicable under the bankruptcy code. An

additional part of the automatic stay applicable only to municipal

cases is included in section 922.

Sec. 364(c), 364(d), 364(e). Obtaining credit. This section

governs the borrowing of money by a municipality in

reorganization. It is narrower than a comparable provision in

current law, section 82(b)(2) (section 402(b)(2) of former title

11). The difference lies mainly in the removal under the bill of

the authority of the court to supervise borrowing by the

municipality in instances in which none of the special bankruptcy

powers are involved. That is, if a municipality could borrow money

outside of the bankruptcy court, then it should have the same

authority in bankruptcy court, under the doctrine of Ashton v.

Cameron Water District No. 1, 298 U.S. 513 (1936) (Tex.1936, 56

S.Ct. 892, 80 L.Ed. 1309, 31 Am.Bankr.Rep.N.S. 96, rehearing denied

57 S.Ct. 5, 299 U.S. 619, 81 L.Ed. 457) and National League of

Cities v. Usery, 426 U.S. 833 (1976) (Dist.Col.1976, 96 S.Ct.

2465, 49 L.Ed.2d 245, on remand 429 F. Supp. 703). Only when the

municipality needs special authority, such as subordination of

existing liens, or special priority for the borrowed funds, will

the court become involved in the authorization.

Sec. 365. Executory contracts and unexpired leases. The

applicability of section 365 incorporates the general power of a

bankruptcy court to authorize the assumption or rejection of

executory contracts or unexpired leases found in other chapters of

the title. This section is comparable to section 82(b)(1) of

current law (section 402(b)(1) of former title 11).

Sec. 366. Utility service. This section gives a municipality the

same authority as any other debtor with respect to continuation of

utility service during the proceeding, provided adequate assurance

of future payment is provided. No comparable explicit provision is

found in current law, although the case law seems to support the

same result.

Sec. 501. Filing of proofs of claims. This section permits

filing of proofs of claims in a chapter 9 case. Note, however,

that section 924 permits listing of creditors' claims, as under

chapter 11 and under section 85(b) of chapter IX (section 405(b) of

former title 11).

Sec. 502. Allowance of claims. This section applies the general

allowance rules to chapter 9 cases. This is no change from current

law.

Sec. 503. Administrative expenses. Administrative expenses as

defined in section 503 will be paid in a chapter 9 case, as

provided under section 89(1) of current law (section 409(1) of

former title 11).

Sec. 504. Sharing of compensation. There is no comparable

provision in current law. However, this provision applies

generally throughout the proposed law, and will not affect the

progress of the case, only the interrelations between attorneys and

other professionals that participate in the case.

Sec. 506. Determination of secured status. Section 506 specifies

that claims secured by a lien should be separated, to the extent

provided, into secured and unsecured claims. It applies

generally. Current law follows this result, though there is no

explicit provision.

Sec. 507(1). Priorities. Paragraph (1) of section 507 requires

that administrative expenses be paid first. This rule will apply

in chapter 9 cases. It is presently found in section 89(1)

(section 409(1) of former title 11). The two other priorities

presently found in section 89 have been deleted. The second for

claims arising within 3 months before the case is commenced, is

deleted from the statute, but may be within the court's equitable

power to award, under the case of Fosdick v. Schall, 99 U.S. 235

(1878) (25 L.Ed. 339). Leaving the provision to the courts permits

greater flexibility, as under railroad cases, than an absolute

three-month rule. The third priority under current law, for claims

which are entitled to priority under the laws of the United States,

is deleted because of the proposed amendment to section 3466 of the

Revised Statutes (former 31 U.S.C. 191, see 31 U.S.C. 3713(a))

contained in section 321(a) of title III of the bill, which

previously has given the United States an absolute first priority

in chapter X (chapter 10 of former title 11) and section 77

(section 205 of former title 11) cases. Because the priority rules

are regularized and brought together in the bankruptcy laws by this

bill, the need for incorporation of priorities elsewhere specified

is eliminated.

Sec. 509. Claims of codebtors. This section provides for the

treatment of sureties, guarantors, and codebtors. The general rule

of postponement found in the other chapters will apply in chapter

9. This section adopts current law.

Sec. 510. Subordination of claims. This section permits the

court to subordinate, on equitable grounds, any claim, and requires

enforcement of contractual subordination agreements, and

subordination of securities rescission claims. The section

recognizes the inherent equitable power of the court under current

law, and the practice followed with respect to contractual

provisions.

Sec. 547. Preferences. Incorporation of section 547 will permit

the debtor to recover preferences. This power will be used

primarily when those who gave the preferences have been replaced by

new municipal officers or when creditors coerced preferential

payments. Unlike Bankruptcy Act Sec. 85(h) (section 405(h) of

former title 11), the section does not permit the appointment of a

trustee for the purpose of pursuing preferences. Moreover, this

bill does not incorporate the other avoiding powers of a trustee

for chapter 9, found in current section 85(h).

Sec. 550. Liability of transfers. Incorporation of this section

is made necessary by the incorporation of the preference section,

and permits recovery by the debtor from a transferee of an avoided

preference.

Sec. 551. Automatic preservation of avoided transfer.

Application of section 551 requires preservation of any avoided

preference for the benefit of the estate.

Sec. 552. Postpetition effect of security interest. This section

will govern the applicability after the commencement of the case of

security interests granted by the debtor before the commencement of

the case.

Sec. 553. Setoff. Under current law, certain setoff is stayed.

Application of this section preserves that result, though the

setoffs that are permitted under section 553 are better defined

than under present law. Application of this section is necessary

to stay the setoff and to provide the offsetting creditor with the

protection to which he is entitled under present law.

Sec. 1122. Classification of claims. This section is derived

from current section 88(b) (section 408(b) of former title 11), and

is substantially similar.

Sec. 1123(a)(1)-(4), (b). Contents of plan. The general

provisions governing contents of a chapter 11 plan are made

applicable here, with two exceptions relating to the rights of

stockholders, which are not applicable in chapter 9 cases. This

section expands current law by specifying the contents of a plan in

some detail. Section 91 of current law (section 411 of former

title 11) speaks only in general terms. The substance of the two

sections is substantially the same, however.

Sec. 1124. Impairment of claims. The confirmation standards

adopted in chapter 9 are the same as those of chapter 11. This

changes current chapter IX (chapter 9 of former title 11), which

requires compliance with the fair and equitable rule. The greater

flexibility of proposed chapter 11 is carried over into chapter 9,

for there appears to be no reason why the confirmation standards

for the two chapters should be different, or why the elimination of

the fair and equitable rule from corporate reorganizations should

not be followed in municipal debt adjustments. The current chapter

IX rule is based on the confirmation rules of current chapter X

(chapter 10 of former title 11). The change in the latter suggests

a corresponding change in the former. Section 1124 is one part of

the new confirmation standard. It defines impairment, for use in

section 1129.

Sec. 1125. Postpetition disclosure and solicitation. The change

in the confirmation standard necessitates a corresponding change in

the disclosure requirements for solicitation of acceptances of a

plan. Under current chapter IX (chapter 9 of former title 11)

there is no disclosure requirement. Incorporation of section 1125

will insure that creditors receive adequate information before they

are required to vote on a plan.

Sec. 1126(a), (b), (c), (e), (f), (g). Acceptance of plan.

Section 1126 incorporates the current chapter IX (chapter 9 of

former title 11) acceptance requirement: two-thirds in amount and a

majority in number, Bankruptcy Act Sec. 92 (section 412 of former

title 11). Section 1125 permits exclusion of certain acceptances

from the computation if the acceptances were obtained in bad faith

or, unlike current law, if there is a conflict of interest

motivating the acceptance.

Sec. 1127(d). Modification of plan. This section governs the

change of a creditor's vote on the plan after a modification is

proposed. It is derived from current section 92(e) (section 412(e)

of former title 11).

Sec. 1128. Hearing on confirmation. This section requires a

hearing on the confirmation of the plan, and permits parties in

interest to object. It is the same as Bankruptcy Act Sec. 93 and

94(a) (sections 413 and 414(a) of former title 11), though the

provision, comparable to section 206 of current chapter X (section

606 of former title 11), permitting a labor organization to appear

and be heard on the economic soundness of the plan, has been

deleted as more appropriate for the Rules.

Sec. 1129(a)(2), (3), (8), (b)(1), (2). Confirmation of plan.

This section provides the boiler-plate language that the plan be

proposed in good faith and that it comply with the provisions of

the chapter, and also provides the financial standard for

confirmation, which replaces the fair and equitable rule. See Sec.

1124, supra.

Sec. 1142(b). Execution of plan. Derived from Bankruptcy Act

Sec. 96(b) (section 416(b) of former title 11), this section

permits the court to order execution and delivery of instruments in

order to execute the plan.

Sec. 1143. Distribution. This section is the same in substance as

section 96(d) (section 416(d) of former title 11), which requires

presentment or delivery of securities within five years, and bars

creditors that do not act within that time.

Sec. 1144. Revocation of order of confirmation. This section

permits the court to revoke the order of confirmation and the

discharge if the confirmation of the plan was procured by fraud.

There is no comparable provision in current chapter IX (chapter 9

of former title 11).

-REFTEXT-

REFERENCES IN TEXT

Section 103(e) of this title, referred to in subsec. (b), was

redesignated section 103(f) and a new section 103(e) was added by

Pub. L. 106-554, Sec. 1(a)(5) (title I, Sec. 112(c)(5)(A)), Dec.

21, 2000, 114 Stat. 2763, 2763A-394.

-MISC2-

AMENDMENTS

1988 - Subsec. (a). Pub. L. 100-597 inserted ''1129(a)(6),''

after ''1129(a)(3),''.

1984 - Subsec. (a). Pub. L. 98-353 inserted ''557,'' after

''553,'' and substituted ''1111(b),'' for ''1111(b)''.

EFFECTIVE DATE OF 1988 AMENDMENT

Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not

applicable to any case commenced under this title before that date,

see section 12 of Pub. L. 100-597, set out as a note under section

101 of this title.

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by Pub. L. 98-353 effective with respect to cases filed

90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,

set out as a note under section 101 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 103, 106, 902, 943 of

this title.

-CITE-

11 USC Sec. 902 01/06/03

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TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER I - GENERAL PROVISIONS

-HEAD-

Sec. 902. Definitions for this chapter

-STATUTE-

In this chapter -

(1) ''property of the estate'', when used in a section that is

made applicable in a case under this chapter by section 103(e)

(FOOTNOTE 1) or 901 of this title, means property of the debtor;

(FOOTNOTE 1) See References in Text note below.

(2) ''special revenues'' means -

(A) receipts derived from the ownership, operation, or

disposition of projects or systems of the debtor that are

primarily used or intended to be used primarily to provide

transportation, utility, or other services, including the

proceeds of borrowings to finance the projects or systems;

(B) special excise taxes imposed on particular activities or

transactions;

(C) incremental tax receipts from the benefited area in the

case of tax-increment financing;

(D) other revenues or receipts derived from particular

functions of the debtor, whether or not the debtor has other

functions; or

(E) taxes specifically levied to finance one or more projects

or systems, excluding receipts from general property, sales, or

income taxes (other than tax-increment financing) levied to

finance the general purposes of the debtor;

(3) ''special tax payer'' means record owner or holder of legal

or equitable title to real property against which a special

assessment or special tax has been levied the proceeds of which

are the sole source of payment of an obligation issued by the

debtor to defray the cost of an improvement relating to such real

property;

(4) ''special tax payer affected by the plan'' means special

tax payer with respect to whose real property the plan proposes

to increase the proportion of special assessments or special

taxes referred to in paragraph (2) of this section assessed

against such real property; and

(5) ''trustee'', when used in a section that is made applicable

in a case under this chapter by section 103(e) (FOOTNOTE 1) or

901 of this title, means debtor, except as provided in section

926 of this title.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2622; Pub. L. 98-353, title

III, Sec. 491, July 10, 1984, 98 Stat. 383; Pub. L. 100-597, Sec.

4, Nov. 3, 1988, 102 Stat. 3028.)

-MISC1-

HISTORICAL AND REVISION NOTES

LEGISLATIVE STATEMENTS

Section 902(2) of the Senate amendment is deleted since the

bankruptcy court will have jurisdiction over all cases under

chapter 9. The concept of a claim being materially and adversely

affected reflected in section 902(1) of the Senate amendment has

been deleted and replaced with the new concept of ''impairment''

set forth in section 1124 of the House amendment and incorporated

by reference into chapter 9.

SENATE REPORT NO. 95-989

There are six definitions for use in chapter 9. Paragraph (1)

defines what claims are included in a chapter 9 case and adopts the

definition now found in section 81(1) (section 401(1) of former

title 11). All claims against the petitioner generally will be

included, with one significant exception. Municipalities are

authorized, under section 103(c) of the Internal Revenue Code of

1954, as amended (title 26), to issue tax-exempt industrial

development revenue bonds to provide for the financing of certain

projects for privately owned companies. The bonds are sold on the

basis of the credit of the company on whose behalf they are issued,

and the principal, interest, and premium, if any, are payable

solely from payments made by the company to the trustee under the

bond indenture and do not constitute claims on the tax revenues or

other funds of the issuing municipalities. The municipality merely

acts as the vehicle to enable the bonds to be issued on a

tax-exempt basis. Claims that arise by virtue of these bonds are

not among the claims defined by this paragraph and amounts owed by

private companies to the holders of industrial development revenue

bonds are not to be included among the assets of the municipality

that would be affected by the plan. See Cong. Record, 94th Cong.,

1st Sess. H.R. 12073 (statement by Mr. Don Edwards, floor manager

of the bill in the House). Paragraph (2) defines the court which

means the federal district court or federal district judge before

which the case is pending. Paragraph (3) (enacted as (1))

specifies that when the term ''property of the estate'' is used in

a section in another chapter made applicable in chapter 9 cases,

the term means ''property of the debtor''. Paragraphs (4) and (5)

(enacted as (2) and (3)) adopt the definition of ''special taxpayer

affected by the plan'' that appears in current sections 81(10) and

81(11) of the Bankruptcy Act (section 401(10) and (11) of former

title 11). Paragraph (6) (enacted as (4)) provides that ''trustee''

means ''debtor'' when used in conjunction with chapter 9.

HOUSE REPORT NO. 95-595

There are only four definitions for use only in chapter 9. The

first specifies that when the term ''property of the estate'' is

used in a section in another chapter made applicable in chapter 9

cases, the term will mean ''property of the debtor''. Paragraphs

(2) and (3) adopt the definition of ''special taxpayer affected by

the plan'' that appears in current sections 81(10) and 81(11)

(section 401(10) and (11) of former title 11). Paragraph (4)

provides for ''trustee'' the same treatment as provided for

''property of the estate'', specifying that it means ''debtor''

when used in conjunction with chapter 9.

-REFTEXT-

REFERENCES IN TEXT

Section 103(e) of this title, referred to in pars. (1) and (5),

was redesignated section 103(f) and a new section 103(e) was added

by Pub. L. 106-554, Sec. 1(a)(5) (title I, Sec. 112(c)(5)(A)), Dec.

21, 2000, 114 Stat. 2763, 2763A-394.

-MISC2-

AMENDMENTS

1988 - Pars. (2) to (5). Pub. L. 100-597 added par. (2) and

redesignated former pars. (2) to (4) as (3) to (5), respectively.

1984 - Par. (2). Pub. L. 98-353 substituted ''legal or equitable

title to real property against which a special assessment or

special tax has been levied'' for ''title, legal or equitable, to

real property against which has been levied a special assessment or

special tax''.

EFFECTIVE DATE OF 1988 AMENDMENT

Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not

applicable to any case commenced under this title before that date,

see section 12 of Pub. L. 100-597, set out as a note under section

101 of this title.

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by Pub. L. 98-353 effective with respect to cases filed

90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,

set out as a note under section 101 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 901 of this title.

-CITE-

11 USC Sec. 903 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER I - GENERAL PROVISIONS

-HEAD-

Sec. 903. Reservation of State power to control municipalities

-STATUTE-

This chapter does not limit or impair the power of a State to

control, by legislation or otherwise, a municipality of or in such

State in the exercise of the political or governmental powers of

such municipality, including expenditures for such exercise, but -

(1) a State law prescribing a method of composition of

indebtedness of such municipality may not bind any creditor that

does not consent to such composition; and

(2) a judgment entered under such a law may not bind a creditor

that does not consent to such composition.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2622; Pub. L. 98-353, title

III, Sec. 492, July 10, 1984, 98 Stat. 383.)

-MISC1-

HISTORICAL AND REVISION NOTES

LEGISLATIVE STATEMENTS

Section 903 of the House amendment represents a stylistic

revision of section 903 of the Senate amendment. To the extent

section 903 of the House bill would have changed present law, such

section is rejected.

SENATE REPORT NO. 95-989

Section 903 is derived, with stylistic changes, from section 83

of current Chapter IX (section 403 of former title 11). It sets

forth the primary authority of a State, through its constitution,

laws, and other powers, over its municipalities. The proviso in

section 83, prohibiting State composition procedures for

municipalities, is retained. Deletion of the provision would

''permit all States to enact their own versions of Chapter IX

(chapter 9 of former title 11)'', Municipal Insolvency, 50

Am.Bankr.L.J. 55, 65, which would frustrate the constitutional

mandate of uniform bankruptcy laws. Constitution of the United

States, Art. I, Sec. 8.

This section provides that the municipality can consent to the

court's orders in regard to use of its income or property. It is

contemplated that such consent will be required by the court for

the issuance of certificates of indebtedness under section 364(c).

Such consent could extend to enforcement of the conditions attached

to the certificates or the municipal services to be provided during

the proceedings.

AMENDMENTS

1984 - Par. (2). Pub. L. 98-353 struck out ''to'' before ''that

does not consent''.

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by Pub. L. 98-353 effective with respect to cases filed

90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,

set out as a note under section 101 of this title.

-CITE-

11 USC Sec. 904 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER I - GENERAL PROVISIONS

-HEAD-

Sec. 904. Limitation on jurisdiction and powers of court

-STATUTE-

Notwithstanding any power of the court, unless the debtor

consents or the plan so provides, the court may not, by any stay,

order, or decree, in the case or otherwise, interfere with -

(1) any of the political or governmental powers of the debtor;

(2) any of the property or revenues of the debtor; or

(3) the debtor's use or enjoyment of any income-producing

property.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2622.)

-MISC1-

HISTORICAL AND REVISION NOTES

SENATE REPORT NO. 95-989

This section adopts the policy of section 82(c) of current law

(section 402(c) of former title 11). The only change in this

section from section 82(c) is to conform the section to the style

and cross-references of S. 2266.

HOUSE REPORT NO. 95-595

This section adopts the policy of section 82(c) of current law

(section 402(c) of former title 11). The Usery case underlines the

need for this limitation on the court's powers. The only change in

this section from section 82(c) is to conform the section to the

style and cross-references of H.R. 8200. This section makes clear

that the court may not interfere with the choices a municipality

makes as to what services and benefits it will provide to its

inhabitants.

-CITE-

11 USC SUBCHAPTER II - ADMINISTRATION 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER II - ADMINISTRATION

.

-HEAD-

SUBCHAPTER II - ADMINISTRATION

-MISC1-

AMENDMENTS

1984 - Pub. L. 98-353, title III, Sec. 493, July 10, 1984, 98

Stat. 383, substituted ''SUBCHAPTER'' for ''SUBCHAPER''.

-CITE-

11 USC Sec. 921 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER II - ADMINISTRATION

-HEAD-

Sec. 921. Petition and proceedings relating to petition

-STATUTE-

(a) Notwithstanding sections 109(d) and 301 of this title, a case

under this chapter concerning an unincorporated tax or special

assessment district that does not have such district's own

officials is commenced by the filing under section 301 of this

title of a petition under this chapter by such district's governing

authority or the board or body having authority to levy taxes or

assessments to meet the obligations of such district.

(b) The chief judge of the court of appeals for the circuit

embracing the district in which the case is commenced shall

designate the bankruptcy judge to conduct the case.

(c) After any objection to the petition, the court, after notice

and a hearing, may dismiss the petition if the debtor did not file

the petition in good faith or if the petition does not meet the

requirements of this title.

(d) If the petition is not dismissed under subsection (c) of this

section, the court shall order relief under this chapter.

(e) The court may not, on account of an appeal from an order for

relief, delay any proceeding under this chapter in the case in

which the appeal is being taken; nor shall any court order a stay

of such proceeding pending such appeal. The reversal on appeal of

a finding of jurisdiction does not affect the validity of any debt

incurred that is authorized by the court under section 364(c) or

364(d) of this title.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2622; Pub. L. 98-353, title

III, Sec. 494, July 10, 1984, 98 Stat. 383.)

-MISC1-

HISTORICAL AND REVISION NOTES

LEGISLATIVE STATEMENTS

Section 905 of the Senate amendment is incorporated as section

921(b) of the House amendment with the difference that the chief

judge of the circuit embracing the district in which the case is

commenced designates a bankruptcy judge to conduct the case in lieu

of a district judge as under present law. It is intended that a

municipality may commence a case in any district in which the

municipality is located, as under present law. Section 906 of the

Senate amendment has been adopted in substance in section 109(c) of

the House amendment.

SENATE REPORT NO. 95-989

Section 905 (enacted as section 921(b)) adopts the procedures for

selection of the judge for the chapter 9 case as found in current

section 82(d) (section 402(d) of former title 11). It is expected

that the large chapter 9 case might take up almost all the judicial

time of the presiding judge and involve very complex legal

questions. Selection should not be left to chance or the luck of

the draw. This provision will insure that calendar demands and

levels of experience can be considered in the selection of the

judge in a chapter 9 case.

HOUSE REPORT NO. 95-595

Subsection (a) is derived from section 85(a) (section 405(a) of

former title 11), second sentence, of current law. There is no

substantive change in the law. The subsection permits a

municipality that does not have its own officers to be moved into

chapter 9 by the action of the body or board that has authority to

levy taxes for the municipality.

Subsection (b) permits a party in interest to object to the

filing of the petition not later than 15 days after notice. This

provision tracks the third sentence of section 85(a) (section

405(a) of former title 11), except that the provision for

publication in section 85(a) is left to the Rules (see Rule 9-14),

and therefore the determinative date is left less definite.

Subsection (c) permits the court to dismiss a petition not filed

in good faith or not filed in compliance with the requirements of

the chapter. This provision is the fourth sentence of section

85(a) (section 405(a) of former title 11).

Subsection (d) directs the court to order relief on the petition

if it does not dismiss the case under subsection (c).

Subsection (e) contains the fifth and sixth sentences of section

85(a) (section 405(a) of former title 11).

AMENDMENTS

1984 - Subsec. (a). Pub. L. 98-353, Sec. 494(c), substituted

''109(d)'' for ''109(c)''.

Subsec. (c). Pub. L. 98-353, Sec. 494(a), substituted ''any'' for

''an'', and ''petition if the debtor did not file the petition in

good faith'' for ''petition, if the debtor did not file the

petition in good faith,''.

Subsec. (d). Pub. L. 98-353, Sec. 494(b), (d), redesignated

subsec. (e) as (d) and substituted ''subsection (c)'' for

''subsection (d)''. No former subsec. (d) had been enacted.

Subsecs. (e), (f). Pub. L. 98-353, Sec. 494(b), redesignated

subsec. (f) as (e). Former subsec. (e) redesignated (d).

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by Pub. L. 98-353 effective with respect to cases filed

90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,

set out as a note under section 101 of this title.

-CITE-

11 USC Sec. 922 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER II - ADMINISTRATION

-HEAD-

Sec. 922. Automatic stay of enforcement of claims against the

debtor

-STATUTE-

(a) A petition filed under this chapter operates as a stay, in

addition to the stay provided by section 362 of this title,

applicable to all entities, of -

(1) the commencement or continuation, including the issuance or

employment of process, of a judicial, administrative, or other

action or proceeding against an officer or inhabitant of the

debtor that seeks to enforce a claim against the debtor; and

(2) the enforcement of a lien on or arising out of taxes or

assessments owed to the debtor.

(b) Subsections (c), (d), (e), (f), and (g) of section 362 of

this title apply to a stay under subsection (a) of this section the

same as such subsections apply to a stay under section 362(a) of

this title.

(c) If the debtor provides, under section 362, 364, or 922 of

this title, adequate protection of the interest of the holder of a

claim secured by a lien on property of the debtor and if,

notwithstanding such protection such creditor has a claim arising

from the stay of action against such property under section 362 or

922 of this title or from the granting of a lien under section

364(d) of this title, then such claim shall be allowable as an

administrative expense under section 503(b) of this title.

(d) Notwithstanding section 362 of this title and subsection (a)

of this section, a petition filed under this chapter does not

operate as a stay of application of pledged special revenues in a

manner consistent with section 927 of this title to payment of

indebtedness secured by such revenues.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623; Pub. L. 98-353, title

III, Sec. 495, July 10, 1984, 98 Stat. 384; Pub. L. 100-597, Sec.

5, Nov. 3, 1988, 102 Stat. 3029.)

-MISC1-

HISTORICAL AND REVISION NOTES

HOUSE REPORT NO. 95-595

The automatic stay provided under section 362 of title 11 is

incomplete for a municipality, because there is the possibility of

action by a creditor against an officer or inhabitant of the

municipality to collect taxes due the municipality. Section

85(e)(1) of current chapter IX (section 405(e)(1) of former title

11) stays such actions. Section 922 carries over that protection

into the proposed chapter 9. Subsection (b) applies the provisions

for relief from the stay that apply generally in section 362 to the

stay under section 922.

AMENDMENTS

1988 - Subsecs. (c), (d). Pub. L. 100-597 added subsecs. (c) and

(d).

1984 - Subsec. (a)(1). Pub. L. 98-353 substituted ''a judicial''

for ''judicial'', and ''action or proceeding'' for ''proceeding''.

EFFECTIVE DATE OF 1988 AMENDMENT

Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not

applicable to any case commenced under this title before that date,

see section 12 of Pub. L. 100-597, set out as a note under section

101 of this title.

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by Pub. L. 98-353 effective with respect to cases filed

90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,

set out as a note under section 101 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 106, 108 of this title.

-CITE-

11 USC Sec. 923 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER II - ADMINISTRATION

-HEAD-

Sec. 923. Notice

-STATUTE-

There shall be given notice of the commencement of a case under

this chapter, notice of an order for relief under this chapter, and

notice of the dismissal of a case under this chapter. Such notice

shall also be published at least once a week for three successive

weeks in at least one newspaper of general circulation published

within the district in which the case is commenced, and in such

other newspaper having a general circulation among bond dealers and

bondholders as the court designates.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623.)

-MISC1-

HISTORICAL AND REVISION NOTES

LEGISLATIVE STATEMENTS

Section 923 of the House amendment represents a compromise with

respect to the notice provisions contained in comparable provisions

of the House bill and Senate amendment. As a general matter, title

11 leaves most procedural issues to be determined by the Rules of

Bankruptcy Procedure. Section 923 of the House amendment contains

certain important aspects of procedure that have been retained from

present law. It is anticipated that the Rules of Bankruptcy

Procedure will adopt rules similar to the present rules for chapter

IX of the Bankruptcy Act (chapter 9 of former title 11).

HOUSE REPORT NO. 95-595

The notice provisions in section 923 are significantly more

sparse than those provided under section 85(d) of chapter IX

(section 405(d) of former title 11). The exact contours of the

notice to be given under chapter 9 are left to the Rules. Because

the Rules deal with notice in a municipal case (Rule 9-14), and

because section 405(d) of title IV of the bill continues those

Rules in effect to the extent not inconsistent with the bill, the

notice provisions of current law and Rules would continue to apply.

-CITE-

11 USC Sec. 924 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER II - ADMINISTRATION

-HEAD-

Sec. 924. List of creditors

-STATUTE-

The debtor shall file a list of creditors.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623.)

-MISC1-

HISTORICAL AND REVISION NOTES

LEGISLATIVE STATEMENTS

Section 924 of the House amendment is derived from section 924 of

the House bill with the location of the filing of the list of

creditors to be determined by the rules of bankruptcy procedure.

The detailed requirements of section 724 (probably should be

''924'') of the Senate bill are anticipated to be incorporated in

the rules of bankruptcy procedure.

SENATE REPORT NO. 95-989

This section adopts the provision presently contained in section

85(b) of Chapter IX (section 405(b) of former title 11). A list of

creditors, as complete and accurate as practicable, must be filed

with the court.

HOUSE REPORT NO. 95-595

This section directs the debtor to file a list of creditors with

the court. A comparable provision is presently contained in

section 85(b) of chapter IX (section 405(b) of former title 11).

The Rules, in Rule 9-7, copy the provisions of section 85(b), with

additional matter. As noted above, section 405(d) of title IV will

continue those Rules in effect. Because the form, time of filing,

and nature of the list, are procedural matters that may call for

some flexibility, those details have been left to the Rules.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 925 of this title.

-CITE-

11 USC Sec. 925 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER II - ADMINISTRATION

-HEAD-

Sec. 925. Effect of list of claims

-STATUTE-

A proof of claim is deemed filed under section 501 of this title

for any claim that appears in the list filed under section 924 of

this title, except a claim that is listed as disputed, contingent,

or unliquidated.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623.)

-MISC1-

HISTORICAL AND REVISION NOTES

LEGISLATIVE STATEMENTS

Section 925 of the Senate amendment regarding venue and fees has

been deleted.

SENATE REPORT NO. 95-989

Section 926 (enacted as section 925) follows the policy contained

in section 88(a) of the present Act (section 408(a) of former title

11), though certain details are left to the Rules. The language of

section 926 is the same as that of proposed 11 U.S.C. 1111, which

applies in chapter 11 cases. The list of creditors filed under

section 924 is given weight as prima facie evidence of the claims

listed (except claims that are listed as disputed, contingent, or

unliquidated), which are deemed filed under section 501, obviating

the need for listed creditors to file proofs of claim.

-CITE-

11 USC Sec. 926 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER II - ADMINISTRATION

-HEAD-

Sec. 926. Avoiding powers

-STATUTE-

(a) If the debtor refuses to pursue a cause of action under

section 544, 545, 547, 548, 549(a), or 550 of this title, then on

request of a creditor, the court may appoint a trustee to pursue

such cause of action.

(b) A transfer of property of the debtor to or for the benefit of

any holder of a bond or note, on account of such bond or note, may

not be avoided under section 547 of this title.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623; Pub. L. 100-597, Sec.

6, Nov. 3, 1988, 102 Stat. 3029.)

-MISC1-

HISTORICAL AND REVISION NOTES

LEGISLATIVE STATEMENTS

Section 926 of the House amendment is derived from section 928 of

the Senate bill. The provision enables creditors to request the

court to appoint a trustee to pursue avoiding powers if the debtor

refuses to exercise those powers. Section 901 of the House

amendment makes a corresponding change to incorporate avoiding

powers included in the Senate amendment, but excluded from the

House bill.

SENATE REPORT NO. 95-989

This section (928 (enacted as section 926)) adopts current

section 85(h) (section 405(h) of former title 11) which provides

for a trustee to be appointed for the purpose of pursuing an action

under an avoiding power, if the debtor refuses to do so. This

section is necessary because a municipality might, by reason of

political pressure or desire for future good relations with a

particular creditor or class of creditors, make payments to such

creditors in the days preceding the petition to the detriment of

all other creditors. No change in the elected officials of such a

city would automatically occur upon filing of the petition, and it

might be very awkward for those same officials to turn around and

demand the return of the payments following the filing of the

petition. Hence, the need for a trustee for such purpose.

The general avoiding powers are incorporated by reference in

section 901 and are broader than under current law. Preference,

fraudulent conveyances, and other kinds of transfers will thus be

voidable.

Incorporated by reference also is the power to accept or reject

executory contracts and leases (section 365). Within the definition

of executory contracts are collective bargaining agreements between

the city and its employees. Such contracts may be rejected despite

contrary State laws. Courts should readily allow the rejection of

such contracts where they are burdensome, the rejection will aid in

the municipality's reorganization and in consideration of the

equities of each case. On the last point, ''(e)quities in favor of

the city in chapter 9 will be far more compelling than the equities

in favor of the employer in chapter 11. Onerous employment

obligations may prevent a city from balancing its budget for some

time. The prospect of an unbalanced budget may preclude judicial

confirmation of the plan. Unless a city can reject its labor

contracts, lack of funds may force cutbacks in police, fire,

sanitation, and welfare services, imposing hardships on many

citizens. In addition, because cities in the past have often

seemed immune to the constraint of ''profitability'' faced by

private businesses, their wage contracts may be relatively more

onerous than those in the private sector.'' Executory Contracts and

Municipal Bankruptcy, 85 Yale L. J. 957, 965 (1976) (footnote

omitted). Rejection of the contracts may require the

municipalities to renegotiate such contracts by state collective

bargaining laws. It is intended that the power to reject

collective bargaining agreements will pre-empt state termination

provisions, but not state collective bargaining laws. Thus, a city

would not be required to maintain existing employment terms during

the renegotiation period.

AMENDMENTS

1988 - Pub. L. 100-597 designated existing provisions as subsec.

(a) and added subsec. (b).

EFFECTIVE DATE OF 1988 AMENDMENT

Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not

applicable to any case commenced under this title before that date,

see section 12 of Pub. L. 100-597, set out as a note under section

101 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 106, 902 of this title.

-CITE-

11 USC Sec. 927 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER II - ADMINISTRATION

-HEAD-

Sec. 927. Limitation on recourse

-STATUTE-

The holder of a claim payable solely from special revenues of the

debtor under applicable nonbankruptcy law shall not be treated as

having recourse against the debtor on account of such claim

pursuant to section 1111(b) of this title.

-SOURCE-

(Added Pub. L. 100-597, Sec. 7(2), Nov. 3, 1988, 102 Stat. 3029.)

-MISC1-

PRIOR PROVISIONS

A prior section 927 was renumbered section 930 of this title.

EFFECTIVE DATE

Section effective Nov. 3, 1988, but not applicable to any case

commenced under this title before that date, see section 12 of Pub.

L. 100-597, set out as an Effective Date of 1988 Amendment note

under section 101 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 922 of this title.

-CITE-

11 USC Sec. 928 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER II - ADMINISTRATION

-HEAD-

Sec. 928. Post petition effect of security interest

-STATUTE-

(a) Notwithstanding section 552(a) of this title and subject to

subsection (b) of this section, special revenues acquired by the

debtor after the commencement of the case shall remain subject to

any lien resulting from any security agreement entered into by the

debtor before the commencement of the case.

(b) Any such lien on special revenues, other than municipal

betterment assessments, derived from a project or system shall be

subject to the necessary operating expenses of such project or

system, as the case may be.

-SOURCE-

(Added Pub. L. 100-597, Sec. 8, Nov. 3, 1988, 102 Stat. 3029.)

-MISC1-

EFFECTIVE DATE

Section effective Nov. 3, 1988, but not applicable to any case

commenced under this title before that date, see section 12 of Pub.

L. 100-597, set out as an Effective Date of 1988 Amendment note

under section 101 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 106 of this title.

-CITE-

11 USC Sec. 929 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER II - ADMINISTRATION

-HEAD-

Sec. 929. Municipal leases

-STATUTE-

A lease to a municipality shall not be treated as an executory

contract or unexpired lease for the purposes of section 365 or

502(b)(6) of this title solely by reason of its being subject to

termination in the event the debtor fails to appropriate rent.

-SOURCE-

(Added Pub. L. 100-597, Sec. 9, Nov. 3, 1988, 102 Stat. 3030.)

-MISC1-

EFFECTIVE DATE

Section effective Nov. 3, 1988, but not applicable to any case

commenced under this title before that date, see section 12 of Pub.

L. 100-597, set out as an Effective Date of 1988 Amendment note

under section 101 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 106 of this title.

-CITE-

11 USC Sec. 930 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER II - ADMINISTRATION

-HEAD-

Sec. 930. Dismissal

-STATUTE-

(a) After notice and a hearing, the court may dismiss a case

under this chapter for cause, including -

(1) want of prosecution;

(2) unreasonable delay by the debtor that is prejudicial to

creditors;

(3) failure to propose a plan within the time fixed under

section 941 of this title;

(4) if a plan is not accepted within any time fixed by the

court;

(5) denial of confirmation of a plan under section 943(b) of

this title and denial of additional time for filing another plan

or a modification of a plan; or

(6) if the court has retained jurisdiction after confirmation

of a plan -

(A) material default by the debtor with respect to a term of

such plan; or

(B) termination of such plan by reason of the occurrence of a

condition specified in such plan.

(b) The court shall dismiss a case under this chapter if

confirmation of a plan under this chapter is refused.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2623, Sec. 927; Pub. L.

98-353, title III, Sec. 496, July 10, 1984, 98 Stat. 384;

renumbered Sec. 930, Pub. L. 100-597, Sec. 7(1), Nov. 3, 1988, 102

Stat. 3029.)

-MISC1-

HISTORICAL AND REVISION NOTES

LEGISLATIVE STATEMENTS

Section 927(b) of the House amendment is derived from section

927(b) of the Senate bill. The provision requires mandatory

dismissal if confirmation of a plan is refused.

The House amendment deletes section 929 of the Senate amendment

as unnecessary since the bankruptcy court has original exclusive

jurisdiction of all cases under chapter 9.

The House amendment deletes section 930 of the Senate amendment

and incorporates section 507(a)(1) by reference.

SENATE REPORT NO. 95-989

Section 927 conforms to section 98 of current law (section 418 of

former title 11). The Section permits dismissal by the court for

unreasonable delay by the debtor, failure to propose a plan,

failure of acceptance of a plan, or default by the debtor under a

conformed plan. Mandatory dismissal is required if confirmation is

refused.

HOUSE REPORT NO. 95-595

Section 926 (enacted as section 927) generally conforms to

section 98(a) (section 418(a) of former title 11) of current law.

Stylistic changes have been made to conform the language with that

used in chapter 11, section 1112. The section permits dismissal by

the court for unreasonable delay by the debtor that is prejudicial

to creditors, failure to propose a plan, failure of confirmation of

a plan, or material default by the debtor under a confirmed plan.

The only significant change from current law lies in the second

ground. Currently, section 98(a)(2) provides for dismissal if a

proposed plan is not accepted, and section 98(b) requires dismissal

if an accepted plan is not confirmed. In order to provide greater

flexibility to the court, the debtor, and creditors, the bill

allows the court to permit the debtor to propose another plan if

the first plan is not confirmed. In that event the debtor need

not, as under current law, commence the case all over again. This

could provide savings in time and administrative expenses if a plan

is denied confirmation.

AMENDMENTS

1984 - Subsec. (b). Pub. L. 98-353 substituted ''confirmation of

a plan under this chapter'' for ''confirmation''.

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by Pub. L. 98-353 effective with respect to cases filed

90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,

set out as a note under section 101 of this title.

-CITE-

11 USC SUBCHAPTER III - THE PLAN 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER III - THE PLAN

.

-HEAD-

SUBCHAPTER III - THE PLAN

-CITE-

11 USC Sec. 941 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER III - THE PLAN

-HEAD-

Sec. 941. Filing of plan

-STATUTE-

The debtor shall file a plan for the adjustment of the debtor's

debts. If such a plan is not filed with the petition, the debtor

shall file such a plan at such later time as the court fixes.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2624.)

-MISC1-

HISTORICAL AND REVISION NOTES

SENATE REPORT NO. 95-989

Section 941 gives the debtor the exclusive right to propose a

plan, and directs that the debtor propose one either with the

petition or within such time as the court directs. The section

follows section 90(a) of current law (section 410(a) of former

title 11).

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in section 930 of this title.

-CITE-

11 USC Sec. 942 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER III - THE PLAN

-HEAD-

Sec. 942. Modification of plan

-STATUTE-

The debtor may modify the plan at any time before confirmation,

but may not modify the plan so that the plan as modified fails to

meet the requirements of this chapter. After the debtor files a

modification, the plan as modified becomes the plan.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2624.)

-MISC1-

HISTORICAL AND REVISION NOTES

LEGISLATIVE STATEMENTS

The House amendment deletes section 942 of the Senate amendment

in favor of incorporating section 1125 by cross-reference.

Similarly, the House amendment does not incorporate section 944 or

945 of the Senate amendment since incorporation of several sections

in chapter 11 in section 901 is sufficient.

SENATE REPORT NO. 95-989

Section 942 permits the debtor to modify the plan at any time

before confirmation, as does section 90(a) of current law (section

410(a) of former title 11).

-CITE-

11 USC Sec. 943 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER III - THE PLAN

-HEAD-

Sec. 943. Confirmation

-STATUTE-

(a) A special tax payer may object to confirmation of a plan.

(b) The court shall confirm the plan if -

(1) the plan complies with the provisions of this title made

applicable by sections 103(e) (FOOTNOTE 1) and 901 of this title;

(FOOTNOTE 1) See References in Text note below.

(2) the plan complies with the provisions of this chapter;

(3) all amounts to be paid by the debtor or by any person for

services or expenses in the case or incident to the plan have

been fully disclosed and are reasonable;

(4) the debtor is not prohibited by law from taking any action

necessary to carry out the plan;

(5) except to the extent that the holder of a particular claim

has agreed to a different treatment of such claim, the plan

provides that on the effective date of the plan each holder of a

claim of a kind specified in section 507(a)(1) of this title will

receive on account of such claim cash equal to the allowed amount

of such claim;

(6) any regulatory or electoral approval necessary under

applicable nonbankruptcy law in order to carry out any provision

of the plan has been obtained, or such provision is expressly

conditioned on such approval; and

(7) the plan is in the best interests of creditors and is

feasible.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2624; Pub. L. 98-353, title

III, Sec. 497, July 10, 1984, 98 Stat. 384; Pub. L. 100-597, Sec.

10, Nov. 3, 1988, 102 Stat. 3030.)

-MISC1-

HISTORICAL AND REVISION NOTES

LEGISLATIVE STATEMENTS

Section 943(a) of the House amendment makes clear that a special

taxpayer may object to confirmation of a plan. Section 943(b) of

the House amendment is derived from section 943 of the House bill

respecting confirmation of a plan under chapter 9. It must be

emphasized that these standards of confirmation are in addition to

standards in section 1129 that are made applicable to chapter 9 by

section 901 of the House amendment. In particular, if the

requirements of sections 1129(a)(8) are not complied with, then the

proponent may request application of section 1129(b). The court

will then be required to confirm the plan if it complies with the

''fair and equitable'' test and is in the best interests of

creditors. The best interests of creditors test does not mean

liquidation value as under chapter XI of the Bankruptcy Act

(chapter 11 of former title 11). In making such a determination, it

is expected that the court will be guided by standards set forth in

Kelley v. Everglades Drainage District, 319 U.S. 415 (1943)

(Fla.1943, 63 S.Ct. 1141, 87 L.Ed. 1485, rehearing denied 63 S.Ct.

1444, 320 U.S. 214, 87 L.Ed. 1851, motion denied 64 S.Ct 783, 321

U.S. 754, 88 L.Ed. 1054) and Fano v. Newport Heights Irrigation

Dist., 114 F.2d 563 (9th Cir. 1940), as under present law, the

bankruptcy court should make findings as detailed as possible to

support a conclusion that this test has been met. However, it must

be emphasized that unlike current law, the fair and equitable test

under section 1129(b) will not apply if section 1129(a)(8) has been

satisfied in addition to the other confirmation standards specified

in section 943 and incorporated by reference in section 901 of the

House amendment. To the extent that American United Mutual Life

Insurance Co. v. City of Avon Park, 311 U.S. 138 (1940) (Fla.1940,

61 S.Ct. 157, 85 L.Ed. 91, 136 A.L.R. 860, rehearing denied 61

S.Ct. 395, 311 U.S. 730, 85 L.Ed. 475) and other cases are to the

contrary, such cases are overruled to that extent.

SENATE REPORT NO. 95-989

Section 946 (enacted as section 943) is adopted from current

section 94 (section 414 of former title 11). The test for

confirmation is whether or not the plan is fair and equitable and

feasible. The fair and equitable test tracts current chapter X

(chapter 10 of former title 11) and is known as the strict priority

rule. Creditors must be provided, under the plan, the going

concern value of their claims. The going concern value

contemplates a ''comparison of revenues and expenditures taking

into account the taxing power and the extent to which tax increases

are both necessary and feasible'' Municipal Insolvency, supra, at

p. 64, and is intended to provide more of a return to creditors

than the liquidation value if the city's assets could be liquidated

like those of a private corporation.

HOUSE REPORT NO. 95-595

In addition to the confirmation requirements incorporated from

section 1129 by section 901, this section specifies additional

requirements. Paragraph (1) requires compliance with the

provisions of the title made applicable in chapter 9 cases. This

provision follows section 94(b)(2) (section 414(b)(2) of former

title 11). Paragraph (2) requires compliance with the provisions of

chapter 9, as does section 94(b)(2). Paragraph (3) adopts section

94(b)(4), requiring disclosure and reasonableness of all payments

to be made in connection with the plan or the case. Paragraph (4),

copied from section 92(b)(6) (probably should be ''94(b)(6)'' which

was section 414(b)(6) of former title 11), requires that the debtor

not be prohibited by law from taking any action necessary to carry

out the plan. Paragraph (5) departs from current law by requiring

that administrative expenses be paid in full, but not necessarily

in cash. Finally, paragraph (6) requires that the plan be in the

best interest of creditors and feasible. The best interest test

was deleted in section 94(b)(1) of current chapter IX from previous

chapter IX (chapter 9 of former title 11) because it was redundant

with the fair and equitable rule. However, this bill proposes a

new confirmation standard generally for reorganization, one element

of which is the best interest of creditors test; see section

1129(a)(7). In that section, the test is phrased in terms of

liquidation of the debtor. Because that is not possible in a

municipal case, the test here is phrased in its more traditional

form, using the words of art ''best interest of creditors.'' The

best interest of creditors test here is in addition to the

financial standards imposed on the plan by sections 1129(a)(8) and

1129(b), just as those provisions are in addition to the comparable

best interest test in chapter 11, 11 U.S.C. 1129(a)(7). The

feasibility requirement, added in the revision of chapter IX last

year, is retained.

-REFTEXT-

REFERENCES IN TEXT

Section 103(e) of this title, referred to in subsec. (b)(1), was

redesignated section 103(f) and a new section 103(e) was added by

Pub. L. 106-554, Sec. 1(a)(5) (title I, Sec. 112(c)(5)(A)), Dec.

21, 2000, 114 Stat. 2763, 2763A-394.

-MISC2-

AMENDMENTS

1988 - Subsec. (b)(6), (7). Pub. L. 100-597 added par. (6) and

redesignated former par. (6) as (7).

1984 - Subsec. (b)(4). Pub. L. 98-353, Sec. 497(1), struck out

''to be taken'' after ''necessary''.

Subsec. (b)(5). Pub. L. 98-353, Sec. 497(2), substituted

provisions requiring the plan to provide payment of cash in an

amount equal to the allowed amount of a claim except to the extent

that the holder of a particular claim has agreed to different

treatment of such claim, for provisions which required the plan to

provide for payment of property of a value equal to the allowed

amount of such claim except to the extent that the holder of a

particular claim has waived such payment on such claim.

EFFECTIVE DATE OF 1988 AMENDMENT

Amendment by Pub. L. 100-597 effective Nov. 3, 1988, but not

applicable to any case commenced under this title before that date,

see section 12 of Pub. L. 100-597, set out as a note under section

101 of this title.

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by Pub. L. 98-353 effective with respect to cases filed

90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,

set out as a note under section 101 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 347, 930 of this title.

-CITE-

11 USC Sec. 944 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER III - THE PLAN

-HEAD-

Sec. 944. Effect of confirmation

-STATUTE-

(a) The provisions of a confirmed plan bind the debtor and any

creditor, whether or not -

(1) a proof of such creditor's claim is filed or deemed filed

under section 501 of this title;

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

(3) such creditor has accepted the plan.

(b) Except as provided in subsection (c) of this section, the

debtor is discharged from all debts as of the time when -

(1) the plan is confirmed;

(2) the debtor deposits any consideration to be distributed

under the plan with a disbursing agent appointed by the court;

and

(3) the court has determined -

(A) that any security so deposited will constitute, after

distribution, a valid legal obligation of the debtor; and

(B) that any provision made to pay or secure payment of such

obligation is valid.

(c) The debtor is not discharged under subsection (b) of this

section from any debt -

(1) excepted from discharge by the plan or order confirming the

plan; or

(2) owed to an entity that, before confirmation of the plan,

had neither notice nor actual knowledge of the case.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2624.)

-MISC1-

HISTORICAL AND REVISION NOTES

SENATE REPORT NO. 95-989

(Section 947) Subsection (a) (enacted as section 944(a)) makes

the provisions of a confirmed plan binding on the debtor and

creditors. It is derived from section 95(a) of chapter 9 (section

415(a) of former title 11).

Subsections (b) and (c) (enacted as section 944(b) and (c))

provide for the discharge of a municipality. The discharge is

essentially the same as that granted under section 95(b) of the

Bankruptcy Act (section 415(b) of former title 11).

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 106, 524 of this title.

-CITE-

11 USC Sec. 945 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER III - THE PLAN

-HEAD-

Sec. 945. Continuing jurisdiction and closing of the case

-STATUTE-

(a) The court may retain jurisdiction over the case for such

period of time as is necessary for the successful implementation of

the plan.

(b) Except as provided in subsection (a) of this section, the

court shall close the case when administration of the case has been

completed.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2625; Pub. L. 98-353, title

III, Sec. 498, July 10, 1984, 98 Stat. 384.)

-MISC1-

HISTORICAL AND REVISION NOTES

SENATE REPORT NO. 95-989

Section 948 (enacted as section 945) permits the court to retain

jurisdiction over the case to ensure successful execution of the

plan. The provision is the same as that found in section 96(e) of

Chapter 9 of the present Act (section 416(e) of former title 11).

AMENDMENTS

1984 - Subsec. (a). Pub. L. 98-353 substituted ''implementation''

for ''execution''.

EFFECTIVE DATE OF 1984 AMENDMENT

Amendment by Pub. L. 98-353 effective with respect to cases filed

90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,

set out as a note under section 101 of this title.

-CITE-

11 USC Sec. 946 01/06/03

-EXPCITE-

TITLE 11 - BANKRUPTCY

CHAPTER 9 - ADJUSTMENT OF DEBTS OF A MUNICIPALITY

SUBCHAPTER III - THE PLAN

-HEAD-

Sec. 946. Effect of exchange of securities before the date of the

filing of the petition

-STATUTE-

The exchange of a new security under the plan for a claim covered

by the plan, whether such exchange occurred before or after the

date of the filing of the petition, does not limit or impair the

effectiveness of the plan or of any provision of this chapter. The

amount and number specified in section 1126(c) of this title

include the amount and number of claims formerly held by a creditor

that has participated in any such exchange.

-SOURCE-

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2625.)

-MISC1-

HISTORICAL AND REVISION NOTES

LEGISLATIVE STATEMENTS

The House amendment deletes section 950 of the Senate amendment

as unnecessary. The constitutionality of chapter 9 of the House

amendment is beyond doubt.

SENATE REPORT NO. 95-989

(Section 949) This section (enacted as section 946), which

follows section 97 of current law (section 417 of former title 11),

permits an exchange of a security before the case is filed to

constitute an acceptance of the plan if the exchange was under a

proposal that later becomes the plan.

-CITE-