Consumer Bankruptcy Reform Act of 2020

I 116TH CONGRESS 2D SESSION H. R. 8902 To amend title 11, United States Code, to add a bankruptcy chapter relating to the debt of individuals, and for other purposes. IN THE HOUSE OF REPRESENTATIVES DECEMBER 8, 2020 Mr. NADLER (for himself and Mr. CICILLINE) introduced the following bill; which was referred to the Committee on the Judiciary, and in addition to the Committee on Financial Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provi- sions as fall within the jurisdiction of the committee concerned A BILL To amend title 11, United States Code, to add a bankruptcy chapter relating to the debt of individuals, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Consumer Bankruptcy 4 Reform Act of 2020’’. 5 SEC. 2. TABLE OF CONTENTS. 6 The table of contents for this Act is as follows: 7 Sec. 1. Short title. Sec. 2. Table of contents. VerDate Sep 11 2014 00:27 Jan 06, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6211 E:\BILLS\H8902.IH H8902 pbinns on DSKJLVW7X2PROD with BILLS 2 •HR 8902 IH TITLE I—CHAPTER 10 INDIVIDUAL BANKRUPTCY Sec. 101. Findings and purpose. Sec. 102. Chapter 10 individual bankruptcy. Sec. 103. Repeal of chapter 13. Sec. 104. Other amendments to the Bankruptcy Code. Sec. 105. Data collection. Sec. 106. Electronic signatures. Sec. 107. Judicial education. Sec. 108. Conforming amendments to other laws. TITLE II—CONSUMER FINANCIAL PROTECTION AMENDMENTS Sec. 201. Amendments to the Consumer Financial Protection Act of 2010. Sec. 202. Amendments to the Truth in Lending Act. Sec. 203. Amendments to the Fair Credit Reporting Act. Sec. 204. Amendments to the Equal Credit Opportunity Act. Sec. 205. Amendments to the Fair Debt Collection Practices Act. Sec. 206. Amendments to the Electronic Fund Transfers Act. TITLE III—BANKRUPTCY RULES Sec. 301. Rules Enabling Act amendments. Sec. 302. Bankruptcy rules amendments. Sec. 303. Sense of Congress. TITLE IV—FUNDING THE BANKRUPTCY SYSTEM Sec. 401. Bankruptcy fees. Sec. 402. Trustee compensation. TITLE V—BANKRUPTCY LIEN FILING SYSTEM Sec. 501. Bankruptcy lien filing system. TITLE VI—MISCELLANEOUS Sec. 601. Effective date. Sec. 602. Transition. Sec. 603. Severability. TITLE I—CHAPTER 10 1 INDIVIDUAL BANKRUPTCY 2 SEC. 101. FINDINGS AND PURPOSE. 3 (a) FINDINGS.—Congress finds that— 4 (1) individuals and families are often in finan- 5 cial distress for reasons outside of their control, such 6 as job loss, medical bills, or educational debt, and an 7 effective bankruptcy system not only provides those 8 VerDate Sep 11 2014 00:27 Jan 06, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H8902.IH H8902 pbinns on DSKJLVW7X2PROD with BILLS 3 •HR 8902 IH individuals and families with a fresh start but also 1 ensures that they can participate fully in the United 2 States economy; 3 (2) the Bankruptcy Code was adopted in 1978, 4 and, since then, consumer lending has grown dra- 5 matically and been transformed by technology and 6 the preemption of State usury and consumer protec- 7 tion laws for certain types of lenders; 8 (3) unnecessary paperwork and overly complex 9 laws increase the cost of bankruptcy and prevent in- 10 dividuals and families in the United States who need 11 help from accessing the bankruptcy system; 12 (4) many consumer debtors cannot afford bank- 13 ruptcy counsel and must instead save up to pay an 14 attorney to file their bankruptcy petitions; 15 (5) the dual-track bankruptcy system produces 16 racially disparate outcomes that disadvantage people 17 of color; 18 (6) student loan debt burdens are creating dis- 19 tortions in the labor and housing market; 20 (7) the nondischargeability of private student 21 loan debt has not resulted in lower financing costs 22 for student loan borrowers; 23 (8) the inability of debtors to restructure home 24 mortgage loans has led to unnecessary foreclosures 25 VerDate Sep 11 2014 00:27 Jan 06, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H8902.IH H8902 pbinns on DSKJLVW7X2PROD with BILLS 4 •HR 8902 IH that have created hardships for individuals and fam- 1 ilies and their communities without reducing costs of 2 mortgage financing; 3 (9) individuals and families often rely on their 4 cars to get to work and to get dependents to school 5 and medical appointments but often cannot retain 6 their cars in bankruptcy without paying substan- 7 tially more than the car is worth; 8 (10) the difficulty of enforcing the discharge in- 9 junction has enabled illegal debt collection activity 10 that undercuts the fresh start policy of bankruptcy; 11 (11) existing law does not provide a sufficient 12 deterrent to predatory creditors that harm individ- 13 uals and families in bankruptcy by violating con- 14 sumer financial laws or failing to comply with bank- 15 ruptcy rules; and 16 (12) well-counseled, affluent debtors can avoid 17 repaying creditors through asset protection planning. 18 (b) PURPOSE.—The purpose of the Act is to establish 19 a bankruptcy system that helps individuals and families 20 in the United States regain financial stability and protects 21 against abusive and predatory behavior by— 22 (1) streamlining the process of filing for bank- 23 ruptcy, simplifying court procedures in bankruptcy, 24 VerDate Sep 11 2014 00:27 Jan 06, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H8902.IH H8902 pbinns on DSKJLVW7X2PROD with BILLS 5 •HR 8902 IH and lowering the cost of bankruptcy for both con- 1 sumers and creditors; 2 (2) creating a single-chapter consumer bank- 3 ruptcy system that allows consumers greater flexi- 4 bility in addressing their debts and prevents dis- 5 parate treatment of similarly situated consumers; 6 (3) offering consumers more and better options 7 to deal with debts, while ensuring the fair treatment 8 of creditors; 9 (4) making it easier for consumers to pay an 10 attorney for counsel or representation in a bank- 11 ruptcy case; 12 (5) simplifying the identification and treatment 13 of cases by expanding the number of routine cases 14 that are handled by the court in which there is no 15 chance of a reasonable payment to creditors and re- 16 ducing paperwork requirements in those routine 17 cases; 18 (6) allowing the modification of mortgages on 19 all residences; 20 (7) allowing the modification of car loans based 21 on the market value of a car; 22 (8) allowing the discharge of student loan debt 23 on equal terms with most other types of debt; 24 VerDate Sep 11 2014 00:27 Jan 06, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H8902.IH H8902 pbinns on DSKJLVW7X2PROD with BILLS 6 •HR 8902 IH (9) reducing racial, gender, and other harmful 1 disparities in the availability, accessibility, costs, and 2 outcomes with respect to the bankruptcy process; 3 (10) ensuring the fair treatment of claimants 4 for domestic support obligations; 5 (11) reducing abusive creditor behavior; and 6 (12) closing bankruptcy loopholes that allow the 7 wealthy to exploit the bankruptcy process. 8 SEC. 102. CHAPTER 10 INDIVIDUAL BANKRUPTCY. 9 (a) IN GENERAL.—Title 11, United States Code, is 10 amended by inserting after section 946 the following: 11 ‘‘CHAPTER 10—INDIVIDUAL BANKRUPTCY 12 ‘‘SUBCHAPTER I—GENERAL PROVISIONS ‘‘Sec. ‘‘1001. Trustee. ‘‘1002. Rights and powers of debtor. ‘‘1003. Debtor engaged in business. ‘‘1004. Possession of property of the estate. ‘‘1005. Conversion or dismissal. ‘‘1006. Treatment of certain contracts and leases. ‘‘1007. Treatment of rental purchase agreements. ‘‘1008. Obtaining credit. ‘‘1009. Stay of action against codebtor. ‘‘1010. Interpretive principle. ‘‘SUBCHAPTER II—PLANS ‘‘1021. Filing of plans. ‘‘1022. Contents of plans. ‘‘1023. Plan confirmation hearing. ‘‘1024. Confirmation of plans. ‘‘1025. Payments under a repayment plan. ‘‘1026. Payments under a residence plan or property plan. ‘‘1027. Protection of lessors and purchase money lenders. ‘‘1028. Effect of confirmation. ‘‘1029. Modification of repayment plan. ‘‘SUBCHAPTER III—DISCHARGE ‘‘1031. Discharge; scope and timing. ‘‘1032. Revocation of discharge or order of confirmation. VerDate Sep 11 2014 00:27 Jan 06, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6211 E:\BILLS\H8902.IH H8902 pbinns on DSKJLVW7X2PROD with BILLS 7 •HR 8902 IH ‘‘SUBCHAPTER IV—AVOIDANCE ACTIONS ‘‘1041. Treatment of certain liens. ‘‘1042. Limitations on avoidance actions. ‘‘SUBCHAPTER V—LIMITED PROCEEDINGS ‘‘1051. Election of limited proceeding. ‘‘1052. Effect of limited proceeding. ‘‘1053. Dismissal or conversion of limited proceedings. ‘‘SUBCHAPTER I—GENERAL PROVISIONS 1 ‘‘§ 1001. Trustee 2 ‘‘(a) APPOINTMENT.—Except as provided by section 3 1052, in a case under this chapter, the United States 4 trustee— 5 ‘‘(1) shall appoint 1 disinterested individual to 6 serve as trustee from the panel of private trustees 7 under section 586(a) of title 28 or a standing trust- 8 ee under subsection (b) of that section who meets 9 the requirements of a trustee under section 522 of 10 this title; or 11 ‘‘(2) may serve as trustee. 12 ‘‘(b) DUTIES.—The trustee shall— 13 ‘‘(1) perform the duties required under para- 14 graphs (2) through (5) and (7) of section 704; 15 ‘‘(2) appear and be heard at any hearing that 16 concerns— 17 ‘‘(A) the value of property subject to a 18 lien; or 19 ‘‘(B) confirmation of a repayment plan, a 20 residence plan, or a property plan; 21 VerDate Sep 11 2014 00:27 Jan 06, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H8902.IH H8902 pbinns on DSKJLVW7X2PROD with BILLS 8 •HR 8902 IH ‘‘(3) advise, other than on legal matters, and 1 assist the debtor in the formulation of, and perform- 2 ance under, any plan; 3 ‘‘(4) ensure that the debtor commences making 4 timely payments under section 1025; 5 ‘‘(5) in the case of a debtor against whom there 6 is a claim for a domestic support obligation, provide 7 the notices required under subsection (d); and 8 ‘‘(6) in the case of a debtor engaged in business 9 as described in section 1003(a), perform the duties 10 required under paragraphs (3) and (4) of section 11 1106(a). 12 ‘‘(c) PROHIBITIONS.—The trustee may not— 13 ‘‘(1) serve as an advocate for debtors or credi- 14 tors; 15 ‘‘(2) advise debtors or creditors on legal mat- 16 ters; or 17 ‘‘(3) raise an objection to a plan filed under 18 section 1021 solely on the basis of the treatment of 19 a secured claim under the plan. 20 ‘‘(d) DOMESTIC SUPPORT CLAIM NOTICE.— 21 ‘‘(1) DEFINITION OF STATE OR LOCAL CHILD 22 SUPPORT ENFORCEMENT AGENCY.—In this sub- 23 section, the term ‘State or local child support en- 24 forcement agency’ means any agency of a State or 25 VerDate Sep 11 2014 00:27 Jan 06, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H8902.IH H8902 pbinns on DSKJLVW7X2PROD with BILLS 9 •HR 8902 IH political subdivision thereof operating pursuant to a 1 plan described in section 454 of the Social Security 2 Act (42 U.S.C. 654) that has been approved by the 3 Secretary of Health and Human Services under part 4 D of title IV of such Act (42 U.S.C. 651 et seq.). 5 ‘‘(2) ADDITIONAL DUTIES.—In the case of a 6 debtor against whom there is a claim for a domestic 7 support obligation, the trustee shall— 8 ‘‘(A) provide written notice of the claim to 9 the holder of the domestic support obligation 10 that includes— 11 ‘‘(i) a notice of the right of the holder 12 to use the services of a State or local child 13 support enforcement agency for assistance 14 in collecting child support during and after 15 the case; and 16 ‘‘(ii) the address and telephone num- 17 ber of the State or local child support en- 18 forcement agency of the State or political 19 subdivision thereof in which the holder re- 20 sides; 21 ‘‘(B) provide written notice of the claim to 22 the State or local child support enforcement 23 agency of the State or political subdivision 24 thereof in which the holder resides that includes 25 VerDate Sep 11 2014 00:27 Jan 06, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H8902.IH H8902 pbinns on DSKJLVW7X2PROD with BILLS 10 •HR 8902 IH the name, address, and telephone number of the 1 holder of the domestic support obligation; and 2 ‘‘(C) on the date on which the debtor is 3 granted a discharge under section 1031, provide 4 written notice to the holder of the domestic sup- 5 port obligation and the State or local child sup- 6 port enforcement agency of the State or polit- 7 ical subdivision thereof in which the holder re- 8 sides of— 9 ‘‘(i) the granting of the discharge; 10 ‘‘(ii) the most recent known address 11 of the debtor; 12 ‘‘(iii) the most recent known name 13 and address of the most recent known em- 14 ployer of the debtor; and 15 ‘‘(iv) the name of each creditor that 16 holds a claim that is not discharged under 17 paragraph (2) or (4) of section 523(a). 18 ‘‘(3) ADDRESS REQUEST.— 19 ‘‘(A) IN GENERAL.—The holder of a claim 20 for domestic support against the debtor or a 21 State or local child support enforcement agency 22 of the State or political subdivision thereof in 23 which the holder resides may request from a 24 VerDate Sep 11 2014 00:27 Jan 06, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H8902.IH H8902 pbinns on DSKJLVW7X2PROD with BILLS 11 •HR 8902 IH creditor described in paragraph (2)(C)(iv) the 1 most recent known address of the debtor. 2 ‘‘(B) NO LIABILITY.—Notwithstanding any 3 other provision of law, a creditor that makes a 4 disclosure in connection with a request made 5 under subparagraph (A) shall not be liable for 6 making the disclosure. 7 ‘‘§ 1002. Rights and powers of debtor 8 ‘‘(a) IN GENERAL.—Subject to any limitations of a 9 trustee under this chapter, the debtor shall have, exclusive 10 of the trustee, the rights and powers of a trustee under— 11 ‘‘(1) subsections (b), (c), (d), (f), and (l) of sec- 12 tion 363; and 13 ‘‘(2) section 364. 14 ‘‘(b) AVOIDANCE OF TRANSFERS.—The debtor may 15 avoid a transfer of property of the debtor or recover a 16 setoff if— 17 ‘‘(1)(A) the transfer is avoidable by the trustee 18 under section 544, 545, 547, 548, 549, or 1041 or 19 recoverable by the trustee under section 553; and 20 ‘‘(B) the trustee does not attempt to avoid the 21 transfer; or 22 ‘‘(2) section 1042 prohibits the trustee from 23 avoiding the transfer. 24 VerDate Sep 11 2014 00:27 Jan 06, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H8902.IH H8902 pbinns on DSKJLVW7X2PROD with BILLS 12 •HR 8902 IH ‘‘§ 1003. Debtor engaged in business 1 ‘‘(a) IN GENERAL.—For the purposes of this chapter, 2 [Text truncated for display. Full text available on Congress.gov.]