Consumer Bankruptcy Reform Act of 2020

II 116TH CONGRESS 2D SESSION S. 4991 To amend title 11, United States Code, to add a bankruptcy chapter relating to the debt of individuals, and for other purposes. IN THE SENATE OF THE UNITED STATES DECEMBER 9, 2020 Ms. WARREN (for herself, Mr. DURBIN, and Mr. WHITEHOUSE) introduced the following bill; which was read twice and referred to the Committee on the Judiciary 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. TITLE I—CHAPTER 10 INDIVIDUAL BANKRUPTCY VerDate Sep 11 2014 20:26 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6211 E:\BILLS\S4991.IS S4991 pamtmann on DSKBC07HB2PROD with BILLS 2 •S 4991 IS 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 individuals and families with a fresh start but also 9 VerDate Sep 11 2014 20:26 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S4991.IS S4991 pamtmann on DSKBC07HB2PROD with BILLS 3 •S 4991 IS ensures that they can participate fully in the United 1 States economy; 2 (2) the Bankruptcy Code was adopted in 1978, 3 and, since then, consumer lending has grown dra- 4 matically and been transformed by technology and 5 the preemption of State usury and consumer protec- 6 tion laws for certain types of lenders; 7 (3) unnecessary paperwork and overly complex 8 laws increase the cost of bankruptcy and prevent in- 9 dividuals and families in the United States who need 10 help from accessing the bankruptcy system; 11 (4) many consumer debtors cannot afford bank- 12 ruptcy counsel and must instead save up to pay an 13 attorney to file their bankruptcy petitions; 14 (5) the dual-track bankruptcy system produces 15 racially disparate outcomes that disadvantage people 16 of color; 17 (6) student loan debt burdens are creating dis- 18 tortions in the labor and housing market; 19 (7) the nondischargeability of private student 20 loan debt has not resulted in lower financing costs 21 for student loan borrowers; 22 (8) the inability of debtors to restructure home 23 mortgage loans has led to unnecessary foreclosures 24 that have created hardships for individuals and fam- 25 VerDate Sep 11 2014 20:26 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S4991.IS S4991 pamtmann on DSKBC07HB2PROD with BILLS 4 •S 4991 IS ilies and their communities without reducing costs of 1 mortgage financing; 2 (9) individuals and families often rely on their 3 cars to get to work and to get dependents to school 4 and medical appointments but often cannot retain 5 their cars in bankruptcy without paying substan- 6 tially more than the car is worth; 7 (10) the difficulty of enforcing the discharge in- 8 junction has enabled illegal debt collection activity 9 that undercuts the fresh start policy of bankruptcy; 10 (11) existing law does not provide a sufficient 11 deterrent to predatory creditors that harm individ- 12 uals and families in bankruptcy by violating con- 13 sumer financial laws or failing to comply with bank- 14 ruptcy rules; and 15 (12) well-counseled, affluent debtors can avoid 16 repaying creditors through asset protection planning. 17 (b) PURPOSE.—The purpose of the Act is to establish 18 a bankruptcy system that helps individuals and families 19 in the United States regain financial stability and protects 20 against abusive and predatory behavior by— 21 (1) streamlining the process of filing for bank- 22 ruptcy, simplifying court procedures in bankruptcy, 23 and lowering the cost of bankruptcy for both con- 24 sumers and creditors; 25 VerDate Sep 11 2014 20:26 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S4991.IS S4991 pamtmann on DSKBC07HB2PROD with BILLS 5 •S 4991 IS (2) creating a single-chapter consumer bank- 1 ruptcy system that allows consumers greater flexi- 2 bility in addressing their debts and prevents dis- 3 parate treatment of similarly situated consumers; 4 (3) offering consumers more and better options 5 to deal with debts, while ensuring the fair treatment 6 of creditors; 7 (4) making it easier for consumers to pay an 8 attorney for counsel or representation in a bank- 9 ruptcy case; 10 (5) simplifying the identification and treatment 11 of cases by expanding the number of routine cases 12 that are handled by the court in which there is no 13 chance of a reasonable payment to creditors and re- 14 ducing paperwork requirements in those routine 15 cases; 16 (6) allowing the modification of mortgages on 17 all residences; 18 (7) allowing the modification of car loans based 19 on the market value of a car; 20 (8) allowing the discharge of student loan debt 21 on equal terms with most other types of debt; 22 (9) reducing racial, gender, and other harmful 23 disparities in the availability, accessibility, costs, and 24 outcomes with respect to the bankruptcy process; 25 VerDate Sep 11 2014 20:26 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S4991.IS S4991 pamtmann on DSKBC07HB2PROD with BILLS 6 •S 4991 IS (10) ensuring the fair treatment of claimants 1 for domestic support obligations; 2 (11) reducing abusive creditor behavior; and 3 (12) closing bankruptcy loopholes that allow the 4 wealthy to exploit the bankruptcy process. 5 SEC. 102. CHAPTER 10 INDIVIDUAL BANKRUPTCY. 6 (a) IN GENERAL.—Title 11, United States Code, is 7 amended by inserting after section 946 the following: 8 ‘‘CHAPTER 10—INDIVIDUAL BANKRUPTCY 9 ‘‘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. ‘‘SUBCHAPTER IV—AVOIDANCE ACTIONS ‘‘1041. Treatment of certain liens. ‘‘1042. Limitations on avoidance actions. ‘‘SUBCHAPTER V—LIMITED PROCEEDINGS VerDate Sep 11 2014 20:26 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6211 E:\BILLS\S4991.IS S4991 pamtmann on DSKBC07HB2PROD with BILLS 7 •S 4991 IS ‘‘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 ‘‘(3) advise, other than on legal matters, and 22 assist the debtor in the formulation of, and perform- 23 ance under, any plan; 24 VerDate Sep 11 2014 20:26 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S4991.IS S4991 pamtmann on DSKBC07HB2PROD with BILLS 8 •S 4991 IS ‘‘(4) ensure that the debtor commences making 1 timely payments under section 1025; 2 ‘‘(5) in the case of a debtor against whom there 3 is a claim for a domestic support obligation, provide 4 the notices required under subsection (d); and 5 ‘‘(6) in the case of a debtor engaged in business 6 as described in section 1003(a), perform the duties 7 required under paragraphs (3) and (4) of section 8 1106(a). 9 ‘‘(c) PROHIBITIONS.—The trustee may not— 10 ‘‘(1) serve as an advocate for debtors or credi- 11 tors; 12 ‘‘(2) advise debtors or creditors on legal mat- 13 ters; or 14 ‘‘(3) raise an objection to a plan filed under 15 section 1021 solely on the basis of the treatment of 16 a secured claim under the plan. 17 ‘‘(d) DOMESTIC SUPPORT CLAIM NOTICE.— 18 ‘‘(1) DEFINITION OF STATE OR LOCAL CHILD 19 SUPPORT ENFORCEMENT AGENCY.—In this sub- 20 section, the term ‘State or local child support en- 21 forcement agency’ means any agency of a State or 22 political subdivision thereof operating pursuant to a 23 plan described in section 454 of the Social Security 24 Act (42 U.S.C. 654) that has been approved by the 25 VerDate Sep 11 2014 20:26 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S4991.IS S4991 pamtmann on DSKBC07HB2PROD with BILLS 9 •S 4991 IS Secretary of Health and Human Services under part 1 D of title IV of such Act (42 U.S.C. 651 et seq.). 2 ‘‘(2) ADDITIONAL DUTIES.—In the case of a 3 debtor against whom there is a claim for a domestic 4 support obligation, the trustee shall— 5 ‘‘(A) provide written notice of the claim to 6 the holder of the domestic support obligation 7 that includes— 8 ‘‘(i) a notice of the right of the holder 9 to use the services of a State or local child 10 support enforcement agency for assistance 11 in collecting child support during and after 12 the case; and 13 ‘‘(ii) the address and telephone num- 14 ber of the State or local child support en- 15 forcement agency of the State or political 16 subdivision thereof in which the holder re- 17 sides; 18 ‘‘(B) provide written notice of the claim to 19 the State or local child support enforcement 20 agency of the State or political subdivision 21 thereof in which the holder resides that includes 22 the name, address, and telephone number of the 23 holder of the domestic support obligation; and 24 VerDate Sep 11 2014 20:26 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S4991.IS S4991 pamtmann on DSKBC07HB2PROD with BILLS 10 •S 4991 IS ‘‘(C) on the date on which the debtor is 1 granted a discharge under section 1031, provide 2 written notice to the holder of the domestic sup- 3 port obligation and the State or local child sup- 4 port enforcement agency of the State or polit- 5 ical subdivision thereof in which the holder re- 6 sides of— 7 ‘‘(i) the granting of the discharge; 8 ‘‘(ii) the most recent known address 9 of the debtor; 10 ‘‘(iii) the most recent known name 11 and address of the most recent known em- 12 ployer of the debtor; and 13 ‘‘(iv) the name of each creditor that 14 holds a claim that is not discharged under 15 paragraph (2) or (4) of section 523(a). 16 ‘‘(3) ADDRESS REQUEST.— 17 ‘‘(A) IN GENERAL.—The holder of a claim 18 for domestic support against the debtor or a 19 State or local child support enforcement agency 20 of the State or political subdivision thereof in 21 which the holder resides may request from a 22 creditor described in paragraph (2)(C)(iv) the 23 most recent known address of the debtor. 24 VerDate Sep 11 2014 20:26 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S4991.IS S4991 pamtmann on DSKBC07HB2PROD with BILLS 11 •S 4991 IS ‘‘(B) NO LIABILITY.—Notwithstanding any 1 other provision of law, a creditor that makes a 2 disclosure in connection with a request made 3 under subparagraph (A) shall not be liable for 4 making the disclosure. 5 ‘‘§ 1002. Rights and powers of debtor 6 ‘‘(a) IN GENERAL.—Subject to any limitations of a 7 trustee under this chapter, the debtor shall have, exclusive 8 of the trustee, the rights and powers of a trustee under— 9 ‘‘(1) subsections (b), (c), (d), (f), and (l) of sec- 10 tion 363; and 11 ‘‘(2) section 364. 12 ‘‘(b) AVOIDANCE OF TRANSFERS.—The debtor may 13 avoid a transfer of property of the debtor or recover a 14 setoff if— 15 ‘‘(1)(A) the transfer is avoidable by the trustee 16 under section 544, 545, 547, 548, 549, or 1041 or 17 recoverable by the trustee under section 553; and 18 ‘‘(B) the trustee does not attempt to avoid the 19 transfer; or 20 ‘‘(2) section 1042 prohibits the trustee from 21 avoiding the transfer. 22 ‘‘§ 1003. Debtor engaged in business 23 ‘‘(a) IN GENERAL.—For the purposes of this chapter, 24 a debtor is engaged in business if the debtor is— 25 VerDate Sep 11 2014 20:26 Dec 29, 2020 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S4991.IS S4991 pamtmann on DSKBC07HB2PROD with BILLS 12 •S 4991 IS ‘‘(1) self-employed; and 1 ‘‘(2) required to withhold taxes under section 2 3402 of the Internal Revenue Code of 1986. 3 ‘‘(b) R [Text truncated for display. Full text available on Congress.gov.]