Bankruptcy Forms: Filing Bankruptcy Chapter 7 Bankruptcy Software Chapter 13

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TITLE 11–BANKRUPTCY

CHAPTER 1–GENERAL PROVISIONS

Sec. 109. Who may be a debtor

    (a) Notwithstanding any other provision of this section, only a 
person that resides or has a domicile, a place of business, or property 
in the United States, or a municipality, may be a debtor under this 
title.
    (b) A person may be a debtor under chapter 7 of this title only if 
such person is not--
        (1) a railroad;
        (2) a domestic insurance company, bank, savings bank, 
    cooperative bank, savings and loan association, building and loan 
    association, homestead association, a small business investment 
    company licensed by the Small Business Administration under 
    subsection (c) or (d) \1\ of section 301 of the Small Business 
    Investment Act of 1958, credit union, or industrial bank or similar 
    institution which is an insured bank as defined in section 3(h) of 
    the Federal Deposit Insurance Act; or
---------------------------------------------------------------------------
    \1\ See References in Text note below.
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        (3) a foreign insurance company, bank, savings bank, cooperative 
    bank, savings and loan association, building and loan association, 
    homestead association, or credit union, engaged in such business in 
    the United States.

    (c) An entity may be a debtor under chapter 9 of this title if and 
only if such entity--
        (1) is a municipality;
        (2) is specifically authorized, in its capacity as a 
    municipality or by name, to be a debtor under such chapter by State 
    law, or by a governmental officer or organization empowered by State 
    law to authorize such entity to be a debtor under such chapter;
        (3) is insolvent;
        (4) desires to effect a plan to adjust such debts; and
        (5)(A) has obtained the agreement of creditors holding at least 
    a majority in amount of the claims of each class that such entity 
    intends to impair under a plan in a case under such chapter;
        (B) has negotiated in good faith with creditors and has failed 
    to obtain the agreement of creditors holding at least a majority in 
    amount of the claims of each class that such entity intends to 
    impair under a plan in a case under such chapter;
        (C) is unable to negotiate with creditors because such 
    negotiation is impracticable; or
        (D) reasonably believes that a creditor may attempt to obtain a 
    transfer that is avoidable under section 547 of this title.

    (d) Only a person that may be a debtor under chapter 7 of this 
title, except a stockbroker or a commodity broker, and a railroad may be 
a debtor under chapter 11 of this title.
    (e) Only an individual with regular income that owes, on the date of 
the filing of the petition, noncontingent, liquidated, unsecured debts 
of less than $250,000 and noncontingent, liquidated, secured debts of 
less than $750,000, or an individual with regular income and such 
individual's spouse, except a stockbroker or a commodity broker, that 
owe, on the date of the filing of the petition, noncontingent, 
liquidated, unsecured debts that aggregate less than $250,000 and 
noncontingent, liquidated, secured debts of less than $750,000 may be a 
debtor under chapter 13 of this title.
    (f) Only a family farmer with regular annual income may be a debtor 
under chapter 12 of this title.
    (g) Notwithstanding any other provision of this section, no 
individual or family farmer may be a debtor under this title who has 
been a debtor in a case pending under this title at any time in the 
preceding 180 days if--
        (1) the case was dismissed by the court for willful failure of 
    the debtor to abide by orders of the court, or to appear before the 
    court in proper prosecution of the case; or
        (2) the debtor requested and obtained the voluntary dismissal of 
    the case following the filing of a request for relief from the 
    automatic stay provided by section 362 of this title.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2557; Pub. L. 97-320, title VII, 
Sec. 703(d), Oct. 15, 1982, 96 Stat. 1539; Pub. L. 98-353, title III, 
Secs. 301, 425, July 10, 1984, 98 Stat. 352, 369; Pub. L. 99-554, title 
II, Sec. 253, Oct. 27, 1986, 100 Stat. 3105; Pub. L. 100-597, Sec. 2, 
Nov. 3, 1988, 102 Stat. 3028; Pub. L. 103-394, title I, Sec. 108(a), 
title II, Sec. 220, title IV, Sec. 402, title V, Sec. 501(d)(2), Oct. 
22, 1994, 108 Stat. 4111, 4129, 4141, 4143.)


                      Historical and Revision Notes

                         legislative statements

    Section 109(b) of the House amendment adopts a provision contained 
in H.R. 8200 as passed by the House. Railroad liquidations will occur 
under chapter 11, not chapter 7.
    Section 109(c) contains a provision which tracks the Senate 
amendment as to when a municipality may be a debtor under chapter 11 of 
title 11. As under the Bankruptcy Act [former title 11], State law 
authorization and prepetition negotiation efforts are required.
    Section 109(e) represents a compromise between H.R. 8200 as passed 
by the House and the Senate amendment relating to the dollar amounts 
restricting eligibility to be a debtor under chapter 13 of title 11. The 
House amendment adheres to the limit of $100,000 placed on unsecured 
debts in H.R. 8200 as passed by the House. It adopts a midpoint of 
$350,000 as a limit on secured claims, a compromise between the level of 
$500,000 in H.R. 8200 as passed by the House and $200,000 as contained 
in the Senate amendment.


                        senate report no. 95-989

    This section specifies eligibility to be a debtor under the 
bankruptcy laws. The first criterion, found in the current Bankruptcy 
Act section 2a(1) [section 11(a)(1) of former title 11] requires that 
the debtor reside or have a domicile, a place of business, or property 
in the United States.
    Subsection (b) defines eligibility for liquidation under chapter 7. 
All persons are eligible except insurance companies, and certain banking 
institutions. These exclusions are contained in current law. However, 
the banking institution exception is expanded in light of changes in 
various banking laws since the current law was last amended on this 
point. A change is also made to clarify that the bankruptcy laws cover 
foreign banks and insurance companies not engaged in the banking or 
insurance business in the United States but having assets in the United 
States. Banking institutions and insurance companies engaged in business 
in this country are excluded from liquidation under the bankruptcy laws 
because they are bodies for which alternate provision is made for their 
liquidation under various State or Federal regulatory laws. Conversely, 
when a foreign bank or insurance company is not engaged in the banking 
or insurance business in the United States, then those regulatory laws 
do not apply, and the bankruptcy laws are the only ones available for 
administration of any assets found in United States.
    The first clause of subsection (b) provides that a railroad is not a 
debtor except where the requirements of section 1174 are met.
    Subsection (c) [enacted as (d)] provides that only a person who may 
be a debtor under chapter 7 and a railroad may also be a debtor under 
chapter 11, but a stockbroker or commodity broker is eligible for relief 
only under chapter 7. Subsection (d) [enacted as (e)] establishes dollar 
limitations on the amount of indebtedness that an individual with 
regular income can incur and yet file under chapter 13.


                         house report no. 95-595

    Subsection (c) defines eligibility for chapter 9. Only a 
municipality that is unable to pay its debts as they mature, and that is 
not prohibited by State law from proceeding under chapter 9, is 
permitted to be a chapter 9 debtor. The subsection is derived from 
Bankruptcy Act Sec. 84 [section 404 of former title 11], with two 
changes. First, section 84 requires that the municipality be ``generally 
authorized to file a petition under this chapter by the legislature, or 
by a governmental officer or organization empowered by State law to 
authorize the filing of a petition.'' The ``generally authorized'' 
language is unclear, and has generated a problem for a Colorado 
Metropolitan District that attempted to use chapter IX [chapter 9 of 
former title 11] in 1976. The ``not prohibited'' language provides 
flexibility for both the States and the municipalities involved, while 
protecting State sovereignty as required by Ashton v. Cameron County 
Water District No. 1, 298 U.S. 513 (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 Bekins v. United States, 304 U.S. 27 (1938) [58 S.Ct. 
811, 82 L.Ed. 1137, 36 Am.Bankr.Rep.N.S. 187, rehearing denied 58 S.Ct. 
1043, 1044, 304 U.S. 589, 82 L.Ed. 1549].
    The second change deletes the four prerequisites to filing found in 
section 84 [section 404 of former title 11]. The prerequisites require 
the municipality to have worked out a plan in advance, to have attempted 
to work out a plan without success, to fear that a creditor will attempt 
to obtain a preference, or to allege that prior negotiation is 
impracticable. The loopholes in those prerequisites are larger than the 
requirement itself. It was a compromise from pre-1976 chapter IX 
[chapter 9 of former title 11] under which a municipality could file 
only if it had worked out an adjustment plan in advance. In the 
meantime, chapter IX protection was unavailable. There was some 
controversy at the time of the enactment of current chapter IX 
concerning deletion of the pre-negotiation requirement. It was argued 
that deletion would lead to a rash of municipal bankruptcies. The 
prerequisites now contained in section 84 were inserted to assuage that 
fear. They are largely cosmetic and precatory, however, and do not offer 
any significant deterrent to use of chapter IX. Instead, other factors, 
such as a general reluctance on the part of any debtor, especially a 
municipality, to use the bankruptcy laws, operates as a much more 
effective deterrent against capricious use.
    Subsection (d) permits a person that may proceed under chapter 7 to 
be a debtor under chapter 11, Reorganization, with two exceptions. 
Railroads, which are excluded from chapter 7, are permitted to proceed 
under chapter 11. Stockbrokers and commodity brokers, which are 
permitted to be debtors under chapter 7, are excluded from chapter 11. 
The special rules for treatment of customer accounts that are the 
essence of stockbroker and commodity broker liquidations are available 
only in chapter 7. Customers would be unprotected under chapter 11. The 
special protective rules are unavailable in chapter 11 because their 
complexity would make reorganization very difficult at best, and 
unintelligible at worst. The variety of options available in 
reorganization cases make it extremely difficult to reorganize and 
continue to provide the special customer protection necessary in these 
cases.
    Subsection (e) specifies eligibility for chapter 13, Adjustment of 
Debts of an Individual with Regular Income. An individual with regular 
income, or an individual with regular income and the individual's 
spouse, may proceed under chapter 13. As noted in connection with the 
definition of the term ``individual with regular income'', this 
represents a significant departure from current law. The change might 
have been too great, however, without some limitation. Thus, the debtor 
(or the debtor and spouse) must have unsecured debts that aggregate less 
than $100,000, and secured debts that aggregate less than $500,000. 
These figures will permit the small sole proprietor, for whom a chapter 
11 reorganization is too cumbersome a procedure, to proceed under 
chapter 13. It does not create a presumption that any sole proprietor 
within that range is better off in chapter 13 than chapter 11. The 
conversion rules found in section 1307 will govern the appropriateness 
of the two chapters for any particular individual. The figures merely 
set maximum limits.
    Whether a small business operated by a husband and wife, the so-
called ``mom and pop grocery store,'' will be a partnership and thus 
excluded from chapter 13, or a business owned by an individual, will 
have to be determined on the facts of each case. Even if partnership 
papers have not been filed, for example, the issue will be whether the 
assets of the grocery store are for the benefit of all creditors of the 
debtor or only for business creditors, and whether such assets may be 
the subject of a chapter 13 proceeding. The intent of the section is to 
follow current law that a partnership by estoppel may be adjudicated in 
bankruptcy and therefore would not prevent a chapter 13 debtor from 
subjecting assets in such a partnership to the reach of all creditors in 
a chapter 13 case. However, if the partnership is found to be a 
partnership by agreement, even informal agreement, than a separate 
entity exists and the assets of that entity would be exempt from a case 
under chapter 13.

                       References in Text

    Section 301 of the Small Business Investment Act of 1958, referred 
to in subsec. (b)(2), is classified to section 681 of Title 15, Commerce 
and Trade. Subsec. (d) of section 301 was repealed by Pub. L. 104-208, 
div. D, title II, Sec. 208(b)(3)(A), Sept. 30, 1996, 110 Stat. 3009-742.
    Section 3(h) of the Federal Deposit Insurance Act, referred to in 
subsec. (b)(2), is classified to section 1813(h) of Title 12, Banks and 
Banking.


                               Amendments

    1994--Subsec. (b)(2). Pub. L. 103-394, Secs. 220, 501(d)(2), 
inserted ``a small business investment company licensed by the Small 
Business Administration under subsection (c) or (d) of section 301 of 
the Small Business Investment Act of 1958,'' after ``homestead 
association,'' and struck out ``(12 U.S.C. 1813(h))'' after ``Insurance 
Act''.
    Subsec. (c)(2). Pub. L. 103-394, Sec. 402, substituted 
``specifically authorized, in its capacity as a municipality or by 
name,'' for ``generally authorized''.
    Subsec. (e). Pub. L. 103-394, Sec. 108(a), substituted ``$250,000'' 
and ``$750,000'' for ``$100,000'' and ``$350,000'', respectively, in two 
places.
    1988--Subsec. (c)(3). Pub. L. 100-597 struck out ``or unable to meet 
such entity's debts as such debts mature'' after ``insolvent''.
    1986--Subsec. (f). Pub. L. 99-554, Sec. 253(1)(B), (2), added 
subsec. (f) and redesignated former subsec. (f) as (g).
    Subsec. (g). Pub. L. 99-554, Sec. 253(1), redesignated former 
subsec. (f) as (g) and inserted reference to family farmer.
    1984--Subsec. (a). Pub. L. 98-353, Sec. 425(a), struck out ``in the 
United States,'' after ``only a person that resides''.
    Subsec. (c)(5)(D). Pub. L. 98-353, Sec. 425(b), substituted 
``transfer that is avoidable under section 547 of this title'' for 
``preference''.
    Subsec. (d). Pub. L. 98-353, Sec. 425(c), substituted 
``stockbroker'' for ``stockholder''.
    Subsec. (f). Pub. L. 98-353, Sec. 301, added subsec. (f).
    1982--Subsec. (b)(2). Pub. L. 97-320 inserted reference to 
industrial banks or similar institutions which are insured banks as 
defined in section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. 
1813(h)).


                    Effective Date of 1994 Amendment

    Amendment by Pub. L. 103-394 effective Oct. 22, 1994, and not 
applicable with respect to cases commenced under this title before Oct. 
22, 1994, see section 702 of Pub. L. 103-394, set out as a note under 
section 101 of this title.


                    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 1986 Amendment

    Amendment by Pub. L. 99-554 effective 30 days after Oct. 27, 1986, 
but not applicable to cases commenced under this title before that date, 
see section 302(a), (c)(1) of Pub. L. 99-554, set out as a note under 
section 581 of Title 28, Judiciary and Judicial Procedure.


                    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.


                      Adjustment of Dollar Amounts

    For adjustment of dollar amounts specified in subsec. (e) of this 
section by the Judicial Conference of the United States, effective Apr. 
1, 1998, see note set out under section 104 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 104, 349, 921 of this title.


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