Bankruptcy Forms: Filing Bankruptcy Chapter 7 Bankruptcy Software Chapter 13

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TITLE 11–BANKRUPTCY

CHAPTER 7–LIQUIDATION

Sub Chapter – Officers and Administration

Sec. 702. Election of trustee

    (a) A creditor may vote for a candidate for trustee only if such 
creditor--
        (1) holds an allowable, undisputed, fixed, liquidated, unsecured 
    claim of a kind entitled to distribution under section 726(a)(2), 
    726(a)(3), 726(a)(4), 752(a), 766(h), or 766(i) of this title;
        (2) does not have an interest materially adverse, other than an 
    equity interest that is not substantial in relation to such 
    creditor's interest as a creditor, to the interest of creditors 
    entitled to such distribution; and
        (3) is not an insider.

    (b) At the meeting of creditors held under section 341 of this 
title, creditors may elect one person to serve as trustee in the case if 
election of a trustee is requested by creditors that may vote under 
subsection (a) of this section, and that hold at least 20 percent in 
amount of the claims specified in subsection (a)(1) of this section that 
are held by creditors that may vote under subsection (a) of this 
section.
    (c) A candidate for trustee is elected trustee if--
        (1) creditors holding at least 20 percent in amount of the 
    claims of a kind specified in subsection (a)(1) of this section that 
    are held by creditors that may vote under subsection (a) of this 
    section vote; and
        (2) such candidate receives the votes of creditors holding a 
    majority in amount of claims specified in subsection (a)(1) of this 
    section that are held by creditors that vote for a trustee.

    (d) If a trustee is not elected under this section, then the interim 
trustee shall serve as trustee in the case.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2604; Pub. L. 97-222, Sec. 7, 
July 27, 1982, 96 Stat. 237; Pub. L. 98-353, title III, Sec. 472, July 
10, 1984, 98 Stat. 380.)


                      Historical and Revision Notes

                         legislative statements

    The House amendment adopts section 702(a)(2) of the Senate 
amendment. An insubstantial equity interest does not disqualify a 
creditor from voting for a candidate for trustee.


                        senate report no. 95-989

    Subsection (a) of this section specifies which creditors may vote 
for a trustee. Only a creditor that holds an allowable, undisputed, 
fixed, liquidated, unsecured claim that is not entitled to priority, 

that does not have an interest materially adverse to the interest of 
general unsecured creditors, and that is not an insider may vote for a 
trustee. The phrase ``materially adverse'' is currently used in the 
Rules of Bankruptcy Procedure, rule 207(d). The application of the 
standard requires a balancing of various factors, such as the nature of 
the adversity. A creditor with a very small equity position would not be 
excluded from voting solely because he holds a small equity in the 
debtor. The Rules of Bankruptcy Procedure also currently provide for 
temporary allowance of claims, and will continue to do so for the 
purposes of determining who is eligible to vote under this provision.
    Subsection (b) permits creditors at the meeting of creditors to 
elect one person to serve as trustee in the case. Creditors holding at 
least 20 percent in amount of the claims specified in the preceding 
paragraph must request election before creditors may elect a trustee. 
Subsection (c) specifies that a candidate for trustee is elected trustee 
if creditors holding at least 20 percent in amount of those claims 
actually vote, and if the candidate receives a majority in amount of 
votes actually cast.
    Subsection (d) specifies that if a trustee is not elected, then the 
interim trustee becomes the permanent trustee and serves in the case 
permanently.


                               Amendments

    1984--Subsec. (b). Pub. L. 98-353, Sec. 472(a), inserted ``held'' 
after ``meeting of creditors''.
    Subsec. (c)(1). Pub. L. 98-353, Sec. 472(b)(1), inserted ``of a 
kind'' after ``claims''.
    Subsec. (c)(2). Pub. L. 98-353, Sec. 472(b)(2), substituted ``for a 
trustee'' for ``for trustee''.
    Subsec. (d). Pub. L. 98-353, Sec. 472(c), substituted ``this 
section'' for ``subsection (c) of this section''.
    1982--Subsec. (a)(1). Pub. L. 97-222 substituted ``726(a)(4), 
752(a), 766(h), or 766(i)'' for ``or 726(a)(4)''.


                    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.

                  Section Referred to in Other Sections

    This section is referred to in sections 322, 546, 557, 701, 703, 
705, 1104 of this title.



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