Bankruptcy Forms: Filing Bankruptcy Chapter 7 Bankruptcy Software Chapter 13

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TITLE 11–BANKRUPTCY

CHAPTER 7–LIQUIDATION

Sub Chapter III – Stockbroker Liquidation

Sec. 752. Customer propert

  (a) The trustee shall distribute customer property ratably to 
customers on the basis and to the extent of such customers' allowed net 
equity claims and in priority to all other claims, except claims of the 
kind specified in section 507(a)(1) of this title that are attributable 
to the administration of such customer property.
    (b)(1) The trustee shall distribute customer property in excess of 
that distributed under subsection (a) of this section in accordance with 
section 726 of this title.
    (2) Except as provided in section 510 of this title, if a customer 
is not paid the full amount of such customer's allowed net equity claim 
from customer property, the unpaid portion of such claim is a claim 
entitled to distribution under section 726 of this title.
    (c) Any cash or security remaining after the liquidation of a 
security interest created under a security agreement made by the debtor, 
excluding property excluded under section 741(4)(B) of this title, shall 
be apportioned between the general estate and customer property in the 
same proportion as the general estate of the debtor and customer 
property were subject to such security interest.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2614; Pub. L. 97-222, Sec. 15, 
July 27, 1982, 96 Stat. 238; Pub. L. 98-353, title III, Sec. 484, July 
10, 1984, 98 Stat. 383.)


                      Historical and Revision Notes

                        senate report no. 95-989

    Section 752(a) requires the trustee to distribute customer property 
to customers based on the amount of their net equity claims. Customer 
property is to be distributed in priority to all claims except expenses 
of administration entitled to priority under Sec. 507(1). It is 
anticipated that the court will apportion such administrative claims on 
an equitable basis between the general estate and the customer property 
of the debtor.
    Subsection (b)(1) indicates that in the event customer property 
exceeds customers net equity claims and administrative expenses, the 
excess pours over into the general estate. This event would occur if the 
value of securities increased dramatically after the order for relief 
but before liquidation by the trustee. Subsection (b)(2) indicates that 
the unpaid portion of a customer's net equity claim is entitled to share 
in the general estate as an unsecured claim unless subordinated by the 
court under proposed 11 U.S.C. 501. A net equity claim of a customer 
that is subordinated under section 747 is entitled to share in 
distribution under section 726(a)(2) unless subordinated under section 
510 independently of the subordination under section 747.
    Subsection (c) provides for apportionment between customer property 
and the general estate of any equity of the debtor in property remaining 
after a secured creditor liquidates a security interest. This might 
occur if a stockbroker hypothecates securities of his own and of his 
customers if the value of the hypothecated securities exceeds the debt 
owed to the secured party. The apportionment is to be made according to 
the ratio of customer property and general property of the debtor that 
comprised the collateral. The subsection refers to cash and securities 
of customers to include any customer property unlawfully converted by 
the stockbroker in the course of such a transaction. The apportionment 
is made subject to section 741(4)(B) to insure that property in a 
customer's account that is owed to the stockbroker will not be 
considered customer property. This recognizes the right of the 
stockbroker to withdraw money that has been erroneously placed in a 
customer's account or that is otherwise owing to the stockbroker.


                               Amendments

    1984--Subsec. (a). Pub. L. 98-353, Sec. 484(a), substituted 
``customers' allowed'' for ``customers allowed'', ``except claims of the 
kind'' for ``except claims'', and ``such customer property'' for 
``customer property''.
    Subsec. (b)(2). Pub. L. 98-353, Sec. 484(b), substituted ``section 
726'' for ``section 726(a)''.
    1982--Subsec. (c). Pub. L. 97-222 substituted ``Any cash or security 
remaining after the liquidation of a security interest created under a 
security agreement made by the debtor, excluding property excluded under 
section 741(4)(B) of this title, shall be apportioned between the 
general estate and customer property in the same proportion as the 
general estate of the debtor and customer property were subject to such 
security interest'' for ``Subject to section 741(4)(B) of this title, 
any cash or security remaining after the liquidation of a security 
interest created under a security agreement made by the debtor shall be 
apportioned between the general estate and customer property in the 
proportion that the general property of the debtor and the cash or 
securities of customers were subject to such security interest''.


                    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 section 702 of this title.



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Legal Resource Center: United States Code TITLE 11 Filing Bankruptcy Forms Software