Bankruptcy Forms: Filing Bankruptcy Chapter 7 Bankruptcy Software Chapter 13

The Center For Debt Management
Center4DebtManagement.com ... Always open 24 / 7

Note: For affordable legal assistance The Center For Debt Management highly recommends Standard Legal's Do-It-Yourself Bankruptcy Forms Software Kits. For credit repair services,
the most trusted law firm in America with over 15 years of experience is Lexington Law Firm.

For more bankruptcy help and bankruptcy alternatives, go to Bankruptcy Resources



TITLE 11–BANKRUPTCY

CHAPTER 7–LIQUIDATION

Sub Chapter IV – Commodity Broker Liquidation

Sec. 761. Definitions for this subchapter

   In this subchapter--
        (1) ``Act'' means Commodity Exchange Act;
        (2) ``clearing organization'' means organization that clears 
    commodity contracts made on, or subject to the rules of, a contract 
    market or board of trade;
        (3) ``Commission'' means Commodity Futures Trading Commission;
        (4) ``commodity contract'' means--
            (A) with respect to a futures commission merchant, contract 
        for the purchase or sale of a commodity for future delivery on, 
        or subject to the rules of, a contract market or board of trade;
            (B) with respect to a foreign futures commission merchant, 
        foreign future;
            (C) with respect to a leverage transaction merchant, 
        leverage transaction;
            (D) with respect to a clearing organization, contract for 
        the purchase or sale of a commodity for future delivery on, or 
        subject to the rules of, a contract market or board of trade 
        that is cleared by such clearing organization, or commodity 
        option traded on, or subject to the rules of, a contract market 
        or board of trade that is cleared by such clearing organization;
            (E) with respect to a commodity options dealer, commodity 
        option;

        (5) ``commodity option'' means agreement or transaction subject 
    to regulation under section 4c(b) of the Act;
        (6) ``commodity options dealer'' means person that extends 
    credit to, or that accepts cash, a security, or other property from, 
    a customer of such person for the purchase or sale of an interest in 
    a commodity option;
        (7) ``contract market'' means board of trade designated as a 
    contract market by the Commission under the Act;
        (8) ``contract of sale'', ``commodity'', ``future delivery'', 
    ``board of trade'', and ``futures commission merchant'' have the 
    meanings assigned to those terms in the Act;
        (9) ``customer'' means--
            (A) with respect to a futures commission merchant--
                (i) entity for or with whom such futures commission 
            merchant deals and that holds a claim against such futures 
            commission merchant on account of a commodity contract made, 
            received, acquired, or held by or through such futures 
            commission merchant in the ordinary course of such futures 
            commission merchant's business as a futures commission 
            merchant from or for the commodity futures account of such 
            entity; or
                (ii) entity that holds a claim against such futures 
            commission merchant arising out of--
                    (I) the making, liquidation, or change in the value 
                of a commodity contract of a kind specified in clause 
                (i) of this subparagraph;
                    (II) a deposit or payment of cash, a security, or 
                other property with such futures commission merchant for 
                the purpose of making or margining such a commodity 
                contract; or
                    (III) the making or taking of delivery on such a 
                commodity contract;

            (B) with respect to a foreign futures commission merchant--
                (i) entity for or with whom such foreign futures 
            commission merchant deals and that holds a claim against 
            such foreign futures commission merchant on account of a 
            commodity contract made, received, acquired, or held by or 
            through such foreign futures commission merchant in the 
            ordinary course of such foreign futures commission 
            merchant's business as a foreign futures commission merchant 
            from or for the foreign futures account of such entity; or
                (ii) entity that holds a claim against such foreign 
            futures commission merchant arising out of--
                    (I) the making, liquidation, or change in value of a 
                commodity contract of a kind specified in clause (i) of 
                this subparagraph;
                    (II) a deposit or payment of cash, a security, or 
                other property with such foreign futures commission 
                merchant for the purpose of making or margining such a 
                commodity contract; or
                    (III) the making or taking of delivery on such a 
                commodity contract;

            (C) with respect to a leverage transaction merchant--
                (i) entity for or with whom such leverage transaction 
            merchant deals and that holds a claim against such leverage 
            transaction merchant on account of a commodity contract 
            engaged in by or with such leverage transaction merchant in 
            the ordinary course of such leverage transaction merchant's 
            business as a leverage transaction merchant from or for the 
            leverage account of such entity; or
                (ii) entity that holds a claim against such leverage 
            transaction merchant arising out of--
                    (I) the making, liquidation, or change in value of a 
                commodity contract of a kind specified in clause (i) of 
                this subparagraph;
                    (II) a deposit or payment of cash, a security, or 
                other property with such leverage transaction merchant 
                for the purpose of entering into or margining such a 
                commodity contract; or
                    (III) the making or taking of delivery on such a 
                commodity contract;

            (D) with respect to a clearing organization, clearing member 
        of such clearing organization with whom such clearing 
        organization deals and that holds a claim against such clearing 
        organization on account of cash, a security, or other property 
        received by such clearing organization to margin, guarantee, or 
        secure a commodity contract in such clearing member's 
        proprietary account or customers' account; or
            (E) with respect to a commodity options dealer--
                (i) entity for or with whom such commodity options 
            dealer deals and that holds a claim on account of a 
            commodity contract made, received, acquired, or held by or 
            through such commodity options dealer in the ordinary course 
            of such commodity options dealer's business as a commodity 
            options dealer from or for the commodity options account of 
            such entity; or
                (ii) entity that holds a claim against such commodity 
            options dealer arising out of--
                    (I) the making of, liquidation of, exercise of, or a 
                change in value of, a commodity contract of a kind 
                specified in clause (i) of this subparagraph; or
                    (II) a deposit or payment of cash, a security, or 
                other property with such commodity options dealer for 
                the purpose of making, exercising, or margining such a 
                commodity contract;

        (10) ``customer property'' means cash, a security, or other 
    property, or proceeds of such cash, security, or property, received, 
    acquired, or held by or for the account of the debtor, from or for 
    the account of a customer--
            (A) including--
                (i) property received, acquired, or held to margin, 
            guarantee, secure, purchase, or sell a commodity contract;
                (ii) profits or contractual or other rights accruing to 
            a customer as a result of a commodity contract;
                (iii) an open commodity contract;
                (iv) specifically identifiable customer property;
                (v) warehouse receipt or other document held by the 
            debtor evidencing ownership of or title to property to be 
            delivered to fulfill a commodity contract from or for the 
            account of a customer;
                (vi) cash, a security, or other property received by the 
            debtor as payment for a commodity to be delivered to fulfill 
            a commodity contract from or for the account of a customer;
                (vii) a security held as property of the debtor to the 
            extent such security is necessary to meet a net equity claim 
            based on a security of the same class and series of an 
            issuer;
                (viii) property that was unlawfully converted from and 
            that is the lawful property of the estate; and
                (ix) other property of the debtor that any applicable 
            law, rule, or regulation requires to be set aside or held 
            for the benefit of a customer, unless including such 
            property as customer property would not significantly 
            increase customer property; but

            (B) not including property to the extent that a customer 
        does not have a claim against the debtor based on such property;

        (11) ``foreign future'' means contract for the purchase or sale 
    of a commodity for future delivery on, or subject to the rules of, a 
    board of trade outside the United States;
        (12) ``foreign futures commission merchant'' means entity 
    engaged in soliciting or accepting orders for the purchase or sale 
    of a foreign future or that, in connection with such a solicitation 
    or acceptance, accepts cash, a security, or other property, or 
    extends credit to margin, guarantee, or secure any trade or contract 
    that results from such a solicitation or acceptance;
        (13) ``leverage transaction'' means agreement that is subject to 
    regulation under section 19 of the Commodity Exchange Act, and that 
    is commonly known to the commodities trade as a margin account, 
    margin contract, leverage account, or leverage contract;
        (14) ``leverage transaction merchant'' means person in the 
    business of engaging in leverage transactions;
        (15) ``margin payment'' means payment or deposit of cash, a 
    security, or other property, that is commonly known to the 
    commodities trade as original margin, initial margin, maintenance 
    margin, or variation margin, including mark-to-market payments, 
    settlement payments, variation payments, daily settlement payments, 
    and final settlement payments made as adjustments to settlement 
    prices;
        (16) ``member property'' means customer property received, 
    acquired, or held by or for the account of a debtor that is a 
    clearing organization, from or for the proprietary account of a 
    customer that is a clearing member of the debtor; and
        (17) ``net equity'' means, subject to such rules and regulations 
    as the Commission promulgates under the Act, with respect to the 
    aggregate of all of a customer's accounts that such customer has in 
    the same capacity--
            (A) the balance remaining in such customer's accounts 
        immediately after--
                (i) all commodity contracts of such customer have been 
            transferred, liquidated, or become identified for delivery; 
            and
                (ii) all obligations of such customer in such capacity 
            to the debtor have been offset; plus

            (B) the value, as of the date of return under section 766 of 
        this title, of any specifically identifiable customer property 
        actually returned to such customer before the date specified in 
        subparagraph (A) of this paragraph; plus
            (C) the value, as of the date of transfer, of--
                (i) any commodity contract to which such customer is 
            entitled that is transferred to another person under section 
            766 of this title; and
                (ii) any cash, security, or other property of such 
            customer transferred to such other person under section 766 
            of this title to margin or secure such transferred commodity 
            contract.

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2615; Pub. L. 97-222, Sec. 16, 
July 27, 1982, 96 Stat. 238; Pub. L. 98-353, title III, Sec. 485, July 
10, 1984, 98 Stat. 383; Pub. L. 103-394, title V, Sec. 501(d)(29), Oct. 
22, 1994, 108 Stat. 4146.)


                      Historical and Revision Notes

                         legislative statements

    Subchapter IV of chapter 7 represents a compromise between similar 
chapters in the House bill and Senate amendment. Section 761(2) of the 
House amendment defines ``clearing organization'' to cover an 
organization that clears commodity contracts on a contract market or a 
board of trade; the expansion of the definition is intended to include 
clearing organizations that clear commodity options. Section 761(4) of 
the House amendment adopts the term ``commodity contract'' as used in 
section 761(5) of the Senate amendment but with the more precise 
substantive definitions contained in section 761(8) of the House bill. 
The definition is modified to insert ``board of trade'' to cover 
commodity options. Section 761(5) of the House amendment adopts the 
definition contained in section 761(6) of the Senate amendment in 
preference to the definition contained in section 761(4) of the House 
bill which erroneously included onions. Section 761(9) of the House 
amendment represents a compromise between similar provisions contained 
in section 761(10) of the Senate amendment and section 761(9) of the 
House bill. The compromise adopts the substance contained in the House 
bill and adopts the terminology of ``commodity contract'' in lieu of 
``contractual commitment'' as suggested in the Senate amendment. Section 
761(10) of the House amendment represents a compromise between similar 
sections in the House bill and Senate amendment regarding the definition 
of ``customer property.'' The definition of ``distribution share'' 
contained in section 761(12) of the Senate amendment is deleted as 
unnecessary. Section 761(12) of the House amendment adopts a definition 
of ``foreign futures commission merchant'' similar to the definition 
contained in section 761(14) of the Senate amendment. The definition is 
modified to cover either an entity engaged in soliciting orders or the 
purchase or sale of a foreign future, or an entity that accepts cash, a 
security, or other property for credit in connection with such a 
solicitation or acceptance. Section 761(13) of the House amendment 
adopts a definition of ``leverage transaction'' identical to the 
definition contained in section 761(15) of the Senate amendment. Section 
761(15) of the House amendment adopts the definition of ``margin 
payment'' contained in section 761(17) of the Senate amendment. Section 
761(17) of the House amendment adopts a definition of ``net equity'' 
derived from section 761(15) of the House bill.


                        senate report no. 95-989

    Paragraph (1) defines ``Act'' to mean the Commodity Exchange Act [7 
U.S.C. 1 et seq.].
    Paragraph (2) defines ``clearing organization'' to mean an 
organization that clears (i.e., matches purchases and sales) commodity 
futures contracts made on or subject to the rules of a contract market 
or commodity options transactions made on or subject to the rules of a 
commodity option exchange. Although commodity option trading on 
exchanges is currently prohibited, it is anticipated that CFTC may 
permit such trading in the future.
    Paragraphs (3) and (4) define terms ``Commission'' and ``commodity 
futures contract''.
    Paragraph (5) [enacted as (4)] defines ``commodity contract'' to 
mean a commodity futures contract (Sec. 761(4)), a commodity option 
(Sec. 761(6)), or a leverage contract (Sec. 761(15)).
    Paragraph (b) [probably should be ``(6)'' which was enacted as (5)] 
defines ``commodity option'' by reference to section 4c(b) of the 
Commodity Exchange Act [7 U.S.C. 6c(b)].
    Paragraphs (7), (8), and (9) [enacted as (6), (7), and (8)] define 
``commodity options dealer,'' ``contract market,'' ``contract of sale,'' 
``commodity,'' ``future delivery,'' ``board of trade,'' and ``futures 
commission merchant.''
    Paragraph (10) [enacted as (9)] defines the term ``customer'' to 
mean with respect to a futures commission merchant or a foreign futures 
commission merchant, the entity for whom the debtor carries a commodity 
futures contract or foreign future, or with whom such a contract is 
carried (such as another commodity broker), or from whom the debtor has 
received, acquired, or holds cash, securities, or other property arising 
out of or connected with specified transactions involving commodity 
futures contracts or foreign futures. This section also defines 
``customer'' in the context of leverage transaction merchants, clearing 
organizations, and commodity options dealers. Persons associated with a 
commodity broker, such as its employees, officers, or partners, may be 
customers under this definition.
    The definition of ``customer'' serves to isolate that class of 
persons entitled to the protection subchapter IV provides to customers. 
In addition, section 101(5) defines ``commodity broker'' to mean a 
futures commission merchant, foreign futures commission merchant, 
clearing organization, leverage transaction merchant, or commodity 
options dealer, with respect to which there is a customer. Accordingly, 
the definition of customer also serves to designate those entities which 
must utilize chapter 7 and are precluded from reorganizing under chapter 
11.
    Paragraph (11) [enacted as (10)] defines ``customer property'' to 
mean virtually all property or proceeds thereof, received, acquired, or 
held by or for the account of the debtor for a customer arising out of 
or in connection with a transaction involving a commodity contract.
    Paragraph (12) defines ``distribution share'' to mean the amount to 
which a customer is entitled under section 765(a).
    Paragraphs (13), (14), (15), and (16) [enacted as (11), (12), (13), 
and (14)] define ``foreign future,'' ``foreign futures commission 
merchant,'' ``leverage transaction,'' and ``leverage transaction 
merchant.''
    Paragraph (17) [enacted as (15)] defines ``margin payment'' to mean 
a payment or deposit commonly known to the commodities trade as original 
margin, initial margin, or variation margin.
    Paragraph (18) [enacted as (16)] defines ``member property.''
    Paragraph (19) [enacted as (17)] defines ``net equity'' to be the 
sum of (A) the value of all customer property remaining in a customer's 
account immediately after all commodity contracts of such customer have 
been transferred, liquidated, or become identified for delivery and all 
obligations of such customer to the debtor have been offset (such as 
margin payments, whether or not called, and brokerage commissions) plus 
(B) the value of specifically identifiable customer property previously 
returned to the customer by the trustee, plus (C) if the trustee has 
transferred any commodity contract to which the customer is entitled or 
any margin or security for such contract, the value of such contract and 
margin or security. Net equity, therefore, will be the total amount of 
customer property to which a customer is entitled as of the date of the 
filing of the bankruptcy petition, although valued at subsequent dates. 
The Commission is given authority to promulgate rules and regulations to 
further refine this definition.


                         house report no. 95-595

    Paragraph (8) [enacted as (4)] is a dynamic definition of 
``contractual commitment''. The definition will vary depending on the 
character of the debtor in each case. If the debtor is a futures 
commission merchant or a clearing organization, then subparagraphs (A) 
and (D) indicate that the definition means a contract of sale of a 
commodity for future delivery on a contract market. If the debtor is a 
foreign futures commission merchant, a leverage transaction merchant, or 
a commodity options dealer, then subparagraphs (B), (C), and (E) 
indicate that the definition means foreign future, leverage transaction, 
or commodity option, respectively.
    Paragraph (9) defines ``customer'' in a similar style. It is 
anticipated that a debtor with multifaceted characteristics will have 
separate estates for each different kind of customer. Thus, a debtor 
that is a leverage transaction merchant and a commodity options dealer 
would have separate estates for the leverage transaction customers and 
for the options customers, and a general estate for other creditors. 
Customers for each kind of commodity broker, except the clearing 
organization, arise from either of two relationships. In subparagraphs 
(A), (B), (C), and (E), clause (i) treats with customers to the extent 
of contractual commitments with the debtor in either a broker or a 
dealer relationship. Clause (ii) treats with customers to the extent of 
proceeds from contractual commitments or deposits for the purpose of 
making contractual commitments. The customer of the clearing 
organization is a member with a proprietary or customers' account.
    Paragraph (10) defines ``customer property'' to include all property 
in customer accounts and property that should have been in those 
accounts but was diverted through conversion or mistake. Clause (i) 
refers to customer property not properly segregated by the debtor or 
customer property converted and then recovered so as to become property 
of the estate. Clause (vii) is intended to exclude property that would 
cost more to recover from a third party than the value of the property 
itself. Subparagraph (B) excludes property in a customer's account that 
belongs to the commodity broker, such as a contract placed in the 
account by error, or cash due the broker for a margin payment that the 
broker has made.
    Paragraph (15) [enacted as (17)] defines ``net equity'' to include 
the value of all contractual commitments at the time of liquidation or 
transfer less any obligations owed by the customer to the debtor, such 
as brokerage fees. In addition, the term includes the value of any 
specifically identifiable property as of the date of return to the 
customer and the value of any customer property transferred to another 
commodity broker as of the date of transfer. This definition places the 
risk of market fluctuations on the customer until commitments leave the 
estate.

                       References in Text

    The Commodity Exchange Act, referred to in pars. (1), (7), (8), and 
(17), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, as amended, which is 
classified generally to chapter 1 (Sec. 1 et seq.) of Title 7, 
Agriculture. Sections 4c(b) and 19 of the Act are classified to sections 
6c(b) and 23, respectively, of Title 7. For complete classification of 
this Act to the Code, see section 1 of Title 7 and Tables.


                               Amendments

    1994--Par. (1). Pub. L. 103-394, Sec. 501(d)(29)(A), struck out ``(7 
U.S.C. 1 et seq.)'' after ``Act''.
    Par. (5). Pub. L. 103-394, Sec. 501(d)(29)(B), struck out ``(7 
U.S.C. 6c(b))'' after ``Act''.
    Par. (13). Pub. L. 103-394, Sec. 501(d)(29)(C), struck out ``(7 
U.S.C. 23)'' after ``Act''.
    1984--Par. (10)(A)(viii). Pub. L. 98-353 substituted ``from and that 
is the lawful property'' for ``and that is property''.
    1982--Par. (2). Pub. L. 97-222, Sec. 16(1), inserted ``made'' after 
``commodity contracts''.
    Par. (4). Pub. L. 97-222, Sec. 16(2), substituted ``with respect 
to'' for ``if the debtor is'' wherever appearing, and substituted 
``cleared by such clearing organization, or commodity option traded on, 
or subject to the rules of, a contract market or board of trade that is 
cleared by such clearing organization'' for ``cleared by the debtor'' in 
subpar. (D).
    Par. (9). Pub. L. 97-222, Sec. 16(3), substituted ``with respect 
to'' for ``if the debtor is'' wherever appearing, in subpar. (A) 
substituted ``such futures commission merchant'' for ``the debtor'' 
wherever appearing and ``such futures commission merchant's'' for ``the 
debtor's'', in subpar. (B) substituted ``such foreign futures commission 
merchant'' for ``the debtor'' wherever appearing and ``such foreign 
futures commission merchant's'' for ``the debtor's'', in subpar. (C) 
substituted ``such leverage transaction merchant'' for ``the debtor'' 
wherever appearing and ``such leverage transaction merchant's'' for 
``the debtor's'', inserted ``or'' after the semicolon in cl. (i), and 
substituted ``holds'' for ``hold'' in cl. (ii), in subpar. (D) 
substituted ``such clearing organization'' for ``the debtor'' wherever 
appearing, and in subpar. (E) substituted ``such commodity options 
dealer'' for ``the debtor'' wherever appearing and ``such commodity 
options dealer's'' for ``the debtor's''.
    Par. (10). Pub. L. 97-222, Sec. 16(4), struck out ``at any time'' 
after ``security, or property,'' in provisions preceding subpar. (A).
    Par. (12). Pub. L. 97-222, Sec. 16(5), inserted a comma after 
``property'' and struck out the comma after ``credit''.
    Par. (13). Pub. L. 97-222, Sec. 16(6), substituted ``section 19 of 
the Commodity Exchange Act (7 U.S.C. 23)'' for ``section 217 of the 
Commodity Futures Trading Commission Act of 1974 (7 U.S.C. 15a)''.
    Par. (14). Pub. L. 97-222, Sec. 16(7), struck out ``that is 
engaged'' after ``means person''.
    Par. (15). Pub. L. 97-222, Sec. 16(8), substituted ``mark-to-market 
payments, settlement payments, variation payments, daily settlement 
payments, and final settlement payments made as adjustments to 
settlement prices'' for ``a daily variation settlement payment''.
    Par. (16). Pub. L. 97-222, Sec. 16(9), struck out ``at any time'' 
after ``customer property''.
    Par. (17). Pub. L. 97-222, Sec. 16(10), in provisions preceding 
subpar. (A) substituted ``has'' for ``holds'', in subpar. (A) inserted 
``the'' after ``(A)'' in provisions preceding cl. (i), and ``in such 
capacity'' after ``customer'' in cl. (ii).


                    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 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 101, 362, 546, 548, 556 of 
this title; title 12 section 1821.



Back Index Next

Note: For affordable legal assistance The Center For Debt Management highly recommends Standard Legal's Do-It-Yourself Bankruptcy Forms Software Kits. For credit repair services,
the most trusted law firm in America with over 15 years of experience is Lexington Law Firm.

For more bankruptcy help and bankruptcy alternatives, go to Bankruptcy Resources

Go to Index of Related Articles and Resources!

Click Below To Check Out More Financial Resources

Return to Top

The Center For Debt Management™

Helping Consumers Save Money and Reduce Debt Is Our Only Business!™

We invite you to explore the sectors listed below. We promise that you'll find exceptional values, offers and resources in which to reduce your living expenses and to enjoy life!


Debt Management and Financial Services! The Internet's oldest and most comprehensive debt management agency! Resources for debt management, consumer credit counseling, debt consolidation, debt reduction settlements, legal aid, financial aid, loans and financing, credit repair, credit reports, insurance quotes, income sources, tax assistance, and more.

Established in 1989 and serving the online community since 1992!


This site was created and designed by Daniel A. Gelinas
Disclaimer and Privacy Policy      © Copyright  2007 "The Center For Debt Management"      Contact Us
Return to Top

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