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Sub Chapter – General Provisions

Sec. 901. Applicability of other sections of this title

   (a) Sections 301, 344, 347(b), 349, 350(b), 361, 362, 364(c), 
364(d), 364(e), 364(f), 365, 366, 501, 502, 503, 504, 506, 507(a)(1), 
509, 510, 524(a)(1), 524(a)(2), 544, 545, 546, 547, 548, 549(a), 549(c), 
549(d), 550, 551, 552, 553, 557, 1102, 1103, 1109, 1111(b), 1122, 
1123(a)(1), 1123(a)(2), 1123(a)(3), 1123(a)(4), 1123(a)(5), 1123(b), 
1124, 1125, 1126(a), 1126(b), 1126(c), 1126(e), 1126(f), 1126(g), 
1127(d), 1128, 1129(a)(2), 1129(a)(3), 1129(a)(6), 1129(a)(8), 
1129(a)(10), 1129(b)(1), 1129(b)(2)(A), 1129(b)(2)(B), 1142(b), 1143, 
1144, and 1145 of this title apply in a case under this chapter.
    (b) A term used in a section of this title made applicable in a case 
under this chapter by subsection (a) of this section or section 103(e) 
of this title has the meaning defined for such term for the purpose of 
such applicable section, unless such term is otherwise defined in 
section 902 of this title.
    (c) A section made applicable in a case under this chapter by 
subsection (a) of this section that is operative if the business of the 
debtor is authorized to be operated is operative in a case under this 

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2621; Pub. L. 98-353, title III, 
Secs. 353, 490, July 10, 1984, 98 Stat. 361, 383; Pub. L. 100-597, 
Sec. 3, Nov. 3, 1988, 102 Stat. 3028.)

                      Historical and Revision Notes

                         legislative statements

    Chapter 9 of the House amendment represents a compromise between 
chapter 9 of the House bill and 9 of the Senate amendment. In most 
respects this chapter follows current law with respect to the adjustment 
of debts of a municipality. Stylistic changes and minor substantive 
revisions have been made in order to conform this chapter with other new 
chapters of the bankruptcy code. There are few major differences between 
the House bill and the Senate amendment on this issue. Section 901 
indicates the applicability of other sections of title 11 in cases under 
chapter 9. Included are sections providing for creditors' committees 
under sections 1102 and 1103.

                         house report no. 95-595

    Section 901 makes applicable appropriate provisions of other 
chapters of proposed title 11. The general rule set out in section 
103(e) is that only the provisions of chapters 1 and 9 apply in a 
chapter 9 case. Section 901 is the exception, and specifies other 
provisions that do apply. They are as follows:
    Sec. 301. Voluntary cases. Application of this section makes clear, 
as under current chapter IX [chapter 9 of former title 11], that a 
municipal case can be commenced only by the municipality itself. There 
are no involuntary chapter 9 cases.
    Sec. 344. Self-incrimination; immunity. Application of this section 
is of no substantive effect for the administration of the case, but 
merely provides that the general rules in part V [Sec. 6001 et seq.] of 
title 18 govern immunity.
    Sec. 347(b). Unclaimed property. This provision currently appears in 
section 96(d) of chapter IX [section 416(d) of former title 11].
    Sec. 349. Effect of dismissal. This section governs the effect of a 
dismissal of a chapter 9 case. It provides in substance that rights that 
existed before the case that were disturbed by the commencement of the 
case are reinstated. This section does not concern grounds for 
dismissal, which are found in section 926.
    Sec. 361. Adequate protection. Section 361 provides the general 
standard for the protection of secured creditors whose property is used 
in a case under title 11. Its importance lies in its application to 
sections 362 and 364.
    Sec. 362. Automatic stay. The automatic stay provisions of the 
general portions of the title are incorporated into chapter 9. There is 
an automatic stay provided in current Bankruptcy Act Sec. 85(e) [section 
405(e) of former title 11]. The thrust of section 362 is the same as 
that of section 85(e), but, of course, its application in chapter 9 is 
modernized and drafted to conform with the stay generally applicable 
under the bankruptcy code. An additional part of the automatic stay 
applicable only to municipal cases is included in section 922.
    Secs. 364(c), 364(d), 364(e). Obtaining credit. This section governs 
the borrowing of money by a municipality in reorganization. It is 
narrower than a comparable provision in current law, section 82(b)(2) 
[section 402(b)(2) of former title 11]. The difference lies mainly in 
the removal under the bill of the authority of the court to supervise 
borrowing by the municipality in instances in which none of the special 
bankruptcy powers are involved. That is, if a municipality could borrow 
money outside of the bankruptcy court, then it should have the same 
authority in bankruptcy court, under the doctrine of Ashton v. Cameron 
Water District No. 1, 298 U.S. 513 (1936) [Tex.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 National League of Cities v. Usery, 426 U.S. 
833 (1976) [Dist.Col.1976, 96 S.Ct. 2465, 49 L.Ed.2d 245, on remand 429 
F. Supp. 703]. Only when the municipality needs special authority, such 
as subordination of existing liens, or special priority for the borrowed 
funds, will the court become involved in the authorization.
    Sec. 365. Executory contracts and unexpired leases. The 
applicability of section 365 incorporates the general power of a 
bankruptcy court to authorize the assumption or rejection of executory 
contracts or unexpired leases found in other chapters of the title. This 
section is comparable to section 82(b)(1) of current law [section 
402(b)(1) of former title 11].
    Sec. 366. Utility service. This section gives a municipality the 
same authority as any other debtor with respect to continuation of 
utility service during the proceeding, provided adequate assurance of 
future payment is provided. No comparable explicit provision is found in 
current law, although the case law seems to support the same result.
    Sec. 501. Filing of proofs of claims. This section permits filing of 
proofs of claims in a chapter 9 case. Note, however, that section 924 
permits listing of creditors' claims, as under chapter 11 and under 
section 85(b) of chapter IX [section 405(b) of former title 11].
    Sec. 502. Allowance of claims. This section applies the general 
allowance rules to chapter 9 cases. This is no change from current law.
    Sec. 503. Administrative expenses. Administrative expenses as 
defined in section 503 will be paid in a chapter 9 case, as provided 
under section 89(1) of current law [section 409(1) of former title 11].
    Sec. 504. Sharing of compensation. There is no comparable provision 
in current law. However, this provision applies generally throughout the 
proposed law, and will not affect the progress of the case, only the 
interrelations between attorneys and other professionals that 
participate in the case.
    Sec. 506. Determination of secured status. Section 506 specifies 
that claims secured by a lien should be separated, to the extent 
provided, into secured and unsecured claims. It applies generally. 
Current law follows this result, though there is no explicit provision.
    Sec. 507(1). Priorities. Paragraph (1) of section 507 requires that 
administrative expenses be paid first. This rule will apply in chapter 9 
cases. It is presently found in section 89(1) [section 409(1) of former 
title 11]. The two other priorities presently found in section 89 have 
been deleted. The second for claims arising within 3 months before the 
case is commenced, is deleted from the statute, but may be within the 
court's equitable power to award, under the case of Fosdick v. Schall, 
99 U.S. 235 (1878) [25 L.Ed. 339]. Leaving the provision to the courts 
permits greater flexibility, as under railroad cases, than an absolute 
three-month rule. The third priority under current law, for claims which 
are entitled to priority under the laws of the United States, is deleted 
because of the proposed amendment to section 3466 of the Revised 
Statutes [former 31 U.S.C. 191, see 31 U.S.C. 3713(a)] contained in 
section 321(a) of title III of the bill, which previously has given the 
United States an absolute first priority in chapter X [chapter 10 of 
former title 11] and section 77 [section 205 of former title 11] cases. 
Because the priority rules are regularized and brought together in the 
bankruptcy laws by this bill, the need for incorporation of priorities 
elsewhere specified is eliminated.
    Sec. 509. Claims of codebtors. This section provides for the 
treatment of sureties, guarantors, and codebtors. The general rule of 
postponement found in the other chapters will apply in chapter 9. This 
section adopts current law.
    Sec. 510. Subordination of claims. This section permits the court to 
subordinate, on equitable grounds, any claim, and requires enforcement 
of contractual subordination agreements, and subordination of securities 
rescission claims. The section recognizes the inherent equitable power 
of the court under current law, and the practice followed with respect 
to contractual provisions.
    Sec. 547. Preferences. Incorporation of section 547 will permit the 
debtor to recover preferences. This power will be used primarily when 
those who gave the preferences have been replaced by new municipal 
officers or when creditors coerced preferential payments. Unlike 
Bankruptcy Act Sec. 85(h) [section 405(h) of former title 11], the 
section does not permit the appointment of a trustee for the purpose of 
pursuing preferences. Moreover, this bill does not incorporate the other 
avoiding powers of a trustee for chapter 9, found in current section 
    Sec. 550. Liability of transfers. Incorporation of this section is 
made necessary by the incorporation of the preference section, and 
permits recovery by the debtor from a transferee of an avoided 
    Sec. 551. Automatic preservation of avoided transfer. Application of 
section 551 requires preservation of any avoided preference for the 
benefit of the estate.
    Sec. 552. Postpetition effect of security interest. This section 
will govern the applicability after the commencement of the case of 
security interests granted by the debtor before the commencement of the 
    Sec. 553. Setoff. Under current law, certain setoff is stayed. 
Application of this section preserves that result, though the setoffs 
that are permitted under section 553 are better defined than under 
present law. Application of this section is necessary to stay the setoff 
and to provide the offsetting creditor with the protection to which he 
is entitled under present law.
    Sec. 1122. Classification of claims. This section is derived from 
current section 88(b) [section 408(b) of former title 11], and is 
substantially similar.
    Sec. 1123(a)(1)-(4), (b). Contents of plan. The general provisions 
governing contents of a chapter 11 plan are made applicable here, with 
two exceptions relating to the rights of stockholders, which are not 
applicable in chapter 9 cases. This section expands current law by 
specifying the contents of a plan in some detail. Section 91 of current 
law [section 411 of former title 11] speaks only in general terms. The 
substance of the two sections is substantially the same, however.
    Sec. 1124. Impairment of claims. The confirmation standards adopted 
in chapter 9 are the same as those of chapter 11. This changes current 
chapter IX [chapter 9 of former title 11], which requires compliance 
with the fair and equitable rule. The greater flexibility of proposed 
chapter 11 is carried over into chapter 9, for there appears to be no 
reason why the confirmation standards for the two chapters should be 
different, or why the elimination of the fair and equitable rule from 
corporate reorganizations should not be followed in municipal debt 
adjustments. The current chapter IX rule is based on the confirmation 
rules of current chapter X [chapter 10 of former title 11]. The change 
in the latter suggests a corresponding change in the former. Section 
1124 is one part of the new confirmation standard. It defines 
impairment, for use in section 1129.
    Sec. 1125. Postpetition disclosure and solicitation. The change in 
the confirmation standard necessitates a corresponding change in the 
disclosure requirements for solicitation of acceptances of a plan. Under 
current chapter IX [chapter 9 of former title 11] there is no disclosure 
requirement. Incorporation of section 1125 will insure that creditors 
receive adequate information before they are required to vote on a plan.
    Sec. 1126(a), (b), (c), (e), (f), (g). Acceptance of plan. Section 
1126 incorporates the current chapter IX [chapter 9 of former title 11] 
acceptance requirement: two-thirds in amount and a majority in number, 
Bankruptcy Act Sec. 92 [section 412 of former title 11]. Section 1125 
permits exclusion of certain acceptances from the computation if the 
acceptances were obtained in bad faith or, unlike current law, if there 
is a conflict of interest motivating the acceptance.
    Sec. 1127(d). Modification of plan. This section governs the change 
of a creditor's vote on the plan after a modification is proposed. It is 
derived from current section 92(e) [section 412(e) of former title 11].
    Sec. 1128. Hearing on confirmation. This section requires a hearing 
on the confirmation of the plan, and permits parties in interest to 
object. It is the same as Bankruptcy Act Secs. 93 and 94(a) [sections 
413 and 414(a) of former title 11], though the provision, comparable to 
section 206 of current chapter X [section 606 of former title 11], 
permitting a labor organization to appear and be heard on the economic 
soundness of the plan, has been deleted as more appropriate for the 
    Sec. 1129(a)(2), (3), (8), (b)(1), (2). Confirmation of plan. This 
section provides the boiler-plate language that the plan be proposed in 
good faith and that it comply with the provisions of the chapter, and 
also provides the financial standard for confirmation, which replaces 
the fair and equitable rule. See Sec. 1124, supra.
    Sec. 1142(b). Execution of plan. Derived from Bankruptcy Act 
Sec. 96(b) [section 416(b) of former title 11], this section permits the 
court to order execution and delivery of instruments in order to execute 
the plan.
    Sec. 1143. Distribution. This section is the same in substance as 
section 96(d) [section 416(d) of former title 11], which requires 
presentment or delivery of securities within five years, and bars 
creditors that do not act within that time.
    Sec. 1144. Revocation of order of confirmation. This section permits 
the court to revoke the order of confirmation and the discharge if the 
confirmation of the plan was procured by fraud. There is no comparable 
provision in current chapter IX [chapter 9 of former title 11].


    1988--Subsec. (a). Pub. L. 100-597 inserted ``1129(a)(6),'' after 
    1984--Subsec. (a). Pub. L. 98-353 inserted ``557,'' after ``553,'' 
and substituted ``1111(b),'' for ``1111(b)''.

                    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 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 103, 106, 902, 943 of this 

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