11 U.S.C. § 722 — Redemption

Page 199 TITLE 11—BANKRUPTCY § 722 United States pursuant to section 104 of this title as follows: By notice dated Jan. 31, 2022, 87 F.R. 6625, effective Apr. 1, 2022, in subsec. (b)(2)(A)(i)(I), dollar amount ‘‘8,175’’ was adjusted to ‘‘9,075’’; in subsec. (b)(2)(A)(i)(II), dollar amount ‘‘13,650’’ was adjusted to ‘‘15,150’’; in subsec. (b)(2)(A)(ii)(IV), dollar amount ‘‘2,050’’ was adjusted to ‘‘2,275’’; in subsec. (b)(2)(B)(iv)(I), dollar amount ‘‘8,175’’ was adjusted to ‘‘9,075’’; in subsec. (b)(2)(B)(iv)(II), dollar amount ‘‘13,650’’ was adjusted to ‘‘15,150’’; in subsec. (b)(5)(B), dollar amount ‘‘1,375’’ was adjusted to ‘‘1,525’’; in sub- sec. (b)(6)(C), dollar amount ‘‘750’’ was adjusted to ‘‘825’’; and, in subsec. (b)(7)(A)(iii), dollar amount ‘‘750’’ was adjusted to ‘‘825’’. See notice of the Judicial Con- ference of the United States set out as a note under section 104 of this title. By notice dated Feb. 5, 2019, 84 F.R. 3488, effective Apr. 1, 2019, in subsec. (b)(2)(A)(i)(I), dollar amount ‘‘7,700’’ was adjusted to ‘‘8,175’’; in subsec. (b)(2)(A)(i)(II), dollar amount ‘‘12,850’’ was adjusted to ‘‘13,650’’; in subsec. (b)(2)(A)(ii)(IV), dollar amount ‘‘1,925’’ was adjusted to ‘‘2,050’’; in subsec. (b)(2)(B)(iv)(I), dollar amount ‘‘7,700’’ was adjusted to ‘‘8,175’’; in subsec. (b)(2)(B)(iv)(II), dollar amount ‘‘12,850’’ was adjusted to ‘‘13,650’’; in subsec. (b)(5)(B), dollar amount ‘‘1,300’’ was adjusted to ‘‘1,375’’; in sub- sec. (b)(6)(C), dollar amount ‘‘700’’ was adjusted to ‘‘750’’; and, in subsec. (b)(7)(A)(iii), dollar amount ‘‘700’’ was adjusted to ‘‘750’’. By notice dated Feb. 16, 2016, 81 F.R. 8748, effective Apr. 1, 2016, in subsec. (b)(2)(A)(i)(I), dollar amount ‘‘7,475’’ was adjusted to ‘‘7,700’’; in subsec. (b)(2)(A)(i)(II), dollar amount ‘‘12,475’’ was adjusted to ‘‘12,850’’; in subsec. (b)(2)(A)(ii)(IV), dollar amount ‘‘1,875’’ was adjusted to ‘‘1,925’’; in subsec. (b)(2)(B)(iv)(I), dollar amount ‘‘7,475’’ was adjusted to ‘‘7,700’’; in subsec. (b)(2)(B)(iv)(II), dollar amount ‘‘12,475’’ was adjusted to ‘‘12,850’’; in subsec. (b)(5)(B), dollar amount ‘‘1,250’’ was adjusted to ‘‘1,300’’; in sub- sec. (b)(6)(C), dollar amount ‘‘675’’ was adjusted to ‘‘700’’; and, in subsec. (b)(7)(A)(iii), dollar amount ‘‘675’’ was adjusted to ‘‘700’’. By notice dated Feb. 12, 2013, 78 F.R. 12089, effective Apr. 1, 2013, in subsec. (b)(2)(A)(i)(I), dollar amount ‘‘7,025’’ was adjusted to ‘‘7,475’’; in subsec. (b)(2)(A)(i)(II), dollar amount ‘‘11,725’’ was adjusted to ‘‘12,475’’; in subsec. (b)(2)(A)(ii)(IV), dollar amount ‘‘1,775’’ was adjusted to ‘‘1,875’’; in subsec. (b)(2)(B)(iv)(I), dollar amount ‘‘7,025’’ was adjusted to ‘‘7,475’’; in subsec. (b)(2)(B)(iv)(II), dollar amount ‘‘11,725’’ was adjusted to ‘‘12,475’’; in subsec. (b)(5)(B), dollar amount ‘‘1,175’’ was adjusted to ‘‘1,250’’; in sub- sec. (b)(6)(C), dollar amount ‘‘625’’ was adjusted to ‘‘675’’; and, in subsec. (b)(7)(A)(iii), dollar amount ‘‘625’’ was adjusted to ‘‘675’’. By notice dated Feb. 19, 2010, 75 F.R. 8747, effective Apr. 1, 2010, in subsec. (b)(2)(A)(i)(I), dollar amount ‘‘6,575’’ was adjusted to ‘‘7,025’’; in subsec. (b)(2)(A)(i)(II), dollar amount ‘‘10,950’’ was adjusted to ‘‘11,725’’; in subsec. (b)(2)(A)(ii)(IV), dollar amount ‘‘1,650’’ was adjusted to ‘‘1,775’’; in subsec. (b)(2)(B)(iv)(I), dollar amount ‘‘6,575’’ was adjusted to ‘‘7,025’’; in subsec. (b)(2)(B)(iv)(II), dollar amount ‘‘10,950’’ was adjusted to ‘‘11,725’’; in subsec. (b)(5)(B), dollar amount ‘‘1,100’’ was adjusted to ‘‘1,175’’; in sub- sec. (b)(6)(C), dollar amount ‘‘575’’ was adjusted to ‘‘625’’; and, in subsec. (b)(7)(A)(iii), dollar amount ‘‘575’’ was adjusted to ‘‘625’’. By notice dated Feb. 7, 2007, 72 F.R. 7082, effective Apr. 1, 2007, as amended by notice dated Mar. 26, 2007, 72 F.R. 15162, in subsec. (b)(2)(A)(i)(I), dollar amount ‘‘6,000’’ was adjusted to ‘‘6,575’’; in subsec. (b)(2)(A)(i)(II), dollar amount ‘‘10,000’’ was adjusted to ‘‘10,950’’; in subsec. (b)(2)(A)(ii)(IV), dollar amount ‘‘1,500’’ was adjusted to ‘‘1,650’’; in subsec. (b)(2)(B)(iv)(I), dollar amount ‘‘6,000’’ was adjusted to ‘‘6,575’’; in subsec. (b)(2)(B)(iv)(II), dollar amount ‘‘10,000’’ was adjusted to ‘‘10,950’’; in subsec. (b)(5)(B), dollar amount ‘‘1,000’’ was adjusted to ‘‘1,100’’; in sub- sec. (b)(6)(C), dollar amount ‘‘525’’ was adjusted to ‘‘575’’; and, in subsec. (b)(7)(A)(iii), dollar amount ‘‘525’’ was adjusted to ‘‘575’’. SUBCHAPTER II—COLLECTION, LIQUIDA- TION, AND DISTRIBUTION OF THE ES- TATE § 721. Authorization to operate business The court may authorize the trustee to oper- ate the business of the debtor for a limited pe- riod, if such operation is in the best interest of the estate and consistent with the orderly liq- uidation of the estate. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2606.) HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95–989 This section is derived from section 2a(5) of the Bank- ruptcy Act [section 11(a)(5) of former title 11]. It per- mits the court to authorize the operation of any busi- ness of the debtor for a limited period, if the operation is in the best interest of the estate and consistent with orderly liquidation of the estate. An example is the op- eration of a watch company to convert watch move- ments and cases into completed watches which will bring much higher prices than the component parts would have brought. § 722. Redemption An individual debtor may, whether or not the debtor has waived the right to redeem under this section, redeem tangible personal property in- tended primarily for personal, family, or house- hold use, from a lien securing a dischargeable consumer debt, if such property is exempted under section 522 of this title or has been aban- doned under section 554 of this title, by paying the holder of such lien the amount of the al- lowed secured claim of such holder that is se- cured by such lien in full at the time of redemp- tion. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2606; Pub. L. 109–8, title III, § 304(2), Apr. 20, 2005, 119 Stat. 79.) HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 722 of the House amendment adopts the posi- tion taken in H.R. 8200 as passed by the House and re- jects the alternative contained in section 722 of the Senate amendment. SENATE REPORT NO. 95–989 This section is new and is broader than rights of re- demption under the Uniform Commercial Code. It au- thorizes an individual debtor to redeem tangible per- sonal property intended primarily for personal, family, or household use, from a lien securing a nonpurchase money dischargeable consumer debt. It applies only if the debtor’s interest in the property is exempt or has been abandoned. This right to redeem is a very substantial change from current law. To prevent abuses such as may occur when the debtor deliberately allows the property to de- preciate in value, the debtor will be required to pay the fair market value of the goods or the amount of the claim if the claim is less. The right is personal to the debtor and not assignable. HOUSE REPORT NO. 95–595 This section is new and is broader than rights of re- demption under the Uniform Commercial Code. It au- Page 200 TITLE 11—BANKRUPTCY § 723 thorizes an individual debtor to redeem tangible per- sonal property intended primarily for personal, family, or household use, from a lien securing a dischargeable consumer debt. It applies only if the debtor’s interest in the property is exempt or has been abandoned. The right to redeem extends to the whole of the prop- erty, not just the debtor’s exempt interest in it. Thus, for example, if a debtor owned a $2,000 car, subject to a $1,200 lien, the debtor could exempt his $800 interest in the car. The debtor is permitted a $1,500 exemption in a car, proposed 11 U.S.C. 522(d)(2). This section per- mits him to pay the holder of the lien $1,200 and redeem the entire car, not just the remaining $700 of his exemp- tion. The redemption is accomplished by paying the holder of the lien the amount of the allowed claim se- cured by the lien. The provision amounts to a right of first refusal for the debtor in consumer goods that might otherwise be repossessed. The right of redemp- tion under this section is not waivable. Editorial Notes AMENDMENTS 2005—Pub. L. 109–8 inserted ‘‘in full at the time of re- demption’’ before period at end. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2005 AMENDMENT Amendment by Pub. L. 109–8 effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under this title before such effective date, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of this title. § 723. Rights of partnership trustee against gen- eral partners (a) If there is a deficiency of property of the estate to pay in full all claims which are allowed in a case under this chapter concerning a part- nership and with respect to which a general partner of the partnership is personally liable, the trustee shall have a claim against such gen- eral partner to the extent that under applicable nonbankruptcy law such general partner is per- sonally liable for such deficiency. (b) To the extent practicable, the trustee shall first seek recovery of such deficiency from any general partner in such partnership that is not a debtor in a case under this title. Pending de- termination of such deficiency, the court may order any such partner to provide the estate with indemnity for, or assurance of payment of, any deficiency recoverable from such partner, or not to dispose of property. (c) The trustee has a claim against the estate of each general partner in such partnership that is a debtor in a case under this title for the full amount of all claims of creditors allowed in the case concerning such partnership. Notwith- standing section 502 of this title, there shall not be allowed in such partner’s case a claim against such partner on which both such partner and such partnership are liable, except to any extent that such claim is secured only by property of such partner and not by property of such part- nership. The claim of the trustee under this sub- section is entitled to distribution in such part- ner’s case under section 726(a) of this title the same as any other claim of a kind specified in such section. (d) If the aggregate that the trustee recovers from the estates of general partners under sub- section (c) of this section is greater than any de- ficiency not recovered under subsection (b) of this section, the court, after notice and a hear- ing, shall determine an equitable distribution of the surplus so recovered, and the trustee shall distribute such surplus to the estates of the gen- eral partners in such partnership according to such determination. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2606; Pub. L. 98–353, title III, § 476, July 10, 1984, 98 Stat. 381; Pub. L. 103–394, title II, § 212, Oct. 22, 1994, 108 Stat. 4125; Pub. L. 111–327, § 2(a)(26), Dec. 22, 2010, 124 Stat. 3560.) HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 723(c) of the House amendment is a com- promise between similar provisions contained in the House bill and Senate amendment. The section makes clear that the trustee of a partnership has a claim against each general partner for the full amount of all claims of creditors allowed in the case concerning the partnership. By restricting the trustee’s rights to claims of ‘‘creditors,’’ the trustee of the partnership will not have a claim against the general partners for administrative expenses or claims allowed in the case concerning the partnership. As under present law, sec- tions of the Bankruptcy Act [former title 11] applying to codebtors and sureties apply to the relationship of a partner with respect to a partnership debtor. See sec- tions 501(b), 502(e), 506(d)(2), 509, 524(d), and 1301 of title 11. SENATE REPORT NO. 95–989 This section is a significant departure from present law. It repeals the jingle rule, which, for ease of admin- istration, denied partnership creditors their rights against general partners by permitting general part- ners’ individual creditors to share in their estates first to the exclusion of partnership creditors. The result under this section more closely tracks generally appli- cable partnership law, without a significant adminis- trative burden. Subsection (a) specifies that each general partner in a partnership debtor is liable to the partnership’s trust- ee for any deficiency of partnership property to pay in full all administrative expenses and all claims against the partnership. Subsection (b) requires the trustee to seek recovery of the deficiency from any general partner that is not a debtor in a bankruptcy case. The court is empowered to order that partner to indemnify the estate or not to dispose of property pending a determination of the defi- ciency. The language of the subsection is directed to cases under the bankruptcy code. However, if, during the early stages of the transition period, a partner in a partnership is proceeding under the Bankruptcy Act [former title 11] while the partnership is proceeding under the bankruptcy code, the trustee should not first seek recovery against the Bankruptcy Act partner. Rather, the Bankruptcy Act partner should be deemed for the purposes of this section and the rights of the trustee to be proceeding under title 11. Subsection (c) requires the partnership trustee to seek recovery of the full amount of the deficiency from the estate of each general partner that is a debtor in a bankruptcy case. The trustee will share equally with the partners’ individual creditors in the assets of the partners’ estates. Claims of partnership creditors who may have filed against the partner will be disallowed to avoid double counting. Subsection (d) provides for the case where the total recovery from all of the bankrupt general partners is greater than the deficiency of which the trustee sought recovery. This case would most likely occur for a part- nership with a large number of general partners. If the situation arises, the court is required to determine an equitable redistribution of the surplus to the estate of