11 U.S.C. § 702 — Election of trustee

Page 190 TITLE 11—BANKRUPTCY § 701 Sec. 724. Treatment of certain liens. 725. Disposition of certain property. 726. Distribution of property of the estate. 727. Discharge. [728. Repealed.] SUBCHAPTER III—STOCKBROKER LIQUIDATION 741. Definitions for this subchapter. 742. Effect of section 362 of this title in this sub- chapter. 743. Notice. 744. Executory contracts. 745. Treatment of accounts. 746. Extent of customer claims. 747. Subordination of certain customer claims. 748. Reduction of securities to money. 749. Voidable transfers. 750. Distribution of securities. 751. Customer name securities. 752. Customer property. 753. Stockbroker liquidation and forward contract merchants, commodity brokers, stock- brokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants. SUBCHAPTER IV—COMMODITY BROKER LIQUIDATION 761. Definitions for this subchapter. 762. Notice to the Commission and right to be heard. 763. Treatment of accounts. 764. Voidable transfers. 765. Customer instructions. 766. Treatment of customer property. 767. Commodity broker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, finan- cial participants, securities clearing agen- cies, swap participants, repo participants, and master netting agreement participants. SUBCHAPTER V—CLEARING BANK LIQUIDATION 781. Definitions. 782. Selection of trustee. 783. Additional powers of trustee. 784. Right to be heard. Editorial Notes AMENDMENTS 2005—Pub. L. 109–8, title I, § 102(k), title VII, § 719(b)(2), title IX, § 907(p)(2), Apr. 20, 2005, 119 Stat. 35, 133, 182, added items 753 and 767, substituted ‘‘Dismissal of a case or conversion to a case under chapter 11 or 13’’ for ‘‘Dismissal’’ in item 707, and struck out item 728 ‘‘Special tax provisions’’. 2000—Pub. L. 106–554, § 1(a)(5) [title I, § 112(d)], Dec. 21, 2000, 114 Stat. 2763, 2763A–396, added subchapter V head- ing and items 781 to 784. 1984—Pub. L. 98–353, title III, § 471, July 10, 1984, 98 Stat. 380, substituted ‘‘Successor’’ for ‘‘Succesor’’ in item 703. SUBCHAPTER I—OFFICERS AND ADMINISTRATION § 701. Interim trustee (a)(1) Promptly after the order for relief under this chapter, the United States trustee shall ap- point one disinterested person that is a member of the panel of private trustees established under section 586(a)(1) of title 28 or that is serv- ing as trustee in the case immediately before the order for relief under this chapter to serve as interim trustee in the case. (2) If none of the members of such panel is willing to serve as interim trustee in the case, then the United States trustee may serve as in- terim trustee in the case. (b) The service of an interim trustee under this section terminates when a trustee elected or designated under section 702 of this title to serve as trustee in the case qualifies under sec- tion 322 of this title. (c) An interim trustee serving under this sec- tion is a trustee in a case under this title. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2604; Pub. L. 99–554, title II, § 215, Oct. 27, 1986, 100 Stat. 3100.) HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS The House amendment deletes section 701(d) of the Senate amendment. It is anticipated that the Rules of Bankruptcy Procedure will require the appointment of an interim trustee at the earliest practical moment in commodity broker bankruptcies, but no later than noon of the day after the date of the filing of the peti- tion, due to the volatility of such cases. SENATE REPORT NO. 95–989 This section requires the court to appoint an interim trustee. The appointment must be made from the panel of private trustees established and maintained by the Director of the Administrative Office under proposed 28 U.S.C. 604(e). Subsection (a) requires the appointment of an in- terim trustee to be made promptly after the order for relief, unless a trustee is already serving in the case, such as before a conversion from a reorganization to a liquidation case. Subsection (b) specifies that the appointment of an interim trustee expires when the permanent trustee is elected or designated under section 702. Subsection (c) makes clear that an interim trustee is a trustee in a case under the bankruptcy code. Subsection (d) provides that in a commodity broker case where speed is essential the interim trustee must be appointed by noon of the business day immediately following the order for relief. Editorial Notes AMENDMENTS 1986—Subsec. (a). Pub. L. 99–554 designated existing provisions as par. (1), substituted ‘‘the United States trustee shall appoint’’ for ‘‘the court shall appoint’’, ‘‘586(a)(1)’’ for ‘‘604(f)’’, ‘‘that is serving’’ for ‘‘that was serving’’, and added par. (2). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99–554 dependent upon the judicial district in- volved, see section 302(d), (e) of Pub. L. 99–554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. § 702. Election of trustee (a) A creditor may vote for a candidate for trustee only if such creditor— (1) holds an allowable, undisputed, fixed, liq- uidated, 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 ad- verse, other than an equity interest that is not substantial in relation to such creditor’s in- terest as a creditor, to the interest of creditors entitled to such distribution; and Page 191 TITLE 11—BANKRUPTCY § 703 (3) is not an insider. (b) At the meeting of creditors held under sec- tion 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 sec- tion 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 sec- tion that are held by creditors that vote for a trustee. (d) If a trustee is not elected under this sec- tion, 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, § 7, July 27, 1982, 96 Stat. 237; Pub. L. 98–353, title III, § 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 can- didate for trustee. SENATE REPORT NO. 95–989 Subsection (a) of this section specifies which credi- tors 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 ad- verse’’ 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 na- ture of the adversity. A creditor with a very small eq- uity 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 can- didate receives a majority in amount of votes actually cast. Subsection (d) specifies that if a trustee is not elect- ed, then the interim trustee becomes the permanent trustee and serves in the case permanently. Editorial Notes AMENDMENTS 1984—Subsec. (b). Pub. L. 98–353, § 472(a), inserted ‘‘held’’ after ‘‘meeting of creditors’’. Subsec. (c)(1). Pub. L. 98–353, § 472(b)(1), inserted ‘‘of a kind’’ after ‘‘claims’’. Subsec. (c)(2). Pub. L. 98–353, § 472(b)(2), substituted ‘‘for a trustee’’ for ‘‘for trustee’’. Subsec. (d). Pub. L. 98–353, § 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)’’. Statutory Notes and Related Subsidiaries 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. § 703. Successor trustee (a) If a trustee dies or resigns during a case, fails to qualify under section 322 of this title, or is removed under section 324 of this title, credi- tors may elect, in the manner specified in sec- tion 702 of this title, a person to fill the vacancy in the office of trustee. (b) Pending election of a trustee under sub- section (a) of this section, if necessary to pre- serve or prevent loss to the estate, the United States trustee may appoint an interim trustee in the manner specified in section 701(a). (c) If creditors do not elect a successor trustee under subsection (a) of this section or if a trust- ee is needed in a case reopened under section 350 of this title, then the United States trustee— (1) shall appoint one disinterested person that is a member of the panel of private trust- ees established under section 586(a)(1) of title 28 to serve as trustee in the case; or (2) may, if none of the disinterested mem- bers of such panel is willing to serve as trust- ee, serve as trustee in the case. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2605; Pub. L. 98–353, title III, § 473, July 10, 1984, 98 Stat. 381; Pub. L. 99–554, title II, § 216, Oct. 27, 1986, 100 Stat. 3100.) HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95–989 If the office of trustee becomes vacant during the case, this section makes provision for the selection of a successor trustee. The office might become vacant through death, resignation, removal, failure to qualify under section 322 by posting bond, or the reopening of a case. If it does, creditors may elect a successor in the same manner as they may elect a trustee under the previous section. Pending the election of a successor, the court may appoint an interim trustee in the usual manner if necessary to preserve or prevent loss to the estate. If creditors do not elect a successor, or if a trustee is needed in a reopened case, then the court ap- points a disinterested member of the panel of private trustees to serve. Editorial Notes AMENDMENTS 1986—Subsec. (b). Pub. L. 99–554 amended subsec. (b) generally, substituting ‘‘the United States trustee may appoint’’ for ‘‘the court may appoint’’ and ‘‘manner specified in section 701(a)’’ for ‘‘manner and subject to the provisions of section 701 of this title’’. Subsec. (c). Pub. L. 99–554 amended subsec. (c) gen- erally, substituting ‘‘this section or’’ for ‘‘this section, or’’, ‘‘then the United States trustee’’ for ‘‘then the