11 U.S.C. § 901 — Applicability of other sections of this title

Page 226 TITLE 11—BANKRUPTCY § 784 1 So in original. The second comma probably should follow ‘‘350(b)’’. 2 See References in Text note below. § 784. Right to be heard The Board or a Federal reserve bank (in the case of a clearing bank that is a member of that bank) may raise and may appear and be heard on any issue in a case under this subchapter. (Added Pub. L. 106–554, § 1(a)(5) [title I, § 112(c)(5)(B)], Dec. 21, 2000, 114 Stat. 2763, 2763A–395.) CHAPTER 9—ADJUSTMENT OF DEBTS OF A MUNICIPALITY SUBCHAPTER I—GENERAL PROVISIONS Sec. 901. Applicability of other sections of this title. 902. Definitions for this chapter. 903. Reservation of State power to control mu- nicipalities. 904. Limitation on jurisdiction and powers of court. SUBCHAPTER II—ADMINISTRATION 921. Petition and proceedings relating to petition. 922. Automatic stay of enforcement of claims against the debtor. 923. Notice. 924. List of creditors. 925. Effect of list of claims. 926. Avoiding powers. 927. Limitation on recourse. 928. Post petition effect of security interest. 929. Municipal leases. 930. Dismissal. SUBCHAPTER III—THE PLAN 941. Filing of plan. 942. Modification of plan. 943. Confirmation. 944. Effect of confirmation. 945. Continuing jurisdiction and closing of the case. 946. Effect of exchange of securities before the date of the filing of the petition. Editorial Notes AMENDMENTS 1988—Pub. L. 100–597, § 11, Nov. 3, 1988, 102 Stat. 3030, added items 927 to 929 and redesignated former item 927 as 930. SUBCHAPTER I—GENERAL PROVISIONS § 901. Applicability of other sections of this title (a) Sections 301, 333, 344, 347(b), 349, 350(b) 351,,1 361, 362, 364(c), 364(d), 364(e), 364(f), 365, 366, 501, 502, 503, 504, 506, 507(a)(2), 509, 510, 524(a)(1), 524(a)(2), 544, 545, 546, 547, 548, 549(a), 549(c), 549(d), 550, 551, 552, 553, 555, 556, 557, 559, 560, 561, 562, 1102, 1103, 1109, 1111(b), 1122, 1123(a)(1), 1123(a)(2), 1123(a)(3), 1123(a)(4), 1123(a)(5), 1123(b), 1123(d), 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 chap- ter. (b) A term used in a section of this title made applicable in a case under this chapter by sub- section (a) of this section or section 103(e) 2 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 chapter. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2621; Pub. L. 98–353, title III, §§ 353, 490, July 10, 1984, 98 Stat. 361, 383; Pub. L. 100–597, § 3, Nov. 3, 1988, 102 Stat. 3028; Pub. L. 109–8, title V, § 502, title XII, § 1216, title XV, § 1502(a)(5), Apr. 20, 2005, 119 Stat. 118, 195, 216; Pub. L. 111–327, § 2(a)(29), Dec. 22, 2010, 124 Stat. 3560.) HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Chapter 9 of the House amendment represents a com- promise between chapter 9 of the House bill and 9 of the Senate amendment. In most respects this chapter fol- lows current law with respect to the adjustment of debts of a municipality. Stylistic changes and minor substantive revisions have been made in order to con- form this chapter with other new chapters of the bank- ruptcy 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 sec- tions providing for creditors’ committees under sec- tions 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: § 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 com- menced only by the municipality itself. There are no involuntary chapter 9 cases. § 344. Self-incrimination; immunity. Application of this section is of no substantive effect for the administra- tion of the case, but merely provides that the general rules in part V [§ 6001 et seq.] of title 18 govern immu- nity. § 347(b). Unclaimed property. This provision currently appears in section 96(d) of chapter IX [section 416(d) of former title 11]. § 349. Effect of dismissal. This section governs the ef- fect 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. § 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 im- portance lies in its application to sections 362 and 364. § 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 cur- rent Bankruptcy Act § 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 chap- ter 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. §§ 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 provi- Page 227 TITLE 11—BANKRUPTCY § 901 sion in current law, section 82(b)(2) [section 402(b)(2) of former title 11]. The difference lies mainly in the re- moval under the bill of the authority of the court to su- pervise borrowing by the municipality in instances in which none of the special bankruptcy powers are in- volved. 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 doc- trine 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 subordi- nation of existing liens, or special priority for the bor- rowed funds, will the court become involved in the au- thorization. § 365. Executory contracts and unexpired leases. The ap- plicability of section 365 incorporates the general power of a bankruptcy court to authorize the assump- tion 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]. § 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 pro- vided. No comparable explicit provision is found in cur- rent law, although the case law seems to support the same result. § 501. Filing of proofs of claims. This section permits fil- ing of proofs of claims in a chapter 9 case. Note, how- ever, 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]. § 502. Allowance of claims. This section applies the gen- eral allowance rules to chapter 9 cases. This is no change from current law. § 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]. § 504. Sharing of compensation. There is no comparable provision in current law. However, this provision ap- plies generally throughout the proposed law, and will not affect the progress of the case, only the interrela- tions between attorneys and other professionals that participate in the case. § 506. Determination of secured status. Section 506 speci- fies 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. § 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 stat- ute, 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 pri- ority under the laws of the United States, is deleted be- cause 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 regular- ized and brought together in the bankruptcy laws by this bill, the need for incorporation of priorities else- where specified is eliminated. § 509. Claims of codebtors. This section provides for the treatment of sureties, guarantors, and codebtors. The general rule of postponement found in the other chap- ters will apply in chapter 9. This section adopts current law. § 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. § 547. Preferences. Incorporation of section 547 will per- mit 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 Bank- ruptcy Act § 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 85(h). § 550. Liability of transfers. Incorporation of this sec- tion is made necessary by the incorporation of the pref- erence section, and permits recovery by the debtor from a transferee of an avoided preference. § 551. Automatic preservation of avoided transfer. Appli- cation of section 551 requires preservation of any avoid- ed preference for the benefit of the estate. § 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 case. § 553. Setoff. Under current law, certain setoff is stayed. Application of this section preserves that re- sult, though the setoffs that are permitted under sec- tion 553 are better defined than under present law. Ap- plication of this section is necessary to stay the setoff and to provide the offsetting creditor with the protec- tion to which he is entitled under present law. § 1122. Classification of claims. This section is derived from current section 88(b) [section 408(b) of former title 11], and is substantially similar. § 1123(a)(1)–(4), (b). Contents of plan. The general provi- sions 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. Sec- tion 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. § 1124. Impairment of claims. The confirmation stand- ards adopted in chapter 9 are the same as those of chap- ter 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 pro- posed chapter 11 is carried over into chapter 9, for there appears to be no reason why the confirmation stand- ards for the two chapters should be different, or why the elimination of the fair and equitable rule from cor- porate reorganizations should not be followed in mu- nicipal 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 de- fines impairment, for use in section 1129. § 1125. Postpetition disclosure and solicitation. The change in the confirmation standard necessitates a cor- responding 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 dis- closure requirement. Incorporation of section 1125 will insure that creditors receive adequate information be- fore they are required to vote on a plan. § 1126(a), (b), (c), (e), (f), (g). Acceptance of plan. Sec- tion 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 § 92 [section 412 of former title 11]. Section 1125 permits exclusion of certain acceptances from the computation Page 228 TITLE 11—BANKRUPTCY § 902 1 See References in Text note below. if the acceptances were obtained in bad faith or, unlike current law, if there is a conflict of interest motivating the acceptance. § 1127(d). Modification of plan. This section governs the change of a creditor’s vote on the plan after a modifica- tion is proposed. It is derived from current section 92(e) [section 412(e) of former title 11]. § 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 Bank- ruptcy Act §§ 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 Rules. § 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 fi- nancial standard for confirmation, which replaces the fair and equitable rule. See § 1124, supra. § 1142(b). Execution of plan. Derived from Bankruptcy Act § 96(b) [section 416(b) of former title 11], this section permits the court to order execution and delivery of in- struments in order to execute the plan. § 1143. Distribution. This section is the same in sub- stance 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. § 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]. Editorial Notes REFERENCES IN TEXT Section 103(e) of this title, referred to in subsec. (b), was redesignated section 103(f) and a new section 103(e) was added by Pub. L. 106–554, § 1(a)(5) [title I, § 112(c)(5)(A)], Dec. 21, 2000, 114 Stat. 2763, 2763A–394. AMENDMENTS 2010—Subsec. (a). Pub. L. 111–327 inserted ‘‘333,’’ after ‘‘301,’’ and ‘‘351,’’ after ‘‘350(b)’’. 2005—Subsec. (a). Pub. L. 109–8, § 1502(a)(5), sub- stituted ‘‘507(a)(2)’’ for ‘‘507(a)(1)’’. Pub. L. 109–8, § 1216, inserted ‘‘1123(d),’’ after ‘‘1123(b),’’. Pub. L. 109–8, § 502, inserted ‘‘555, 556,’’ after ‘‘553,’’ and ‘‘559, 560, 561, 562,’’ after ‘‘557,’’. 1988—Subsec. (a). Pub. L. 100–597 inserted ‘‘1129(a)(6),’’ after ‘‘1129(a)(3),’’. 1984—Subsec. (a). Pub. L. 98–353 inserted ‘‘557,’’ after ‘‘553,’’ and substituted ‘‘1111(b),’’ for ‘‘1111(b)’’. 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. 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. § 902. Definitions for this chapter In this chapter— (1) ‘‘property of the estate’’, when used in a section that is made applicable in a case under this chapter by section 103(e) 1 or 901 of this title, means property of the debtor; (2) ‘‘special revenues’’ means— (A) receipts derived from the ownership, operation, or disposition of projects or sys- tems of the debtor that are primarily used or intended to be used primarily to provide transportation, utility, or other services, in- cluding the proceeds of borrowings to fi- nance the projects or systems; (B) special excise taxes imposed on par- ticular activities or transactions; (C) incremental tax receipts from the ben- efited area in the case of tax-increment fi- nancing; (D) other revenues or receipts derived from particular functions of the debtor, whether or not the debtor has other functions; or (E) taxes specifically levied to finance one or more projects or systems, excluding re- ceipts from general property, sales, or in- come taxes (other than tax-increment fi- nancing) levied to finance the general pur- poses of the debtor; (3) ‘‘special tax payer’’ means record owner or holder of legal or equitable title to real property against which a special assessment or special tax has been levied the proceeds of which are the sole source of payment of an ob- ligation issued by the debtor to defray the cost of an improvement relating to such real prop- erty; (4) ‘‘special tax payer affected by the plan’’ means special tax payer with respect to whose real property the plan proposes to increase the proportion of special assessments or special taxes referred to in paragraph (2) of this sec- tion assessed against such real property; and (5) ‘‘trustee’’, when used in a section that is made applicable in a case under this chapter by section 103(e) 1 or 901 of this title, means debtor, except as provided in section 926 of this title. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2622; Pub. L. 98–353, title III, § 491, July 10, 1984, 98 Stat. 383; Pub. L. 100–597, § 4, Nov. 3, 1988, 102 Stat. 3028.) HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 902(2) of the Senate amendment is deleted since the bankruptcy court will have jurisdiction over all cases under chapter 9. The concept of a claim being materially and adversely affected reflected in section 902(1) of the Senate amendment has been deleted and replaced with the new concept of ‘‘impairment’’ set forth in section 1124 of the House amendment and in- corporated by reference into chapter 9. SENATE REPORT NO. 95–989 There are six definitions for use in chapter 9. Para- graph (1) defines what claims are included in a chapter 9 case and adopts the definition now found in section 81(1) [section 401(1) of former title 11]. All claims against the petitioner generally will be included, with