|
U.S. Code as of:
01/19/04
Section 524. Effect of discharge
(a) A discharge in a case under this title -
(1) voids any judgment at any time obtained, to the extent that
such judgment is a determination of the personal liability of the
debtor with respect to any debt discharged under section 727,
944, 1141, 1228, or 1328 of this title, whether or not discharge
of such debt is waived;
(2) operates as an injunction against the commencement or
continuation of an action, the employment of process, or an act,
to collect, recover or offset any such debt as a personal
liability of the debtor, whether or not discharge of such debt is
waived; and
(3) operates as an injunction against the commencement or
continuation of an action, the employment of process, or an act,
to collect or recover from, or offset against, property of the
debtor of the kind specified in section 541(a)(2) of this title
that is acquired after the commencement of the case, on account
of any allowable community claim, except a community claim that
is excepted from discharge under section 523, 1228(a)(1), or
1328(a)(1) (!1) of this title, or that would be so excepted,
determined in accordance with the provisions of sections 523(c)
and 523(d) of this title, in a case concerning the debtor's
spouse commenced on the date of the filing of the petition in the
case concerning the debtor, whether or not discharge of the debt
based on such community claim is waived.
(b) Subsection (a)(3) of this section does not apply if -
(1)(A) the debtor's spouse is a debtor in a case under this
title, or a bankrupt or a debtor in a case under the Bankruptcy
Act, commenced within six years of the date of the filing of the
petition in the case concerning the debtor; and
(B) the court does not grant the debtor's spouse a discharge in
such case concerning the debtor's spouse; or
(2)(A) the court would not grant the debtor's spouse a
discharge in a case under chapter 7 of this title concerning such
spouse commenced on the date of the filing of the petition in the
case concerning the debtor; and
(B) a determination that the court would not so grant such
discharge is made by the bankruptcy court within the time and in
the manner provided for a determination under section 727 of this
title of whether a debtor is granted a discharge.
(c) An agreement between a holder of a claim and the debtor, the
consideration for which, in whole or in part, is based on a debt
that is dischargeable in a case under this title is enforceable
only to any extent enforceable under applicable nonbankruptcy law,
whether or not discharge of such debt is waived, only if -
(1) such agreement was made before the granting of the
discharge under section 727, 1141, 1228, or 1328 of this title;
(2)(A) such agreement contains a clear and conspicuous
statement which advises the debtor that the agreement may be
rescinded at any time prior to discharge or within sixty days
after such agreement is filed with the court, whichever occurs
later, by giving notice of rescission to the holder of such
claim; and
(B) such agreement contains a clear and conspicuous statement
which advises the debtor that such agreement is not required
under this title, under nonbankruptcy law, or under any agreement
not in accordance with the provisions of this subsection;
(3) such agreement has been filed with the court and, if
applicable, accompanied by a declaration or an affidavit of the
attorney that represented the debtor during the course of
negotiating an agreement under this subsection, which states that
-
(A) such agreement represents a fully informed and voluntary
agreement by the debtor;
(B) such agreement does not impose an undue hardship on the
debtor or a dependent of the debtor; and
(C) the attorney fully advised the debtor of the legal effect
and consequences of -
(i) an agreement of the kind specified in this subsection;
and
(ii) any default under such an agreement;
(4) the debtor has not rescinded such agreement at any time
prior to discharge or within sixty days after such agreement is
filed with the court, whichever occurs later, by giving notice of
rescission to the holder of such claim;
(5) the provisions of subsection (d) of this section have been
complied with; and
(6)(A) in a case concerning an individual who was not
represented by an attorney during the course of negotiating an
agreement under this subsection, the court approves such
agreement as -
(i) not imposing an undue hardship on the debtor or a
dependent of the debtor; and
(ii) in the best interest of the debtor.
(B) Subparagraph (A) shall not apply to the extent that such
debt is a consumer debt secured by real property.
(d) In a case concerning an individual, when the court has
determined whether to grant or not to grant a discharge under
section 727, 1141, 1228, or 1328 of this title, the court may hold
a hearing at which the debtor shall appear in person. At any such
hearing, the court shall inform the debtor that a discharge has
been granted or the reason why a discharge has not been granted. If
a discharge has been granted and if the debtor desires to make an
agreement of the kind specified in subsection (c) of this section
and was not represented by an attorney during the course of
negotiating such agreement, then the court shall hold a hearing at
which the debtor shall appear in person and at such hearing the
court shall -
(1) inform the debtor -
(A) that such an agreement is not required under this title,
under nonbankruptcy law, or under any agreement not made in
accordance with the provisions of subsection (c) of this
section; and
(B) of the legal effect and consequences of -
(i) an agreement of the kind specified in subsection (c) of
this section; and
(ii) a default under such an agreement; and
(2) determine whether the agreement that the debtor desires to
make complies with the requirements of subsection (c)(6) of this
section, if the consideration for such agreement is based in
whole or in part on a consumer debt that is not secured by real
property of the debtor.
(e) Except as provided in subsection (a)(3) of this section,
discharge of a debt of the debtor does not affect the liability of
any other entity on, or the property of any other entity for, such
debt.
(f) Nothing contained in subsection (c) or (d) of this section
prevents a debtor from voluntarily repaying any debt.
(g)(1)(A) After notice and hearing, a court that enters an order
confirming a plan of reorganization under chapter 11 may issue, in
connection with such order, an injunction in accordance with this
subsection to supplement the injunctive effect of a discharge under
this section.
(B) An injunction may be issued under subparagraph (A) to enjoin
entities from taking legal action for the purpose of directly or
indirectly collecting, recovering, or receiving payment or recovery
with respect to any claim or demand that, under a plan of
reorganization, is to be paid in whole or in part by a trust
described in paragraph (2)(B)(i), except such legal actions as are
expressly allowed by the injunction, the confirmation order, or the
plan of reorganization.
(2)(A) Subject to subsection (h), if the requirements of
subparagraph (B) are met at the time an injunction described in
paragraph (1) is entered, then after entry of such injunction, any
proceeding that involves the validity, application, construction,
or modification of such injunction, or of this subsection with
respect to such injunction, may be commenced only in the district
court in which such injunction was entered, and such court shall
have exclusive jurisdiction over any such proceeding without regard
to the amount in controversy.
(B) The requirements of this subparagraph are that -
(i) the injunction is to be implemented in connection with a
trust that, pursuant to the plan of reorganization -
(I) is to assume the liabilities of a debtor which at the
time of entry of the order for relief has been named as a
defendant in personal injury, wrongful death, or
property-damage actions seeking recovery for damages allegedly
caused by the presence of, or exposure to, asbestos or
asbestos-containing products;
(II) is to be funded in whole or in part by the securities of
1 or more debtors involved in such plan and by the obligation
of such debtor or debtors to make future payments, including
dividends;
(III) is to own, or by the exercise of rights granted under
such plan would be entitled to own if specified contingencies
occur, a majority of the voting shares of -
(aa) each such debtor;
(bb) the parent corporation of each such debtor; or
(cc) a subsidiary of each such debtor that is also a
debtor; and
(IV) is to use its assets or income to pay claims and
demands; and
(ii) subject to subsection (h), the court determines that -
(I) the debtor is likely to be subject to substantial future
demands for payment arising out of the same or similar conduct
or events that gave rise to the claims that are addressed by
the injunction;
(II) the actual amounts, numbers, and timing of such future
demands cannot be determined;
(III) pursuit of such demands outside the procedures
prescribed by such plan is likely to threaten the plan's
purpose to deal equitably with claims and future demands;
(IV) as part of the process of seeking confirmation of such
plan -
(aa) the terms of the injunction proposed to be issued
under paragraph (1)(A), including any provisions barring
actions against third parties pursuant to paragraph (4)(A),
are set out in such plan and in any disclosure statement
supporting the plan; and
(bb) a separate class or classes of the claimants whose
claims are to be addressed by a trust described in clause (i)
is established and votes, by at least 75 percent of those
voting, in favor of the plan; and
(V) subject to subsection (h), pursuant to court orders or
otherwise, the trust will operate through mechanisms such as
structured, periodic, or supplemental payments, pro rata
distributions, matrices, or periodic review of estimates of the
numbers and values of present claims and future demands, or
other comparable mechanisms, that provide reasonable assurance
that the trust will value, and be in a financial position to
pay, present claims and future demands that involve similar
claims in substantially the same manner.
(3)(A) If the requirements of paragraph (2)(B) are met and the
order confirming the plan of reorganization was issued or affirmed
by the district court that has jurisdiction over the reorganization
case, then after the time for appeal of the order that issues or
affirms the plan -
(i) the injunction shall be valid and enforceable and may not
be revoked or modified by any court except through appeal in
accordance with paragraph (6);
(ii) no entity that pursuant to such plan or thereafter becomes
a direct or indirect transferee of, or successor to any assets
of, a debtor or trust that is the subject of the injunction shall
be liable with respect to any claim or demand made against such
entity by reason of its becoming such a transferee or successor;
and
(iii) no entity that pursuant to such plan or thereafter makes
a loan to such a debtor or trust or to such a successor or
transferee shall, by reason of making the loan, be liable with
respect to any claim or demand made against such entity, nor
shall any pledge of assets made in connection with such a loan be
upset or impaired for that reason;
(B) Subparagraph (A) shall not be construed to -
(i) imply that an entity described in subparagraph (A)(ii) or
(iii) would, if this paragraph were not applicable, necessarily
be liable to any entity by reason of any of the acts described in
subparagraph (A);
(ii) relieve any such entity of the duty to comply with, or of
liability under, any Federal or State law regarding the making of
a fraudulent conveyance in a transaction described in
subparagraph (A)(ii) or (iii); or
(iii) relieve a debtor of the debtor's obligation to comply
with the terms of the plan of reorganization, or affect the power
of the court to exercise its authority under sections 1141 and
1142 to compel the debtor to do so.
(4)(A)(i) Subject to subparagraph (B), an injunction described in
paragraph (1) shall be valid and enforceable against all entities
that it addresses.
(ii) Notwithstanding the provisions of section 524(e), such an
injunction may bar any action directed against a third party who is
identifiable from the terms of such injunction (by name or as part
of an identifiable group) and is alleged to be directly or
indirectly liable for the conduct of, claims against, or demands on
the debtor to the extent such alleged liability of such third party
arises by reason of -
(I) the third party's ownership of a financial interest in the
debtor, a past or present affiliate of the debtor, or a
predecessor in interest of the debtor;
(II) the third party's involvement in the management of the
debtor or a predecessor in interest of the debtor, or service as
an officer, director or employee of the debtor or a related
party;
(III) the third party's provision of insurance to the debtor or
a related party; or
(IV) the third party's involvement in a transaction changing
the corporate structure, or in a loan or other financial
transaction affecting the financial condition, of the debtor or a
related party, including but not limited to -
(aa) involvement in providing financing (debt or equity), or
advice to an entity involved in such a transaction; or
(bb) acquiring or selling a financial interest in an entity
as part of such a transaction.
(iii) As used in this subparagraph, the term "related party"
means -
(I) a past or present affiliate of the debtor;
(II) a predecessor in interest of the debtor; or
(III) any entity that owned a financial interest in -
(aa) the debtor;
(bb) a past or present affiliate of the debtor; or
(cc) a predecessor in interest of the debtor.
(B) Subject to subsection (h), if, under a plan of
reorganization, a kind of demand described in such plan is to be
paid in whole or in part by a trust described in paragraph
(2)(B)(i) in connection with which an injunction described in
paragraph (1) is to be implemented, then such injunction shall be
valid and enforceable with respect to a demand of such kind made,
after such plan is confirmed, against the debtor or debtors
involved, or against a third party described in subparagraph
(A)(ii), if -
(i) as part of the proceedings leading to issuance of such
injunction, the court appoints a legal representative for the
purpose of protecting the rights of persons that might
subsequently assert demands of such kind, and
(ii) the court determines, before entering the order confirming
such plan, that identifying such debtor or debtors, or such third
party (by name or as part of an identifiable group), in such
injunction with respect to such demands for purposes of this
subparagraph is fair and equitable with respect to the persons
that might subsequently assert such demands, in light of the
benefits provided, or to be provided, to such trust on behalf of
such debtor or debtors or such third party.
(5) In this subsection, the term "demand" means a demand for
payment, present or future, that -
(A) was not a claim during the proceedings leading to the
confirmation of a plan of reorganization;
(B) arises out of the same or similar conduct or events that
gave rise to the claims addressed by the injunction issued under
paragraph (1); and
(C) pursuant to the plan, is to be paid by a trust described in
paragraph (2)(B)(i).
(6) Paragraph (3)(A)(i) does not bar an action taken by or at the
direction of an appellate court on appeal of an injunction issued
under paragraph (1) or of the order of confirmation that relates to
the injunction.
(7) This subsection does not affect the operation of section 1144
or the power of the district court to refer a proceeding under
section 157 of title 28 or any reference of a proceeding made prior
to the date of the enactment of this subsection.
(h) Application to Existing Injunctions. - For purposes of
subsection (g) -
(1) subject to paragraph (2), if an injunction of the kind
described in subsection (g)(1)(B) was issued before the date of
the enactment of this Act, as part of a plan of reorganization
confirmed by an order entered before such date, then the
injunction shall be considered to meet the requirements of
subsection (g)(2)(B) for purposes of subsection (g)(2)(A), and to
satisfy subsection (g)(4)(A)(ii), if -
(A) the court determined at the time the plan was confirmed
that the plan was fair and equitable in accordance with the
requirements of section 1129(b);
(B) as part of the proceedings leading to issuance of such
injunction and confirmation of such plan, the court had
appointed a legal representative for the purpose of protecting
the rights of persons that might subsequently assert demands
described in subsection (g)(4)(B) with respect to such plan;
and
(C) such legal representative did not object to confirmation
of such plan or issuance of such injunction; and
(2) for purposes of paragraph (1), if a trust described in
subsection (g)(2)(B)(i) is subject to a court order on the date
of the enactment of this Act staying such trust from settling or
paying further claims -
(A) the requirements of subsection (g)(2)(B)(ii)(V) shall not
apply with respect to such trust until such stay is lifted or
dissolved; and
(B) if such trust meets such requirements on the date such
stay is lifted or dissolved, such trust shall be considered to
have met such requirements continuously from the date of the
enactment of this Act.
|
|