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119th Congress

Title 11 — Bankruptcy

Chapter 5 — Creditors, the Debtor, and the Estate

§ 548. Fraudulent transfers and obligations

Statutory text

(a)
(1)

The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily—

(A)

made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; or

(B)
(i)

received less than a reasonably equivalent value in exchange for such transfer or obligation; and

(ii)
(I)

was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;

(II)

was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital;

(III)

intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor’s ability to pay as such debts matured; or

(IV)

made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.

(2)

A transfer of a charitable contribution to a qualified religious or charitable entity or organization shall not be considered to be a transfer covered under paragraph (1)(B) in any case in which—

(A)

the amount of that contribution does not exceed 15 percent of the gross annual income of the debtor for the year in which the transfer of the contribution is made; or

(B)

the contribution made by a debtor exceeded the percentage amount of gross annual income specified in subparagraph (A), if the transfer was consistent with the practices of the debtor in making charitable contributions.

(b)

The trustee of a partnership debtor may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, to a general partner in the debtor, if the debtor was insolvent on the date such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation.

(c)

Except to the extent that a transfer or obligation voidable under this section is voidable under section 544, 545, or 547 of this title, a transferee or obligee of such a transfer or obligation that takes for value and in good faith has a lien on or may retain any interest transferred or may enforce any obligation incurred, as the case may be, to the extent that such transferee or obligee gave value to the debtor in exchange for such transfer or obligation.

(d)
(1)

For the purposes of this section, a transfer is made when such transfer is so perfected that a bona fide purchaser from the debtor against whom applicable law permits such transfer to be perfected cannot acquire an interest in the property transferred that is superior to the interest in such property of the transferee, but if such transfer is not so perfected before the commencement of the case, such transfer is made immediately before the date of the filing of the petition.

(2)

In this section—

(A)

“value” means property, or satisfaction or securing of a present or antecedent debt of the debtor, but does not include an unperformed promise to furnish support to the debtor or to a relative of the debtor;

(B)

a commodity broker, forward contract merchant, stockbroker, financial institution, financial participant, or securities clearing agency that receives a margin payment, as defined in section 101, 741, or 761 of this title, or settlement payment, as defined in section 101 or 741 of this title, takes for value to the extent of such payment;

(C)

a repo participant or financial participant that receives a margin payment, as defined in section 741 or 761 of this title, or settlement payment, as defined in section 741 of this title, in connection with a repurchase agreement, takes for value to the extent of such payment;

(D)

a swap participant or financial participant that receives a transfer in connection with a swap agreement takes for value to the extent of such transfer; and

(E)

a master netting agreement participant that receives a transfer in connection with a master netting agreement or any individual contract covered thereby takes for value to the extent of such transfer, except that, with respect to a transfer under any individual contract covered thereby, to the extent that such master netting agreement participant otherwise did not take (or is otherwise not deemed to have taken) such transfer for value.

(3)

In this section, the term “charitable contribution” means a charitable contribution, as that term is defined in section 170(c) of the Internal Revenue Code of 1986, if that contribution—

(A)

is made by a natural person; and

(B)

consists of—

(i)

a financial instrument (as that term is defined in section 731(c)(2)(C) of the Internal Revenue Code of 1986); or

(ii)

cash.

(4)

In this section, the term “qualified religious or charitable entity or organization” means—

(A)

an entity described in section 170(c)(1) of the Internal Revenue Code of 1986; or

(B)

an entity or organization described in section 170(c)(2) of the Internal Revenue Code of 1986.

(e)
(1)

In addition to any transfer that the trustee may otherwise avoid, the trustee may avoid any transfer of an interest of the debtor in property that was made on or within 10 years before the date of the filing of the petition, if—

(A)

such transfer was made to a self-settled trust or similar device;

(B)

such transfer was by the debtor;

(C)

the debtor is a beneficiary of such trust or similar device; and

(D)

the debtor made such transfer with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made, indebted.

(2)

For the purposes of this subsection, a transfer includes a transfer made in anticipation of any money judgment, settlement, civil penalty, equitable order, or criminal fine incurred by, or which the debtor believed would be incurred by—

(A)

any violation of the securities laws (as defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47))), any State securities laws, or any regulation or order issued under Federal securities laws or State securities laws; or

(B)

fraud, deceit, or manipulation in a fiduciary capacity or in connection with the purchase or sale of any security registered under section 12 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78l and 78o(d)) or under section 6 of the Securities Act of 1933 (15 U.S.C. 77f).

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

  1. Pub. L. 95–598 · 92 Stat. 2549

    Enacted · 11 U.S.C. § 548

    Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2600

    Source evidence

    Code source credit
    Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2600

  2. Pub. L. 97–222 § 5 · 96 Stat. 235

    Substituted · 11 U.S.C. § 548(d)(2)(B)

    Pub. L. 97–222 substituted “a commodity broker, forward contract merchant, stockbroker, or securities clearing agency that receives a margin payment, as defined in section 741(5) or 761(15) of this title, or settlement payment, as defined in section 741(8) of this title, takes for value to extent of such payment” for “a commodity broker or forward contract merchant that receives a margin payment, as defined in section 761(15) of this title, takes for value”

    Source evidence

    Code amendment note
    Subsec. (d)(2)(B). Pub. L. 97–222 substituted “a commodity broker, forward contract merchant, stockbroker, or securities clearing agency that receives a margin payment, as defined in section 741(5) or 761(15) of this title, or settlement payment, as defined in section 741(8) of this title, takes for value to extent of such payment” for “a commodity broker or forward contract merchant that receives a margin payment, as defined in section 761(15) of this title, takes for value”.

    Enacted provision · exact public law section
    Sec. 5. Section 548(d)(2)(B) of title 11, United States Code, is amended— (1) by striking out “or forward contract merchant” and inserting in lieu thereof “, forward contract merchant, stockbroker, or securities clearing agency”, (2) by inserting “741(5) or” after “section”, (3) by inserting “, or settlement payment, as defined in section 741(8) of this title” after “of this title”, and (4) by striking out “value” and inserting in lieu thereof “value to the extent of such payment.”.

  3. Pub. L. 98–353 § 463(a)(1) · 98 Stat. 333

    Substituted · 11 U.S.C. § 548(a)

    Pub. L. 98–353, § 463(a)(1), substituted “if the debtor voluntarily or involuntarily” for “if the debtor” in provisions preceding par. (1)

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 98–353, § 463(a)(1), substituted “if the debtor voluntarily or involuntarily” for “if the debtor” in provisions preceding par. (1).

    Enacted provision · exact public law section
    (1) by striking out “if the debtor” and inserting in lieu thereof “if the debtor voluntarily or involuntarily”;

  4. Pub. L. 98–353 § 463(a)(2) · 98 Stat. 333

    Substituted · 11 U.S.C. § 548(a)(1)

    Pub. L. 98–353, § 463(a)(2), substituted “was made” for “occurred”

    Source evidence

    Code amendment note
    Subsec. (a)(1). Pub. L. 98–353, § 463(a)(2), substituted “was made” for “occurred”.

    Enacted provision · exact public law section
    (2) in paragraph (1), by striking out “occurred” and inserting in lieu thereof “was made”; and

  5. Pub. L. 98–353 § 463(a)(3) · 98 Stat. 333

    Inserted · 11 U.S.C. § 548(a)(2)(B)(ii)

    Pub. L. 98–353, § 463(a)(3), inserted “or a transaction” after “engaged in business”

    Source evidence

    Code amendment note
    Subsec. (a)(2)(B)(ii). Pub. L. 98–353, § 463(a)(3), inserted “or a transaction” after “engaged in business”.

    Enacted provision · exact public law section
    (3) in paragraph (2)(B)(ii), by inserting “or a transaction” after “engaged in business”.

  6. Pub. L. 98–353 § 463(b) · 98 Stat. 333

    1. Inserted · 11 U.S.C. § 548(c)

      Pub. L. 98–353, § 463(b), inserted “or may retain” after “lien on”

    2. Struck · 11 U.S.C. § 548(c)

      Pub. L. 98–353, § 463(b), struck out “, may retain any lien transferred,” before “or may enforce any obligation incurred”

    Source evidence

    Code amendment note
    Subsec. (c). Pub. L. 98–353, § 463(b), inserted “or may retain” after “lien on” and struck out “, may retain any lien transferred,” before “or may enforce any obligation incurred”.

    Enacted provision · exact public law section
    (b) Section 548(c) of title 11 of the United States Code is amended by— (1) inserting “or may retain” after “lien on”; and (2) striking out “, may retain any lien transferred,”.

  7. Pub. L. 98–353 § 463(c)(1) · 98 Stat. 333

    1. Substituted · 11 U.S.C. § 548(d)(1)

      Pub. L. 98–353, § 463(c)(1), substituted “is so” for “becomes so far”

    2. Substituted · 11 U.S.C. § 548(d)(1)

      Pub. L. 98–353, § 463(c)(1), substituted “applicable law permits such transfer to be” for “such transfer could have been”

    3. Substituted · 11 U.S.C. § 548(d)(1)

      Pub. L. 98–353, § 463(c)(1), substituted “is made” for “occurs”

    Source evidence

    Code amendment note
    Subsec. (d)(1). Pub. L. 98–353, § 463(c)(1), substituted “is so” for “becomes so far”, “applicable law permits such transfer to be” for “such transfer could have been”, and “is made” for “occurs”.

    Enacted provision · exact public law section
    (1) Section 548(d)(1) of title 11 of the United States Code is amended by— (A) striking out “becomes so far” and inserting in lieu thereof “is so”; (B) striking out “such transfer could have been” and inserting in lieu thereof “applicable law permits such transfer to be”; and (C) striking out “occurs” and inserting in lieu thereof “is made”.

  8. Pub. L. 98–353 § 463(c)(2) · 98 Stat. 333

    Inserted · 11 U.S.C. § 548(d)(2)(B)

    Pub. L. 98–353, § 463(c)(2), inserted “financial institution,” after “stockbroker”

    Source evidence

    Code amendment note
    Subsec. (d)(2)(B). Pub. L. 98–353, § 463(c)(2), inserted “financial institution,” after “stockbroker”.

    Enacted provision · exact public law section
    (2) Section 548(d)(2)(B) of title 11 is amended by inserting “financial institution,” after “stockbroker”.

  9. Pub. L. 98–353 § 394(2) · 98 Stat. 333

    Added · 11 U.S.C. § 548(d)(2)(C)

    Pub. L. 98–353, § 394(2), added subpar. (C)

    Source evidence

    Code amendment note
    Subsec. (d)(2)(C). Pub. L. 98–353, § 394(2), added subpar. (C).

    Enacted provision · exact public law section
    (2) in subparagraph (B) by striking out the period at the end thereof and inserting in lieu thereof “; and”; and by inserting after paragraph (B) the following new subparagraph: “(C) a repo participant that receives a margin payment, as defined in section 741(5) or 761(15) of this title, or settlement payment, as defined in section 741(8) of this title, in connection with a repurchase agreement, takes for value to the extent of such payment.”.

  10. Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986

    Pub. L. 99–554 title II § 283(n) · 100 Stat. 3088

    Substituted · 11 U.S.C. § 548(d)(2)(B)

    Pub. L. 99–554 substituted “, financial institution” for “financial institution,”

    Source evidence

    Code amendment note
    Subsec. (d)(2)(B). Pub. L. 99–554 substituted “, financial institution” for “financial institution,”.

    Enacted provision · exact public law section
    (n) Section 548(d)(2)(B) of title 11, United States Code, is amended by striking out “financial institution,” and inserting in lieu thereof “, financial institution”.

  11. Pub. L. 101–311 § 204 · 104 Stat. 267

    Inserted · 11 U.S.C. § 548(d)(2)(B)

    Pub. L. 101–311, § 204, inserted reference to sections 101(34) and 101(35) of this title

    Source evidence

    Code amendment note
    Subsec. (d)(2)(B). Pub. L. 101–311, § 204, inserted reference to sections 101(34) and 101(35) of this title.

    Enacted provision · exact public law section
    SEC. 204. FRAUDULENT TRANSFERS AND OBLIGATIONS. Section 548(d)(2)(B) of title 11, United States Code, is amended— (1) by striking “section 741(5) or 761(15)” and inserting “section 101(34), 741(5) or 761(15)”; and (2) by striking “section 741(8)” and inserting “section 101(35) or 741(8)”.

  12. Pub. L. 101–311 § 104 · 104 Stat. 267

    Added · 11 U.S.C. § 548(d)(2)(D)

    Pub. L. 101–311, § 104, added subpar. (D)

    Source evidence

    Code amendment note
    Subsec. (d)(2)(D). Pub. L. 101–311, § 104, added subpar. (D).

    Enacted provision · exact public law section
    SEC. 104. FRAUDULENT TRANSFERS AND OBLIGATIONS. Section 548(d)(2) of title 11, United States Code, is amended— (1) in subparagraph (B) by striking “and” at the end (2) in subparagraph (C) by striking the period and inserting “; and”; and (3) by adding at the end the following: “(D) a swap participant that receives a transfer in connection with a swap agreement takes for value to the extent of such transfer.”.

  13. Bankruptcy Reform Act of 1994

    Pub. L. 103–394 § 501(b)(5)(A) · 108 Stat. 4106

    1. Substituted · 11 U.S.C. § 548(d)(2)(B)

      Pub. L. 103–394, § 501(b)(5)(A), substituted “section 101, 741, or 761” for “section 101(34), 741(5) or 761(15)”

    2. Substituted · 11 U.S.C. § 548(d)(2)(B)

      Pub. L. 103–394, § 501(b)(5)(A), substituted “section 101 or 741” for “section 101(35) or 741(8)”

    Source evidence

    Code amendment note
    Subsec. (d)(2)(B). Pub. L. 103–394, § 501(b)(5)(A), substituted “section 101, 741, or 761” for “section 101(34), 741(5) or 761(15)” and “section 101 or 741” for “section 101(35) or 741(8)”.

    Enacted provision · exact public law section
    (A) in subparagraph (B)— (i) by striking “section 101(34), 741(5) or 761(15)” and inserting “section 101, 741, or 761”, and (ii) by striking “section 101(35) or 741(8)” and inserting “section 101 or 741”, and

  14. Bankruptcy Reform Act of 1994

    Pub. L. 103–394 § 501(b)(5)(B) · 108 Stat. 4106

    1. Substituted · 11 U.S.C. § 548(d)(2)(C)

      Pub. L. 103–394, § 501(b)(5)(B), substituted “section 741 or 761” for “section 741(5) or 761(15)”

    2. Substituted · 11 U.S.C. § 548(d)(2)(C)

      Pub. L. 103–394, § 501(b)(5)(B), substituted “section 741” for “section 741(8)”

    Source evidence

    Code amendment note
    Subsec. (d)(2)(C). Pub. L. 103–394, § 501(b)(5)(B), substituted “section 741 or 761” for “section 741(5) or 761(15)” and “section 741” for “section 741(8)”.

    Enacted provision · exact public law section
    (B) in subparagraph (C)— (i) by striking “section 741(5) or 761(15)” and inserting “section 741 or 761”, and (ii) by striking “section 741(8)” and inserting “section 741”.

  15. Religious Liberty and Charitable Donation Protection Act of 1998

    Pub. L. 105–183 § 3(a) · 112 Stat. 517

    1. Amended · 11 U.S.C. § 548(a)

      Pub. L. 105–183, § 3(a), designated existing provisions as par. (1)

    2. Redesignated · 11 U.S.C. § 548(a)

      Pub. L. 105–183, § 3(a), redesignated former pars. (1) and (2) as par. (1)(A) and (B), respectively

    3. Redesignated · 11 U.S.C. § 548(a)

      Pub. L. 105–183, § 3(a), redesignated former par. (2)(A) and (B) as par. (1)(B)(i) and (ii), respectively

    4. Redesignated · 11 U.S.C. § 548(a)

      Pub. L. 105–183, § 3(a), redesignated former par. (2)(B)(i) to (iii) as par. (1)(B)(ii)(I) to (III), respectively

    5. Added · 11 U.S.C. § 548(a)

      Pub. L. 105–183, § 3(a), added par. (2)

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 105–183, § 3(a), designated existing provisions as par. (1), redesignated former pars. (1) and (2) as par. (1)(A) and (B), respectively, redesignated former par. (2)(A) and (B) as par. (1)(B)(i) and (ii), respectively, and redesignated former par. (2)(B)(i) to (iii) as par. (1)(B)(ii)(I) to (III), respectively, and added par. (2).

    Enacted provision · exact public law section
    (a) In General.— Section 548(a) of title 11, United States Code, is amended— (1) by inserting “(1)” after “(a)”; (2) by striking “(1) made” and inserting “(A) made”; (3) by striking “(2)(A)” and inserting “(B)(i)”; (4) by striking “(B)(i)” and inserting “(ii)(I)”; (5) by striking “(ii) was” and inserting “(II) was”; (6) by striking “(iii)” and inserting “(III)”; and (7) by adding at the end the following: “(2) A transfer of a charitable contribution to a qualified religious or charitable entity or organization shall not be considered to be a transfer covered under paragraph (1)(B) in any case in which— “(A) the amount of that contribution does not exceed 15 percent of the gross annual income of the debtor for the year in which the transfer of the contribution is made; or “(B) the contribution made by a debtor exceeded the percentage amount of gross annual income specified in subparagraph (A), if the transfer was consistent with the practices of the debtor in making charitable contributions.”.

  16. Religious Liberty and Charitable Donation Protection Act of 1998

    Pub. L. 105–183 § 2 · 112 Stat. 517

    Added · 11 U.S.C. § 548(d)(3); 11 U.S.C. § 548(d)(4)

    Pub. L. 105–183, § 2, added pars. (3) and (4)

    Source evidence

    Code amendment note
    Subsec. (d)(3), (4). Pub. L. 105–183, § 2, added pars. (3) and (4).

    Enacted provision · exact public law section
    SEC. 2. DEFINITIONS. Section 548(d) of title 11, United States Code, is amended by adding at the end the following: “(3) In this section, the term ‘charitable contribution’ means a charitable contribution, as that term is defined in section 170(c) of the Internal Revenue Code of 1986, if that contribution— “(A) is made by a natural person; and “(B) consists of— “(i) a financial instrument (as that term is defined in section 731(c)(2)(C) of the Internal Revenue Code of 1986); or “(ii) cash. “(4) In this section, the term ‘qualified religious or charitable entity or organization’ means— “(A) an entity described in section 170(c)(1) of the Internal Revenue Code of 1986; or “(B) an entity or organization described in section 170(c)(2) of the Internal Revenue Code of 1986.”.

  17. Pub. L. 109–8 § 1402(2) · 119 Stat. 23

    Inserted · 11 U.S.C. § 548(a)(1)

    Pub. L. 109–8, § 1402(2), in introductory provisions, inserted “(including any transfer to or for the benefit of an insider under an employment contract)” after “avoid any transfer” and “(including any obligation to or for the benefit of an insider under an employment contract)” after “or any obligation”

    Source evidence

    Code amendment note
    Subsec. (a)(1). Pub. L. 109–8, § 1402(2), in introductory provisions, inserted “(including any transfer to or for the benefit of an insider under an employment contract)” after “avoid any transfer” and “(including any obligation to or for the benefit of an insider under an employment contract)” after “or any obligation”.

    Enacted provision · exact public law section
    (2) in subsection (a)— (A) by inserting “(including any transfer to or for the benefit of an insider under an employment contract)” after “transfer” the 1st place it appears, and (B) by inserting “(including any obligation to or for the benefit of an insider under an employment contract)” after “obligation” the 1st place it appears, and

    Effective date note
    Amendment by section 1402 of Pub. L. 109–8 effective Apr. 20, 2005, and applicable only with respect to cases commenced under this title on or after such date, with amendment by par. (1) of such section applicable only with respect to cases commenced under this title more than 1 year after Apr. 20, 2005, see section 1406 of Pub. L. 109–8, set out as a note under section 507 of this title. Amendment by section 907 of 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.

  18. Pub. L. 109–8 § 1402(1) · 119 Stat. 23

    Substituted · 11 U.S.C. § 548(a)(1)

    Pub. L. 109–8, § 1402(1), substituted “2 years” for “one year” in introductory provisions

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 109–8, § 1402(1), substituted “2 years” for “one year” in introductory provisions.

    Enacted provision · exact public law section
    (1) in subsections (a) and (b) by striking “one year” and inserting “2 years”,

    Effective date note
    Amendment by section 1402 of Pub. L. 109–8 effective Apr. 20, 2005, and applicable only with respect to cases commenced under this title on or after such date, with amendment by par. (1) of such section applicable only with respect to cases commenced under this title more than 1 year after Apr. 20, 2005, see section 1406 of Pub. L. 109–8, set out as a note under section 507 of this title. Amendment by section 907 of 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.

  19. Pub. L. 109–8 § 1402(3) · 119 Stat. 23

    Added · 11 U.S.C. § 548(a)(1)(B)(ii)(IV)

    Pub. L. 109–8, § 1402(3), added subcl. (IV)

    Source evidence

    Code amendment note
    Subsec. (a)(1)(B)(ii)(IV). Pub. L. 109–8, § 1402(3), added subcl. (IV).

    Enacted provision · exact public law section
    (3) in subsection (a)(1)(B)(ii)— (A) in subclause (II) by striking “or” at the end, (B) in subclause (III) by striking the period at the end and inserting “; or”, and (C) by adding at the end the following: “(IV) made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.” .

    Effective date note
    Amendment by section 1402 of Pub. L. 109–8 effective Apr. 20, 2005, and applicable only with respect to cases commenced under this title on or after such date, with amendment by par. (1) of such section applicable only with respect to cases commenced under this title more than 1 year after Apr. 20, 2005, see section 1406 of Pub. L. 109–8, set out as a note under section 507 of this title. Amendment by section 907 of 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.

  20. Pub. L. 109–8 § 1402(1) · 119 Stat. 23

    Substituted · 11 U.S.C. § 548(b)

    Pub. L. 109–8, § 1402(1), substituted “2 years” for “one year”

    Source evidence

    Code amendment note
    Subsec. (b). Pub. L. 109–8, § 1402(1), substituted “2 years” for “one year”.

    Enacted provision · exact public law section
    (1) in subsections (a) and (b) by striking “one year” and inserting “2 years”,

    Effective date note
    Amendment by section 1402 of Pub. L. 109–8 effective Apr. 20, 2005, and applicable only with respect to cases commenced under this title on or after such date, with amendment by par. (1) of such section applicable only with respect to cases commenced under this title more than 1 year after Apr. 20, 2005, see section 1406 of Pub. L. 109–8, set out as a note under section 507 of this title. Amendment by section 907 of 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.

  21. Pub. L. 109–8 § 907 · 119 Stat. 23

    Inserted · 11 U.S.C. § 548(d)(2)(B)

    Pub. L. 109–8, § 907(o)(4), inserted “financial participant,” after “financial institution,”

    Source evidence

    Code amendment note
    Subsec. (d)(2)(B). Pub. L. 109–8, § 907(o)(4), inserted “financial participant,” after “financial institution,”.

    Enacted provision · exact public law section
    SEC. 907. BANKRUPTCY LAW AMENDMENTS. (a) Definitions of Forward Contract, Repurchase Agreement, Securities Clearing Agency, Swap Agreement, Commodity Contract, and Securities Contract.— Title 11, United States Code, is amended— (1) in section 101— (A) in paragraph (25)— (i) by striking “means a contract” and inserting “means— “(A) a contract” ; (ii) by striking “, or any combination thereof or option thereon;” and inserting “, or any other similar agreement;”; and (iii) by adding at the end the following: “(B) any combination of agreements or transactions referred to in subparagraphs (A) and (C); “(C) any option to enter into an agreement or transaction referred to in subparagraph (A) or (B); “(D) a master agreement that provides for an agreement or transaction referred to in subparagraph (A), (B), or (C), together with all supplements to any such master agreement, without regard to whether such master agreement provides for an agreement or transaction that is not a forward contract under this paragraph, except that such master agreement shall be considered to be a forward contract under this paragraph only with respect to each agreement or transaction under such master agreement that is referred to in subparagraph (A), (B), or (C); or “(E) any security agreement or arrangement, or other credit enhancement related to any agreement or transaction referred to in subparagraph (A), (B), (C), or (D), including any guarantee or reimbursement obligation by or to a forward contract merchant or financial participant in connection with any agreement or transaction referred to in any such subparagraph, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562;” ; (B) in paragraph (46), by striking “on any day during the period beginning 90 days before the date of” and inserting “at any time before”; (C) by amending paragraph (47) to read as follows: “(47) ‘repurchase agreement’ (which definition also applies to a reverse repurchase agreement)— “(A) means— “(i) an agreement, including related terms, which provides for the transfer of one or more certificates of deposit, mortgage related securities (as defined in section 3 of the Securities Exchange Act of 1934), mortgage loans, interests in mortgage related securities or mortgage loans, eligible bankers’ acceptances, qualified foreign government securities (defined as a security that is a direct obligation of, or that is fully guaranteed by, the central government of a member of the Organization for Economic Cooperation and Development), or securities that are direct obligations of, or that are fully guaranteed by, the United States or any agency of the United States against the transfer of funds by the transferee of such certificates of deposit, eligible bankers’ acceptances, securities, mortgage loans, or interests, with a simultaneous agreement by such transferee to transfer to the transferor thereof certificates of deposit, eligible bankers’ acceptance, securities, mortgage loans, or interests of the kind described in this clause, at a date certain not later than 1 year after such transfer or on demand, against the transfer of funds; “(ii) any combination of agreements or transactions referred to in clauses (i) and (iii); “(iii) an option to enter into an agreement or transaction referred to in clause (i) or (ii); “(iv) a master agreement that provides for an agreement or transaction referred to in clause (i), (ii), or (iii), together with all supplements to any such master agreement, without regard to whether such master agreement provides for an agreement or transaction that is not a repurchase agreement under this paragraph, except that such master agreement shall be considered to be a repurchase agreement under this paragraph only with respect to each agreement or transaction under the master agreement that is referred to in clause (i), (ii), or (iii); or “(v) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in clause (i), (ii), (iii), or (iv), including any guarantee or reimbursement obligation by or to a repo participant or financial participant in connection with any agreement or transaction referred to in any such clause, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562 of this title; and “(B) does not include a repurchase obligation under a participation in a commercial mortgage loan;” ; (D) in paragraph (48), by inserting “, or exempt from such registration under such section pursuant to an order of the Securities and Exchange Commission,” after “1934”; and (E) by amending paragraph (53B) to read as follows: “(53B) ‘swap agreement’— “(A) means— “(i) any agreement, including the terms and conditions incorporated by reference in such agreement, which is— “(I) an interest rate swap, option, future, or forward agreement, including a rate floor, rate cap, rate collar, cross-currency rate swap, and basis swap; “(II) a spot, same day-tomorrow, tomorrow-next, forward, or other foreign exchange or precious metals agreement; “(III) a currency swap, option, future, or forward agreement; “(IV) an equity index or equity swap, option, future, or forward agreement; “(V) a debt index or debt swap, option, future, or forward agreement; “(VI) a total return, credit spread or credit swap, option, future, or forward agreement; “(VII) a commodity index or a commodity swap, option, future, or forward agreement; or “(VIII) a weather swap, weather derivative, or weather option; “(ii) any agreement or transaction that is similar to any other agreement or transaction referred to in this paragraph and that— “(I) is of a type that has been, is presently, or in the future becomes, the subject of recurrent dealings in the swap markets (including terms and conditions incorporated by reference therein); and “(II) is a forward, swap, future, or option on one or more rates, currencies, commodities, equity securities, or other equity instruments, debt securities or other debt instruments, quantitative measures associated with an occurrence, extent of an occurrence, or contingency associated with a financial, commercial, or economic consequence, or economic or financial indices or measures of economic or financial risk or value; “(iii) any combination of agreements or transactions referred to in this subparagraph; “(iv) any option to enter into an agreement or transaction referred to in this subparagraph; “(v) a master agreement that provides for an agreement or transaction referred to in clause (i), (ii), (iii), or (iv), together with all supplements to any such master agreement, and without regard to whether the master agreement contains an agreement or transaction that is not a swap agreement under this paragraph, except that the master agreement shall be considered to be a swap agreement under this paragraph only with respect to each agreement or transaction under the master agreement that is referred to in clause (i), (ii), (iii), or (iv); or “(vi) any security agreement or arrangement or other credit enhancement related to any agreements or transactions referred to in clause (i) through (v), including any guarantee or reimbursement obligation by or to a swap participant or financial participant in connection with any agreement or transaction referred to in any such clause, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562; and “(B) Applicability. is applicable for purposes of this title only, and shall not be construed or applied so as to challenge or affect the characterization, definition, or treatment of any swap agreement under any other statute, regulation, or rule, including the Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility Holding Company Act of 1935, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Securities Investor Protection Act of 1970, the Commodity Exchange Act, the Gramm-Leach-Bliley Act, and the Legal Certainty for Bank Products Act of 2000;” ; (2) in section 741(7), by striking paragraph (7) and inserting the following: “(7) ‘securities contract’— “(A) means— “(i) a contract for the purchase, sale, or loan of a security, a certificate of deposit, a mortgage loan or any interest in a mortgage loan, a group or index of securities, certificates of deposit, or mortgage loans or interests therein (including an interest therein or based on the value thereof), or option on any of the foregoing, including an option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or option, and including any repurchase or reverse repurchase transaction on any such security, certificate of deposit, mortgage loan, interest, group or index, or option; “(ii) any option entered into on a national securities exchange relating to foreign currencies; “(iii) the guarantee by or to any securities clearing agency of a settlement of cash, securities, certificates of deposit, mortgage loans or interests therein, group or index of securities, or mortgage loans or interests therein (including any interest therein or based on the value thereof), or option on any of the foregoing, including an option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or option; “(iv) any margin loan; “(v) any other agreement or transaction that is similar to an agreement or transaction referred to in this subparagraph; “(vi) any combination of the agreements or transactions referred to in this subparagraph; “(vii) any option to enter into any agreement or transaction referred to in this subparagraph; “(viii) a master agreement that provides for an agreement or transaction referred to in clause (i), (ii), (iii), (iv), (v), (vi), or (vii), together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a securities contract under this subparagraph, except that such master agreement shall be considered to be a securities contract under this subparagraph only with respect to each agreement or transaction under such master agreement that is referred to in clause (i), (ii), (iii), (iv), (v), (vi), or (vii); or “(ix) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this subparagraph, including any guarantee or reimbursement obligation by or to a stockbroker, securities clearing agency, financial institution, or financial participant in connection with any agreement or transaction referred to in this subparagraph, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562; and “(B) does not include any purchase, sale, or repurchase obligation under a participation in a commercial mortgage loan;” ; and (3) in section 761(4)— (A) by striking “or” at the end of subparagraph (D); and (B) by adding at the end the following: “(F) any other agreement or transaction that is similar to an agreement or transaction referred to in this paragraph; “(G) any combination of the agreements or transactions referred to in this paragraph; “(H) any option to enter into an agreement or transaction referred to in this paragraph; “(I) a master agreement that provides for an agreement or transaction referred to in subparagraph (A), (B), (C), (D), (E), (F), (G), or (H), together with all supplements to such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a commodity contract under this paragraph, except that the master agreement shall be considered to be a commodity contract under this paragraph only with respect to each agreement or transaction under the master agreement that is referred to in subparagraph (A), (B), (C), (D), (E), (F), (G), or (H); or “(J) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this paragraph, including any guarantee or reimbursement obligation by or to a commodity broker or financial participant in connection with any agreement or transaction referred to in this paragraph, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562;” . (b) Definitions of Financial Institution, Financial Participant, and Forward Contract Merchant.— Section 101 of title 11, United States Code, is amended— (1) by striking paragraph (22) and inserting the following: “(22) ‘financial institution’ means— “(A) a Federal reserve bank, or an entity (domestic or foreign) that is a commercial or savings bank, industrial savings bank, savings and loan association, trust company, federally-insured credit union, or receiver, liquidating agent, or conservator for such entity and, when any such Federal reserve bank, receiver, liquidating agent, conservator or entity is acting as agent or custodian for a customer in connection with a securities contract (as defined in section 741) such customer; or “(B) in connection with a securities contract (as defined in section 741) an investment company registered under the Investment Company Act of 1940;” ; (2) by inserting after paragraph (22) the following: “(22A) ‘financial participant’ means— “(A) an entity that, at the time it enters into a securities contract, commodity contract, swap agreement, repurchase agreement, or forward contract, or at the time of the date of the filing of the petition, has one or more agreements or transactions described in paragraph (1), (2), (3), (4), (5), or (6) of section 561(a) with the debtor or any other entity (other than an affiliate) of a total gross dollar value of not less than $1,000,000,000 in notional or actual principal amount outstanding on any day during the previous 15-month period, or has gross mark-to-market positions of not less than $100,000,000 (aggregated across counterparties) in one or more such agreements or transactions with the debtor or any other entity (other than an affiliate) on any day during the previous 15-month period; or “(B) a clearing organization (as defined in section 402 of the Federal Deposit Insurance Corporation Improvement Act of 1991);” ; and (3) by striking paragraph (26) and inserting the following: “(26) ‘forward contract merchant’ means a Federal reserve bank, or an entity the business of which consists in whole or in part of entering into forward contracts as or with merchants in a commodity (as defined in section 761) or any similar good, article, service, right, or interest which is presently or in the future becomes the subject of dealing in the forward contract trade;” . (c) Definition of Master Netting Agreement and Master Netting Agreement Participant.— Section 101 of title 11, United States Code, is amended by inserting after paragraph (38) the following new paragraphs: “(38A) ‘master netting agreement’— “(A) means an agreement providing for the exercise of rights, including rights of netting, setoff, liquidation, termination, acceleration, or close out, under or in connection with one or more contracts that are described in any one or more of paragraphs (1) through (5) of section 561(a), or any security agreement or arrangement or other credit enhancement related to one or more of the foregoing, including any guarantee or reimbursement obligation related to 1 or more of the foregoing; and “(B) if the agreement contains provisions relating to agreements or transactions that are not contracts described in paragraphs (1) through (5) of section 561(a), shall be deemed to be a master netting agreement only with respect to those agreements or transactions that are described in any one or more of paragraphs (1) through (5) of section 561(a); “(38B) ‘master netting agreement participant’ means an entity that, at any time before the date of the filing of the petition, is a party to an outstanding master netting agreement with the debtor;” . (d) Swap Agreements, Securities Contracts, Commodity Contracts, Forward Contracts, Repurchase Agreements, and Master Netting Agreements Under the Automatic-Stay.— (1) In general.— Section 362(b) of title 11, United States Code, as amended by sections 224, 303, 311, 401, and 718, is amended— (A) in paragraph (6), by inserting “, pledged to, under the control of,” after “held by”; (B) in paragraph (7), by inserting “, pledged to, under the control of,” after “held by”; (C) by striking paragraph (17) and inserting the following: “(17) under subsection (a), of the setoff by a swap participant or financial participant of a mutual debt and claim under or in connection with one or more swap agreements that constitutes the setoff of a claim against the debtor for any payment or other transfer of property due from the debtor under or in connection with any swap agreement against any payment due to the debtor from the swap participant or financial participant under or in connection with any swap agreement or against cash, securities, or other property held by, pledged to, under the control of, or due from such swap participant or financial participant to margin, guarantee, secure, or settle any swap agreement;” ; and (D) by inserting after paragraph (26) the following: “(27) under subsection (a), of the setoff by a master netting agreement participant of a mutual debt and claim under or in connection with one or more master netting agreements or any contract or agreement subject to such agreements that constitutes the setoff of a claim against the debtor for any payment or other transfer of property due from the debtor under or in connection with such agreements or any contract or agreement subject to such agreements against any payment due to the debtor from such master netting agreement participant under or in connection with such agreements or any contract or agreement subject to such agreements or against cash, securities, or other property held by, pledged to, under the control of, or due from such master netting agreement participant to margin, guarantee, secure, or settle such agreements or any contract or agreement subject to such agreements, to the extent that such participant is eligible to exercise such offset rights under paragraph (6), (7), or (17) for each individual contract covered by the master netting agreement in issue; and” . (2) Limitation.— Section 362 of title 11, United States Code, as amended by sections 106, 305, 311, and 441, is amended by adding at the end the following: “(o) The exercise of rights not subject to the stay arising under subsection (a) pursuant to paragraph (6), (7), (17), or (27) of subsection (b) shall not be stayed by any order of a court or administrative agency in any proceeding under this title.” . (e) Limitation of Avoidance Powers Under Master Netting Agreement.— Section 546 of title 11, United States Code, is amended— (1) in subsection (g) (as added by section 103 of Public Law 101–311)— (A) by striking “under a swap agreement”; (B) by striking “in connection with a swap agreement” and inserting “under or in connection with any swap agreement”; and (C) by inserting “or financial participant” after “swap participant”; and (2) by adding at the end the following: “(j) Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and 548(b) the trustee may not avoid a transfer made by or to a master netting agreement participant under or in connection with any master netting agreement or any individual contract covered thereby that is made before the commencement of the case, except under section 548(a)(1)(A) and except to the extent that the trustee could otherwise avoid such a transfer made under an individual contract covered by such master netting agreement.” . (f) Fraudulent Transfers of Master Netting Agreements.— Section 548(d)(2) of title 11, United States Code, is amended— (1) in subparagraph (C), by striking “and” at the end; (2) in subparagraph (D), by striking the period and inserting “; and”; and (3) by adding at the end the following new subparagraph: “(E) a master netting agreement participant that receives a transfer in connection with a master netting agreement or any individual contract covered thereby takes for value to the extent of such transfer, except that, with respect to a transfer under any individual contract covered thereby, to the extent that such master netting agreement participant otherwise did not take (or is otherwise not deemed to have taken) such transfer for value.” . (g) Termination or Acceleration of Securities Contracts.— Section 555 of title 11, United States Code, is amended— (1) by amending the section heading to read as follows: “§ 555. Contractual right to liquidate, terminate, or accelerate a securities contract” ; and (2) in the first sentence, by striking “liquidation” and inserting “liquidation, termination, or acceleration”. (h) Termination or Acceleration of Commodities or Forward Contracts.— Section 556 of title 11, United States Code, is amended— (1) by amending the section heading to read as follows: “§ 556. Contractual right to liquidate, terminate, or accelerate a commodities contract or forward contract” ; (2) in the first sentence, by striking “liquidation” and inserting “liquidation, termination, or acceleration”; and (3) in the second sentence, by striking “As used” and all that follows through “right,” and inserting “As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act) or in a resolution of the governing board thereof and a right,”. (i) Termination or Acceleration of Repurchase Agreements.— Section 559 of title 11, United States Code, is amended— (1) by amending the section heading to read as follows: “§ 559. Contractual right to liquidate, terminate, or accelerate a repurchase agreement” ; (2) in the first sentence, by striking “liquidation” and inserting “liquidation, termination, or acceleration”; and (3) in the third sentence, by striking “As used” and all that follows through “right,” and inserting “As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act) or in a resolution of the governing board thereof and a right,”. (j) Liquidation, Termination, or Acceleration of Swap Agreements.— Section 560 of title 11, United States Code, is amended— (1) by amending the section heading to read as follows: “§ 560. Contractual right to liquidate, terminate, or accelerate a swap agreement” ; (2) in the first sentence, by striking “termination of a swap agreement” and inserting “liquidation, termination, or acceleration of one or more swap agreements”; (3) by striking “in connection with any swap agreement” and inserting “in connection with the termination, liquidation, or acceleration of one or more swap agreements”; and (4) in the second sentence, by striking “As used” and all that follows through “right,” and inserting “As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act) or in a resolution of the governing board thereof and a right,”. (k) Liquidation, Termination, Acceleration, or Offset Under a Master Netting Agreement and Across Contracts.— (1) In general.— Title 11, United States Code, is amended by inserting after section 560 the following: “§ 561. Contractual right to terminate, liquidate, accelerate, or offset under a master netting agreement and across contracts; proceedings under chapter 15 “(a) Subject to subsection (b), the exercise of any contractual right, because of a condition of the kind specified in section 365(e)(1), to cause the termination, liquidation, or acceleration of or to offset or net termination values, payment amounts, or other transfer obligations arising under or in connection with one or more (or the termination, liquidation, or acceleration of one or more)— “(1) securities contracts, as defined in section 741(7); “(2) commodity contracts, as defined in section 761(4); “(3) forward contracts; “(4) repurchase agreements; “(5) swap agreements; or “(6) master netting agreements, shall not be stayed, avoided, or otherwise limited by operation of any provision of this title or by any order of a court or administrative agency in any proceeding under this title. “(b) (1) A party may exercise a contractual right described in subsection (a) to terminate, liquidate, or accelerate only to the extent that such party could exercise such a right under section 555, 556, 559, or 560 for each individual contract covered by the master netting agreement in issue. “(2) If a debtor is a commodity broker subject to subchapter IV of chapter 7— “(A) a party may not net or offset an obligation to the debtor arising under, or in connection with, a commodity contract traded on or subject to the rules of a contract market designated under the Commodity Exchange Act or a derivatives transaction execution facility registered under the Commodity Exchange Act against any claim arising under, or in connection with, other instruments, contracts, or agreements listed in subsection (a) except to the extent that the party has positive net equity in the commodity accounts at the debtor, as calculated under such subchapter; and “(B) another commodity broker may not net or offset an obligation to the debtor arising under, or in connection with, a commodity contract entered into or held on behalf of a customer of the debtor and traded on or subject to the rules of a contract market designated under the Commodity Exchange Act or a derivatives transaction execution facility registered under the Commodity Exchange Act against any claim arising under, or in connection with, other instruments, contracts, or agreements listed in subsection (a). “(3) No provision of subparagraph (A) or (B) of paragraph (2) shall prohibit the offset of claims and obligations that arise under— “(A) a cross-margining agreement or similar arrangement that has been approved by the Commodity Futures Trading Commission or submitted to the Commodity Futures Trading Commission under paragraph (1) or (2) of section 5c(c) of the Commodity Exchange Act and has not been abrogated or rendered ineffective by the Commodity Futures Trading Commission; or “(B) any other netting agreement between a clearing organization (as defined in section 761) and another entity that has been approved by the Commodity Futures Trading Commission. “(c) As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act) or in a resolution of the governing board thereof, and a right, whether or not evidenced in writing, arising under common law, under law merchant, or by reason of normal business practice. “(d) Any provisions of this title relating to securities contracts, commodity contracts, forward contracts, repurchase agreements, swap agreements, or master netting agreements shall apply in a case under chapter 15, so that enforcement of contractual provisions of such contracts and agreements in accordance with their terms will not be stayed or otherwise limited by operation of any provision of this title or by order of a court in any case under this title, and to limit avoidance powers to the same extent as in a proceeding under chapter 7 or 11 of this title (such enforcement not to be limited based on the presence or absence of assets of the debtor in the United States).” . (2) Conforming amendment.— The table of sections for chapter 5 of title 11, United States Code, is amended by inserting after the item relating to section 560 the following: “561. Contractual right to terminate, liquidate, accelerate, or offset under a master netting agreement and across contracts; proceedings under chapter 15.”. (l) Commodity Broker Liquidations.— Title 11, United States Code, is amended by inserting after section 766 the following: “§ 767. Commodity broker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants   “Notwithstanding any other provision of this title, the exercise of rights by a forward contract merchant, commodity broker, stockbroker, financial institution, financial participant, securities clearing agency, swap participant, repo participant, or master netting agreement participant under this title shall not affect the priority of any unsecured claim it may have after the exercise of such rights.” . (m) Stockbroker Liquidations.— Title 11, United States Code, is amended by inserting after section 752 the following: “§ 753. Stockbroker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants   “Notwithstanding any other provision of this title, the exercise of rights by a forward contract merchant, commodity broker, stockbroker, financial institution, financial participant, securities clearing agency, swap participant, repo participant, or master netting agreement participant under this title shall not affect the priority of any unsecured claim it may have after the exercise of such rights.” . (n) Setoff.— Section 553 of title 11, United States Code, is amended— (1) in subsection (a)(2)(B)(ii), by inserting before the semicolon the following: “(except for a setoff of a kind described in section 362(b)(6), 362(b)(7), 362(b)(17), 362(b)(27), 555, 556, 559, 560, or 561)”; (2) in subsection (a)(3)(C), by inserting before the period the following: “(except for a setoff of a kind described in section 362(b)(6), 362(b)(7), 362(b)(17), 362(b)(27), 555, 556, 559, 560, or 561)”; and (3) in subsection (b)(1), by striking “362(b)(14),” and inserting “362(b)(17), 362(b)(27), 555, 556, 559, 560, 561,”. (o) Securities Contracts, Commodity Contracts, and Forward Contracts.— Title 11, United States Code, is amended— (1) in section 362(b)(6), by striking “financial institutions,” each place such term appears and inserting “financial institution, financial participant,”; (2) in sections 362(b)(7) and 546(f), by inserting “or financial participant” after “repo participant” each place such term appears; (3) in section 546(e), by inserting “financial participant,” after “financial institution,”; (4) in section 548(d)(2)(B), by inserting “financial participant,” after “financial institution,”; (5) in section 548(d)(2)(C), by inserting “or financial participant” after “repo participant”; (6) in section 548(d)(2)(D), by inserting “or financial participant” after “swap participant”; (7) in section 555— (A) by inserting “financial participant,” after “financial institution,”; and (B) by striking the second sentence and inserting the following: “As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act), or in a resolution of the governing board thereof, and a right, whether or not in writing, arising under common law, under law merchant, or by reason of normal business practice.”; (8) in section 556, by inserting “, financial participant,” after “commodity broker”; (9) in section 559, by inserting “or financial participant” after “repo participant” each place such term appears; and (10) in section 560, by inserting “or financial participant” after “swap participant”. (p) Conforming Amendments.— Title 11, United States Code, is amended— (1) in the table of sections for chapter 5— (A) by amending the items relating to sections 555 and 556 to read as follows: “555. Contractual right to liquidate, terminate, or accelerate a securities contract. “556. Contractual right to liquidate, terminate, or accelerate a commodities contract or forward contract.”; and (B) by amending the items relating to sections 559 and 560 to read as follows: “559. Contractual right to liquidate, terminate, or accelerate a repurchase agreement. “560. Contractual right to liquidate, terminate, or accelerate a swap agreement.”; and (2) in the table of sections for chapter 7— (A) by inserting after the item relating to section 766 the following: “767. Commodity broker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants.”; and (B) by inserting after the item relating to section 752 the following: “753. Stockbroker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants.”.

    Effective date note
    Amendment by section 1402 of Pub. L. 109–8 effective Apr. 20, 2005, and applicable only with respect to cases commenced under this title on or after such date, with amendment by par. (1) of such section applicable only with respect to cases commenced under this title more than 1 year after Apr. 20, 2005, see section 1406 of Pub. L. 109–8, set out as a note under section 507 of this title. Amendment by section 907 of 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.

  22. Pub. L. 109–8 § 907 · 119 Stat. 23

    Inserted · 11 U.S.C. § 548(d)(2)(C)

    Pub. L. 109–8, § 907(o)(5), inserted “or financial participant” after “repo participant”

    Source evidence

    Code amendment note
    Subsec. (d)(2)(C). Pub. L. 109–8, § 907(o)(5), inserted “or financial participant” after “repo participant”.

    Enacted provision · exact public law section
    SEC. 907. BANKRUPTCY LAW AMENDMENTS. (a) Definitions of Forward Contract, Repurchase Agreement, Securities Clearing Agency, Swap Agreement, Commodity Contract, and Securities Contract.— Title 11, United States Code, is amended— (1) in section 101— (A) in paragraph (25)— (i) by striking “means a contract” and inserting “means— “(A) a contract” ; (ii) by striking “, or any combination thereof or option thereon;” and inserting “, or any other similar agreement;”; and (iii) by adding at the end the following: “(B) any combination of agreements or transactions referred to in subparagraphs (A) and (C); “(C) any option to enter into an agreement or transaction referred to in subparagraph (A) or (B); “(D) a master agreement that provides for an agreement or transaction referred to in subparagraph (A), (B), or (C), together with all supplements to any such master agreement, without regard to whether such master agreement provides for an agreement or transaction that is not a forward contract under this paragraph, except that such master agreement shall be considered to be a forward contract under this paragraph only with respect to each agreement or transaction under such master agreement that is referred to in subparagraph (A), (B), or (C); or “(E) any security agreement or arrangement, or other credit enhancement related to any agreement or transaction referred to in subparagraph (A), (B), (C), or (D), including any guarantee or reimbursement obligation by or to a forward contract merchant or financial participant in connection with any agreement or transaction referred to in any such subparagraph, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562;” ; (B) in paragraph (46), by striking “on any day during the period beginning 90 days before the date of” and inserting “at any time before”; (C) by amending paragraph (47) to read as follows: “(47) ‘repurchase agreement’ (which definition also applies to a reverse repurchase agreement)— “(A) means— “(i) an agreement, including related terms, which provides for the transfer of one or more certificates of deposit, mortgage related securities (as defined in section 3 of the Securities Exchange Act of 1934), mortgage loans, interests in mortgage related securities or mortgage loans, eligible bankers’ acceptances, qualified foreign government securities (defined as a security that is a direct obligation of, or that is fully guaranteed by, the central government of a member of the Organization for Economic Cooperation and Development), or securities that are direct obligations of, or that are fully guaranteed by, the United States or any agency of the United States against the transfer of funds by the transferee of such certificates of deposit, eligible bankers’ acceptances, securities, mortgage loans, or interests, with a simultaneous agreement by such transferee to transfer to the transferor thereof certificates of deposit, eligible bankers’ acceptance, securities, mortgage loans, or interests of the kind described in this clause, at a date certain not later than 1 year after such transfer or on demand, against the transfer of funds; “(ii) any combination of agreements or transactions referred to in clauses (i) and (iii); “(iii) an option to enter into an agreement or transaction referred to in clause (i) or (ii); “(iv) a master agreement that provides for an agreement or transaction referred to in clause (i), (ii), or (iii), together with all supplements to any such master agreement, without regard to whether such master agreement provides for an agreement or transaction that is not a repurchase agreement under this paragraph, except that such master agreement shall be considered to be a repurchase agreement under this paragraph only with respect to each agreement or transaction under the master agreement that is referred to in clause (i), (ii), or (iii); or “(v) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in clause (i), (ii), (iii), or (iv), including any guarantee or reimbursement obligation by or to a repo participant or financial participant in connection with any agreement or transaction referred to in any such clause, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562 of this title; and “(B) does not include a repurchase obligation under a participation in a commercial mortgage loan;” ; (D) in paragraph (48), by inserting “, or exempt from such registration under such section pursuant to an order of the Securities and Exchange Commission,” after “1934”; and (E) by amending paragraph (53B) to read as follows: “(53B) ‘swap agreement’— “(A) means— “(i) any agreement, including the terms and conditions incorporated by reference in such agreement, which is— “(I) an interest rate swap, option, future, or forward agreement, including a rate floor, rate cap, rate collar, cross-currency rate swap, and basis swap; “(II) a spot, same day-tomorrow, tomorrow-next, forward, or other foreign exchange or precious metals agreement; “(III) a currency swap, option, future, or forward agreement; “(IV) an equity index or equity swap, option, future, or forward agreement; “(V) a debt index or debt swap, option, future, or forward agreement; “(VI) a total return, credit spread or credit swap, option, future, or forward agreement; “(VII) a commodity index or a commodity swap, option, future, or forward agreement; or “(VIII) a weather swap, weather derivative, or weather option; “(ii) any agreement or transaction that is similar to any other agreement or transaction referred to in this paragraph and that— “(I) is of a type that has been, is presently, or in the future becomes, the subject of recurrent dealings in the swap markets (including terms and conditions incorporated by reference therein); and “(II) is a forward, swap, future, or option on one or more rates, currencies, commodities, equity securities, or other equity instruments, debt securities or other debt instruments, quantitative measures associated with an occurrence, extent of an occurrence, or contingency associated with a financial, commercial, or economic consequence, or economic or financial indices or measures of economic or financial risk or value; “(iii) any combination of agreements or transactions referred to in this subparagraph; “(iv) any option to enter into an agreement or transaction referred to in this subparagraph; “(v) a master agreement that provides for an agreement or transaction referred to in clause (i), (ii), (iii), or (iv), together with all supplements to any such master agreement, and without regard to whether the master agreement contains an agreement or transaction that is not a swap agreement under this paragraph, except that the master agreement shall be considered to be a swap agreement under this paragraph only with respect to each agreement or transaction under the master agreement that is referred to in clause (i), (ii), (iii), or (iv); or “(vi) any security agreement or arrangement or other credit enhancement related to any agreements or transactions referred to in clause (i) through (v), including any guarantee or reimbursement obligation by or to a swap participant or financial participant in connection with any agreement or transaction referred to in any such clause, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562; and “(B) Applicability. is applicable for purposes of this title only, and shall not be construed or applied so as to challenge or affect the characterization, definition, or treatment of any swap agreement under any other statute, regulation, or rule, including the Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility Holding Company Act of 1935, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Securities Investor Protection Act of 1970, the Commodity Exchange Act, the Gramm-Leach-Bliley Act, and the Legal Certainty for Bank Products Act of 2000;” ; (2) in section 741(7), by striking paragraph (7) and inserting the following: “(7) ‘securities contract’— “(A) means— “(i) a contract for the purchase, sale, or loan of a security, a certificate of deposit, a mortgage loan or any interest in a mortgage loan, a group or index of securities, certificates of deposit, or mortgage loans or interests therein (including an interest therein or based on the value thereof), or option on any of the foregoing, including an option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or option, and including any repurchase or reverse repurchase transaction on any such security, certificate of deposit, mortgage loan, interest, group or index, or option; “(ii) any option entered into on a national securities exchange relating to foreign currencies; “(iii) the guarantee by or to any securities clearing agency of a settlement of cash, securities, certificates of deposit, mortgage loans or interests therein, group or index of securities, or mortgage loans or interests therein (including any interest therein or based on the value thereof), or option on any of the foregoing, including an option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or option; “(iv) any margin loan; “(v) any other agreement or transaction that is similar to an agreement or transaction referred to in this subparagraph; “(vi) any combination of the agreements or transactions referred to in this subparagraph; “(vii) any option to enter into any agreement or transaction referred to in this subparagraph; “(viii) a master agreement that provides for an agreement or transaction referred to in clause (i), (ii), (iii), (iv), (v), (vi), or (vii), together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a securities contract under this subparagraph, except that such master agreement shall be considered to be a securities contract under this subparagraph only with respect to each agreement or transaction under such master agreement that is referred to in clause (i), (ii), (iii), (iv), (v), (vi), or (vii); or “(ix) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this subparagraph, including any guarantee or reimbursement obligation by or to a stockbroker, securities clearing agency, financial institution, or financial participant in connection with any agreement or transaction referred to in this subparagraph, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562; and “(B) does not include any purchase, sale, or repurchase obligation under a participation in a commercial mortgage loan;” ; and (3) in section 761(4)— (A) by striking “or” at the end of subparagraph (D); and (B) by adding at the end the following: “(F) any other agreement or transaction that is similar to an agreement or transaction referred to in this paragraph; “(G) any combination of the agreements or transactions referred to in this paragraph; “(H) any option to enter into an agreement or transaction referred to in this paragraph; “(I) a master agreement that provides for an agreement or transaction referred to in subparagraph (A), (B), (C), (D), (E), (F), (G), or (H), together with all supplements to such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a commodity contract under this paragraph, except that the master agreement shall be considered to be a commodity contract under this paragraph only with respect to each agreement or transaction under the master agreement that is referred to in subparagraph (A), (B), (C), (D), (E), (F), (G), or (H); or “(J) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this paragraph, including any guarantee or reimbursement obligation by or to a commodity broker or financial participant in connection with any agreement or transaction referred to in this paragraph, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562;” . (b) Definitions of Financial Institution, Financial Participant, and Forward Contract Merchant.— Section 101 of title 11, United States Code, is amended— (1) by striking paragraph (22) and inserting the following: “(22) ‘financial institution’ means— “(A) a Federal reserve bank, or an entity (domestic or foreign) that is a commercial or savings bank, industrial savings bank, savings and loan association, trust company, federally-insured credit union, or receiver, liquidating agent, or conservator for such entity and, when any such Federal reserve bank, receiver, liquidating agent, conservator or entity is acting as agent or custodian for a customer in connection with a securities contract (as defined in section 741) such customer; or “(B) in connection with a securities contract (as defined in section 741) an investment company registered under the Investment Company Act of 1940;” ; (2) by inserting after paragraph (22) the following: “(22A) ‘financial participant’ means— “(A) an entity that, at the time it enters into a securities contract, commodity contract, swap agreement, repurchase agreement, or forward contract, or at the time of the date of the filing of the petition, has one or more agreements or transactions described in paragraph (1), (2), (3), (4), (5), or (6) of section 561(a) with the debtor or any other entity (other than an affiliate) of a total gross dollar value of not less than $1,000,000,000 in notional or actual principal amount outstanding on any day during the previous 15-month period, or has gross mark-to-market positions of not less than $100,000,000 (aggregated across counterparties) in one or more such agreements or transactions with the debtor or any other entity (other than an affiliate) on any day during the previous 15-month period; or “(B) a clearing organization (as defined in section 402 of the Federal Deposit Insurance Corporation Improvement Act of 1991);” ; and (3) by striking paragraph (26) and inserting the following: “(26) ‘forward contract merchant’ means a Federal reserve bank, or an entity the business of which consists in whole or in part of entering into forward contracts as or with merchants in a commodity (as defined in section 761) or any similar good, article, service, right, or interest which is presently or in the future becomes the subject of dealing in the forward contract trade;” . (c) Definition of Master Netting Agreement and Master Netting Agreement Participant.— Section 101 of title 11, United States Code, is amended by inserting after paragraph (38) the following new paragraphs: “(38A) ‘master netting agreement’— “(A) means an agreement providing for the exercise of rights, including rights of netting, setoff, liquidation, termination, acceleration, or close out, under or in connection with one or more contracts that are described in any one or more of paragraphs (1) through (5) of section 561(a), or any security agreement or arrangement or other credit enhancement related to one or more of the foregoing, including any guarantee or reimbursement obligation related to 1 or more of the foregoing; and “(B) if the agreement contains provisions relating to agreements or transactions that are not contracts described in paragraphs (1) through (5) of section 561(a), shall be deemed to be a master netting agreement only with respect to those agreements or transactions that are described in any one or more of paragraphs (1) through (5) of section 561(a); “(38B) ‘master netting agreement participant’ means an entity that, at any time before the date of the filing of the petition, is a party to an outstanding master netting agreement with the debtor;” . (d) Swap Agreements, Securities Contracts, Commodity Contracts, Forward Contracts, Repurchase Agreements, and Master Netting Agreements Under the Automatic-Stay.— (1) In general.— Section 362(b) of title 11, United States Code, as amended by sections 224, 303, 311, 401, and 718, is amended— (A) in paragraph (6), by inserting “, pledged to, under the control of,” after “held by”; (B) in paragraph (7), by inserting “, pledged to, under the control of,” after “held by”; (C) by striking paragraph (17) and inserting the following: “(17) under subsection (a), of the setoff by a swap participant or financial participant of a mutual debt and claim under or in connection with one or more swap agreements that constitutes the setoff of a claim against the debtor for any payment or other transfer of property due from the debtor under or in connection with any swap agreement against any payment due to the debtor from the swap participant or financial participant under or in connection with any swap agreement or against cash, securities, or other property held by, pledged to, under the control of, or due from such swap participant or financial participant to margin, guarantee, secure, or settle any swap agreement;” ; and (D) by inserting after paragraph (26) the following: “(27) under subsection (a), of the setoff by a master netting agreement participant of a mutual debt and claim under or in connection with one or more master netting agreements or any contract or agreement subject to such agreements that constitutes the setoff of a claim against the debtor for any payment or other transfer of property due from the debtor under or in connection with such agreements or any contract or agreement subject to such agreements against any payment due to the debtor from such master netting agreement participant under or in connection with such agreements or any contract or agreement subject to such agreements or against cash, securities, or other property held by, pledged to, under the control of, or due from such master netting agreement participant to margin, guarantee, secure, or settle such agreements or any contract or agreement subject to such agreements, to the extent that such participant is eligible to exercise such offset rights under paragraph (6), (7), or (17) for each individual contract covered by the master netting agreement in issue; and” . (2) Limitation.— Section 362 of title 11, United States Code, as amended by sections 106, 305, 311, and 441, is amended by adding at the end the following: “(o) The exercise of rights not subject to the stay arising under subsection (a) pursuant to paragraph (6), (7), (17), or (27) of subsection (b) shall not be stayed by any order of a court or administrative agency in any proceeding under this title.” . (e) Limitation of Avoidance Powers Under Master Netting Agreement.— Section 546 of title 11, United States Code, is amended— (1) in subsection (g) (as added by section 103 of Public Law 101–311)— (A) by striking “under a swap agreement”; (B) by striking “in connection with a swap agreement” and inserting “under or in connection with any swap agreement”; and (C) by inserting “or financial participant” after “swap participant”; and (2) by adding at the end the following: “(j) Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and 548(b) the trustee may not avoid a transfer made by or to a master netting agreement participant under or in connection with any master netting agreement or any individual contract covered thereby that is made before the commencement of the case, except under section 548(a)(1)(A) and except to the extent that the trustee could otherwise avoid such a transfer made under an individual contract covered by such master netting agreement.” . (f) Fraudulent Transfers of Master Netting Agreements.— Section 548(d)(2) of title 11, United States Code, is amended— (1) in subparagraph (C), by striking “and” at the end; (2) in subparagraph (D), by striking the period and inserting “; and”; and (3) by adding at the end the following new subparagraph: “(E) a master netting agreement participant that receives a transfer in connection with a master netting agreement or any individual contract covered thereby takes for value to the extent of such transfer, except that, with respect to a transfer under any individual contract covered thereby, to the extent that such master netting agreement participant otherwise did not take (or is otherwise not deemed to have taken) such transfer for value.” . (g) Termination or Acceleration of Securities Contracts.— Section 555 of title 11, United States Code, is amended— (1) by amending the section heading to read as follows: “§ 555. Contractual right to liquidate, terminate, or accelerate a securities contract” ; and (2) in the first sentence, by striking “liquidation” and inserting “liquidation, termination, or acceleration”. (h) Termination or Acceleration of Commodities or Forward Contracts.— Section 556 of title 11, United States Code, is amended— (1) by amending the section heading to read as follows: “§ 556. Contractual right to liquidate, terminate, or accelerate a commodities contract or forward contract” ; (2) in the first sentence, by striking “liquidation” and inserting “liquidation, termination, or acceleration”; and (3) in the second sentence, by striking “As used” and all that follows through “right,” and inserting “As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act) or in a resolution of the governing board thereof and a right,”. (i) Termination or Acceleration of Repurchase Agreements.— Section 559 of title 11, United States Code, is amended— (1) by amending the section heading to read as follows: “§ 559. Contractual right to liquidate, terminate, or accelerate a repurchase agreement” ; (2) in the first sentence, by striking “liquidation” and inserting “liquidation, termination, or acceleration”; and (3) in the third sentence, by striking “As used” and all that follows through “right,” and inserting “As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act) or in a resolution of the governing board thereof and a right,”. (j) Liquidation, Termination, or Acceleration of Swap Agreements.— Section 560 of title 11, United States Code, is amended— (1) by amending the section heading to read as follows: “§ 560. Contractual right to liquidate, terminate, or accelerate a swap agreement” ; (2) in the first sentence, by striking “termination of a swap agreement” and inserting “liquidation, termination, or acceleration of one or more swap agreements”; (3) by striking “in connection with any swap agreement” and inserting “in connection with the termination, liquidation, or acceleration of one or more swap agreements”; and (4) in the second sentence, by striking “As used” and all that follows through “right,” and inserting “As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act) or in a resolution of the governing board thereof and a right,”. (k) Liquidation, Termination, Acceleration, or Offset Under a Master Netting Agreement and Across Contracts.— (1) In general.— Title 11, United States Code, is amended by inserting after section 560 the following: “§ 561. Contractual right to terminate, liquidate, accelerate, or offset under a master netting agreement and across contracts; proceedings under chapter 15 “(a) Subject to subsection (b), the exercise of any contractual right, because of a condition of the kind specified in section 365(e)(1), to cause the termination, liquidation, or acceleration of or to offset or net termination values, payment amounts, or other transfer obligations arising under or in connection with one or more (or the termination, liquidation, or acceleration of one or more)— “(1) securities contracts, as defined in section 741(7); “(2) commodity contracts, as defined in section 761(4); “(3) forward contracts; “(4) repurchase agreements; “(5) swap agreements; or “(6) master netting agreements, shall not be stayed, avoided, or otherwise limited by operation of any provision of this title or by any order of a court or administrative agency in any proceeding under this title. “(b) (1) A party may exercise a contractual right described in subsection (a) to terminate, liquidate, or accelerate only to the extent that such party could exercise such a right under section 555, 556, 559, or 560 for each individual contract covered by the master netting agreement in issue. “(2) If a debtor is a commodity broker subject to subchapter IV of chapter 7— “(A) a party may not net or offset an obligation to the debtor arising under, or in connection with, a commodity contract traded on or subject to the rules of a contract market designated under the Commodity Exchange Act or a derivatives transaction execution facility registered under the Commodity Exchange Act against any claim arising under, or in connection with, other instruments, contracts, or agreements listed in subsection (a) except to the extent that the party has positive net equity in the commodity accounts at the debtor, as calculated under such subchapter; and “(B) another commodity broker may not net or offset an obligation to the debtor arising under, or in connection with, a commodity contract entered into or held on behalf of a customer of the debtor and traded on or subject to the rules of a contract market designated under the Commodity Exchange Act or a derivatives transaction execution facility registered under the Commodity Exchange Act against any claim arising under, or in connection with, other instruments, contracts, or agreements listed in subsection (a). “(3) No provision of subparagraph (A) or (B) of paragraph (2) shall prohibit the offset of claims and obligations that arise under— “(A) a cross-margining agreement or similar arrangement that has been approved by the Commodity Futures Trading Commission or submitted to the Commodity Futures Trading Commission under paragraph (1) or (2) of section 5c(c) of the Commodity Exchange Act and has not been abrogated or rendered ineffective by the Commodity Futures Trading Commission; or “(B) any other netting agreement between a clearing organization (as defined in section 761) and another entity that has been approved by the Commodity Futures Trading Commission. “(c) As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act) or in a resolution of the governing board thereof, and a right, whether or not evidenced in writing, arising under common law, under law merchant, or by reason of normal business practice. “(d) Any provisions of this title relating to securities contracts, commodity contracts, forward contracts, repurchase agreements, swap agreements, or master netting agreements shall apply in a case under chapter 15, so that enforcement of contractual provisions of such contracts and agreements in accordance with their terms will not be stayed or otherwise limited by operation of any provision of this title or by order of a court in any case under this title, and to limit avoidance powers to the same extent as in a proceeding under chapter 7 or 11 of this title (such enforcement not to be limited based on the presence or absence of assets of the debtor in the United States).” . (2) Conforming amendment.— The table of sections for chapter 5 of title 11, United States Code, is amended by inserting after the item relating to section 560 the following: “561. Contractual right to terminate, liquidate, accelerate, or offset under a master netting agreement and across contracts; proceedings under chapter 15.”. (l) Commodity Broker Liquidations.— Title 11, United States Code, is amended by inserting after section 766 the following: “§ 767. Commodity broker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants   “Notwithstanding any other provision of this title, the exercise of rights by a forward contract merchant, commodity broker, stockbroker, financial institution, financial participant, securities clearing agency, swap participant, repo participant, or master netting agreement participant under this title shall not affect the priority of any unsecured claim it may have after the exercise of such rights.” . (m) Stockbroker Liquidations.— Title 11, United States Code, is amended by inserting after section 752 the following: “§ 753. Stockbroker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants   “Notwithstanding any other provision of this title, the exercise of rights by a forward contract merchant, commodity broker, stockbroker, financial institution, financial participant, securities clearing agency, swap participant, repo participant, or master netting agreement participant under this title shall not affect the priority of any unsecured claim it may have after the exercise of such rights.” . (n) Setoff.— Section 553 of title 11, United States Code, is amended— (1) in subsection (a)(2)(B)(ii), by inserting before the semicolon the following: “(except for a setoff of a kind described in section 362(b)(6), 362(b)(7), 362(b)(17), 362(b)(27), 555, 556, 559, 560, or 561)”; (2) in subsection (a)(3)(C), by inserting before the period the following: “(except for a setoff of a kind described in section 362(b)(6), 362(b)(7), 362(b)(17), 362(b)(27), 555, 556, 559, 560, or 561)”; and (3) in subsection (b)(1), by striking “362(b)(14),” and inserting “362(b)(17), 362(b)(27), 555, 556, 559, 560, 561,”. (o) Securities Contracts, Commodity Contracts, and Forward Contracts.— Title 11, United States Code, is amended— (1) in section 362(b)(6), by striking “financial institutions,” each place such term appears and inserting “financial institution, financial participant,”; (2) in sections 362(b)(7) and 546(f), by inserting “or financial participant” after “repo participant” each place such term appears; (3) in section 546(e), by inserting “financial participant,” after “financial institution,”; (4) in section 548(d)(2)(B), by inserting “financial participant,” after “financial institution,”; (5) in section 548(d)(2)(C), by inserting “or financial participant” after “repo participant”; (6) in section 548(d)(2)(D), by inserting “or financial participant” after “swap participant”; (7) in section 555— (A) by inserting “financial participant,” after “financial institution,”; and (B) by striking the second sentence and inserting the following: “As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act), or in a resolution of the governing board thereof, and a right, whether or not in writing, arising under common law, under law merchant, or by reason of normal business practice.”; (8) in section 556, by inserting “, financial participant,” after “commodity broker”; (9) in section 559, by inserting “or financial participant” after “repo participant” each place such term appears; and (10) in section 560, by inserting “or financial participant” after “swap participant”. (p) Conforming Amendments.— Title 11, United States Code, is amended— (1) in the table of sections for chapter 5— (A) by amending the items relating to sections 555 and 556 to read as follows: “555. Contractual right to liquidate, terminate, or accelerate a securities contract. “556. Contractual right to liquidate, terminate, or accelerate a commodities contract or forward contract.”; and (B) by amending the items relating to sections 559 and 560 to read as follows: “559. Contractual right to liquidate, terminate, or accelerate a repurchase agreement. “560. Contractual right to liquidate, terminate, or accelerate a swap agreement.”; and (2) in the table of sections for chapter 7— (A) by inserting after the item relating to section 766 the following: “767. Commodity broker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants.”; and (B) by inserting after the item relating to section 752 the following: “753. Stockbroker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants.”.

    Effective date note
    Amendment by section 1402 of Pub. L. 109–8 effective Apr. 20, 2005, and applicable only with respect to cases commenced under this title on or after such date, with amendment by par. (1) of such section applicable only with respect to cases commenced under this title more than 1 year after Apr. 20, 2005, see section 1406 of Pub. L. 109–8, set out as a note under section 507 of this title. Amendment by section 907 of 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.

  23. Pub. L. 109–8 § 907 · 119 Stat. 23

    Inserted · 11 U.S.C. § 548(d)(2)(D)

    Pub. L. 109–8, § 907(o)(6), inserted “or financial participant” after “swap participant”

    Source evidence

    Code amendment note
    Subsec. (d)(2)(D). Pub. L. 109–8, § 907(o)(6), inserted “or financial participant” after “swap participant”.

    Enacted provision · exact public law section
    SEC. 907. BANKRUPTCY LAW AMENDMENTS. (a) Definitions of Forward Contract, Repurchase Agreement, Securities Clearing Agency, Swap Agreement, Commodity Contract, and Securities Contract.— Title 11, United States Code, is amended— (1) in section 101— (A) in paragraph (25)— (i) by striking “means a contract” and inserting “means— “(A) a contract” ; (ii) by striking “, or any combination thereof or option thereon;” and inserting “, or any other similar agreement;”; and (iii) by adding at the end the following: “(B) any combination of agreements or transactions referred to in subparagraphs (A) and (C); “(C) any option to enter into an agreement or transaction referred to in subparagraph (A) or (B); “(D) a master agreement that provides for an agreement or transaction referred to in subparagraph (A), (B), or (C), together with all supplements to any such master agreement, without regard to whether such master agreement provides for an agreement or transaction that is not a forward contract under this paragraph, except that such master agreement shall be considered to be a forward contract under this paragraph only with respect to each agreement or transaction under such master agreement that is referred to in subparagraph (A), (B), or (C); or “(E) any security agreement or arrangement, or other credit enhancement related to any agreement or transaction referred to in subparagraph (A), (B), (C), or (D), including any guarantee or reimbursement obligation by or to a forward contract merchant or financial participant in connection with any agreement or transaction referred to in any such subparagraph, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562;” ; (B) in paragraph (46), by striking “on any day during the period beginning 90 days before the date of” and inserting “at any time before”; (C) by amending paragraph (47) to read as follows: “(47) ‘repurchase agreement’ (which definition also applies to a reverse repurchase agreement)— “(A) means— “(i) an agreement, including related terms, which provides for the transfer of one or more certificates of deposit, mortgage related securities (as defined in section 3 of the Securities Exchange Act of 1934), mortgage loans, interests in mortgage related securities or mortgage loans, eligible bankers’ acceptances, qualified foreign government securities (defined as a security that is a direct obligation of, or that is fully guaranteed by, the central government of a member of the Organization for Economic Cooperation and Development), or securities that are direct obligations of, or that are fully guaranteed by, the United States or any agency of the United States against the transfer of funds by the transferee of such certificates of deposit, eligible bankers’ acceptances, securities, mortgage loans, or interests, with a simultaneous agreement by such transferee to transfer to the transferor thereof certificates of deposit, eligible bankers’ acceptance, securities, mortgage loans, or interests of the kind described in this clause, at a date certain not later than 1 year after such transfer or on demand, against the transfer of funds; “(ii) any combination of agreements or transactions referred to in clauses (i) and (iii); “(iii) an option to enter into an agreement or transaction referred to in clause (i) or (ii); “(iv) a master agreement that provides for an agreement or transaction referred to in clause (i), (ii), or (iii), together with all supplements to any such master agreement, without regard to whether such master agreement provides for an agreement or transaction that is not a repurchase agreement under this paragraph, except that such master agreement shall be considered to be a repurchase agreement under this paragraph only with respect to each agreement or transaction under the master agreement that is referred to in clause (i), (ii), or (iii); or “(v) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in clause (i), (ii), (iii), or (iv), including any guarantee or reimbursement obligation by or to a repo participant or financial participant in connection with any agreement or transaction referred to in any such clause, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562 of this title; and “(B) does not include a repurchase obligation under a participation in a commercial mortgage loan;” ; (D) in paragraph (48), by inserting “, or exempt from such registration under such section pursuant to an order of the Securities and Exchange Commission,” after “1934”; and (E) by amending paragraph (53B) to read as follows: “(53B) ‘swap agreement’— “(A) means— “(i) any agreement, including the terms and conditions incorporated by reference in such agreement, which is— “(I) an interest rate swap, option, future, or forward agreement, including a rate floor, rate cap, rate collar, cross-currency rate swap, and basis swap; “(II) a spot, same day-tomorrow, tomorrow-next, forward, or other foreign exchange or precious metals agreement; “(III) a currency swap, option, future, or forward agreement; “(IV) an equity index or equity swap, option, future, or forward agreement; “(V) a debt index or debt swap, option, future, or forward agreement; “(VI) a total return, credit spread or credit swap, option, future, or forward agreement; “(VII) a commodity index or a commodity swap, option, future, or forward agreement; or “(VIII) a weather swap, weather derivative, or weather option; “(ii) any agreement or transaction that is similar to any other agreement or transaction referred to in this paragraph and that— “(I) is of a type that has been, is presently, or in the future becomes, the subject of recurrent dealings in the swap markets (including terms and conditions incorporated by reference therein); and “(II) is a forward, swap, future, or option on one or more rates, currencies, commodities, equity securities, or other equity instruments, debt securities or other debt instruments, quantitative measures associated with an occurrence, extent of an occurrence, or contingency associated with a financial, commercial, or economic consequence, or economic or financial indices or measures of economic or financial risk or value; “(iii) any combination of agreements or transactions referred to in this subparagraph; “(iv) any option to enter into an agreement or transaction referred to in this subparagraph; “(v) a master agreement that provides for an agreement or transaction referred to in clause (i), (ii), (iii), or (iv), together with all supplements to any such master agreement, and without regard to whether the master agreement contains an agreement or transaction that is not a swap agreement under this paragraph, except that the master agreement shall be considered to be a swap agreement under this paragraph only with respect to each agreement or transaction under the master agreement that is referred to in clause (i), (ii), (iii), or (iv); or “(vi) any security agreement or arrangement or other credit enhancement related to any agreements or transactions referred to in clause (i) through (v), including any guarantee or reimbursement obligation by or to a swap participant or financial participant in connection with any agreement or transaction referred to in any such clause, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562; and “(B) Applicability. is applicable for purposes of this title only, and shall not be construed or applied so as to challenge or affect the characterization, definition, or treatment of any swap agreement under any other statute, regulation, or rule, including the Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility Holding Company Act of 1935, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Securities Investor Protection Act of 1970, the Commodity Exchange Act, the Gramm-Leach-Bliley Act, and the Legal Certainty for Bank Products Act of 2000;” ; (2) in section 741(7), by striking paragraph (7) and inserting the following: “(7) ‘securities contract’— “(A) means— “(i) a contract for the purchase, sale, or loan of a security, a certificate of deposit, a mortgage loan or any interest in a mortgage loan, a group or index of securities, certificates of deposit, or mortgage loans or interests therein (including an interest therein or based on the value thereof), or option on any of the foregoing, including an option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or option, and including any repurchase or reverse repurchase transaction on any such security, certificate of deposit, mortgage loan, interest, group or index, or option; “(ii) any option entered into on a national securities exchange relating to foreign currencies; “(iii) the guarantee by or to any securities clearing agency of a settlement of cash, securities, certificates of deposit, mortgage loans or interests therein, group or index of securities, or mortgage loans or interests therein (including any interest therein or based on the value thereof), or option on any of the foregoing, including an option to purchase or sell any such security, certificate of deposit, mortgage loan, interest, group or index, or option; “(iv) any margin loan; “(v) any other agreement or transaction that is similar to an agreement or transaction referred to in this subparagraph; “(vi) any combination of the agreements or transactions referred to in this subparagraph; “(vii) any option to enter into any agreement or transaction referred to in this subparagraph; “(viii) a master agreement that provides for an agreement or transaction referred to in clause (i), (ii), (iii), (iv), (v), (vi), or (vii), together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a securities contract under this subparagraph, except that such master agreement shall be considered to be a securities contract under this subparagraph only with respect to each agreement or transaction under such master agreement that is referred to in clause (i), (ii), (iii), (iv), (v), (vi), or (vii); or “(ix) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this subparagraph, including any guarantee or reimbursement obligation by or to a stockbroker, securities clearing agency, financial institution, or financial participant in connection with any agreement or transaction referred to in this subparagraph, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562; and “(B) does not include any purchase, sale, or repurchase obligation under a participation in a commercial mortgage loan;” ; and (3) in section 761(4)— (A) by striking “or” at the end of subparagraph (D); and (B) by adding at the end the following: “(F) any other agreement or transaction that is similar to an agreement or transaction referred to in this paragraph; “(G) any combination of the agreements or transactions referred to in this paragraph; “(H) any option to enter into an agreement or transaction referred to in this paragraph; “(I) a master agreement that provides for an agreement or transaction referred to in subparagraph (A), (B), (C), (D), (E), (F), (G), or (H), together with all supplements to such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a commodity contract under this paragraph, except that the master agreement shall be considered to be a commodity contract under this paragraph only with respect to each agreement or transaction under the master agreement that is referred to in subparagraph (A), (B), (C), (D), (E), (F), (G), or (H); or “(J) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this paragraph, including any guarantee or reimbursement obligation by or to a commodity broker or financial participant in connection with any agreement or transaction referred to in this paragraph, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562;” . (b) Definitions of Financial Institution, Financial Participant, and Forward Contract Merchant.— Section 101 of title 11, United States Code, is amended— (1) by striking paragraph (22) and inserting the following: “(22) ‘financial institution’ means— “(A) a Federal reserve bank, or an entity (domestic or foreign) that is a commercial or savings bank, industrial savings bank, savings and loan association, trust company, federally-insured credit union, or receiver, liquidating agent, or conservator for such entity and, when any such Federal reserve bank, receiver, liquidating agent, conservator or entity is acting as agent or custodian for a customer in connection with a securities contract (as defined in section 741) such customer; or “(B) in connection with a securities contract (as defined in section 741) an investment company registered under the Investment Company Act of 1940;” ; (2) by inserting after paragraph (22) the following: “(22A) ‘financial participant’ means— “(A) an entity that, at the time it enters into a securities contract, commodity contract, swap agreement, repurchase agreement, or forward contract, or at the time of the date of the filing of the petition, has one or more agreements or transactions described in paragraph (1), (2), (3), (4), (5), or (6) of section 561(a) with the debtor or any other entity (other than an affiliate) of a total gross dollar value of not less than $1,000,000,000 in notional or actual principal amount outstanding on any day during the previous 15-month period, or has gross mark-to-market positions of not less than $100,000,000 (aggregated across counterparties) in one or more such agreements or transactions with the debtor or any other entity (other than an affiliate) on any day during the previous 15-month period; or “(B) a clearing organization (as defined in section 402 of the Federal Deposit Insurance Corporation Improvement Act of 1991);” ; and (3) by striking paragraph (26) and inserting the following: “(26) ‘forward contract merchant’ means a Federal reserve bank, or an entity the business of which consists in whole or in part of entering into forward contracts as or with merchants in a commodity (as defined in section 761) or any similar good, article, service, right, or interest which is presently or in the future becomes the subject of dealing in the forward contract trade;” . (c) Definition of Master Netting Agreement and Master Netting Agreement Participant.— Section 101 of title 11, United States Code, is amended by inserting after paragraph (38) the following new paragraphs: “(38A) ‘master netting agreement’— “(A) means an agreement providing for the exercise of rights, including rights of netting, setoff, liquidation, termination, acceleration, or close out, under or in connection with one or more contracts that are described in any one or more of paragraphs (1) through (5) of section 561(a), or any security agreement or arrangement or other credit enhancement related to one or more of the foregoing, including any guarantee or reimbursement obligation related to 1 or more of the foregoing; and “(B) if the agreement contains provisions relating to agreements or transactions that are not contracts described in paragraphs (1) through (5) of section 561(a), shall be deemed to be a master netting agreement only with respect to those agreements or transactions that are described in any one or more of paragraphs (1) through (5) of section 561(a); “(38B) ‘master netting agreement participant’ means an entity that, at any time before the date of the filing of the petition, is a party to an outstanding master netting agreement with the debtor;” . (d) Swap Agreements, Securities Contracts, Commodity Contracts, Forward Contracts, Repurchase Agreements, and Master Netting Agreements Under the Automatic-Stay.— (1) In general.— Section 362(b) of title 11, United States Code, as amended by sections 224, 303, 311, 401, and 718, is amended— (A) in paragraph (6), by inserting “, pledged to, under the control of,” after “held by”; (B) in paragraph (7), by inserting “, pledged to, under the control of,” after “held by”; (C) by striking paragraph (17) and inserting the following: “(17) under subsection (a), of the setoff by a swap participant or financial participant of a mutual debt and claim under or in connection with one or more swap agreements that constitutes the setoff of a claim against the debtor for any payment or other transfer of property due from the debtor under or in connection with any swap agreement against any payment due to the debtor from the swap participant or financial participant under or in connection with any swap agreement or against cash, securities, or other property held by, pledged to, under the control of, or due from such swap participant or financial participant to margin, guarantee, secure, or settle any swap agreement;” ; and (D) by inserting after paragraph (26) the following: “(27) under subsection (a), of the setoff by a master netting agreement participant of a mutual debt and claim under or in connection with one or more master netting agreements or any contract or agreement subject to such agreements that constitutes the setoff of a claim against the debtor for any payment or other transfer of property due from the debtor under or in connection with such agreements or any contract or agreement subject to such agreements against any payment due to the debtor from such master netting agreement participant under or in connection with such agreements or any contract or agreement subject to such agreements or against cash, securities, or other property held by, pledged to, under the control of, or due from such master netting agreement participant to margin, guarantee, secure, or settle such agreements or any contract or agreement subject to such agreements, to the extent that such participant is eligible to exercise such offset rights under paragraph (6), (7), or (17) for each individual contract covered by the master netting agreement in issue; and” . (2) Limitation.— Section 362 of title 11, United States Code, as amended by sections 106, 305, 311, and 441, is amended by adding at the end the following: “(o) The exercise of rights not subject to the stay arising under subsection (a) pursuant to paragraph (6), (7), (17), or (27) of subsection (b) shall not be stayed by any order of a court or administrative agency in any proceeding under this title.” . (e) Limitation of Avoidance Powers Under Master Netting Agreement.— Section 546 of title 11, United States Code, is amended— (1) in subsection (g) (as added by section 103 of Public Law 101–311)— (A) by striking “under a swap agreement”; (B) by striking “in connection with a swap agreement” and inserting “under or in connection with any swap agreement”; and (C) by inserting “or financial participant” after “swap participant”; and (2) by adding at the end the following: “(j) Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and 548(b) the trustee may not avoid a transfer made by or to a master netting agreement participant under or in connection with any master netting agreement or any individual contract covered thereby that is made before the commencement of the case, except under section 548(a)(1)(A) and except to the extent that the trustee could otherwise avoid such a transfer made under an individual contract covered by such master netting agreement.” . (f) Fraudulent Transfers of Master Netting Agreements.— Section 548(d)(2) of title 11, United States Code, is amended— (1) in subparagraph (C), by striking “and” at the end; (2) in subparagraph (D), by striking the period and inserting “; and”; and (3) by adding at the end the following new subparagraph: “(E) a master netting agreement participant that receives a transfer in connection with a master netting agreement or any individual contract covered thereby takes for value to the extent of such transfer, except that, with respect to a transfer under any individual contract covered thereby, to the extent that such master netting agreement participant otherwise did not take (or is otherwise not deemed to have taken) such transfer for value.” . (g) Termination or Acceleration of Securities Contracts.— Section 555 of title 11, United States Code, is amended— (1) by amending the section heading to read as follows: “§ 555. Contractual right to liquidate, terminate, or accelerate a securities contract” ; and (2) in the first sentence, by striking “liquidation” and inserting “liquidation, termination, or acceleration”. (h) Termination or Acceleration of Commodities or Forward Contracts.— Section 556 of title 11, United States Code, is amended— (1) by amending the section heading to read as follows: “§ 556. Contractual right to liquidate, terminate, or accelerate a commodities contract or forward contract” ; (2) in the first sentence, by striking “liquidation” and inserting “liquidation, termination, or acceleration”; and (3) in the second sentence, by striking “As used” and all that follows through “right,” and inserting “As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act) or in a resolution of the governing board thereof and a right,”. (i) Termination or Acceleration of Repurchase Agreements.— Section 559 of title 11, United States Code, is amended— (1) by amending the section heading to read as follows: “§ 559. Contractual right to liquidate, terminate, or accelerate a repurchase agreement” ; (2) in the first sentence, by striking “liquidation” and inserting “liquidation, termination, or acceleration”; and (3) in the third sentence, by striking “As used” and all that follows through “right,” and inserting “As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act) or in a resolution of the governing board thereof and a right,”. (j) Liquidation, Termination, or Acceleration of Swap Agreements.— Section 560 of title 11, United States Code, is amended— (1) by amending the section heading to read as follows: “§ 560. Contractual right to liquidate, terminate, or accelerate a swap agreement” ; (2) in the first sentence, by striking “termination of a swap agreement” and inserting “liquidation, termination, or acceleration of one or more swap agreements”; (3) by striking “in connection with any swap agreement” and inserting “in connection with the termination, liquidation, or acceleration of one or more swap agreements”; and (4) in the second sentence, by striking “As used” and all that follows through “right,” and inserting “As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act) or in a resolution of the governing board thereof and a right,”. (k) Liquidation, Termination, Acceleration, or Offset Under a Master Netting Agreement and Across Contracts.— (1) In general.— Title 11, United States Code, is amended by inserting after section 560 the following: “§ 561. Contractual right to terminate, liquidate, accelerate, or offset under a master netting agreement and across contracts; proceedings under chapter 15 “(a) Subject to subsection (b), the exercise of any contractual right, because of a condition of the kind specified in section 365(e)(1), to cause the termination, liquidation, or acceleration of or to offset or net termination values, payment amounts, or other transfer obligations arising under or in connection with one or more (or the termination, liquidation, or acceleration of one or more)— “(1) securities contracts, as defined in section 741(7); “(2) commodity contracts, as defined in section 761(4); “(3) forward contracts; “(4) repurchase agreements; “(5) swap agreements; or “(6) master netting agreements, shall not be stayed, avoided, or otherwise limited by operation of any provision of this title or by any order of a court or administrative agency in any proceeding under this title. “(b) (1) A party may exercise a contractual right described in subsection (a) to terminate, liquidate, or accelerate only to the extent that such party could exercise such a right under section 555, 556, 559, or 560 for each individual contract covered by the master netting agreement in issue. “(2) If a debtor is a commodity broker subject to subchapter IV of chapter 7— “(A) a party may not net or offset an obligation to the debtor arising under, or in connection with, a commodity contract traded on or subject to the rules of a contract market designated under the Commodity Exchange Act or a derivatives transaction execution facility registered under the Commodity Exchange Act against any claim arising under, or in connection with, other instruments, contracts, or agreements listed in subsection (a) except to the extent that the party has positive net equity in the commodity accounts at the debtor, as calculated under such subchapter; and “(B) another commodity broker may not net or offset an obligation to the debtor arising under, or in connection with, a commodity contract entered into or held on behalf of a customer of the debtor and traded on or subject to the rules of a contract market designated under the Commodity Exchange Act or a derivatives transaction execution facility registered under the Commodity Exchange Act against any claim arising under, or in connection with, other instruments, contracts, or agreements listed in subsection (a). “(3) No provision of subparagraph (A) or (B) of paragraph (2) shall prohibit the offset of claims and obligations that arise under— “(A) a cross-margining agreement or similar arrangement that has been approved by the Commodity Futures Trading Commission or submitted to the Commodity Futures Trading Commission under paragraph (1) or (2) of section 5c(c) of the Commodity Exchange Act and has not been abrogated or rendered ineffective by the Commodity Futures Trading Commission; or “(B) any other netting agreement between a clearing organization (as defined in section 761) and another entity that has been approved by the Commodity Futures Trading Commission. “(c) As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act) or in a resolution of the governing board thereof, and a right, whether or not evidenced in writing, arising under common law, under law merchant, or by reason of normal business practice. “(d) Any provisions of this title relating to securities contracts, commodity contracts, forward contracts, repurchase agreements, swap agreements, or master netting agreements shall apply in a case under chapter 15, so that enforcement of contractual provisions of such contracts and agreements in accordance with their terms will not be stayed or otherwise limited by operation of any provision of this title or by order of a court in any case under this title, and to limit avoidance powers to the same extent as in a proceeding under chapter 7 or 11 of this title (such enforcement not to be limited based on the presence or absence of assets of the debtor in the United States).” . (2) Conforming amendment.— The table of sections for chapter 5 of title 11, United States Code, is amended by inserting after the item relating to section 560 the following: “561. Contractual right to terminate, liquidate, accelerate, or offset under a master netting agreement and across contracts; proceedings under chapter 15.”. (l) Commodity Broker Liquidations.— Title 11, United States Code, is amended by inserting after section 766 the following: “§ 767. Commodity broker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants   “Notwithstanding any other provision of this title, the exercise of rights by a forward contract merchant, commodity broker, stockbroker, financial institution, financial participant, securities clearing agency, swap participant, repo participant, or master netting agreement participant under this title shall not affect the priority of any unsecured claim it may have after the exercise of such rights.” . (m) Stockbroker Liquidations.— Title 11, United States Code, is amended by inserting after section 752 the following: “§ 753. Stockbroker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants   “Notwithstanding any other provision of this title, the exercise of rights by a forward contract merchant, commodity broker, stockbroker, financial institution, financial participant, securities clearing agency, swap participant, repo participant, or master netting agreement participant under this title shall not affect the priority of any unsecured claim it may have after the exercise of such rights.” . (n) Setoff.— Section 553 of title 11, United States Code, is amended— (1) in subsection (a)(2)(B)(ii), by inserting before the semicolon the following: “(except for a setoff of a kind described in section 362(b)(6), 362(b)(7), 362(b)(17), 362(b)(27), 555, 556, 559, 560, or 561)”; (2) in subsection (a)(3)(C), by inserting before the period the following: “(except for a setoff of a kind described in section 362(b)(6), 362(b)(7), 362(b)(17), 362(b)(27), 555, 556, 559, 560, or 561)”; and (3) in subsection (b)(1), by striking “362(b)(14),” and inserting “362(b)(17), 362(b)(27), 555, 556, 559, 560, 561,”. (o) Securities Contracts, Commodity Contracts, and Forward Contracts.— Title 11, United States Code, is amended— (1) in section 362(b)(6), by striking “financial institutions,” each place such term appears and inserting “financial institution, financial participant,”; (2) in sections 362(b)(7) and 546(f), by inserting “or financial participant” after “repo participant” each place such term appears; (3) in section 546(e), by inserting “financial participant,” after “financial institution,”; (4) in section 548(d)(2)(B), by inserting “financial participant,” after “financial institution,”; (5) in section 548(d)(2)(C), by inserting “or financial participant” after “repo participant”; (6) in section 548(d)(2)(D), by inserting “or financial participant” after “swap participant”; (7) in section 555— (A) by inserting “financial participant,” after “financial institution,”; and (B) by striking the second sentence and inserting the following: “As used in this section, the term ‘contractual right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of trade (as defined in the Commodity Exchange Act), or in a resolution of the governing board thereof, and a right, whether or not in writing, arising under common law, under law merchant, or by reason of normal business practice.”; (8) in section 556, by inserting “, financial participant,” after “commodity broker”; (9) in section 559, by inserting “or financial participant” after “repo participant” each place such term appears; and (10) in section 560, by inserting “or financial participant” after “swap participant”. (p) Conforming Amendments.— Title 11, United States Code, is amended— (1) in the table of sections for chapter 5— (A) by amending the items relating to sections 555 and 556 to read as follows: “555. Contractual right to liquidate, terminate, or accelerate a securities contract. “556. Contractual right to liquidate, terminate, or accelerate a commodities contract or forward contract.”; and (B) by amending the items relating to sections 559 and 560 to read as follows: “559. Contractual right to liquidate, terminate, or accelerate a repurchase agreement. “560. Contractual right to liquidate, terminate, or accelerate a swap agreement.”; and (2) in the table of sections for chapter 7— (A) by inserting after the item relating to section 766 the following: “767. Commodity broker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants.”; and (B) by inserting after the item relating to section 752 the following: “753. Stockbroker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants.”.

    Effective date note
    Amendment by section 1402 of Pub. L. 109–8 effective Apr. 20, 2005, and applicable only with respect to cases commenced under this title on or after such date, with amendment by par. (1) of such section applicable only with respect to cases commenced under this title more than 1 year after Apr. 20, 2005, see section 1406 of Pub. L. 109–8, set out as a note under section 507 of this title. Amendment by section 907 of 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.

  24. Pub. L. 109–8 § 907(f) · 119 Stat. 23

    Added · 11 U.S.C. § 548(d)(2)(E)

    Pub. L. 109–8, § 907(f), added subpar. (E)

    Source evidence

    Code amendment note
    Subsec. (d)(2)(E). Pub. L. 109–8, § 907(f), added subpar. (E).

    Enacted provision · exact public law section
    (f) Fraudulent Transfers of Master Netting Agreements.— Section 548(d)(2) of title 11, United States Code, is amended— (1) in subparagraph (C), by striking “and” at the end; (2) in subparagraph (D), by striking the period and inserting “; and”; and (3) by adding at the end the following new subparagraph: “(E) a master netting agreement participant that receives a transfer in connection with a master netting agreement or any individual contract covered thereby takes for value to the extent of such transfer, except that, with respect to a transfer under any individual contract covered thereby, to the extent that such master netting agreement participant otherwise did not take (or is otherwise not deemed to have taken) such transfer for value.” .

    Effective date note
    Amendment by section 1402 of Pub. L. 109–8 effective Apr. 20, 2005, and applicable only with respect to cases commenced under this title on or after such date, with amendment by par. (1) of such section applicable only with respect to cases commenced under this title more than 1 year after Apr. 20, 2005, see section 1406 of Pub. L. 109–8, set out as a note under section 507 of this title. Amendment by section 907 of 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.

  25. Pub. L. 109–8 § 1402(4) · 119 Stat. 23

    Added · 11 U.S.C. § 548(e)

    Pub. L. 109–8, § 1402(4), added subsec. (e)

    Source evidence

    Code amendment note
    Subsec. (e). Pub. L. 109–8, § 1402(4), added subsec. (e).

    Enacted provision · exact public law section
    (4) by adding at the end the following: “(e) (1) In addition to any transfer that the trustee may otherwise avoid, the trustee may avoid any transfer of an interest of the debtor in property that was made on or within 10 years before the date of the filing of the petition, if— “(A) such transfer was made to a self-settled trust or similar device; “(B) such transfer was by the debtor; “(C) the debtor is a beneficiary of such trust or similar device; and “(D) the debtor made such transfer with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made, indebted. “(2) For the purposes of this subsection, a transfer includes a transfer made in anticipation of any money judgment, settlement, civil penalty, equitable order, or criminal fine incurred by, or which the debtor believed would be incurred by— “(A) any violation of the securities laws (as defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47))), any State securities laws, or any regulation or order issued under Federal securities laws or State securities laws; or “(B) fraud, deceit, or manipulation in a fiduciary capacity or in connection with the purchase or sale of any security registered under section 12 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78l and 78o(d)) or under section 6 of the Securities Act of 1933 (15 U.S.C. 77f).” .

    Effective date note
    Amendment by section 1402 of Pub. L. 109–8 effective Apr. 20, 2005, and applicable only with respect to cases commenced under this title on or after such date, with amendment by par. (1) of such section applicable only with respect to cases commenced under this title more than 1 year after Apr. 20, 2005, see section 1406 of Pub. L. 109–8, set out as a note under section 507 of this title. Amendment by section 907 of 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.

33 of 34 references resolved to an enrolled provision · 1 partial

Notes

Historical and Revision Notes
legislative statements

Section 548(d)(2) is modified to reflect general application of a provision contained in section 766 of the Senate amendment with respect to commodity brokers. In particular, section 548(d)(2)(B) of the House amendment makes clear that a commodity broker who receives a margin payment is considered to receive the margin payment in return for “value” for purposes of section 548.

senate report no. 95–989

This section is derived in large part from section 67d of the Bankruptcy Act [section 107(d) of former title 11]. It permits the trustee to avoid transfers by the debtor in fraud of his creditors. Its history dates from the statute of 13 Eliz. c. 5 (1570).

The trustee may avoid fraudulent transfers or obligations if made with actual intent to hinder, delay, or defraud a past or future creditor. Transfers made for less than a reasonably equivalent consideration are also vulnerable if the debtor was or thereby becomes insolvent, was engaged in business with an unreasonably small capital, or intended to incur debts that would be beyond his ability to repay.

The trustee of a partnership debtor may avoid any transfer of partnership property to a partner in the debtor if the debtor was or thereby became insolvent.

If a transferee’s only liability to the trustee is under this section, and if he takes for value and in good faith, then subsection (c) grants him a lien on the property transferred, or other similar protection.

Subsection (d) specifies that for the purposes of fraudulent transfer section, a transfer is made when it is valid against a subsequent bona fide purchaser. If not made before the commencement of the case, it is considered made immediately before then. Subsection (d) also defines “value” to mean property, or the satisfaction or securing of a present or antecedent debt, but does not include an unperformed promise to furnish support to the debtor or a relative of the debtor.

Editorial Notes

References in Text

Sections 170(c) and 731(c)(2)(C) of the Internal Revenue Code of 1986, referred to in subsec. (d)(3), (4), are classified to sections 170(c) and 731(c)(2)(C), respectively, of Title 26, Internal Revenue Code.

Amendments1982–2005 · 7 rounds

2005

Subsec. (a)(1). Pub. L. 109–8, § 1402(2), in introductory provisions, inserted “(including any transfer to or for the benefit of an insider under an employment contract)” after “avoid any transfer” and “(including any obligation to or for the benefit of an insider under an employment contract)” after “or any obligation”.

Pub. L. 109–8, § 1402(1), substituted “2 years” for “one year” in introductory provisions.

Subsec. (a)(1)(B)(ii)(IV). Pub. L. 109–8, § 1402(3), added subcl. (IV).

Subsec. (b). Pub. L. 109–8, § 1402(1), substituted “2 years” for “one year”.

Subsec. (d)(2)(B). Pub. L. 109–8, § 907(o)(4), inserted “financial participant,” after “financial institution,”.

Subsec. (d)(2)(C). Pub. L. 109–8, § 907(o)(5), inserted “or financial participant” after “repo participant”.

Subsec. (d)(2)(D). Pub. L. 109–8, § 907(o)(6), inserted “or financial participant” after “swap participant”.

Subsec. (d)(2)(E). Pub. L. 109–8, § 907(f), added subpar. (E).

Subsec. (e). Pub. L. 109–8, § 1402(4), added subsec. (e).

1998

Subsec. (a). Pub. L. 105–183, § 3(a), designated existing provisions as par. (1), redesignated former pars. (1) and (2) as par. (1)(A) and (B), respectively, redesignated former par. (2)(A) and (B) as par. (1)(B)(i) and (ii), respectively, and redesignated former par. (2)(B)(i) to (iii) as par. (1)(B)(ii)(I) to (III), respectively, and added par. (2).

Subsec. (d)(3), (4). Pub. L. 105–183, § 2, added pars. (3) and (4).

1994

Subsec. (d)(2)(B). Pub. L. 103–394, § 501(b)(5)(A), substituted “section 101, 741, or 761” for “section 101(34), 741(5) or 761(15)” and “section 101 or 741” for “section 101(35) or 741(8)”.

Subsec. (d)(2)(C). Pub. L. 103–394, § 501(b)(5)(B), substituted “section 741 or 761” for “section 741(5) or 761(15)” and “section 741” for “section 741(8)”.

1990

Subsec. (d)(2)(B). Pub. L. 101–311, § 204, inserted reference to sections 101(34) and 101(35) of this title.

Subsec. (d)(2)(D). Pub. L. 101–311, § 104, added subpar. (D).

1986

Subsec. (d)(2)(B). Pub. L. 99–554 substituted “, financial institution” for “financial institution,”.

1984

Subsec. (a). Pub. L. 98–353, § 463(a)(1), substituted “if the debtor voluntarily or involuntarily” for “if the debtor” in provisions preceding par. (1).

Subsec. (a)(1). Pub. L. 98–353, § 463(a)(2), substituted “was made” for “occurred”.

Subsec. (a)(2)(B)(ii). Pub. L. 98–353, § 463(a)(3), inserted “or a transaction” after “engaged in business”.

Subsec. (c). Pub. L. 98–353, § 463(b), inserted “or may retain” after “lien on” and struck out “, may retain any lien transferred,” before “or may enforce any obligation incurred”.

Subsec. (d)(1). Pub. L. 98–353, § 463(c)(1), substituted “is so” for “becomes so far”, “applicable law permits such transfer to be” for “such transfer could have been”, and “is made” for “occurs”.

Subsec. (d)(2)(B). Pub. L. 98–353, § 463(c)(2), inserted “financial institution,” after “stockbroker”.

Subsec. (d)(2)(C). Pub. L. 98–353, § 394(2), added subpar. (C).

1982

Subsec. (d)(2)(B). Pub. L. 97–222 substituted “a commodity broker, forward contract merchant, stockbroker, or securities clearing agency that receives a margin payment, as defined in section 741(5) or 761(15) of this title, or settlement payment, as defined in section 741(8) of this title, takes for value to extent of such payment” for “a commodity broker or forward contract merchant that receives a margin payment, as defined in section 761(15) of this title, takes for value”.

Statutory Notes and Related Subsidiaries

Effective Date of 2005 Amendment

Amendment by section 1402 of Pub. L. 109–8 effective , and applicable only with respect to cases commenced under this title on or after such date, with amendment by par. (1) of such section applicable only with respect to cases commenced under this title more than 1 year after , see section 1406 of Pub. L. 109–8, set out as a note under section 507 of this title.

Amendment by section 907 of Pub. L. 109–8 effective 180 days after , 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 1998 Amendment

Amendment by Pub. L. 105–183 applicable to any case brought under an applicable provision of this title that is pending or commenced on or after , see section 5 of Pub. L. 105–183, set out as a note under section 544 of this title.

Effective Date of 1994 Amendment

Amendment by Pub. L. 103–394 effective , and not applicable with respect to cases commenced under this title before , see section 702 of Pub. L. 103–394, set out as a note under section 101 of this title.

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–554 effective 30 days after , see section 302(a) of Pub. L. 99–554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–353 effective with respect to cases filed 90 days after , see section 552(a) of Pub. L. 98–353, set out as a note under section 101 of this title.

Credits

1978–2005 · 8 acts
  1. 1978Pub. L. 95–598, , 92 Stat. 2600
  2. 1982Pub. L. 97–222, § 5, , 96 Stat. 236
  3. 1984Pub. L. 98–353, title III, §§ 394, 463, , 98 Stat. 365, 378
  4. 1986Pub. L. 99–554, title II, § 283(n), , 100 Stat. 3117
  5. 1990Pub. L. 101–311, title I, § 104, title II, § 204, , 104 Stat. 268, 269
  6. 1994Pub. L. 103–394, title V, § 501(b)(5), , 108 Stat. 4142
  7. 1998Pub. L. 105–183, §§ 2, 3(a), , 112 Stat. 517
  8. 2005Pub. L. 109–8, title IX, § 907(f), (o)(4)–(6), title XIV, § 1402, , 119 Stat. 177, 182, 214.
Show as published

(Pub. L. 95–598, , 92 Stat. 2600; Pub. L. 97–222, § 5, , 96 Stat. 236; Pub. L. 98–353, title III, §§ 394, 463, , 98 Stat. 365, 378; Pub. L. 99–554, title II, § 283(n), , 100 Stat. 3117; Pub. L. 101–311, title I, § 104, title II, § 204, , 104 Stat. 268, 269; Pub. L. 103–394, title V, § 501(b)(5), , 108 Stat. 4142; Pub. L. 105–183, §§ 2, 3(a), , 112 Stat. 517; Pub. L. 109–8, title IX, § 907(f), (o)(4)–(6), title XIV, § 1402, , 119 Stat. 177, 182, 214.)

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