§746 — Title 11 Bankruptcy | U.S. Code

Summary

If a person or company makes a deal with the debtor after the bankruptcy petition is filed, and that deal would have made them a customer if it had happened before filing, and they acted in good faith before a trustee qualifies under section 322, they are treated as a customer. The date of that deal is counted as the petition filing date when figuring that customer's net equity. A person or company cannot make a customer claim for any cash or securities they gave the debtor that are (1) part of the debtor’s capital or (2) subordinated to creditors’ claims by contract, agreement, understanding, or by law.

Title 11, §746

Bankruptcy — Source: USLM XML via OLRC

(a)If, after the date of the filing of the petition, an entity enters into a transaction with the debtor, in a manner that would have made such entity a customer had such transaction occurred before the date of the filing of the petition, and such transaction was entered into by such entity in good faith and before the qualification under section 322 of this title of a trustee, such entity shall be deemed a customer, and the date of such transaction shall be deemed to be the date of the filing of the petition for the purpose of determining such entity’s net equity.

(b)An entity does not have a claim as a customer to the extent that such entity transferred to the debtor cash or a security that, by contract, agreement, understanding, or operation of law, is—

(1)part of the capital of the debtor; or

(2)subordinated to the claims of any or all creditors.

Notes & Related Subsidiaries

Historical and Revision Notes

senate report no. 95–989

section 746(a) protects entities who deal in good faith with the debtor after the filing of the petition and before a trustee is appointed by deeming such entities to be customers. The principal application of this section will be in an involuntary case before the order for relief, because § 701(b) requires prompt appointment of an interim trustee after the order for relief. Subsection (b) indicates that an entity who holds securities that are either part of the capital of the debtor or that are subordinated to the claims of any creditor of the debtor is not a customer with respect to those securities. This subsection will apply when the stockbroker has sold securities in itself to the customer or when the customer has otherwise placed such securities in an account with the stockbroker.

Editorial Notes

Amendments

1982—Pub. L. 97–222, § 12(c), substituted “claims” for “claim” in section catchline. Subsec. (a). Pub. L. 97–222, § 12(a), substituted “enters into” for “effects, with respect to cash or a security,”, struck out “with respect to such cash or security” wherever appearing, and substituted “the date of the filing of the petition” for “such date”, and “entered into” for “effected”. Subsec. (b). Pub. L. 97–222, § 12(b), substituted “transferred to the debtor” for “has a claim for” in provisions preceding par. (1), and struck out “is” in par. (2).

§746 Extent of customer claims