§ 746. Extent of customer claims

412 words·~2 min read·/usc/title-11/section-746

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(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.

(Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2613; Pub. L. 97–222, § 12, July 27, 1982, 96 Stat. 238.)

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.

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Cited by 1 section

statutes-at-large

Public Law 95–598
To establish a uniform Law on the Subject of Bankruptcies

Traces to 1 document

U.S. Code

Qualification of trustee
§ 322

7 references not yet in our index

Pub. L. 95–598
92 Stat. 2613
Pub. L. 97–222, § 12
96 Stat. 238
Pub. L. 97–222, § 12(c)
Pub. L. 97–222, § 12(a)
Pub. L. 97–222, § 12(b)

Citation graph

cites case law

§ 746

Extent of customer claims

Stat.×1

U.S.C.§ 322

Pub. L.Pub. L. 95–598

Stat.92 Stat. 2613

Pub. L.Pub. L. 97–222, § 12

Stat.96 Stat. 238

Pub. L.Pub. L. 97–222, § 12(c)

Cites 8 · showing 6Cited by 1 across 1 source