A bill to amend the Bankruptcy Act to add a new chapter thereto providing for the adjustment of the debts of major municipalities.

(Reported to Senate from the Committee on the Judiciary with amendment, S. Rept. 94-458)

Adds a new chapter to the Bankruptcy Act entitled "Adjustment of Indebtednesses of Major Municipalities." Grants to courts of bankruptcy the jurisdiction over the composition and extension of the debts of specified public agencies or instrumentalities or political divisions. Allows such courts to permit the rejection of executory contracts of the petitioner, upon notice. Retains in the State the legislative and other powers, including expenditure therefor, over public agencies or instrumentalities or political subdivisions.

Makes eligible for relief under this chapter any municipality, public agency, instrumentality, or political subdivision of the State if the municipality is first specifically authorized to petition under this chapter by the chief executive, legislature, or other appropriate power of the State. Permits such petitions to be voluntary. Prescribes the procedures for filing such petitions. Makes such filing operate to stay the commencement or the continuation of any court or other proceeding against the petitioner or its property, and to stay the recognition or enforcement of any setoff effected within three months of filing. Requires the earliest possible hearing on a complaint seeking relief from such a stay.

Prohibits any stay, order, or decree of the court from interfering with the political or governmental powers of the petitioner; any of the property or revenues of the petitioner necessary for essential purposes; or the petitioner's use or enjoyment of any income-producing property.

Permits creditors to file complaints in the court to contest the petition for refief under this chapter.

Requires the petitioner to give prompt notice of the commencement of a proceeding or dismissal of the petition under this chapter to the State, the Securities and Exchange Commission, and creditors. Requires such a petitioner to also give notice to creditors of appropriate dates of specified actions in opposition to such petition.

Authorizes the judge to permit labor organizations of the debtor petitioner to be heard on the economic soundness of the plan affecting the interests of the represented employees.

Requires the petitioner to list creditors and amounts owed each.

Permits the court to authorize the petitioner to issue certificates of indebtedness for cash, property or other consideration, with such security and priority in payment as the court may approve.

Lists the priority of debts.

Requires, for confirmation of a petitioner's plan, the affirmative vote of creditors who hold two-thirds in amount and 51 percent in number of each class materially and adversely affected. Permits any creditor materially and adversely affected by such a plan to file a complaint in objection.

Requires a hearing on confirmation or modification of such a plan. Requires a dismissal of a proceeding under this chapter where any person promoting such a plan is compensated by both petitioner and any creditor.

Provides that the court shall confirm such a plan if it is fair, equitable, feasible, and not unfairly discriminatory in favor of any creditor, if it appears from the petitioner's current and projected revenues and expenditures that the budget of the petitioner will be in balance within a reasonable time, and if additional specified requirements are met.

Permits the judge to refer any special issues of fact to a referee in bankruptcy or special master for consideration, taking of testimony and a report if the judge finds his docket allows insufficient time.

Allows eligible petitioners who have filed under chapter IX of the Bankruptcy Act to apply to have the case proceed under this chapter.