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BANKRUPTCY UPDATE: Overview of Comments to the Proposed Amendments to the FRBP and Official Forms

Posted By USFN, Thursday, February 5, 2015
Updated: Wednesday, September 23, 2015

February 5, 2015 

 

by David McAllister
Pite Duncan, LLP
USFN Member (California, Nevada)
Chair, USFN Bankruptcy Committee

The Judicial Conference Advisory Committee on Bankruptcy Rules (Committee) proposed amendments to the Federal Rules of Bankruptcy Procedure (FRBP) and Official Forms. The deadline for public comment is February 17, 2015. Below is a brief summary of the primary issues that should be considered for comments.

Proofs of Claim
The proposed changes to FRBP 3002 shorten the time for filing proofs of claim (POC) to 60 days after the petition date, and require the filing of a new Mortgage Proof of Claim Attachment that includes a detailed loan transaction history from the first date of the default, on a loan secured by a debtor’s principal residence in Chapter 13 proceedings, to be filed with the claim. FRBP 3002 then provides an additional 60 days for filing required loan documentation. The signer of the POC must verify under penalty of perjury that the information provided in the claim is accurate. However, filing a claim without a review of supporting documentation raises the issue of whether the signer is committing perjury and/or violating FRBP 9011. While an alternative time for filing a POC to 90 days post-petition with no bifurcation would appear reasonable, the Committee ignored the previous comments on this proposed rule change, and it is likely that this amendment, as proposed, will be adopted.

Proposed FRBP 3002 also requires creditors who seek allowance of their proofs of claim in all voluntary Chapter 7 cases to file the claim within the above time frame. However, the Chapter 7 trustee does not typically determine whether there are assets to administer within this period. Furthermore, FRBP 3002(c)(2)(C) requires a Mortgage Proof of Claim Attachment and escrow account statement in individual Chapter 7 cases, if a security interest is claimed in the debtor’s principal residence. Finally, the failure for a creditor to timely file a POC in a Chapter 7 case will preclude the exercise of credit-bidding rights at a sale of property that is subject to the creditor’s lien. See, Title 11 U.S.C § 363(k). Accordingly, proposed FRBP 3002 should be revised to only require Chapter 7 proofs of claim in asset cases, within the time frame of the Notice of Claims Bar Deadline issued by the court.

National Form Plan
The Committee drafted the form and FRBP amendments as complementary parts of a project to improve the Chapter 13 process. It has been the understanding of many creditors that the proposed amended FRBPs, which weaken certain existing protections and due process, are in exchange for one consistent national Chapter 13 plan. Thus, the adoption of proposed amended FRBPs 2002, 3002, 3007, 3012, 3015, 4003, 5009, 7001, and 9009 should be contingent on the simultaneous adoption of a uniform plan. However, the Committee of Concerned Bankruptcy Judges submitted comments opposing a mandatory national Chapter 13 plan, and there is a significant possibility that the above-referenced amended FRBPs will be approved without the benefit of the uniform plan.

Section 3.5 of the proposed uniform Chapter 13 plan addresses the surrender of collateral securing a creditor’s claim, and merely provides for “consent to termination of the stay.” In several jurisdictions, the existing practice provides for relief from the automatic and/or co-debtor stays upon entry of the plan confirmation order. Accordingly, the Committee should consider revising Section 3.5 to provide for termination of the automatic and co-debtor stays, with respect to creditors’ exercise of their rights against the collateral, to be effective upon entry of the confirmation order.

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