May 2, 2016
by Kim Rattet
Trott Law, P.C.
USFN Member (Michigan)
At the start of 2016 the U.S. District Court for the Eastern District of Michigan entered Administrative Order 16-AO-006, calling for fundamental changes to the Local Bankruptcy Rules. The revised local bankruptcy rules, which went into effect February 1, 2016, are directly impacting the local practices in consumer bankruptcy cases, particularly as they relate to chapters 7, 11, and 13. As such, it is worth reviewing the adjustments that are taking place to satisfy the new guidelines.
Chapter 13 — Changes relating to chapter 13 bankruptcy cases were especially extensive:
• Under E.D. Mich. Rule 2015-3, there are new rules for trustee’s procedures following a chapter 13 plan completion. It was previously stated that “any pre-petition or post-petition defaults have been cured and the claim is in all respects current, with no escrow balance, late charges, costs or attorney fees owing.” Now, the language has been updated to eliminate the latter portion. As such, the current rule reads: “with respect to any secured claim that continues beyond the term of the plan, any pre-petition or post-petition defaults have been cured. [E.D. Mich. L.B.R. 2015-3(a)(3)].
• Clarity has also been added to Section (a)(4) of chapter 13 cases, which outlines that in instances where the stay has been terminated as to a creditor, the response to a notice of a final cure under Fed. R. Bankr. P. 3002.1 no longer applies.
• Lastly, payment changes are now in place that allow for a “Notice of Inability to Comply with Timing Requirements.” Applicable for creditors whose claims are secured by a mortgage where the debtor’s payment obligation is susceptible to change multiple times in a 60-day period, a creditor may file a “Notice of Inability to Comply with Local Rule 3001-2(a) Deadline” as an attachment to any proposed payment change filed under subpart (a). Should an objection not be made within 14 days, or unless otherwise stated by the court, the trustee must execute the payment change stated in the notice of payment change versus the previous 21 days after service of the notice.
Chapter 7 — There is now a new form that must be used in chapter 7 reaffirmation agreements. For a reaffirmation without an attorney certification, a coversheet must be included with the motion as specified in § 524(k)(1) and Fed. R. Bankr. P. 4008. The motion needs to be titled and filed in the ECF event, “Motion for Approval of Reaffirmation – Presumption of Undue Hardship Applies.”
Chapter 11 — For chapter 11 bankruptcy cases in which a combined plan and disclosure agreement are entered, there is a seven-day window prior to the first scheduled date of the confirmation hearing to file an election, as outlined under § 1111(b).
All Bankruptcy Cases — There are also several revisions to general bankruptcy requirements. Listed below are a few of the noteworthy changes:
• Transfer of Claims – According to E.D. Mich. L.B.R. 3001-1, “any assignments or other evidence of a transfer of claim filed after the proof of claim has been filed must include the claim number of the claim to be transferred.”
• Motion for Relief from the Stay or Stipulation – This new requirement is interesting as it eliminates any timing advantage for filing a motion for release versus filing a stipulation. As written in the approved changes, any motion seeking relief from the stay must be served under Fed. R. Bankr. P. 4001 and signed by all interested parties (i.e., the debtor, trustee, any party with interest in the property, or any party requesting notice). In the event that the signatures of all required parties are not received, a motion to approve the stipulation must be filed.
• Procedure for Ex Parte Motions – Under E.D. Mich. L.B.R. 9037, an official procedure has been established for parties seeking to restrict access to documents containing protected private information. The unredacted information must be in violation of the Fed. R. Bankr. P. 9037(a) before a party can file an ex parte motion, which will restrict access to the pleading while the motion is pending. Upon granting the motion, there is a seven-day window to file a redacted replacement document.
For a complete breakdown of all of the changes, visit the website for the U.S. Bankruptcy Court for the Eastern District of Michigan (http://www.mieb.uscourts.gov/).
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Spring 2016 USFN Report