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Amendments to Bankruptcy Rules Effective December 1, 2017

Posted By USFN, Tuesday, December 12, 2017
Updated: Tuesday, November 21, 2017

December 12, 2017

 

by Crystal V. (Sava) Cáceres
Anselmo Lindberg & Associates LLC – USFN Member (Illinois)

The Advisory Committee on Bankruptcy Rules has been hard at work over the last five years amending and adding new rules to the Bankruptcy Code; major changes went into effect on December 1, 2017. Of the many modifications, the most noteworthy that particularly affect creditors are: (1) a new Chapter 13 Plan which can be used uniformly in all federal districts — subject to an opt-out that many districts chose; (2) changes to the proof of claim filing deadline and requirements that secured creditors must file proofs of claim; (3) new deadlines for plan objections and the confirmation hearing process; and (4) determinations of the amount/value of secured and priority claims.

1. Amended Rule 3015 and New Rule 3015.1 – Model Chapter 13 Plan. Rule 3015 has been amended to require the use of an Official Form Model Chapter 13 Plan (Form 113). Districts can opt-out of using Form 113, and a Local Form can be used as long as it is adopted consistently with the new Rule 3015.1 (which requires that a single Local Form be adopted and specifically delineates several formatting and disclosure requirements to promote consistency among local forms). Although districts have the ability to opt-out, the Local Form must retain the content and requirements of the Official Form.

With respect to the treatment of secured creditors, the new Official Form specifically states that any existing arrearage on a listed claim will be paid in full through disbursements by the trustee, with interest (if any) at the rate stated. Unless otherwise ordered by the court, the amounts listed in the timely-filed proof of claim control over the amounts listed in the plan. That is, the timely-filed claim controls in all districts, not the confirmed plan. This will put the burden on debtors to modify their plans to ensure that their case is properly funded to pay all timely-filed claims.

Amended Rule 3015 and Rule 3015.1 were created to promote uniformity and the goal of creating an Official Form was to aid all parties (debtors, creditors, trustees and judges alike) in carrying out their responsibilities and ensure that plan provisions comply with the Bankruptcy Code. Due to this uniformity, creditors will now more easily be able to identify a debtor’s treatment of their claims in the proposed plan, and will also be able to ascertain non-standard provisions within the plan. To date, more jurisdictions have opted to use a Local Form instead of the Official Form; accordingly, creditors should not rely solely on the model plan and should continue to seek the advice of their local counsel for the Local Form for any district that has opted-out.

2. Amended Rule 3002 - Proof of Claim Requirements and Timelines. Rule 3002 has been amended to specifically state that secured creditors must also file a proof of claim. Language was also added clarifying that failure to file a claim does not void a secured claim. Additionally, creditors are now required to file a claim 70 days after the bankruptcy case is filed (previously, a creditor had 90 days after the 341(a) meeting of creditors to file its claim). Creditors should review their claims filing process to ensure that they can meet and comply with the new deadlines.

Further, a creditor may request up to a 60-day extension to file its claim, but only if there was insufficient notice. That is, the debtor did not timely file the creditor’s name and address or the notice was mailed to a foreign address.

Effectively, there is now a two-stage deadline for secured creditors to file their mortgage proofs of claim on a debtor’s principal residence. While all secured creditors must file their secured claims within 70 days after the bankruptcy was filed (the filed claim must include the proof of claim attachment and escrow analysis, if applicable), subsection 7(B) was added to allow that required attachments can be filed within 120 days after the case is filed to supplement the claim (i.e., within 50 days after the filing of the proof of claim). The claim will be timely if additional documents evidencing the claim are filed, but best practice is to file the claim as a complete package with all required attachments when possible.

Although there is a tighter deadline to file claims, the new deadline ensures that claims are timely filed prior to plan confirmation hearings. This will streamline the confirmation process for debtors, creditors, trustees, and judges alike.

3. Amended Rule 2002 and Amended Rule 3015 – Notice Requirements for Plan Objection and Confirmation Hearing. Amended Rule 2002 provides that 21-day notice be mailed to advise of the deadline to objection to confirmation of a Chapter 13 plan, and that 28-day notice be mailed regarding confirmation hearings. Amended Rule 3015 now requires that an objection to confirmation must be filed and served at least 7 days before the confirmation hearing date, unless otherwise ordered. There had been little uniformity in the various districts regarding the plan confirmation process and important events that occur, and these amended rules should remove the unpredictability among districts.

4. Amended Rule 3012 – Determination of the Amount of Secured and Priority Claims. Amended Rule 3012 provides that a request to determine the amount of a secured claim (for lien-strips and/or cramdowns) can now be made in the plan, as well as by motion or claim objection. Previously, the rule required that a motion be filed, but many districts allowed the request through the plan; hence the amended rule conforms to local practices. Further, under amended Rule 3015(g), any determination about the amount of a secured claim under amended Rule 3012 is binding on the holder of the claim, regardless of whether a contrary claim is filed or how the debtor schedules the claim, and irrespective of whether a claim objection has been filed. A determination under amended Rule 3012 (unlike the amount of any current installment payments or arrearage) controls over a contrary proof of claim. For this reason, it is extremely important that creditors carefully review a debtor’s proposed plan to determine whether an objection to the plan is needed.

Although adapting to the tighter time constraints and practice requirements may be challenging at the outset, all parties should benefit from the modifications to the Federal Rules of Bankruptcy Procedure. One of the main purposes of the rule changes is to promote uniformity among all federal districts. Many creditors function on a multi-state basis, and the rule changes will allow them to be more efficient in their operations because they can predict what each federal district requires of them. As always, consulting with local counsel regarding plan or rule inquiries, as well as remaining vigilant in reviewing plan terms and complying with deadlines, will help ensure that a creditor’s rights are protected.

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