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Amendment to FRBP Rule 3002.1: Notice Relating to Claims Secured by Security Interest in the Debtor’s Principal Residence

Posted By USFN, Monday, November 7, 2016
Updated: Wednesday, October 26, 2016

November 7, 2016

by David McAllister
Aldridge Pite, LLP
USFN Member (California, Georgia)

On December 1, 2016, amended Federal Rules of Bankruptcy Procedure (FRBP) Rule 3002.1 will become effective. Presently, FRBP Rule 3002.1 applies in Chapter 13 bankruptcy cases to claims that are secured by a debtor’s principal residence and which are provided for under the debtor’s plan in a manner where the pre-petition arrears are being cured and the post-petition payments are maintained on a loan that matures after plan completion. Creditors whose claims fall within the scope of FRBP Rule 3002.1 are required to continue to timely file and serve payment change notices (PCNs) and notices of post-petition mortgage fees, expenses and charges (PPFNs), and to also timely respond to Notices of Final Cure (NOFCs) unless the court specifically waives these requirements. As discussed more fully below, the amendment to FRBP Rule 3002.1 will both broaden the scope of the rule regarding secured claims in a Chapter 13 plan and also limit the applicability of the rule following entry of an order terminating or annulling the automatic stay.

First: The requirement that the debtor’s plan specifies a cure of arrears has been eliminated. Instead, FRBP Rule 3002.1 simply requires that the Chapter 13 plan provide for either the trustee or the debtor to make the contractual installment payments. As a result, creditors will be required to comply with FRBP Rule 3002.1 even if there are no pre-petition arrears being cured under the plan, and regardless of whether the post-petition payments on their claims are being made by the Chapter 13 trustee or the debtor.

Second: Amended FRBP Rule 3002.1 provides that “[u]nless the court orders otherwise, the notice requirements of this rule cease to apply when an order terminating or annulling the automatic stay becomes effective with respect to the residence that secures the claim.” Therefore, once a creditor obtains an entered order for relief from and/or annulment of the automatic stay that is effective, the creditor will no longer be required to file and serve any PCNs and/or PPFNs, and the Chapter 13 trustee and/or debtor should not be filing and serving any NOFCs that would require the creditor’s response.

However, the effective date of the entered order for relief from and/or annulment of the automatic stay may be stayed and creditors must comply with the supplemental notice requirements of FRBP Rule 3002.1: (1) unless and until the 14-day stay of FRBP Rule 4001(a)(3) is either waived or terminates; (2) if the order specifically provides that its effectiveness is stayed until a future date; and/or (3) if an interested party obtains a stay on the effectiveness of the order (e.g., a stay pending an appeal of the order). Finally, a bankruptcy court may still expressly require creditors to comply with the notice requirements of FRBP Rule 3002.1 when it terminates or annuls the automatic stay.

In conclusion, creditors should carefully review the particular provisions of a debtor’s Chapter 13 plan and any orders terminating or annulling the automatic stay regarding their claims secured by a debtor’s principal residence in a Chapter 13 bankruptcy proceeding — and the bankruptcy court docket — to determine whether the supplemental notice requirements of FRBP Rule 3002.1 are no longer applicable prior to making any adjustments to their account records regarding the same.

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