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New Round of Federal Bankruptcy Rule and Form Changes Expected in 12/2019

Posted By USFN, Thursday, February 1, 2018
Updated: Monday, January 29, 2018

February 1, 2018


by Edward J. Boll III
Lerner, Sampson & Rothfuss, LPA
USFN Member (Kentucky, Ohio)

The mortgage industry now has two months under its belt adapting to the big changes to the Federal Rules of Bankruptcy Procedure (FRBP) that took effect in December 2017. These rule changes ushered in accelerated proof of claim filing deadlines and changes to Chapter 13 plans, nationally. But get ready, more changes are likely to come, and the USFN Bankruptcy Committee is already analyzing them.

In late 2017, further amendments to the FRBP and forms suggested by the Advisory Committee on Bankruptcy Rules (Advisory Committee) were unveiled for comment. The new proposed rules, if adopted, would impact how notice of filings in bankruptcy cases is received; how abandonments are secured; and how personal information inadvertently filed with the court is redacted.

Notice: Email Instead of Paper Mail
The Advisory Committee has been looking at the ongoing electronic filing, notice, and service cost-saving initiatives of other federal courts for ways to reduce the expense and burden of noticing in bankruptcy courts. Out of the nearly 150 FRBP that address noticing or service issues, the Advisory Committee decided to test the waters and phase in electronic noticing and service, using the proof of claim form (Official Form 410) to allow parties to opt into electronic notice and service. Specifically, a revised proof of claim form, which includes a box to check allowing the creditor to opt into electronic notice and service, is being proposed.

Uniform Abandonment Process
The FRBP provide that “the trustee or debtor in possession” shall give notice of a proposed abandonment or disposition of property. It is common practice in the industry to file a “motion to abandon” or a “motion to compel abandonment.” In considering the motions, some courts struggle with the view that only the trustee or debtor in possession can abandon the property. The Advisory Committee pointed out that differences have been observed “in how courts proceed once a motion to compel abandonment is granted — e.g., whether the trustee must file a notice to abandon property or, rather, the abandonment process is complete upon entry of the order granting the motion to compel.” The proposed rule amendment clarifies that no further action is necessary to notice or effect the abandonment of property ordered by the court in connection with a motion to abandon or compel abandonment.

Uniform Redaction Process
Section 205(c)(3) of the E-Government Act of 2002 required the U.S. Supreme Court to prescribe rules “to protect privacy and security concerns relating to electronic filing of documents and the public availability . . . of documents filed electronically.” To satisfy this requirement, bankruptcy courts adopted Rule 9037, which restricts the filing of documents in bankruptcy cases containing certain types of personally identifiable information (PII), such as social security numbers, financial account numbers, birth dates, and names of minor children. Rule 9037 became effective on December 1, 2007.

In reaction to the need for a uniform national procedure for belatedly redacting PII that is mistakenly filed with the bankruptcy court, a proposed change to Rule 9037 and a new motion procedure for redacting PII have been recommended. The attachment to the motion must be identical to the offending document previously filed, but should not include the unredacted information itself. Instead, the attachment must show the proposed redactions. The moving party may be, but is not limited to, the original filer of the document; still, the filer of the unredacted document will need to be served.

A single motion may relate to more than one unredacted document and the rules authorize the court to alter the prescribed procedure, which as the Committee Note to the proposed amendment provides: “might be appropriate, for example, when the movant seeks to redact a large number of documents. In that situation the court by order or local rule might require the movant to file an omnibus motion, initiate a miscellaneous proceeding, or proceed in another manner directed by the court.”

Importantly, because the filing of the motion to redact could raise a red flag and call attention to the existence of filed PII, courts are to take immediate steps to protect the motion and the document from public access. Cautioning, the Committee Note also points out that “[t]his procedure does not affect the availability of any remedies that an individual whose personal identifiers are exposed may have against the entity that filed the unredacted document.”

Public Comment Period
The comment period opened in August 2017 and closes on February 15, 2018. The Advisory Committee scheduled hearings on the proposed Bankruptcy Rule amendments in Washington, D.C. on January 17, 2018, and in Pasadena, California on January 30, 2018. After the public comment period, the Advisory Committee will decide whether to submit the proposed amendments to the Committee on Rules of Practice and Procedure for approval in accordance with the Rules Enabling Act. If approved — with or without revision — by the relevant Advisory Committee, the Committee on Rules of Practice and Procedure, the Judicial Conference, and the Supreme Court, the proposed amendments would become effective on December 1, 2019 — if Congress does not act to defer, modify, or reject them.

Copyright © 2018 USFN. All rights reserved.
Winter USFN Report

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."

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