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April 29 — The U.S. Supreme Court April 28 submitted to Congress for its consideration proposed amendments to the Federal Rules of Bankruptcy Procedure that have been approved by the Supreme Court.
The amendments will take effect Dec. 1, 2016, and “shall govern in all proceedings in bankruptcy cases thereafter commenced and, insofar as just and practicable, all proceedings then pending,” the Supreme Court order states. However, prior to Dec. 1, Congress may enact legislation to reject, modify, or defer the pending rule amendments.
The amendments cover international procedures, Chapter 13 debtors, time extension periods, and ambiguities in the bankruptcy court's jurisdiction and authority created by the U.S. Supreme Court's decision in Stern v. Marshall, 2011 BL 165774, 131 S.Ct. 2594 (2011)(23 BBLR 817, 6/30/11).
Bankruptcy Rules 1010, 1011, 2002, 3002.1, 7008, 7012, 7016, 9006, 9027, and 9033 are proposed to be amended, and Rule 1012 is new.
Amendments to Rules 1010, 1011, and 2002, and new Rule 1012 are intended to improve procedures for international bankruptcy cases. Shortly after Chapter 15 (Ancillary and Other Cross-Border Cases) was added to the Bankruptcy Code in 2005, the rules were amended to add new provisions on cross-border cases.
The amendments to Rules 1010 and 1011 remove provisions regarding the issuance of a summons for service in certain Chapter 15 proceedings. The requirements for notice and service in Chapter 15 proceedings are now found in Rule 2002(q). The requirements for responses to a petition for recognition of a foreign proceeding are now in Rule 1012.
New Rule 1012, Responsive Pleading in Cross-Border Cases, governs responses to a Chapter 15 petition and augments Rule 2002 to clarify the procedures for giving notice in cross-border proceedings. Chapter 15 of the Bankruptcy Code is designed for the U.S. court to assist an insolvency principally pending in another country.
Rule 2002(q) is amended to clarify the procedures for giving notice in cross-border proceedings. Under the amended rule, a hearing on a request for provisional relief may sometimes overlap with the merits of the petition for recognition. In that case, the court may choose to consolidate the hearing on the request for provisional relief with the hearing on the petition for recognition, and shorten the usual 21-day notice period.
Rule 3002.1, Notice Relating to Claims Secured by Security Interest in the Debtor's Principal Residence, applies only in Chapter 13 cases and requires creditors whose claims are secured by a security interest in the debtor's principal residence to provide the debtor and the trustee notice of any changes in the periodic payment amount or the assessment of any fees or changes during the bankruptcy case. This rule is intended to ensure that debtors who attempt to maintain their home mortgage payments while they are in Chapter 13 will have the information they need to do so.
Chapter 13 bankruptcy allows individuals receiving regular income to obtain debt relief while retaining their property, but to do so, the debtor must propose a plan that uses future income to repay a portion of his or her debts over a three to five year period.
The amendments to Rule 9006(f), Computing and Eliminating Time; Time for Motion Papers, eliminate the three-day extension to time periods when service is made electronically.
Rule 9006(f) and Federal Rule of Civil Procedure 6(d) contain similar provisions providing additional time for actions after being served by mail or by certain modes of service that are identified by reference to Rule 5(b)(2).
Rules 7008, 7012, 7016, 9027, and 9033 have been amended in response to Stern v. Marshall, in which the U.S. Supreme Court held that the bankruptcy court lacked authority under Article III to hear and enter a final judgment on a state-law counterclaim by the estate against a creditor who had filed a claim against the estate. Adjudication is expressly authorized under 28 U.S.C. § 157(b)(2), which classifies it as a core proceeding.
According to the Judicial Conference of the United States Committee Notes, Stern created an ambiguity about the meaning of the terms “core” and “non-core.” Under Stern, a proceeding might be designated core by the statute but be beyond the constitutional authority of a bankruptcy court to hear and determine, at least without the parties' consent. As a result, it would be constitutionally non-core.
Following Stern, the terms “core” and “non-core” proceedings have been removed from Rules 7008, 7012, 9027, and 9033 to avoid possible confusion.
In addition, parties in all bankruptcy proceedings, including removed actions, must state whether they do or do not consent to entry of final orders or judgment by the bankruptcy judge.
Rule 7016, which governs pretrial procedures, was amended to direct bankruptcy courts to decide the proper treatment of proceedings. A new subdivision (b) to Rule 7016 provides for the bankruptcy court to enter final orders and judgment, issue proposed findings and conclusions, or take some other action in a proceeding. The rule leaves the decision as to the appropriate course of proceedings to the bankruptcy court.
If the bankruptcy court chooses to issue proposed findings of fact and conclusions of law, Rule 9033 applies.
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Full text of the Supreme Court order adopting the amendments and the text of the Rules at: http://src.bna.com/eyL; Additional information about the rules is available at: http://www.uscourts.gov/rules-policies/pending-rules-amendments
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