Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.
By Diane Davis
The U.S. Supreme Court April 27 submitted to Congress proposed amendments to the Federal Rules of Bankruptcy Procedure that the justices have approved.
New Official Form 113, “Chapter 13 Plan,” is also part of the package of rule amendments.
Bankruptcy Rules 1001, 1006(b), and 1015(b) address “housekeeping” or general drafting issues.
Rules 2002, 3002, 3007, 3012, 3015, 4003, 5009, 7001, and 9009, and new Rule 3015.1 would implement the new official plan form or a local plan equivalent for use in cases filed under Chapter 13. Chapter 13 allows individuals receiving regular income to obtain debt relief while retaining their property, but to do so, they must propose a plan that uses future income to repay all or a portion of their debts over a three- to five-year period.
“Forms don’t require Supreme Court approval,” retired bankruptcy Judge Eugene R. Wedoff, N.D. Ill., Chicago, and current American Bankruptcy Institute president, told Bloomberg BNA April 28 via email.
“If the Judicial Conference approves them, they become effective,” Wedoff said. “That’s why the Supreme Court hasn’t said anything about the national form,” he said.
Wedoff is the former chair of the Advisory Committee on Bankruptcy Rules for the Judicial Conference of the United States.
“The form will go into effect on Dec. 1 in any district that has not adopted a local form by that date,” Wedoff said.
Congress isn’t given notice of changes in forms, but it could “enact a law that changed or eliminated a bankruptcy form,” Wedoff said, but acknowledged that it is “unlikely.”
The rule amendments will also take effect Dec. 1, absent passage of a contrary law by Congress, which is unlikely.
Rule 1001, which addresses the scope of the rules and forms, is the bankruptcy counterpart to Federal Rule of Civil Procedure 1 and generally tracks the language of that rule.
The proposed amendment to Rule 1001 changes the last sentence of the rule to conform to the language of Fed.R.Civ.P. 1: “These rules shall be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every case and proceeding.”
The word “administered” has been added to the rule to recognize the affirmative duty of the court to exercise the authority given by the rules to ensure bankruptcy cases and proceedings are resolved fairly and without undue cost or delay, according to the Advisory Committee notes.
As officers of the court, attorneys share this responsibility with the judge assigned to the case.
The phrase “employed by the court and the parties” also shows that the parties share the duty of using the rules to secure the just, speedy, and inexpensive determination of every case and proceeding.
Rule 1006(b), which addresses filing fees, will clarify that a debtor’s voluntary petition accompanied by an application to pay the filing fee in installments must be accepted for filing even if the court requires the initial installment to be paid at the time the petition is filed and the debtor fails to make that payment.
Under revised Rule 1006(b), courts can’t refuse to accept petitions or summarily dismiss cases for failure to make initial installment payments at the time of filing. Dismissal of the case for failure to pay any installment must proceed under Rule 1017(b)(1), according to the Advisory Committee.
Rule 1015 provides for the joint administration of bankruptcy cases in which the debtors are closely related. The rule covers a “husband and wife.”
The Advisory Committee has been considering the possibility of creating an official form for Chapter 13 plans since 2011. Currently, every district’s plan is different, which makes it difficult for creditors to know where to look for their treatment from district to district.
A proposed Chapter 13 plan form and proposed amendments to nine rules were published for public comment in August 2013. After making significant changes to the form, the revised form and rules were published a year later.
The Advisory Committee revised and republished the form and rules in July 2016, after receiving strong opposition to a national form for Chapter 13 plans. Rule 3015 and new Rule 3015.1 were republished, which would allow districts to use their own local plan form rather than the proposed national form if the local form meets certain requirements.
The Advisory Committee unanimously approved the nine rule amendments, the new rule, and the new form.
Amended Rule 3015(c) will require the use of an official form if one is adopted for Chapter 13 plans unless a local form has been adopted consistent with new Rule 3015.1.
“Rule 3015.1 is the compromise, allowing a judicial district to a adopt a single local form that conforms to requirements set out in the rule, but with the national form required to be used where such a local form has not been adopted,” Wedoff said.
“This compromise advances uniformity but retains a degree of local autonomy, and both the committee and the objecting judges were satisfied with that outcome,” Wedoff said.
Under new Rule 3015.1, only one local form may be adopted in a district.
Although the method of adoption isn’t specified, a local form must be adopted and preceded by a public notice and comment period.
To “promote consistency among Local Forms and clarity of content,” Rule 3015.1 provides several formatting and disclosure requirements.
A local form must begin with a paragraph calling attention to the fact that the plan contains a nonstandard provision, limits the amount of a secured claim based on valuation of the collateral, or avoids a lien. The last paragraph of a local form must include any nonstandard provisions, and must include a statement that nonstandard provisions placed elsewhere in the plan are void.
The form requires a certification by the debtor’s attorney or unrepresented debtor that there are no nonstandard provisions other than those placed in the final paragraph.
Rule 2002 is amended and reorganized to alter the provisions giving notice in Chapter 13 cases. Subdivision (a)(9) has been added to require at least 21 days notice of the time for filing objections to confirmation of a Chapter 13 plan.
Subdivision (b)(3) has been added to provide separately for a 28-day notice of the date of the confirmation hearing in a Chapter 13 case.
These amendments conform to amended Rule 3015.
Rule 3002, which addresses filing proof of claim or interest, has been amended to clarify that a creditor, including a secured creditor, must file a proof of claim to have an allowed claim. It also clarifies that a secured creditor’s failure to file a proof of claim doesn’t render the creditor’s lien void.
Subdivision (c) of Rule 3002 alters the calculation of the bar date for proofs of claim in Chapters 7, 12, and 13 cases. The time for filing a proof of claim is changed from 90 days after the meeting of creditors under Bankruptcy Code Section 341 to 70 days after the petition date.
If a case is converted to Chapter 12 or 13, the 70-day time for filing runs from the order of conversion. If a case is converted to Chapter 7, a new time period for filing a claim begins under Rule 3002.
In involuntary Chapter 7 cases, the 90-day time period runs from the entry of the order for relief, according to the Advisory Committee notes.
Under Rule 3002(c)(6), a court may extend the time to file a proof of claim if the debtor fails to file a timely list of names and addresses of creditors as required.
Subdivision (c)(7) provides a two-stage deadline for filing mortgage proofs of claim secured by an interest in the debtor’s principal residence.
Rule 3007 is amended to specify the manner in which an objection to a claim and notice of the objection must be served. The rule clarifies that a claimant must be served by first-class mail addressed to the person whom the claimant most recently designated on its proof of claim to receive notices, at the address indicated.
The amended rule no longer requires that a hearing be scheduled or held on every objection.
Rule 3012 is amended and reorganized to provide that a party in interest may seek a determination of the amount of a secured claim. The amount of a claim entitled to priority may also be determined by the court.
Subdivision (b) of Rule 3012 now provides that a request to determine the amount of a secured claim may be made in a Chapter 12 or 13 plan, and by motion or a claim objection.
Subdivision (c) clarifies that a determination for a secured claim of a governmental unit may be made only by motion or in a claim objection after the governmental unit has filed a proof of claim or its time for filing a proof of claim has expired.
Under Rule 4003(d), a request to avoid a lien or other transfer of exempt property may be made by motion or by a Chapter 12 or 13 plan.
A plan that proposes lien avoidance must be served as provided under Rule 7004 for service of a summons and complaint, the Advisory Committee notes state. Lien avoidance not covered by this rule require an adversary proceeding.
Subdivision (d) is added to Rule 5009 providing a procedure by which a debtor in a Chapter 12 or 13 case may request an order declaring a secured claim satisfied and a lien released under the terms of a confirmed plan.
A debtor may need documentation for title purposes of the elimination of a second mortgage or other lien that was secured by property of the estate, the committee notes said.
Rule 7001(2) has been amended to state that the determination of the amount of a secured claim under Rule 3012 doesn’t require an adversary proceeding.
Rule 9009 has been amended to address permissible modifications to official forms.
Rule 9009(a) requires that an official form must be used without alteration, except when another rule, the official form, or the national instructions permit alteration. The rule preserves the ability to make minor modifications to an official form that don’t affect the wording or the order in which information is presented on a form.
Permissible changes include expanding or deleting space for responses as appropriate or deleting inapplicable items as long as the filer indicates that no response is needed. Varying the width or orientation of columnar data on a form for clarity would also be a minor permissible change, the Advisory Committee notes state.
Any change that contravenes the directions on an official form is prohibited under Rule 9009.
To contact the reporter on this story: Diane Davis in Washington at DDavis@bna.com
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
Full text of the Rules at: https://www.supremecourt.gov/orders/courtorders/frbk17_d18e.pdf ; Additional information about the rules is available at: http://www.uscourts.gov/rules-policies/pending-rules-and-forms-amendments
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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