New Bankruptcy Rule, Amendments to Ch. 13 Plan Form Proposed

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By Diane Davis

July 1 — Consumer bankruptcy attorneys should be aware that the adoption of a national Chapter 13 plan form is getting closer, with a new “opt-out proposal” being considered in a new proposed bankruptcy rule and amendments.

The Judicial Conference Advisory Committee on Bankruptcy Rules July 1 published a proposed amendment to Bankruptcy Rule 3015 and the adoption of a new Rule 3015.1 that would require the use of an official form for Chapter 13 plans unless a district requires the use of a single local form for that purpose and meets the requirements in the new rule.

The proposed amendment to Rule 3015, and new Rule 3015.1 would modify the Advisory Committee's proposal for a mandatory nation-wide official Chapter 13 plan form. Chapter 13 bankruptcy allows individuals receiving regular income to obtain debt relief while retaining their property. To do so, the debtor must propose a plan that uses future income to repay all or a portion of his debts over a three to five year period.

The Advisory Committee has been considering an official form for Chapter 13 plans since 2011.

Comments on the proposed amendments must be submitted electronically by Oct. 3.

Members of the public who wish to present testimony may appear at the public hearing on the proposals on Sept. 27, in Pasadena, Calif., but must notify the committee in writing at least 30 days before the scheduled hearing date.

New Official Ch. 13 Form

Under the proposed amendments, Rule 3015(c) would be amended to 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. The nonstandard provisions in a Chapter 13 plan must be set out in the section of the Official or Local Form specifically designed for such provisions and must be identified in the manner required by the Official or Local Form.

Subdivision (d) of Rule 3015 would be amended to ensure that the trustee and creditors are served with the plan before confirmation. Service may be made either at the time the plan is filed or with the notice under Rule 2002 of the hearing to consider confirmation of the plan.

Rule 3015(f) would be amended to require service of an objection to confirmation at least seven days before the hearing to consider confirmation of a plan, unless the court orders otherwise.

Other amendments to Rule 3015 include amending subdivision (g) to set out two effects of confirmation. Under Rule 3015(g)(1), the amount of a secured claim under Bankruptcy Code Section 506(a) may be determined through a Chapter 12 or Chapter 13 plan in accordance with Rule 3012. That determination controls over a contrary proof of claim and over the schedule submitted by the debtor. The amount of a secured claim of a governmental unit, however, may not be determined through a Chapter 12 or Chapter 13 plan under Rule 3012.

Rule 3015(g)(2), as amended, provides for termination of the automatic stay under Sections 362, 1201, and 1301 as requested in the plan.

Rule 3015(h) has been redesignated and amended to reflect that often the party proposing a plan modification is responsible for serving the proposed modification on other parties. The rule retains the option to serve a summary of the proposed modification.

Local Form Requirements

Proposed Rule 3015.1 is new and establishes features that are required for all Local Forms for plans in Chapter 13 cases. If a Local Form doesn't comply with this rule, it can't be used in lieu of the Official Chapter 13 Plan Form.

Under 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. For example, paragraphs must be numbered and labeled in bold type, and the form must contain separate paragraphs for the cure and maintenance of home mortgages, payment of domestic support obligations, treatment of secured claims covered by the “hanging paragraph” of Section 1325(a), and surrender of property securing a claim.

A Local Form must also 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 must also require a certification by the debtor's attorney or unrepresented debtor that there are no nonstandard provisions other than those placed in the final paragraph.

Considering ‘Opt-Out Proposal.'

A proposed Chapter 13 plan form and proposed amendments to nine related rules were published for comment in August 2013 (25 BBLR 1142, 8/22/13), and then revisions were published in August 2014.

At the fall 2015 meeting, the committee approved a national plan form (Official Form 113) and related amendments to rules, but it voted to defer submitting those items to the Standing Committee to allow further consideration of an “opt-out proposal.”

Various groups, including the National Bankruptcy Conference, National Conference of Bankruptcy Judges, and the National Association of Consumer Bankruptcy Attorneys, expressed support for the opt-out proposal. Judge Marvin Isgur of the U.S. Bankruptcy Court for the Southern District of Texas circulated the opt-out proposal to the 144 bankruptcy judges who had submitted a letter in 2014 opposing a national plan form, and there was general acceptance of Rules 3015 and 3015.1 among the group.

The opt-out concept wasn't included in the 2013 and 2014 publications of the rules. The committee wanted to republish the rules for the public to have a fair opportunity to express their comments on the opt-out proposal.

The committee truncated the typical schedule for comment from six months to three months so that the form and rules could potentially have an effective date of Dec. 1, 2017.

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

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