By Diane Davis
Changes to the Federal Rules of Bankruptcy Procedure and a new Chapter 13 plan form went into effect Dec. 1.
Nine other Official Forms were amended and also went into effect Dec. 1, including Forms 101, 309F, 309G, 309H, 309I, 425A, 425B, 425C, and 426.
These rule changes and new Chapter 13 form are “important” because they “will make changes to the Chapter 13 process so that it works more consistently around the country, and allows confirmation of Chapter 13 plans more quickly that will become final,” retired bankruptcy Judge Eugene R. Wedoff, N.D. Ill., Chicago, and current president of the American Bankruptcy Institute, told Bloomberg Law Nov. 30.
Although Wedoff said he would have “preferred a single, national Chapter 13 plan form” without the option of using a local plan form, it is a “move in the right direction,” he said.
Many of the locally adopted forms have used the national form as a “template,” Wedoff said.
The “ package” of bankruptcy Rules 2002, 3002, 3007, 3012, 3015, 4003, 5009, 7001, and 9009, and new Rule 3015.1 implement the new Official Form 113, “Chapter 13 Plan.”
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.
The amended rules and new Chapter 13 plan form are discussed in more detail in Bloomberg Law: Bankruptcy Treatise.
Under amended Rule 3015(c), all Chapter 13 debtors must use the new official form unless a local form plan has been adopted, after public notice and comment, in the district in which the case is pending that is consistent with new Rule 3015.1.
Practitioners should make sure to check their court’s local rules, general orders, and public notices to determine if they should use the new local form. According to research conducted by Bloomberg Law for Bloomberg Law: Bankruptcy Treatise, 81 of 94 districts have “opted out” of the new national form.
“Nonstandard” provisions in the plan will become effective only if they are included in a section of the local form designated for nonstandard provisions.
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 under new Rule 3015.1.
Another important rule change is that secured creditors must now file proofs of claim, Wedoff told Bloomberg Law. Amended Rule 3002(c) now requires proofs of claim in Chapters 7, 12, and 13 bankruptcy cases to be filed 70 days after the petition date.
The new rules “greatly shorten the time period,” which was 90 days after the first date set for the meeting of creditors under the former rules, Wedoff said.
Chapter 13 plans have to make special provisions if the debtor wants to keep certain collateral, and secured claims are treated in a special way in the plan, Wedoff said.
Shortening the time period for filing proofs of claim will “let debtors know earlier what they have to pay off so those claims can be taken care of in a ‘solid plan’ that can be confirmed,” Wedoff said.
Amendments to Bankruptcy Rules 1001, 1006(b), and 1015(b) address “housekeeping” or general drafting issues.
These rule changes are “for the better” and were published for public comment two separate times, but there is “always the possibility that they will need minor changes,” Wedoff said.
The Administrative Office of the United States Courts’ Committee on Rules of Practice and Procedure is open to suggestions from the public, Wedoff said.
Suggestions for rule changes should be sent to: Rules_Support@ao.uscourts.gov.
An amendment to a federal rule usually takes about three years, according to the Administrative Office of the U.S. Court’s website.
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