Proposed Bankruptcy Rule Changes: Word Counts to HELOCs

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By Daniel Gill

Aug. 15 — The Committee on Rules of Practice and Procedure of the Judicial Conference of the United States has published proposed amendments to the Federal Rules of Bankruptcy Procedure.

The proposed changes provide some flexibility in Chapter 13 cases where home equity lines of credit are in play, tweak filing requirements for briefs and motions, including setting word count limitations, and look to bring procedures into alignment with recent U.S. Supreme Court precedent regarding bankruptcy court judgments issued without constitutional authority.

Members of the public are invited to comment on the proposed changes in writing by Feb. 15, 2017.

Modifying HELOC Payments in Ch. 13

Bankruptcy Rule 3002.1 applies in Chapter 13 to claims secured by the debtor's residence. Subsection (b) would be amended to include a provision for modifying a home equity line of credit (HELOC) by court order or by filing a notice of the change. If no objection is filed within 21 days, the change goes into effect.

The change “provides flexibility” to handle HELOC payments which “may adjust frequently and in small amounts,” the committee says in its note. The court can fashion “alternative requirements” for providing notice of HELOC payment changes by local rules or orders.

Bankruptcy Appeals

Part VIII of the Bankruptcy Rules, beginning with Rule 8001, governs appeals to district courts or bankruptcy appellate panels, where applicable.

The proposed amendments to these rules largely deal with page limitations for briefs and motions. The proposal changes limitations to word counts, rather than page lengths (with exceptions for parties who can certify they have not created the documents on a computer). The affected provisions include Rules 8013, 8015, 8016, 8022, Official Form 417C, and Part VIII Appendix (which summarizes the new word count limitations).

The modifications also feature certifications for service for incarcerated parties—Rules 8002(c), 8001(a)(2)(C) and Official Form 417A.

The committee proposed changes to Rule 8017, regarding the filing of briefs by amicus curiae (or friends of the court). Under the revised rule, courts would be able to prohibit or strike any such brief if admitting it would result in a judge's disqualification.

Another substantive change can be found by the addition of a new proposed rule, Rule 8018.1. This new rule creates a procedure to be consistent with the Supreme Court's decision in Exec. Benefits Ins. Agency v. Arkison, 134 S.Ct. 2165 (2014). According to the new rule, if a bankruptcy court issues a judgment without having proper constitutional authority to do so under Stern v. Marshall, 2011 BL 165774, 131 S.Ct. 2594 (2011), the district court can treat the bankruptcy court judgment as proposed findings of fact and conclusions of law.

Rule 8023 is proposed to be amended to add “subject to Rule 9019” when discussing the parties' right to voluntarily dismiss an appeal. The addition was intended as a “reminder” to the courts and parties that a settlement which might resolve an appeal may be required first to be approved by the bankruptcy court in accordance with Rule 9019 (if the bankruptcy estate is party to the agreement).

Amended Forms

A number of official forms are proposed to be amended. Several (Forms 425A, 425B and 425C) are for use in Chapter 11 cases for “small business” debtors. According to the committee, these forms are changed to add clarity and to make the forms easier to read. They include illustrative forms for Chapter 11 Plans and Disclosure Statements, with format and style changes.

The proposed changes to the small business Monthly Operating Reports (Form 425C) are amended to include a requirement for “basic financial information” recommended by the Internal Revenue Service.

Electronic Filing

The committee proposes to amend Rule 5005 to allow courts' local rules to require electronic filing by parties represented by counsel and to authorize when an unrepresented individual might be permitted or required to e-file.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bna.com

To contact the editor responsible for this story: Jay Horowitz at jhorowitz@bna.com

For More Information

The proposed amendments can be viewed here: http://src.bna.com/hIU.

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