Are You Prepared for Upcoming Changes to the Federal Rules of Bankruptcy Procedure?August 31, 2017 | Scott D. Fink, Esq.
Beginning on December 1, 2017, creditors and their counsel will be operating under many new rules governing the practice of consumer bankruptcy law. In an effort to ensure that you are prepared, I've highlighted the following important changes:
Rule 2002 has now been amended to require that creditors be given at least 21 days' notice of the time fixed for filing an objection to confirmation of a Chapter 13 plan. Amended Rule 2002 also requires that creditors receive at least 28 days' notice of the confirmation hearing in a Chapter 13 case. These amendments are designed to give creditors sufficient advance notice of the date of the scheduled plan confirmation in Chapter 13 and the deadline for filing a plan objection.
Rule 3002 has been amended to shorten the deadlines for filing proofs of claim. Specifically, creditors must file proofs of claim within 70 days of the filing date of a Chapter 7, 12 or 13 case. Also, in the event that a case is converted to Chapter 12 or 13, a creditor must file its claim within 70 days of the date of conversion for the claim to be allowed. While this significantly shortens the time within which a creditor must have its claim on file, the amended rule does provide a creditor with an opportunity via motion to seek an extension of up to 60 days to file the proof of claim if the creditor can show that it lacked reasonable time to file the claim because (1) the debtor failed to timely file the creditor list or (2) the notice of bankruptcy filing was mailed to the creditor at a foreign address. Amended Rule 3002 also clarifies for secured creditors that a secured claim is NOT void should the creditor fail to timely file a proof of claim and the lien remains valid.
Claims secured by a security interest in the debtor's principal residence also must be filed within 70 days. However, only the Official Form 410 mortgage attachment and an escrow account statement must be filed within the 70 days. The amended rule gives mortgage creditors an additional 50 days (on or before 120 days) of the filing date (or conversion date) to file all other loan documents, including the note, mortgage, assignments and allonges, etc.
As amended, Rule 3007 now requires that creditors be given at least 30 days' notice of an objection to their claim(s). The claim objection may be served via first-class mail to the name and address most recently designated on the creditors' original or amended proof of claim.
The amendment to Rule 3012, in combination with amendments to Rule 3015 discussed below, provides that any determination made in a plan regarding the amount of a secured claim is binding on the holder of the claim, even if the holder files a contrary proof of claim and regardless of whether an objection to the claim has been filed. In other words, the plan terms control for all secured claims and a secured creditor must take great care to review the Chapter 13 plan for any potential adverse treatment (including the amount of the claim, interest rate and valuation of collateral) and must object if it does not agree with the treatment. Creditors can no longer rely on the terms of their proof of claim and cannot wait for a claim objection to be filed.
Amended Rule 2015 requires the use of a Uniform Official Model Chapter 13 Plan unless a jurisdiction decides to "opt out" and a local form, compliant with Rule 3015.1, is adopted. In combination with amended Rule 3012, this Rule also provides that a determination of a secured claim's value or valuation done through the Plan will become effective and binding upon confirmation, despite the absence of a claim objection or contrary proof of claim. The rule, as amended, also requires a creditor to file an objection to confirmation at least 7 days before the confirmation hearing.
As you can see, many of these upcoming changes are significant and will require creditors and their counsel to change the way in which they practice and address accounts in bankruptcy. I strongly urge creditors to make sure their counsel are aware of these upcoming changes. Creditors should also be certain to seek advice of counsel as to best practices going forward from December 1, 2017. My staff and I are always available to answer questions on these and any other bankruptcy-related matters.
For more information, please contact Scott D. Fink, Esq. Mr. Fink is a Shareholder and Chair of the firm's Bankruptcy Practice Group. He practices in consumer and commercial bankruptcy, as well as real estate default. He is a Martindale-Hubbell AV Preeminent Peer Review Rated Attorney, and has been selected for inclusion in the Ohio Rising Stars list. He is a member of the National Association of Chapter 13 Trustees, and the Ohio State and Cleveland Metropolitan Bar Associations.
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