21 April 2020
/ Garry A. Masterson
Forbearance Agreements in the Western District of Pennsylvania Bankruptcy Court During COVID-19
On April 17th, 2020, the Bankruptcy Judges, along with the Clerk of Court of the Western District of Pennsylvania Bankruptcy Court, held a conference* with attorneys practicing in that jurisdiction to discuss matters and procedures related to the outbreak of COVID-19. The Clerk provided new year-to-date bankruptcy case filing statistics, reflecting that overall filings in this District had decreased by 13%. The Clerk cautioned that January and February filings were on par with previous years and that the significant decrease did not occur until the last week of March. This timeframe coincides with when many states undertook stay-at-home orders. During March, the District saw a 30% decrease in new case filings, with chapter 7’s decreasing by 27% and chapter 13’s by 36%. Both the chief judge and clerk did express that the view across the country is that there is a “tsunami” of filings coming, expected late summer and early fall.
The Court cautioned that they will not currently issue a blanket Order putting all responsive deadlines on hold. All of the judges expressed the view that they prefer to handle these on a case by case basis and will rely on the parties to bring matters of this nature to their attention. The judges did add that there are possible statutory and other deadline extensions that may be contained in future COVID-19 federal legislation, however, they added that any such legislation has yet to begin in Congress at this time.
One of the most important items discussed by the Court relates to forbearance agreements during the pandemic. The judges all uniformly expressed that the Court must approve all forbearance agreements entered into by parties to their open cases. They instructed that once an agreement is reached, one of the parties shall file a Motion to Approve the agreement. Once the Court has approved the forbearance agreement, the burden is on the bankrupt debtor to file an Amended Plan per the terms of the agreement. The Amended Plan will follow the normal confirmation process in this District, which can be lengthy compared to other Districts due to the Conciliation Conference process. When the forbearance agreement period has ended, the bankrupt debtor will need to file another Amended Plan, unless the previous Amended Plan provided for an end date as to the agreement. The Trustee may continue to pay out creditor claims while the agreement approval and Amended Plan confirmation are pending. The Court reiterated a Trustee is under no obligation to stop or decrease the payments to creditors until the process is complete. The final instruction from the Court, in regards to such agreements, was a caution that creditors will still need to comply with the Notice of Mortgage Payment Change process.
If you need assistance crafting forbearance agreements with your debtors, as well as navigating the process, please contact our office. We will continue to monitor changes in this District and across the country and advise as changes take place.
*Information referenced in this publication is from a conference call with Chief Judge Carlota Bohm, Judge Thomas Agresti, Judge Jeffery Deller, and Judge Gregory Taddonio – the court has not yet issued any written statement.
For more comprehensive information and insights, watch our COVID-19 Loan Forbearance – What Lenders Need to Know webinar.
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
The Court cautioned that they will not currently issue a blanket Order putting all responsive deadlines on hold. All of the judges expressed the view that they prefer to handle these on a case by case basis and will rely on the parties to bring matters of this nature to their attention. The judges did add that there are possible statutory and other deadline extensions that may be contained in future COVID-19 federal legislation, however, they added that any such legislation has yet to begin in Congress at this time.
One of the most important items discussed by the Court relates to forbearance agreements during the pandemic. The judges all uniformly expressed that the Court must approve all forbearance agreements entered into by parties to their open cases. They instructed that once an agreement is reached, one of the parties shall file a Motion to Approve the agreement. Once the Court has approved the forbearance agreement, the burden is on the bankrupt debtor to file an Amended Plan per the terms of the agreement. The Amended Plan will follow the normal confirmation process in this District, which can be lengthy compared to other Districts due to the Conciliation Conference process. When the forbearance agreement period has ended, the bankrupt debtor will need to file another Amended Plan, unless the previous Amended Plan provided for an end date as to the agreement. The Trustee may continue to pay out creditor claims while the agreement approval and Amended Plan confirmation are pending. The Court reiterated a Trustee is under no obligation to stop or decrease the payments to creditors until the process is complete. The final instruction from the Court, in regards to such agreements, was a caution that creditors will still need to comply with the Notice of Mortgage Payment Change process.
If you need assistance crafting forbearance agreements with your debtors, as well as navigating the process, please contact our office. We will continue to monitor changes in this District and across the country and advise as changes take place.
*Information referenced in this publication is from a conference call with Chief Judge Carlota Bohm, Judge Thomas Agresti, Judge Jeffery Deller, and Judge Gregory Taddonio – the court has not yet issued any written statement.
For more comprehensive information and insights, watch our COVID-19 Loan Forbearance – What Lenders Need to Know webinar.
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
