Anticipated Amendments to Bankruptcy Rules Require Changes to Claims Filing Procedures

The US Supreme Court recently authorized a number of significant changes to the procedural rules applicable to bankruptcy proceedings. Absent Congressional intervention, which appears unlikely, the new rules will take effect on December 1, 2017. The amendments will most impact creditors dealing with consumer debtors in Chapter 13 cases, creating new deadlines for filing proofs of claim and allowing debtors to prosecute challenges to secured creditor claims through the plan submission and confirmation process. Some of the more significant changes are:

• Adoption of an “official” Chapter 13 Plan. The new rules provide for an “official,” standardized Chapter 13 Plan. Under amended Rule 3015(c), debtors will need to use the “official” form unless their jurisdiction has adopted its own local form, which must itself include the information outlined in Rule 3015.1. Among other things, Rule 3015.1 will require local form Chapter 13 Plans to include a paragraph requiring the debtor to highlighting any nonstandard plan provisions, provisions that limit any secured creditor’s claim to the value of its collateral, or provisions that seek to avoid a lien on the debtor’s real or personal property.
• Required Notice for Chapter 13 Confirmation Hearings and Objections to Confirmation. Rule 2002 has been amended to establish definitive notice provisions in Chapter 13 cases. A new subsection (2002(a)(9)) will require the debtor to provide creditors with at least 21 days’ notice of the deadline for objecting to Chapter 13 Plans. Another new subsection (2002)(b))(3)) calls for 28 days’ notice of the confirmation hearing in Chapter 13 cases.
• Proofs of Claim. The amendments will also alter the procedures for filing proofs of claim. Specifically:

• Rule 3002 is amended to clarify that secured creditors must file proofs of claim to have their claims allowed. (However, the Rule makes clear that a secured creditor’s claim will not be rendered void if it chooses not to file a proof of claim.)
• Rule 3002(c) makes changes to the periods for calculating the claims bar deadline in Chapter 7 (liquidation), 12 (family farmer), and 13 (individual debt readjustment) cases. For those types of cases, the deadline for filing a proof of claim will be reduced. Whereas the current Rule requires proofs of claim to be filed within 90 days after the initial §341 meeting of creditors, the revised Rule will require creditors to file their proofs of claim within seventy (70) days after the bankruptcy petition filing date.
• When a case is converted to a case under Chapter 12 or 13, the new, 70-day period for filing proofs of claim will run from the date of the court’s order converting the case. If a case is converted to a case under Chapter 7, a new time period for filing claims will begin running.
• Amended Rule 3002(c)(6) will allow the Bankruptcy Court to extend any proof of claim deadline if the debtor has failed to file a complete list of his/her creditors.
• New Rule 3002(c))(7) establishes a 2-stage deadline for filing mortgage proofs of claim where the claim is secured by an interest in the debtor’s principal residence.

• Claims Objections. Rule 3012, as amended, provides that any party-in-interest may seek a determination of the amount and priority of any claim. Moreover, in a departure from current practice, the amended Rule will permit plan proponents in Chapter 12 and Chapter 13 cases to include objections to the amount and/or priority of claims in the body of the Plan. Rule 3007, as amended, will require that a party objecting to a proof of claim must serve the affected creditor by first-class mail directed to the name and address indicated on the filed proof of claim form. Under amended Rule 3007, the Bankruptcy Court will no longer be required to schedule or hold a hearing on every claim objection.
• Objections to Liens or Transfers of Exempt Property.  Consistent with revised Rule 3012, amended Rule 4003(d) will allow a request to avoid a lien or other transfer of the debtor’s exempt property to be made either by motion or in the debtor’s Chapter 13 Plan.

Again, these changes to the Bankruptcy Rules are scheduled to take effect on December 1, 2017. Creditors should become familiar with the new requirements and begin developing internal procedures as necessary to ensure compliance.