After several years of drafting, debate, compromise and fine tuning, it appears that major changes to the administration of consumer bankruptcy cases are imminent. On April 27, 2017, Chief Justice John Roberts submitted to Congress amendments to the Federal Rules of Bankruptcy Procedure that will have a profound impact on consumer bankruptcy cases. The most noteworthy changes are:
- the required use of a Model Chapter 13 Plan (Official Form 113), subject to a district “opt-out” under certain conditions;
- the explicit requirement that secured creditors file a proof of claim, qualified by the express recognition that a lien is not void due only to the failure to file such a claim;
- the establishment of a proof of claim bar date tied to the bankruptcy filing date;
- the establishment of certain deadlines related to plan confirmation; and
- the express recognition of certain mechanisms for determining the amount of secured and priority claims.
Model Chapter 13 Plan – Amended Rule 3015 provides that if there is an official form for a plan filed in a Chapter 13 case, that form must be used unless a local form has been adopted in compliance with Rule 3015.1. Amended Rule 3015 further provides that nonstandard provisions are effective only if included in the appropriate designated section of the form. Rule 3015.1 allows districts to adopt a local form for a plan filed in a Chapter 13 case, subject to a number of restrictions that ensure the district’s retention of the key content of the official form. Amended Rule 3015 and Rule 3015.1 should streamline the plan review process for creditors, who now will be able to more easily locate the debtor’s proposed treatment of their claims and any nonstandard provisions within the plan.
Proof of Claim Requirement and Timeline – Amended Rule 3002(a) clarifies that secured creditors must file a proof of claim for the claim to be allowed, provided that a lien that secured a claim against the debtor is not void due only to the failure of any entity to file a proof of claim. Amended Rule 3002(c) provides that in voluntary cases under Chapter 7, 12, or 13, a proof of claim is timely filed if it is filed not later than 70 days after the bankruptcy filing date. Under Amended Rule 3002(c)(7), a proof of claim filed by the holder of a claim that is secured by a security interest in the debtor’s principal residence is timely filed if:
- the proof of claim (Official Form 410), together with the proof of claim attachment (Official Form 401A) and escrow analysis (if applicable) required under Rule 3001(c)(2)((C), is filed not later than 70 days after the bankruptcy filing date; and
- any attachments required by Rule 3001(c)(1) and (d) – such as the note (with any endorsement or allonge), mortgage or deed of trust, and relevant assignments or supporting documents – are filed as a supplement to the holder’s claim not later than 120 days after the bankruptcy filing date.
These amendments tighten the proof of claim deadline for creditors, but also should provide both more certainty on a case-by-case basis with respect to the bar date. In contrast, the current rule provides a deadline tied to the first date set for the meeting of creditors, which may vary by case or district. Moreover, the amendments permit creditors to submit the proof of claim and attachments related to the claim amount within 70 days, while providing creditors with an additional 50 days to collect the related loan documents to be filed as a supplement.
Plan Objection and Confirmation Hearing Deadlines – Amended Rule 2002(a) provides that the clerk, or some other person as the clerk may direct, shall give at least 21 days’ notice by mail of the deadline to object to confirmation of a Chapter 13 plan. Amended Rule 2002(b) provides that the clerk, or some other person as the clerk may direct, shall give at least 28 days’ notice by mail of the hearing on confirmation of a Chapter 13 plan. Amended Rule 3015(f) also provides that an objection to confirmation of a plan shall be filed and served at least seven days before the date set for the hearing on confirmation, unless the court orders otherwise. These rules provide a degree of uniformity and predictability across districts with respect to the timing of key events in the confirmation process.
Determining the Amount of Secured and Priority Claims – Amended Rule 3012 expressly sets forth various mechanisms by which courts may determine the amounts of secured claims, namely a motion, claim objection, or a Chapter 12 or 13 plan. Courts may determine the amount of priority claims by motion (after a claim is filed) or claim objection. Notably, Amended Rule 3015(g) provides that any determination made in the plan made under Rule 3012 about the amount of a secured claim is binding on the holder of the claim, even if the holder files a contrary proof of claim or the debtor schedules that claim, and regardless of whether an objection to the claim has been filed. This provision underscores the need for creditors to carefully review the debtor’s plan to determine whether an objection is necessary.
The foregoing amendments, while burdensome in some respects, should aid creditors in their efforts to formulate more streamlined procedures related to consumer bankruptcy cases. Uniform proof of claim deadlines, coupled with consistent plan content and notice and objection deadlines across districts, should foster a level of predictability and allow creditors to more efficiently process consumer bankruptcy cases. The tightened proof of claim deadline, while likely presenting an initial challenge to creditors with regard to the financial information needed to populate the proof of claim form and attachment, provides flexibility with respect to the gathering of supporting loan documents.
