Fall, 2013 

 

The Advisory Committee on Federal Rules of Bankruptcy Procedure published proposed amendments to the current rules and forms and circulated this to the bench, bar and public with requests for comments and feedback. Many of the proposed amendments revisions simply reorganize and clarify the existing rules, but two of the proposed amendments contain substantive changes that could significantly impact the practice of creditor bankruptcy.

Rule 3002 Filing Proof of Claim or Interest
The Advisory Committee's Memorandum, dated May 8, 2013, states that the Bankruptcy Judges and Trustees surveyed by the Committee expressed "dissatisfaction with the requirements for filing a proof of claim" with regards to Chapter 13 practice. The Advisory Committee seeks to remedy this dissatisfaction by amending Rule 3002.

The amendment to Rule 3002(c) drastically shortens the amount of time in which a creditor may file a claim to 60 days after the bankruptcy filing date for Chapter 7, Chapter 12, and Chapter 13 cases. Or, if a Chapter 7 case converts to a Chapter 12 or Chapter 13 case, the bar date is set 60 days after the conversion date.

The 60 day deadline is easy to calculate and will occur prior to confirmation hearings in Chapter 13 cases, but it will likely prove difficult to comply with for servicers. Subdivisions (c)(6) and (c)(7) attempt to provide some exceptions and caveats to the 60 day filing deadline. Subdivision (c)(6) is amended to extend the bar date in circumstances where the debtor fails to provide the creditor with sufficient notice. Subdivision (c)(7) applies only to secured creditors filing a claim as to the debtor's principal residence and creates a 2-part filing deadline: the claim will be considered timely if (A) the Official Proof of Claim Form is filed within 60 days of the bankruptcy filing and (B) any supplemental attachments required by Rule 3001(c)(1) and (d) are filed within 120 of the bankruptcy filing.

Although subdivision (c)(7) attempts to mitigate the rigid Proof of Claim filing deadline imposed upon secured creditors that hold a security interest in the debtor's principal residence, it may ultimately increase costs associated with preparing Proofs of Claim due to the multiple filings and sparks additional questions and ambiguities. Can the information contained in the original filed claim be amended within the 120 day period if initially filed within the 60 day deadline or can the claim be amended during the 120 days only if there are outstanding supplemental documents to be filed? Does the 120 deadline strictly apply to required supplemental documents? In theory, the amended Rule 3002 will clarify and simplify the Proof of Claim filing procedure and requirements, but in practice it may result in unforeseen complications, hardship, and confusion for all parties involved.


The Chapter 13 Plan Form and Rule 9009
Rule 9009 is amended to require use of and prohibit alterations to the Official Forms, specifically with regards to the Chapter 13 Plan Form. Currently, changes to Official Forms are generally permitted, but the amended rule instead carves out a narrow list of permissible modifications. Overall, Rule 9009 and the Chapter 13 Plan Form provide for a more consistent, organized format.

Official Form 113 is the new, required Chapter 13 Plan Form. Part 3 of the Plan addresses the treatment of secured claims, but several sections of Part 3 leave room for misinterpretation.

Section 3.1 "Maintenance of payments and cure of any default" warrants both positive and negative feedback. It requires the inclusion of certain information that is often excluded from Chapter 13 Plans. However, the language regarding the ongoing payment amount, more particularly its beginning date, and the escrow portion of the payment is either unclear or omitted.

Section 3.5 "Surrender of collateral" contains unclear verbiage with regards to what the termination of the stay permits. Amended Section 3.5 of Part 3 states that "...debtor(s) consent to the termination of the stay under 11 U.S.C. § 362(a) and § 1301...upon confirmation of the plan."  This raises two concerns. First, the verbiage suggests that the debtor consents to the termination of the co-debtor stay which, in and of itself, raises issues as to what is allowed by law. Second, in keeping with the proposed amendments' objective to become more user-friendly, the reference to code sections should be accompanied by a brief description of the code sections  (i.e. .the co-debtor stay under 11 U.S.C § 1301) and additional verbiage explaining what the stay and co-debtor stay entail.

Many, including our firm, are providing comment to the new Rules and Chapter 13 Plan Form in hopes of eliciting substantive changes or, at a minimum, clarification. Until such time as the Rules and new Plan form are made official, we will continue to provide comment and promote a favorable outcome.  

 

  

The term "Triage" is said to have arisen during World War I by French doctors treating the battlefield wounded at aid stations behind the front. In title litigation, we meticulously triage referrals behind-the-scenes of the foreclosure front to reform, establish, or judicially cure numerous title issues that could otherwise halt a potential foreclosure. Right now, we are seeing a large number of referrals for the following common title issues: unrecorded/lost/misplaced security deed, improper execution of deeds, prior open lien, probate/heirship issue and missing spousal interest/break in the chain of title.

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Lauren Fierman
Marketing Director
770.246.3353