Big Changes Proposed to Chapter 13 Bankruptcy – Notes from April 2-3, 2013 Meeting of Advisory Committee

Bankruptcy_ClientThe Bankruptcy Rules Advisory Committee is proposing several significant proposed changes to Chapter 13, which could go into effect in December, 2014.  The Advisory Committee on Bankruptcy Rules is expected to present a uniform Chapter 13 plan and submit it for comment in August 2013.  The current version of the proposed changes consolidates several motions into the Chapter 13 confirmation process.  For example, instead of holding the Debtor responsible for obtaining the correct claim amount pre-confirmation, the duty is shifted to the creditor to file its proof of claim within 60 days of the petition date.  Thus, the proof of claim bar date would be decreased to 60 days from the petition, rather than 90 days from the first scheduled 341 meeting of the creditors.  When considered with the 2010 amendments, these rules would appear to increase the burdens on mortgage servicers in Chapter 13 proceedings.

The Rules Committee met on April 2-3, 2013.   The Committee published a 482 page report from the meeting.  Topics discussed in the meeting included the proof of claim bar date, whether the plan or a contrary proof of claim controls (proof of claim in most cases), adequate protection payments, the order of distributions, and including a place where the debtor can propose nonstandard provision.

For the claim bar date, the goal of the committee is to set the proof of claim bar date prior to the plan confirmation.  The current draft proposal of the advisory committee required that proofs of claim be submitted within 60 days.  Mortgage servicers were concerned that 60 days did not provide sufficient time to gather all the required documentation.  To accommodate these concerns, the group altered draft Bankruptcy Rule 3002(c) to bifurcate a claim secured by the debtor’s principal residence.  The modified draft provides that the proof of claim is timely filed if it is filed within 60 days of the petition date and includes the mortgage form attachment required by Rule 3001(c)(2)(C). The documentation required by Rule 3001(c)(1) and (d), however, may be filed as a supplement not later than 120 days after the petition date.

Other proposed Bankruptcy Rules Amendments in their current form include:

  1. Bankruptcy Rule 2002 – would require 21 days’ notice of the time to file objections to confirmation.
  2. Bankruptcy Rule 3002 -Rule 3002(c)’s 60-day bar date has been adjusted to provide additional time to file supporting documentation for mortgage claims. Second, language has been included in Rule 3002(c) to make clear that the bar date runs from the conversion of a case to chapter 12 or chapter 13 (Rule 1019 deals with conversion from chapter 12 or 13, but not the reverse). Third, the Working Group has refinedthe language of the draft that provides an explicit exception to the bar date when the debtor fails to file a timely list of creditors’ names and addresses under Rule 1007(a)(1).
  3. Bankruptcy Rule 3007 – to provide an exception to the need to file a claim objection if a determination with respect to that claim is made in connection with plan confirmation under proposed Rule 3012.
  4. Bankruptcy Rule 3012 – to clarify that the amount of secured claims may be determined in a proposed plan, subject to objection and resolution at theconfirmation hearing.
  5. Bankruptcy Rule 3015 – extensive amendments to Rule 3015, which governs the filing of a chapter 13 plan as well as plan modifications and objections to confirmation.
  6. Bankruptcy Rule 4003(d) – to provide, in keeping with amended Rule 3012, that chapter 12 and chapter 13 plans may seek the avoidance of liens encumbering exempt property pursuant to § 522(f) of the Code.
  7. Bankruptcy Rule 5009 – The Working Group has sought to provide a procedure for the debtor to obtain an order confirming that a secured claim has been satisfied.
  8. Bankruptcy Rule 7001(2) – to exclude proceedings under amended Rule 3012, such as determinations of the amount of a secured claim through confirmation of a Chapter 12 or 13 plan.
  9. Bankruptcy Rule 9009 – First, the draft rule has been reorganized with separate subdivisions for official forms, director’s forms, and a rule of construction for forms. Second, the draft now contemplates that alterations of official forms may be permitted by the Bankruptcy Rules or by an official form itself. Third, the language regarding reproduction of unnecessary blank space has been restyled to permit a filer to expand or delete space, as appropriate, when responding to an item on a form.

The proposed form and rules changes also would have to be approved by the Committee on Rules of Practice and Procedure, the Judicial Conference, the Supreme Court, and then Congress. The plan and rules would be published for six months public comment in August 2013 and go into effect December 1, 2014, if approved at each stage of the rules making process.

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