You’re a creditor in a bankruptcy case and a bankruptcy notice arrives on your desk setting a deadline to object to an important motion. The address on the notice is a P.O. box located a thousand miles away, one used only for customer payments and not for legal notices. As a result, the notice took a long time to be routed to you. When you look at it more closely, you realize that so much time has passed that the deadline to respond was last week and the hearing took place yesterday. The situation can be even worse if the late-arriving notice is about a deadline (also known as a "bar date") for filing a proof of claim or perhaps for responding to an objection to your claim.
Ability To Designate An Address. Well, one of the lesser known changes made by the 2005 amendments to the Bankruptcy Code, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), permits creditors to designate a preferred address for receiving bankruptcy notices. Section 342(f) of the Bankruptcy Code, added by BAPCPA, allows creditors to use one preferred address for cases in every bankruptcy court in the country or to designate different addresses for cases in specific bankruptcy courts.
National Creditor Registration Service. To implement this new rule, a National Creditor Registration Service ("NCRS") has been created. According to its website, the NCRS is "a free service provided by the U.S. Bankruptcy Courts to give creditors options to specify a preferred U.S. mail, e-mail address, or fax number to which bankruptcy notices should be sent." Creditors can choose to receive paper notices mailed to one or more designated addresses or faxed to specific fax numbers. Creditors also have the option of receiving bankruptcy court notices via email by registering for the Electronic Bankruptcy Noticing ("EBN") system.
- A creditor’s preferred address and delivery method will be substituted for any address used in a bankruptcy mailing matrix (the official list of addresses for its creditors that a debtor files with the bankruptcy court) within 30 days of the creditor’s registration. (Although Section 342(f) itself mentions only Chapters 7 and 13 of the Bankruptcy Code, as implemented the system is being applied to all cases, including Chapter 11 cases.)
- When registering, it’s important to list all of the different versions of a creditor’s name, including formal corporate names, a "doing business as" name, and even common misspellings of the creditor’s name. The service’s software will attempt to match the names the creditor supplied to the one listed in the debtor’s mailing matrix. If a match cannot be made, the notice will be sent to the address listed by the debtor.
- NCRS allows you to complete forms online or to print them and send them in. You can find the registration forms here, here, and here, but I suggest going to the NCRS registration website itself to make sure you are using the most up-to-date forms and procedure.
- A creditor or its bankruptcy counsel can always file a request for special notice with the bankruptcy court in a particular case using a specific address for notices in that case. In that circumstance, the address listed in the case-specific notice request will be used instead of the NCRS-listed address.
Be Prepared. Regardless of which option creditors choose, they should be prepared to handle the volume of notices that may be directed to the physical or email address. If using a physical address, creditors should be sure to monitor that address regularly and be in a position to process the notices received. A dedicated P.O. box may make sense in some cases. If an email address is used, it may be helpful to use a special email address or account for notices, create email rules to direct notices to the right person, or use other software to monitor and process those notices. With good procedures in place, the NCRS and EBN services should help creditors receive important bankruptcy notices in time to protect their rights.
What If Something Goes Wrong? Another new provision, Section 342(g), governs the situation in which notice does not get to the right address. Although courts have not yet answered how it applies in various contexts, the section provides that a notice is not "effective notice" unless it’s sent in compliance with the Bankruptcy Code’s notice rules or it’s actually brought to the creditor’s attention.
- This section allows a creditor to designate "a person or an organizational subdivision" to be responsible for receiving bankruptcy notices. If the creditor also establishes "reasonable procedures" so that notices are delivered to the designated person or subdivision, a notice sent to the creditor other than in accordance with Section 342’s procedures "shall not be considered to have been brought to the attention of such creditor until such notice is received by such person or such subdivision."
- In addition, a creditor that did not receive a notice of the bankruptcy filing complying with Section 342’s provisions may have a defense to a claim that it violated the automatic stay.
- While helpful to creditors, these provisions raise questions about how debtors and trustees can be sure to send out effective notice, especially if they are not aware of which person or subdivision a particular creditor has designated for notice. That problem will be reduced if many creditors register with the NCRS or EBN system.
Get Advice. As always, if you have questions about these procedures or how they may affect you as a debtor or creditor, be sure to get advice from your bankruptcy counsel.