Nearly every year, changes are made to the Federal Rules of Bankruptcy Procedure — the ones that govern how bankruptcy cases are managed — to address issues identified by an Advisory Committee made up of federal judges, bankruptcy attorneys, and others. This year’s amendments to the national bankruptcy rules take effect on December 1, 2008. 

Business Bankruptcy Rule Changes. Unlike the more substantive modifications made last year (discussed here), this year’s amendments make a host of relatively smaller, but still important, changes. The most notable ones for business bankruptcy cases involve privacy concerns. New rules have been put in place to protect patients when health care businesses file for bankruptcy while others govern the proposed sale or transfer of personally identifiable information by any type of business. Separate rule changes implement provisions of Chapter 15 (the Bankruptcy Code’s cross-border and international insolvency chapter), address a range of issues in small business Chapter 11 cases, grant courts more flexibility in giving notice to foreign creditors, introduce various consumer bankruptcy procedural changes, and establish a process to allow some bankruptcy court decisions to be appealed directly to the U.S. Court of Appeals.

Interim Bankruptcy Rules Being Replaced. These rules also replace the interim bankruptcy rules that have been in place for the past few years following the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (known as BAPCPA). Some bankruptcy courts, such as the District of Delaware and the Southern District of New York, have already issued general orders retracting the effectiveness of the interim rules effective as of December 1, 2008.

Rules Of The Road. At a time when the financial crisis is likely to push more and more companies into Chapter 11, bankruptcy attorneys and other insolvency professionals will want to review the rule changes closely to make sure they are following the most current version of the Federal Rules of Bankruptcy Procedure. For debtors, creditors, and other parties, this year’s rule amendments should help make management of Chapter 11 bankruptcy cases more consistent with BAPCPA’s changes and, potentially, a more efficient process.