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Business Bankruptcy Issues Recent Developments

Amendments To The Federal Rules Of Bankruptcy Procedure Take Effect December 1, 2017

Just about every year amendments are made to the rules that govern how bankruptcy cases are managed — the Federal Rules of Bankruptcy Procedure. The amendments address issues identified by an Advisory Committee made up of federal judges, bankruptcy attorneys, and others. As the photo above reminds us, the rule amendments are ultimately adopted by the U.S. Supreme Court (and technically subject to Congressional disapproval).

Key Rule Amendments For Business Bankruptcy Cases. This year, the majority of rule amendments involve consumer cases. For example, one notable change should lead to the creation of a national form Chapter 13 plan whose use will be required — unless a local form Chapter 13 plan has been adopted in its place.

Since In The Red® is focused on business bankruptcy developments, this post will highlight only those rule amendments impacting business cases. Be sure to read all of the amendments (see link below) and, if relevant to you, review the changes affecting consumer bankruptcy cases, which are not discussed below.

With that caveat, these changes are of particular note for business bankruptcy cases:

  • Rule 1001 has been amended to note that the Federal Rules of Bankruptcy Procedures are not just to be construed but also “administered” and “employed by the court and the parties” to secure the just, speedy, and inexpensive determination of every case and proceeding. This is consistent with revisions previously made to the Federal Rules of Civil Procedure.
  • Rule 3002 has been amended in several important ways.
    • First, a secured creditor is now required to file a proof of claim to have an allowed secured claim. Failing to do so will not alone lead to the lien securing the claim being deemed void.
    • Second, the deadline for filing a proof of claim in a voluntary Chapter 7, Chapter 12, or Chapter 13 case is not later than 70 days after entry of the order for relief (or the date of the order of conversion to a Chapter 12 or Chapter 13 case). In an involuntary Chapter 7 case, the proof of claim deadline is not later than 90 days after the entry of the order for relief. The old 90 days after the “first date set for the meeting of creditors” language has been jettisoned. These amendments leave unchanged how deadlines for filing proofs of claim in Chapter 11 cases under Rule 3003(c)(3) are established.
    • Third, Rule 3002 contains other provisions in recognition that the claim deadline will now be earlier in Chapter 7, 12, and 13 cases. The court, on motion filed before or after the deadline expires, may extend the time for filing a proof of claim for not more than 60 days following the date a motion seeking additional time is granted in certain circumstances. Those cover situations where (1) a debtor fails timely to file the required Rule 1007(a) list of creditor names and addresses or (2) the notice was insufficient to provide the creditor with a reasonable time to file a proof of claim but only if the notice was mailed to a foreign address.
  • Rule 3007 has been revised to clarify that Rule 7004’s specific service requirements do not apply to most claim objections. Instead, service of the claim objection by first-class mail on the person most recently designated to receive notices on the original or amended proof of claim will suffice. Exceptions apply to claims by the United States, its officers or agencies, or an insured depository institution. For those claimants, Rule 7004’s service requirements will continue to apply. Rule 3007 also more expressly permits giving notice and only an opportunity to request a hearing, rather than requiring an actual hearing, a practice that has become common in many districts.
  • Rule 3012 now permits determination not only of the amount of a secured claim under Section 506(a) but also of the amount entitled to priority under Section 507, and either by motion or claim objection. As amended the rule now provides that the amount of governmental unit’s secured claim can only be determined by motion or claim objection after the governmental unit has either filed a proof of claim or the time for doing so has expired.
  • Rule 7001 has been revised to reflect the changes made to Rule 3012.
  • Rule 9009 now more clearly requires the use of Official Forms and limits the types of acceptable alterations, essentially to only minor revisions to expand or delete spaces or delete items checked with “no” or “none.”

Evidence Please. Two Federal Rules of Evidence have been amended as well. First, the “ancient document” hearsay exception in Rule 803(16) has been changed to remove the “at least 20 years old” language and insert insert “prior to January 1, 1998.” The Advisory Committee’s concern is that going forward the old language could be used to admit “vast amounts of unreliable electronically stored information.” Other revisions, to Federal Rules of Evidence 902(13) and 902(14), create procedures for establishing the authenticity of electronic records without a testifying witness.

Did Someone Mention A Redline? Everybody loves to see a redline, so follow the link in this sentence for the complete set of rule changes, including redlines showing the revisions made, as well as the Advisory Committee’s explanations for each amendment.

Get Ready. The amendments take effect on December 1, 2017 so read up now and be ready for the changes taking effect in business bankruptcy cases in just a few weeks.

Business Bankruptcy Issues Recent Developments

Amendments To The Federal Rules Of Bankruptcy Procedure Take Effect December 1, 2016

Just about every year changes are made to the rules that govern how bankruptcy cases are managed — the Federal Rules of Bankruptcy Procedure. The revisions address issues identified by an Advisory Committee made up of federal judges, bankruptcy attorneys, and others.

Key Rule Amendments. This year the rule amendments address the continuing impact of the Stern v. Marshall case on bankruptcy proceedings, the effect of electronic service on response deadlines, and certain Chapter 15 procedures. Be sure to read all the amendments (see link below), but here are the changes of particular note in business bankruptcy cases:

  • Rules 1010, 1011, and 2002 have been revised to improve procedures in cross-border Chapter 15 cases, with a new Rule 1012 added to govern responses to Chapter 15 petitions.
  • Rule 7008 has been amended to remove the requirement that a party in an adversary proceeding state whether the proceeding is core or non core, leaving instead the requirement to state whether the party does or does not consent to entry of final orders or judgment by the bankruptcy court.
  • Rule 7012 has been revised in a similar fashion as Rule 7008.
  • Rule 7016 governing pretrial conferences has been changed to add a requirement for the bankruptcy court, on its own motion or that of a party, to decide whether to hear and determine the adversary proceeding, to hear it and issue proposed findings of fact and conclusions of law, or to take some other action.
  • Rule 9006(f) has been amended to remove service by electronic means, including ECF service, from the types of service allowing three added days to act or respond after being served. Put differently, if you’ve consented to electronic service, you no longer get to add three days for any response or action. Instead, the 7, 14, 21, and 28 day periods will apply directly.
  • Rule 9027 governing removal has been updated along the same lines as Rules 7008 and 7012 described above.
  • Finally, Rule 9033 has been amended to remove the core/non core language since even core proceedings may require a bankruptcy court to issue proposed findings of fact and conclusions of law in light of the Stern-related decisions.

Read All About It. So you can keep up-to-date, a copy of the amendments, in both clean and redline, is available by following the link in this sentence. (As a bonus, clean and redlines of the amendments to the Federal Rules of Appellate Procedure and the Federal Rules of Civil Procedure are also included.) The amendments to the Federal Rules of Bankruptcy Procedure start at page 117 of the linked document.

Ready, Set, Go. The amendments take effect on December 1, 2016. They govern all proceedings in bankruptcy cases commenced after that and all pending proceedings “insofar as just and practicable.” I take that to mean they will govern virtually all bankruptcy cases and adversary proceedings, including those filed prior to December 1, 2016, so be ready to apply them right away.

 

Image Courtesy of Flickr by Ken Lund

Business Bankruptcy Issues Recent Developments

A Beam Of Sun For Trademark Licensees: Another Appellate Court Holds Rejection Does Not Terminate A Trademark Licensee’s Rights

The In re Tempnology LLC bankruptcy case in New Hampshire has produced yet another important decision involving trademarks and Section 365(n) of the Bankruptcy Code. This time the decision is from the United States Bankruptcy Appellate Panel for the First Circuit (“BAP”). Although the BAP’s Section 365(n) discussion is interesting, even more significant is its holding on the impact of rejection of a trademark license. The decision is also further evidence of the continuing trend of courts seeking ways to protect trademark licensees in bankruptcy.

Before we get ahead of ourselves, let’s take a quick look back at the Bankruptcy Court’s decision.

The Bankruptcy Court’s Decision. Just about a year ago the New Hampshire Bankruptcy Court issued a decision involving the effects of rejection by the debtor, Tempnology LLC, of a Co-Marketing and Distribution Agreement (“Agreement”). In re Tempnology, LLC, 541 B.R. 1 (Bankr. D.N.H. 2015). In the Agreement, Tempnology had granted Mission Product Holdings, Inc. (“Mission”) (1) a non-exclusive license to certain of Tempnology’s copyrights, patents, and trade secrets, (2) an exclusive right to distribute certain cooling material products that Tempnology manufactured, and (3) an associated trademark license. With one of its first motions in the bankruptcy case, Tempnology rejected the Agreement.

  • The Bankruptcy Court held that the non-exclusive license to Tempnology’s copyright, patent, and trade secret rights was a license of “intellectual property” as defined in Section 101(35A) of the Bankruptcy Code, and that Mission’s rights to continue to use that IP was protected under Section 365(n). However, the exclusive distribution rights were not “intellectual property” under Section 101(35A) and the Bankruptcy Court held Mission’s distribution rights were not protected under Section 365(n).
  • The Bankruptcy Court also held that because trademarks were not included in Section 101(35A)’s definition of intellectual property, Mission’s trademark license rights were not protected by Section 365(n).
  • In considering the impact of rejection, the Bankruptcy Court followed the 1985 decision in Lubrizol Enterprises, Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir. 1985). The Bankruptcy Court held that due to the rejection of the Agreement, Mission lost both the exclusive distribution rights and the trademark license rights.
  • You can get the details on the Bankruptcy Court’s decision at this prior post, entitled “A Reminder Of The Limits Of Section 365(n)’s Licensee Protection.”

Why No Mention Of The Seventh Circuit’s Sunbeam Decision? In that earlier post, I noted that given Circuit level decisions over the last few years involving trademarks and bankruptcy, it was interesting that the Bankruptcy Court’s decision did not mention the Seventh Circuit’s 2012 decision in Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, 686 F.3d 382 (7th Cir. 2012).

  • In Sunbeam, the Seventh Circuit expressly rejected the Lubrizol decision and its analysis of the effects of rejection (follow the link for a full discussion of the Sunbeam decision). In contrast to Lubrizol, the Sunbeam court held that rejection is a breach by the debtor and does not terminate the agreement or the rights of the non-breaching party.
  • As a result, the Seventh Circuit allowed the non-debtor trademark licensee to continue using the licensed trademarks despite rejection of the trademark license.

At the time I speculated that if the Bankruptcy Court in the Tempnology case had applied the Sunbeam decision, the result might have been different.

The Bankruptcy Appellate Panel Decision. Mission appealed the Bankruptcy Court’s decision to the BAP. On November 18, 2016, the BAP issued its decision, affirming in part and reversing in part the Bankruptcy Court’s decision. Follow this link for a copy of the BAP’s November 18, 2016 decision.

  • The BAP affirmed the Bankruptcy Court’s holding that the exclusive distribution rights in the Agreement were not intellectual property as defined in the Bankruptcy Code and were not protected by Section 365(n).
  • The BAP also affirmed the Bankruptcy Court’s decision that Section 365(n) did not protect Mission’s rights as a trademark licensee, ruling that the Bankruptcy Court had corrected held that Section 101(35A)’s definition of “intellectual property” excludes trademarks.
  • On the trademark point, Mission urged the BAP to follow the equitable approach that Judge Ambro had suggested in his concurring opinion in the Third Circuit’s decision in In re Exide Techs., 607 F.3d 957 (3d Cir. 2010), which would let bankruptcy courts fashion equitable protections for trademark licensees. The BAP declined to follow either that approach or the one taken by the New Jersey Bankruptcy Court in In re Crumbs Bake Shop, 522 B.R. 766 (Bankr. D.N.J. 2014), which had effectively applied Section 365(n) to trademarks.
  • For more on the Crumbs Bake Shop and Exide Techs. decisions, take a look at this earlier post.

The BAP Discusses, And Then Follows, Sunbeam. Had the BAP stopped there, it would have affirmed the Bankruptcy Court’s holding. The BAP, however, did not stop there. Instead, it considered the Sunbeam decision and ultimately followed its analysis on the effect of rejection on a trademark license agreement. In so doing, the BAP became the first appellate court outside the Seventh Circuit to adopt the Sunbeam decision’s rejection analysis.

The BAP turned to the Lubrizol decision first:

We must part company with the bankruptcy court, however, on the effect the Debtor’s rejection of the Agreement had on Mission’s licensee rights in the Debtor’s trademark and logo. The bankruptcy court ruled that, because the Debtor’s trademark and logo were not protected by Mission’s election under § 365(n), Mission did “not retain rights to the Debtor’s trademarks and logos post-rejection.” This conclusion endorses Lubrizol’s approach to the rejection of executory contracts, namely that rejection terminates the contract. Lubrizol, however, is not binding precedent in this circuit and, like the many others who have criticized its reasoning [footnote omitted], we do not believe it articulates correctly the consequences of rejection of an executory contract under § 365(g). We adopt Sunbeam’s interpretation of the effect of rejection of an executory contract under § 365 involving a trademark license.

The BAP went on with its analysis:

Applying Sunbeam’s rationale, we conclude that, while the Debtor’s trademark and logo were not encompassed in the categories of intellectual property entitled to special protections under § 365(n), the Debtor’s rejection of the Agreement did not vaporize Mission’s trademark rights under the Agreement. Whatever post-rejection rights Mission retained in the Debtor’s trademark and logo are governed by the terms of the Agreement and applicable non-bankruptcy law.

Thus, we conclude that the bankruptcy court did not err in ruling that Mission’s § 365(n) election failed to protect its rights under the Agreement as licensee of the Debtor’s trademark and logo, but it erred in ruling that Mission’s rights in the Debtor’s trademark and logo as set forth in the Agreement terminated upon the Debtor’s rejection of the Agreement.

Sunbeam, Now Joined By Tempnology, Raises A Number Of Questions. If followed by other courts, the Sunbeam and Tempnology decisions raise a variety of issues. These include the following:

  • Aside from the right to use the licensed trademarks, does the licensee keep other rights under the trademark license, such as exclusivity if applicable?
  • Does the licensee have rights to use the trademarks for the full term of the license agreement plus any extensions, or some shorter period?
  • If payment of royalties is required under a trademark license, must the trademark licensee continue to pay them post-rejection to use the licensed trademarks, as an IP licensee covered by Section 365(n) is required to do?
  • Can the trademark licensee instead argue that rejection is a material breach by the debtor and excuses the obligation to pay royalties?
  • Under Sunbeam and Tempnology, if rejection does not terminate trademark license rights, is the same true for intellectual property licenses other than trademarks, such as patents and copyrights, covered by Section 365(n)?
  • Is the Section 365(g) analysis of Sunbeam and Tempnology just limited to trademark license rights? Can a non-debtor party to an executory contract argue that other of its contract rights are also preserved, as long as they don’t impose affirmative performance obligations on the debtor? If so, in Tempnology, would that extend to Mission’s exclusive distribution rights?
  • Are licensees of patents, copyrights, or trade secrets, otherwise protected by Section 365(n), required to follow Section 365(n)’s statutory scheme to retain their rights, or can they rely on the analysis in Sunbeam and Tempnology as a complete alternative?
  • How will purchasers of trademarks and other assets react to the potential continued use of trademarks by licensees under rejected trademark licenses?

Conclusion. The BAP’s Tempnology decision marks the first time an appellate court other than the Seventh Circuit has applied the Sunbeam analysis to a trademark license.

  • It remains to be seen if other courts will start to follow suit or, alternatively, if the Lubrizol decision’s approach to the consequences of rejection will continue to hold sway.
  • If many courts followed the Sunbeam/Tempnology approach and rejected Lubrizol, the omission of trademarks from Section 365(n) protection could matter less than in the past. In addition, the license agreement’s provisions governing the licensee’s rights upon the licensor’s breach could become much more significant.

Given the broad implications of the Lubrizol/Sunbeam split on rejection of executory contracts, and especially on trademark licenses, be sure to stay tuned.

 

Image Courtesy of Flickr by discutant

Business Bankruptcy Issues Recent Developments

Official Bankruptcy Forms Revised To Reflect April 1, 2016 Dollar Amount Adjustments Now In Effect

As discussed in an earlier post called “Going Up: Bankruptcy Code Dollar Amounts Will Increase On April 1, 2016,” various dollar amounts in the Bankruptcy Code and related statutory provisions were increased for cases filed on or after today, April 1, 2016. This information sheet has a list of all the dollar amount changes now in effect.

The official bankruptcy forms have also been revised to reflect these new dollar amounts.

Remember, the increased dollar amounts, now reflected on these forms, apply only to cases filed on or after April 1, 2016.

Business Bankruptcy Issues Recent Developments

Going Up: Bankruptcy Code Dollar Amounts Will Increase On April 1, 2016

An official notice from the Judicial Conference of the United States was just published announcing that certain dollar amounts in the Bankruptcy Code will be increased ever so slightly — only about 3% this time — for new cases filed on or after April 1, 2016. Follow this link for the Federal Register page with a chart listing all of the updated dollar amounts.  Among the most meaningful increases for Chapter 11 and other business bankruptcy cases:

  • The employee compensation and employee benefit plan contribution priorities under Sections 507(a)(4) and 507(a)(5) both increase to $12,850 from $12,475;
  • The consumer deposit priority under Section 507(a)(7) rises to $2,850 from $2,775;
  • The total amount of claims required to file an involuntary petition rises to $15,775 from $15,325;
  • The dollar amount in the bankruptcy venue provision, 28 U.S.C. Section 1409(b), which requires that actions to recover for non-consumer, non-insider debt be brought against defendants in the district in which they reside, has increased to $12,850 from $12,475;
  • The minimum amount required to bring a preference claim against a defendant in a non-consumer debtor case, specified in Section 547(c)(9), rises to $6,425 from $6,225; and
  • The total debt amount in the definition of small business debtor in Section 101(51D) will rise to $2,566,050.

Other adjustments will affect consumers more than business debtors. For example, the debt limit for an individual to qualify for a Chapter 13 bankruptcy case will rise to $1,184,200 of secured debt, and certain exemption amounts will also increase.

Although the changes aren’t substantial, be sure to keep them in mind when assessing cases filed after April 1st.

Business Bankruptcy Issues Recent Developments

A Reminder Of The Limits Of Section 365(n)’s Licensee Protection

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A decision last month by the U.S. Bankruptcy Court for the District of New Hampshire serves as a good reminder that, although helpful, Bankruptcy Code Section 365(n)’s protection for intellectual property licensees definitely has its limits. That’s especially true for a commercial agreement whose central purpose is something other than as a technology license. Since we don’t get many Section 365(n) cases, let’s examine this one more closely.

Distribution And License Rights. In In re Tempnology, LLC (use link to access decision), the Debtor had entered into a Co-Marketing and Distribution Agreement (“Agreement”) with Mission Product Holdings, Inc. (“Mission”) for the sale and distribution of certain cooling material products developed by the Debtor. The Agreement granted Mission “exclusive distribution rights” in the United States and an opportunity to obtain similar rights in other countries. The Debtor agreed not to “license or sell” the products involved to others during the term of the Agreement. In another section of the Agreement the Debtor agreed not to take actions that would “directly or indirectly frustrate its exclusivity obligations” and agreed to enforce the Debtor’s “intellectual property rights and contractual rights against third parties.”

Another section of the Agreement addressed intellectual property. “Intellectual Property Rights” were defined to include, among others, the Debtor’s copyrights, patentable and unpatentable inventions, discoveries, designs, technology, trademarks, and trade secrets.” In addition, the Debtor granted Mission the following “Non-Exclusive License”:

Excluding those elements of the CC Property consisting of Marks, Domain Names, [the Debtor] hereby grants to [Mission] and its agents and contractors a non-exclusive, irrevocable, royalty-free, fully paid-up, perpetual, worldwide, fully-transferable license, with the right to sublicense (through multiple tiers), use, reproduce, modify, and create derivative work based on and otherwise freely exploit the CC Property in any manner for the benefit of [Mission], its licensees and other third parties.

The “CC Property” covered all products developed or provided by the Debtor and all IP rights with respect to those products. The Debtor also granted Mission “a non-exclusive, non-transferable, limited license . . . to use its Coolcore trademark and logo (as well as any other Marks licensed hereunder) for the limited purpose of performing its obligations hereunder” during the Agreement’s term. If the Agreement were terminated, it would trigger a two-year wind down period during which Mission would retain the right to purchase, distribute, and sell the relevant products, including use of the trademark rights.

Feeling Rejected. On September 1, 2015, the Debtor filed a Chapter 11 bankruptcy case and the next day moved to reject the Agreement. The court approved the rejection subject to Mission’s election to retain its rights under Section 365(n). With a sale also taking place, the Debtor then filed a second motion seeking a determination that Mission’s Section 365(n) rights were limited only to the grant of the Non-Exclusive License and not the exclusive distribution rights or the trademark license. Mission argued that Section 365(n) also extended to its exclusive distribution rights because Section 365(n)(1)(B) permits a licensee to enforce “any exclusivity provision of such contract.” Citing to the In re Crumbs Bake Shop case (follow link for full discussion of that case), Mission also argued that under Section 365(n) and the court’s equitable authority, it should be allowed to use the Debtor’s trademarks during the remainder of the wind down period expiring in July 2016.

The Court Rules Mission’s Section 365(n) Rights Are Limited. In issuing its decision, the court ruled in favor of the Debtor and did not accept either of Mission’s arguments.

  • First, the court concluded that the exclusivity and other protections of Section 365(n) extend only to the intellectual property rights in the Agreement. The court held that the exclusive distribution rights granted to Mission were not a right to intellectual property, even if the products were patented. Instead, they were unrelated to the Non-Exclusive License, which gave Mission the right, directly or through sublicensees,to exploit the underlying intellectual property free of distribution of the Debtor’s products. Although the Non-Exclusive License was protected under Section 365(n), the distribution rights were not. As a result, the court held that the exclusive distribution rights did not survive rejection of the Agreement.
  • Second, with respect to the trademark license, the court declined to follow the In re Crumbs Bake Shop case and instead held that Bankruptcy Code Section 101(35A)’s definition of “intellectual property” does not include trademarks. The court ruled that Section 365(n) therefore does not protect Mission’s trademark license post-rejection.

A Few Observations. The In re Tempnology, LLC decision is interesting for what it does and does not do.

  • The court’s holding that Section 365(n) extends only to non-trademark IP license rights, and not to exclusive rights to distribute products, serves as a good reminder that Section 365(n) protection is limited principally to the continued right to use intellectual property.
  • The court’s rejection of the In re Crumbs Bake Shop case applying Section 365(n) to trademarks is not a surprise. The overwhelming majority of cases likewise hold that the absence of trademarks in Section 101(35A)’s definition of “intellectual property” means no Section 365(n) protection for trademarks.
  • The Tempnology court applied the seminal 1985 decision that led to the adoption of Section 365(n), Lubrizol Enterprises, Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir. 1985), to hold rejection of the Agreement meant that Mission lost both the exclusive distribution rights and any continued rights to the trademark license.
  • However, given Circuit level decisions over the last few years involving trademarks and bankruptcy, it’s interesting that the Tempnology court did not mention in particular the Seventh Circuit’s 2012 decision in Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, 686 F.3d 382 (7th Cir. 2012). In Sunbeam, the Seventh Circuit expressly rejected the Lubrizol decision and its analysis of the effects of rejection (follow the link for a full analysis of the Sunbeam decision). The Sunbeam court permitted a non-debtor trademark licensee to continue using licensed trademarks after the underlying trademark license had been rejected, holding that rejection is a breach by the debtor and does not terminate rights of the non-breaching party.
  • Perhaps the Tempnology court had no interest in following Sunbeam over Lubrizol and perhaps Mission chose not to advance Sunbeam’s analysis for other reasons. In any event, if the Tempnology court had followed Sunbeam’s analysis of the impact of rejection (and, for our purposes, if courts in the future decide to follow Sunbeam), the result might have been different.
  • On another note, in this case the core IP rights apparently involved patented products, not copyrighted works. When the products at issue are copyrighted works, however, the licensee might be able to argue that exclusive distribution rights are part of the licensed intellectual property rights. The Copyright Act, specifically 17 U.S.C. Section 106(3), includes among the exclusive rights of the copyright owner (subject to being licensed) the right to “distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.” It’s not a certainty, but a licensee granted the exclusive right to distribute copyrighted works might be able to argue that its exclusive distribution rights are part of IP (copyright) rights protected under Section 365(n).

Conclusion. The Tempnology decision underscores the limits of Section 365(n), particularly in commercial agreements with essentially only a back-up IP license. The decision has been appealed so it’s possible we may get an opinion in the months ahead from an appellate court. With Section 365(n) decisions about as rare as hen’s teeth, be sure to stayed tuned.

 

Image Courtesy of Flickr by Alexander Dulaunoy

Business Bankruptcy Issues Recent Developments

Major Overhaul Of Federal Bankruptcy Forms, Plus An Accompanying Rule Amendment, To Take Effect December 1, 2015

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Almost every year, changes are made to the set of rules that govern how bankruptcy cases are managed — the Federal Rules of Bankruptcy Procedure. The changes address issues identified by an Advisory Committee made up of federal judges, bankruptcy attorneys, and others. Often there are revisions to the official bankruptcy forms as well.

One Little Rule Amendment? This year’s amendments impact only one rule, Federal Rule of Bankruptcy Procedure 1007. On the surface, the change is only a small revision to a reference to one of the official bankruptcy schedules. A link to a copy of the amendment, including the transmittal correspondence and a clean and redline version, can be found using the link in this sentence (and if you keep reading you will get the amendments to the Federal Rules of Civil Procedure as a bonus).

Big Changes Are Coming To The Bankruptcy Forms. Don’t let the minor rule amendment fool you. As one presidential candidate these days might put it, the changes coming to the official bankruptcy forms are “huge.”

  • As part of a modernizing of the official forms, virtually every bankruptcy form is being substantially revised.
  • Many forms, including the bankruptcy petition, list of 20 largest creditors, bankruptcy schedules, and statement of financial affairs, will now have customized versions for cases involving individual and non-individual debtors. The non-individual voluntary petition form pictured at the beginning of this post gives you an idea of how different the new forms look.
  • Going forward, business bankruptcy cases filed by corporations, LLCs, and partnerships will use a set of forms designed specifically for businesses instead of having to respond to questions meant for individuals.
  • The numbering system for the official bankruptcy forms is also changing. For example, forms bearing numbers in the 100 sequence will be reserved for individual debtors while those in the 200 sequence will apply to non-individual and business debtors.

Read All About It: Access The Revised Bankruptcy Forms. The U.S. Courts system has made the revised bankruptcy forms available now so you can get ready for the changes.

Get Ready. These major changes go into effect December 1st so bankruptcy attorneys and others should take the time now to review the new forms and get ready to use them.