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.