Dallas Bar Association

New Bankruptcy Rules

by Gary A. Armstrong

Effective December 1, 2011, new amendments to the Rules of Bankruptcy Procedure will affect the claims process in consumer bankruptcy cases, affect Rule 2019 disclosure requirements in Chapter 11 and 9 cases, and make other miscellaneous changes.

For claimants in consumer cases, Rule 3001 now prescribes in greater detail the supporting information that must accompany proofs of claim. Claimants must itemize their claim between principal, interest and other charges. Secured claimants must state the amount necessary to cure any default. Mortgage claimants also must provide an escrow account statement effective as of the petition date. Failure to provide the required information can result in exclusion of the creditor’s omitted information at trial, or other appropriate relief, including reasonable expenses and attorney’s fees caused by the failure.

Consumer debtors often file Chapter 13 cases to save their home from foreclosure. Chapter 13 allows debtors to propose a plan to catch up on their home mortgage by the end of the Chapter 13 case. Sometimes, additional mortgage collection fees and charges accrue and do not get paid during the bankruptcy case, thus frustrating the debtor’s attempt to cure the mortgage default.

New Rule 3002.1 attempts to address this problem by requiring mortgage creditors to file a supplemental proof of claim within 180 days after a fee, expense, or charge is incurred. Thereafter, the Court may determine whether the supplemental claim should be paid through the plan. Finally, the new Rule provides for an order determining whether the debtor has cured the default and paid all required post-petition amounts under the mortgage loan.

For Chapter 11 lawyers, the most significant development is the reworking of Rule 2019, which addresses disclosure requirements for certain unofficial groups of creditors seeking to influence Chapter 11 and Chapter 9 cases. The amended Rule requires disclosure of certain financial information by all committees or groups that consist of, or represent, more than one creditor or equity security holder. The Rule also deletes the requirement to disclose  the amount paid for a claim, unless required by the court. The Rule also clarifies that the Court may order any relief appropriate for the Rule’s violation.

Of general interest to all practitioners, and especially trustees, is the amendment to Rule 2003(e). The amended rule provides that if a meeting of creditors or equity security holders is adjourned, the presiding official must promptly file a statement specifying the new time at which the meeting is adjourned. Previously, no further notice of the adjourned meeting was required.

The remaining rules changes make certain technical amendments.

New Rule 1004.2 requires that petitions for recognition of a foreign proceeding under Chapter 15 of the Bankruptcy Code designate the country where the debtor has its “center of main interests” and the country where the foreign proceeding is pending. The rule also sets forth a procedure and time limit for challenging the designation.

Rule 4004 is amended to allow a party in interest to file a motion to extend the time to object to discharge, even if the deadline to file a motion to extend has previously expired. This Rule applies in the limited circumstance where the discharge order has not yet been entered, the movant alleges facts that would provide a basis for revocation of the discharge under section 727(d) of the Bankruptcy Code, and the movant did not have knowledge of those facts in time to permit an objection prior to expiration of the deadline to file such motions.

Bankruptcy Rule 6003, as amended, clarifies that the 21-day waiting period before a court can enter certain orders at the beginning of a case, including an order approving employment of counsel, does not prevent the court from specifying an effective date for the order that is earlier than the date of its issuance.

In addition to the new rules, conforming changes to certain forms are also proposed. A copy of the new rules can be obtained from the Supreme Court’s website at: www.supremecourt.gov/orders/courtorders/frbk11.pdf.

Gary A. Armstrong is a DBA member and is a shareholder with Armstrong Kellett Bartholow P.C., a consumer credit and bankruptcy boutique. He can be reached at gary@akbpc.com.

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