New Bankruptcy Rules

On December 1, 2017, a series of new Federal and EDKY bankruptcy rules went into effect. Most of these changes are procedural and will not have a direct impact on a clients’ eligibility or decision to file one chapter of bankruptcy over another. However, these changes must be carefully considered and implemented by counsel to ensure clients’ plans are confirmable and successful.

The changes will be applicable to all cases filed on or after December 1, 2017 but shall also be applied to pending cases where appropriate. While vague, the governing rule means that most likely, none of the amended rules regarding deadlines will apply to cases filed prior to December 1, 2017, but the use of new forms and service of process should be implemented into any case immediately.

The new rules that will have the largest impact on greatest number of debtors include:

Rule 3002: The Bar Date

The bar date for non-governmental units, including secured and unsecured creditors, is now reduced to 70 days from the date of the petition. Debtors’ counsel has a duty to ensure that secured proofs of claim are filed in order to protect their secured assets and therefore this much shorter deadline should be monitored closely.

Rule 3007: Objection of Claims

Under the new rules, Debtors’ counsel must follow substantially different guidelines in order to object to a filed claim. The Objection itself must be accompanied by a Notice of Objection to Claim which conforms to Official Form 420B. The objection must be mailed to the person and address listed on the proof of claim.

Rule 3012: Valuation of Claims

Requests for valuation of secured claims may be made by motion, in a claim objection, or in a Chapter 13 plan unless the creditor is a governmental unit. If the creditor is a governmental unit, the request for valuation can only be made by motion following the bar date or claim or through a claim objection. To comply with this Rule, Debtor’s counsel must careful monitor claims and the new, shorter bar date. If any claim is valued in the plan and the creditor fails to file an objection, confirmation will make such valuation binding. Most importantly, Rule 3012 now requires such creditors to be served in such a manner under Rule 7004; this applies to service of the Chapter 13 plan, a Motion for valuation, or a claim objection requesting valuation.

Form 3015-4(b): Adequate Protection

Previously, Adequate Protection payments could be established through the Chapter 13 Plan. Now, a Debtor must file and serve and order for adequate protection with the plan using Local Form 3015-4(b). However, filing an Agreed Order with a creditor after the initial filing can also serve this purpose.

New Local Forms:

There are now established Local Forms (Local Forms 4001-3-1 and 4001-3-2) for a motion and order to obtain credit to purchase a vehicle post-confirmation.

Additionally, avoidance of judicial and non-PMSI liens can now be accomplished through the Chapter 13 plan or by Motion. Local Forms 4003-2(a) and 4003-2(c) are orders that can be recorded with the county clerk to conveniently compel the release of such liens.

The December 1, 2017 changes to the Bankruptcy code, and specifically, Chapter 13 procedures, require debtors’ counsel to careful monitor filed claims and shorter timelines. With the correct routines and procedures put in place in everyday practice, these changes can be implemented easily and prove extremely beneficial to consumer debtors.