Contributed by Dana Hall
Although the proposed amendments to Bankruptcy Rule 2019 have no doubt won the 2011 amendments popularity contest (at least in terms of amount of coverage and commentary although perhaps not for public support) and last week, we discussed the proposed amendments to Bankruptcy Rule 2019, given the Supreme Court’s recent approval of a total of four other proposed amendments and two new rules, we thought it would also be useful to provide our readers with a brief summary of these more subtle amendments coming down the pipeline. Now that the Supreme Court has approved the proposed amendments and new rules, if Congress does not enact legislation to reject, modify, or defer the rules, the proposed rule changes will take effect as a matter of law on December 1, 2011.
Welcome the Freshmen
In addition to the five proposed amendments discussed herein, this year’s batch of changes also includes two new rules. Bankruptcy Rule 1004.2was originally published for comment in August of 2008. Due to the substantive nature of several received comments, however, the Advisory Committee determined to revise the proposed rule and republish it. This new rule governing the filing of a chapter 15 petition for recognition of a foreign proceeding aims to assist parties and bankruptcy courts in determining whether the debtor’s foreign proceeding is a “main” or “nonmain” proceeding. The proposed rule requires the foreign debtor to state, in the petition, the country in which the debtor has its center of main interests (“COMI”) and to identify each country in which a foreign proceeding regarding the debtor is pending. Additionally, the rule permits interested parties to challenge the debtor’s COMI designation by filing a motion at least seven days prior to the hearing on the petition for recognition.
The second freshman set to go effective on December 1, 2011 is Rule 3002.1. Rule 3002.1 deals with the implementation of section 1322(b)(5) of the Bankruptcy Code. Section 1322(b)(5) permits a chapter 13 debtor to cure any prepetition defaults and continue payments on a home mortgage throughout the chapter 13 case. This new rule requires the holder of a claim secured by the debtor’s principal residence to give notice of any change to the debtor’s postpetition mortgage payment amount to the debtor, debtor’s counsel, and the trustee at least 21 days before a payment in the new amount is due. The rule also provides certain procedures for giving such notice and provides a detailed procedure for determining, at the end of the case, whether the debtor has cured the prepetition default and whether the debtor is current on all payments in accordance with section 1322(b)(5).
The Old Order Changeth, Yielding Place to New
Under existing Rule 2003, the meeting of creditors or unsecured equity security holders pursuant to section 341 of the Bankruptcy Code may be adjourned by announcing the adjourned date and time at the meeting without further written notice. The proposed amendment would require the presiding official to “promptly file” a statement specifying the date and time to which the meeting is adjourned. While Debtor’s counsel have often filed such notices as a matter of course, this new rule would mandate such a practice.
The proposed amendment to Rule 3001 requires a claimant to provide a greater degree of detail in his or her proof of claim. Specifically, for any proof of claim premised on a writing, the proposed amendment would require the claimant to provide a copy of such writing with the proof of claim or, if such writing could not be obtained, a statement describing the reason why it could not be obtained. Surprisingly, and contrary to what many practitioners may have previously believed, this does actually present a change to the current Rules. The current Rules require that any proof of claim comply substantially with the official form and the official form, in turn, requires a claimant to provide supporting documentation. The supporting documentation requirement, however, was not previously included in Bankruptcy Rule 3001 itself. In addition to the supporting documentation requirement, the proposed amendment also imposes additional requirements on a claimant in an individual debtor case and sets forth the consequences for failure to comply.
Under existing Rule 4004, in a case under chapter 7 or chapter 13, a complaint objecting to discharge must be filed no later than 60 days after the first day of the section 341 creditors’ meeting. To extend the objection period, a party in interest must file a motion to extend such period prior to the expiration thereof. The proposed amendment to Rule 4004 seeks to permit a party, under limited circumstances, to extend the time to object. Such amendment provides that a motion to extend the objection period may be filed after the expiration of the prescribed period, but before discharge has been granted, only if the objection is based on facts that, if learned after discharge, would provide a basis for revocation under section 727 of the Bankruptcy Code. The proposed amendment also requires that the movant have had no knowledge of such facts in time to permit a timely objection.
The pending amendment to Rule 6003 serves to clarify that the existing 21-day waiting period imposed on the entry of certain orders at the outset of a case (e.g., an order approving employment pursuant to Rule 2014 and sections 327, 1103, and 1114 of the Bankruptcy Code or a motion to use, sell, lease, or incur an obligation on property of the estate pursuant to section 363 of the Bankruptcy Code) does not prohibit nunc pro tunc relief (an order specifying an effective date that is earlier than the date of the order’s issuance). The proposed amendment would do so by changing the language “shall not…grant relief regarding the following” to “shall not…issue an order granting the following….”
While these changes to the Bankruptcy Rules may not be the most titillating subject, it is nonetheless prudent for any practitioner to stay abreast of such changes in the law and to be aware of the process by which the Rules that guide their practice are formed. Good luck to these new candidates as they move onward toward Congressional approval!
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