Dear constituency list members of the Insolvency Law Committee:
In April 2017, the Supreme Court submitted to Congress proposed revisions to the Federal Rules of Appellate Procedure (“FRAP”), Federal Rules of Bankruptcy Procedure (“FRBP”), Federal Rules of Civil Procedure (“FRCP”), and Federal Rules of Evidence (“FRE”). The proposed revisions will go into effect on December 1, 2017, unless Congress rejects or defers the proposed amendments.
The entire package of materials transmitted to Congress may be accessed here: http://bit.ly/2017-Rules. Some of the proposed revisions are described below.
Bankruptcy Rule 3002(a) – Secured creditors must now file proofs of claims
Current FRBP 3002(a) generally provides that unsecured creditors and equity security holders must file proofs of claims.
Under revised FRBP 3002(a), secured creditors must also file proofs of claims. However, the revised rule also expressly states that “[a] lien that secures a claim against the debtor is not void due only to the failure of an entity to file a proof of claim.”
Bankruptcy Rule 3002(c) – Reduction of the time to file a proof of claim
Current FRBP 3002(c) establishes a general rule that in chapter 7, 12 and 13 cases, a proof of claim is timely if it is filed within 90 days after the first date set for the § 341(a) meeting of creditors.
Under revised FRBP 3002(c), the general rule is that a proof of claim is timely if it is filed within 70 days after the order for relief under that chapter, or the date of the order converting a case to chapter 12 or 13. In an involuntary chapter 7 case, a proof of claim is timely if it is filed within 90 days after the order for relief is entered.
Comment: FRBP 3002(c) does not expressly address the time to file a proof of claim when a case converts to chapter 7 because conversions to chapter 7 are covered by FRBP 1019. However, FRBP 1019 provides that, except in limited circumstances, a new time period for filing proofs of claims commences under FRBP 3002. Thus, in most cases that convert to chapter 7, a new claims bar date will be set for 70 days after the conversion date.
The first five exceptions to the general rule (FRBP 3002(c)(1)-(5)) remain in place. Of particular importance, FRBP 3002(c)(5) still provides that in a case originally classified as a “no-asset” case, and in which the trustee files a notice of assets, the clerk will give 90 days’ notice of the date by which proofs of claims must be filed.
The sixth exception (FRBP 3002(c)(6)) is broadened. That rule currently provides that if notice of the claims bar date has been mailed to a creditor at a foreign address, the court may extend the deadline by up to 60 days if the notice was insufficient to give the creditor a reasonable time to file a proof of claim. Now, the court may also extend the time for any creditor to file a proof of claim if that creditor received insufficient notice of the claims bar date because the debtor failed to timely file the list of creditors’ names and addresses. An extension under revised FRBP 3002(c)(6) may be granted for up to 60 days from the date of the order granting the creditor’s request for an extension, not just from the original filing deadline.
Bankruptcy Rule 3007 – Claim objections need not be set for hearing, and must be sent to the person and address listed on the proof of claim
Current FRBP 3007(a) provides that an objection to a claim, and notice of the hearing, must be mailed or otherwise delivered at least 30 days before the hearing. The rule does not specify the address to which the notice and objection must be sent.
Revised FRBP 3007(a) clarifies that FRBP 7004’s specific service requirements do not apply to most claim objections, and eliminates the implicit requirement that the court hold a hearing. Now, 30 days’ notice must be given before any scheduled hearing on the objection or any deadline for the claimant to request a hearing. With certain exceptions, the objection and notice must be sent to the person most recently designated on the claimant’s proof of claim as the person to receive notices, at the address so indicated. Special requirements are adopted for objections to claims filed by the United States, officers or agencies of the United States, or insured depository institutions.
Bankruptcy Rules 3012, 3015(g) and 7001(2) – Valuation of secured claims may be sought by motion, claim objection, or through a chapter 12 or 13 plan; determination of amount of claim entitled to priority under § 507 may be sought by motion or claim objection
Current FRBP 3012 provides that the court may determine the value of a secured claim on motion of any party in interest. Revised FRBP 3012(b) provides that such a determination may be sought by motion, in a claim objection, or in a chapter 12 or 13 plan. Revised FRBP 7001(2) confirms that such a determination does not require an adversary proceeding.
If a determination regarding the amount of a secured claim is sought through a chapter 12 or 13 plan, revised FRBP 3012(b) provides that the plan must be served on the claimant in the manner provided by FRBP 7004 for service of a summons and complaint. New FRBP 3015(g) provides that, upon confirmation of the plan, any such determination is binding on the secured creditor, even if the creditor files a contrary proof of claim or the claim was scheduled by the debtor in a different amount. This is the case regardless of whether a claim objection has been filed.
The amendment also expands FRBP 3012 to cover determinations regarding the amount of a claim entitled to priority under § 507. Such a determination may be sought by motion or in a claim objection.
Bankruptcy Rule 4003(d) – Avoidance of liens that impair exemptions may be sought by a motion or through a chapter 12 or 13 plan
Current FRBP 4003(d) provides that a debtor seeking to avoid a lien that impairs his or her exemption must do so by motion.
Revised FRBP 4003(d) also allows a chapter 12 or 13 debtor to seek avoidance of an exemption-impairing lien through a plan. The plan must be served on the affected creditor in the manner provided by FRBP 7004 for service of a summons and complaint.
Bankruptcy Rules 3015(c) and 3015.1 – Establishment of new official form chapter 13 plan, and allowance for Local Form chapter 13 plans
Revised FRBP 3015(c) requires chapter 13 debtors to use the official federal form plan (Official Form 113) unless a local form plan has been adopted in the district in which the case is pending. A “nonstandard” provision inserted by the debtor will be effective only if it is included in a section of the form designated for nonstandard provisions.
New FRBP 3015.1 governs a district’s adoption of an alternative form chapter 13 plan. It allows each district to adopt a single “Local Form” plan after public notice and opportunity for public comment. It also specifies certain provisions that must be included in the Local Form. For example, the Local Form must include an initial paragraph for the debtor to indicate that the plan does, or does not, “(1) contain any nonstandard provision; (2) limit the amount of a secured claim based on a valuation of the collateral for the claim; or (3) avoid a security interest or lien.”
All four districts in California have adopted a Local Form unique to each district:
Northern (NDC 1-1): http://bit.ly/CANB-Plan
Eastern (EDC 3-080): http://bit.ly/CAEB-Plan
Central (F 3015-1.01.CHAPTER13.PLAN): http://bit.ly/CACB-Plan
Southern (CSD 1300): http://bit.ly/CASB-Plan
COMMENT 1: Even after December 1, 2017, be sure to check your court’s local rules, general orders and public notices to determine whether you should use the new Local Form. For example, the Northern District’s General Order 34 provides that its Local Form must be used in cases filed under chapter 13, or converted to chapter 13, on or after December 1. The Eastern District’s General Order 17-03 provides that its Local Form must be used whenever a chapter 13 plan is filed in a case after December 1. The Central District’s Public Notice 17-015 states that its Local Form may be used only in chapter 13 cases commencing on or after December 1, and that the Central District’s current form plan should be used in cases filed before December 1. The Southern District’s General Order 173c does not specify whether its Local Form must be used in all cases or just those filed on or after December 1.
COMMENT 2: The Eastern and Southern Districts’ Local Forms appear to contravene revised FRBP 3012(b) and 4003(d). Section 1.04 of the Eastern District’s Local Form states, “The confirmation of this plan will not limit the amount of a secured claim based on a valuation of the collateral for the claim, nor will it avoid a security interest or lien. This relief requires a separate claim objection, valuation motion, or lien avoidance motion that is successfully prosecuted in connection with the confirmation of this plan.” Similarly, the first page of the Southern District’s Local Form states, “This plan does not provide for avoidance of a lien which impairs an exemption. This must be sought by separate motion.” These provisions effectively preclude chapter 13 debtors from using the Local Forms to seek relief that the federal rules (as revised) expressly allow to be sought through a chapter 13 plan.
COMMENT 3: Along the same lines, the Local Form adopted by the Eastern District appears to neuter new FRBP 3015(g)(1). That new rule provides that, upon confirmation, a determination in the plan regarding the amount of a secured claim is binding on the claimant. Since the Eastern District’s Local Form precludes chapter 13 debtors from valuing secured claims through their plans, new FRBP 3015(g)(1) will have no effect.
Bankruptcy Rules 2002 and 3015(f) – Establishment of deadline to object to chapter 12 and 13 plans, and minimum notice required in chapter 13 cases for (a) the time to object, and (b) the confirmation hearing
Current FRBP 3015(f) provides that objections to confirmation of chapter 12 and 13 plans must be filed before confirmation. Revised FRBP 3015(f) provides that objections must be filed at least 7 days before the hearing date, unless the court orders otherwise.
New FRBP 2002(a)(9) provides that creditors must be given 21 days’ notice by mail of the time to file objections to confirmation of a chapter 13 plan. Revised FRBP 2002(b) provides that creditors must be given 28 days’ notice by mail of the hearing to consider confirmation of the chapter 13 plan.
COMMENT: FRBP 2002(a)(8) remains unchanged. That rule provides that creditors must be given 21 days’ notice by mail of both (a) the time to file objections to a chapter 12 plan, and (b) the confirmation hearing. It is unclear why the drafters did not also revise FRBP 2002(a)(8) to make the notice periods consistent with those now applicable in chapter 13 cases.
Bankruptcy Rule 1015 – “Husband and wife” changed to “spouses”
In light of the Supreme Court’s decision in Obergefell v. Hodges, 135 S. Ct. 2584 (2015), references to petitions and cases filed by “a husband and wife” have been revised to refer to petitions and cases filed by “spouses.”
Appellate Rule 4(a)(4)(B) – No additional fee will be required when filing an amended notice of appeal
If a party files a notice of appeal while a motion for reconsideration (or similar motion) is pending, the notice becomes effective when the order disposing of the motion is entered. FRAP 4(a)(4)(B)(i). If the party also wants to challenge a judgment’s alteration or amendment upon such a motion, the party must file an amended notice of appeal. FRAP 4(a)(4)(B)(ii). The 2009 amendments inadvertently deleted language which provided that no additional fee is required to file the amended notice of appeal. That language is being restored, as new FRAP 4(a)(4)(B)(iii).
COMMENT: FRBP 8002(b)(4) provides that, in bankruptcy appeals, no additional fee is required to file an amended notice of appeal. Therefore, FRBP 8002(b) and FRAP 4(a)(4)(B) will be aligned in this regard.
Evidence Rule 803(16) – The “ancient documents” exception to the hearsay rule will apply only to documents prepared before January 1, 1998
FRE 803 lists exceptions to the hearsay rule. Current FRE 803(16) provides that the admission of “[a] statement in a document that is at least 20 years old and whose authenticity is established” is not barred by the hearsay rule. Revised FRE 803(16) restricts the exception to “[a] statement in a document that was prepared before January 1, 1998, and whose authenticity is established.” The revision addresses the Advisory Committee’s concern that because electronically stored information (“ESI”) can be retained for more than 20 years, a strong likelihood exists that, going forward, the existing “ancient documents” exception would allow for the admission of vast amounts of unreliable ESI.
Evidence Rule 902 – Expansion of self-authenticating documents to certified records generated by an electronic process or system, and certified data copied from an electronic device, storage medium or file
New FRE 902(13) and 902(14) provide that “[a] record generated by an electronic process or system that produces an accurate result” and “[d]ata copied from an electronic device, storage medium, or file” may be authenticated by a written certification of a qualified person, in lieu of that person’s testimony at trial. The certification must comply with FRE 902(11) or (12) (certified records of a regularly conducted activity). The proponent must give the adverse party reasonable written notice of its intent to offer the record or data into evidence, and must make the record / data and the certification available for inspection so that the adverse party has a fair opportunity to challenge them.
COMMENT: These new rules relate only to the authentication of electronic records and data; objections to admissibility on other grounds (e.g., hearsay) are unaffected. The goal is to allow a party to authenticate such records and data ahead of time, and not incur the expense and inconvenience of unnecessarily producing an authenticating witness at trial. Parties can determine in advance of trial whether a challenge to authenticity will be made, and plan accordingly.
These materials were written by John N. Tedford, IV, of Danning, Gill, Diamond & Kollitz, LLP, in Los Angeles, California (firstname.lastname@example.org). Editorial contributions were provided by ILC member Michael W. Davis of Brutzkus Gubner Rozansky Seror Weber LLP in Woodland Hills, California (email@example.com).
Thank you for your continued support of the Committee.
Insolvency Law Committee
Radmila A. Fulton
Law Offices of Radmila A. Fulton
John N. Tedford, IV
Danning, Gill, Diamond & Kollitz, LLP
Marcus O. Colabianchi
Duane Morris LLP
Rebecca J. Winthrop
Norton Rose Fulbright US LLP