The New Year brings with it new changes to the bankruptcy code. These recent rule changes apply to any case filed after December 1, 2017, and may apply retroactively to pending proceedings in those instances where it would be “just and practicable.” Although many of the changes deal with consumer bankruptcies, key changes will affect secured creditors.
Changes concerning proof of claim deadlines
In voluntary Chapter 7, 12 or 13 cases, a proof of claim must now be filed no later than 70 days after the bankruptcy filing date. In involuntary chapter 7 cases, a proof of claim must be filed no later than 90 days after the order for relief. Rule 3002(c).
For debts secured by a security interest, a proof of claim (together with certain supplementary attachments required under Rule 3001(c)(2)(C)) is considered timely if the claim is filed not later than 70 days after the order for relief and the supplementary attachments are filed no later than 50 days thereafter. Rule 3002(c)(7).
The amendments do not change Chapter 11 deadlines for filing proofs of claim pursuant to Rule 3003(c).
What does this practically mean? While they offer more predictability, the new rules are significantly more time-restrictive. The prior rule did not require the filing of a proof of claim until roughly 135 days after filing (more precisely, 90 days after the 341 meeting of creditors). Accordingly, financial institutions may want to review internal procedures for preparing proofs of claim to maximize efficiency and enable the prompt preparation and filing of a proof of claim.
Changes concerning secured creditors and claims
Secured creditors must now file a proof of claim for the claim to be allowed. Rule 3002(a). Secured creditors were not previously expressly required to do so.
Rule 3015 now provides that the holder of a secured claim is bound to any determination made pursuant to Rule 3012(a) concerning the amount of a secured claim and the amount entitled to priority. See Rule 3015(g); Rule 3012(a). To determine the amount of a secured claim, a request should be made by motion, in a claim objection, or in a Chapter 12 or 13 plan, but a request to determine the amount of a claim entitled to priority may only be made by motion or claim objection. Rule 3012(b).
In Chapter 12 or 13 cases, debtors may now request an order declaring secured claims satisfied and corresponding liens released pursuant to the confirmed plan. Rule 5009(d).
What does this practically mean? Creditors may want to undertake a thorough examination of the debtor’s plan to determine the propriety of an objection. Rule 3015(g)’s provision that the holder of a secured claim is bound to any determination made in the plan under Rule 3012 applies even in the face of an objection to the claim and even if the holder files, or the debtor schedules, a contrary proof of claim.
Changes concerning claim objections
Objections and notices must be served by first-class mail on the most recently designated person on the creditor’s proof of claim a minimum of thirty days before a scheduled hearing or the deadline for the claimant to request a hearing. Rule 3007(a).
Claim objection hearings are no longer required, a practice already quite common in many courts. Rule 3007(a)(1).
What does this practically mean? Creditors decide the person/place to whom a debtor mails a claim objection.
Nino Przulj is an associate who assists litigation clients in state and federal courts in business litigation and financial restructuring matters.