Posts made in November, 2013

Changes in the works for Chapter 13 bankruptcy filings

Posted by on Nov 19, 2013 in Uncategorized | Comments Off on Changes in the works for Chapter 13 bankruptcy filings

Changes in the works for Chapter 13 bankruptcy filings

SHERRY KARABIN Legal News Reporter Published: November 15, 2013 As states continue to adopt the Common Core State Standards in an effort to provide consistent education guidelines for students, parents and educators, bankruptcy attorneys and judges are being asked to consider a similar idea for Chapter 13 filings. For the past two years, the Judicial Conference Advisory Committees on Bankruptcy and Civil Rules have been discussing the creation of a national plan form for Chapter 13 cases in an effort to bring uniformity to the practice and simplify the review process for debtors, courts, trustees and creditors. The idea is among the top Proposed Amendments to the Federal Rules of Bankruptcy and Civil Procedure unveiled for public comment on Aug. 15. Brennan, Manna & Diamond Bankruptcy Department Chair Michael Steel explained the proposal is a direct result of the U.S. Supreme Court’s decision in United Student Aid Funds Inc. v. Espinosa. “The Supreme Court indicated that even though a confirmed Chapter 13 plan may be procedurally improper it would still have a ‘preclusive effect’ if challenged later on by someone who did not object to the submitted plan,” said Steel. “The end result was a directive to bankruptcy judges to independently review Chapter 13 plans. The move toward a national standardization of Chapter 13 plans is designed to make it easier on bankruptcy judges, creditors and other interested parties to review the contents of a plan.” As a result, Steel said he expects to see a more “check-the-box” type of approach for Chapter 13 filings, rather than “a creative approach to dealing with debtor problems.” As part of the proposed change to Rule 3012, he said debtors would be able to seek a determination of the amount of a secured claim through the proposed bankruptcy plan, subject to objection at the confirmation hearing, whereas previously this may have been done by motion in some jurisdictions. “Further proposed changes to Rule 4003, would allow a debtor to do lien avoidance through the plan. “I believe the move toward uniformity will result in more disputes between the debtor and creditors earlier in the process since the issues will have to be addressed in the first few months of the case rather than later on.” Steel said this could be a good thing for those who practice in the area since making a determination about the plan’s feasibility and amounts of certain claims earlier will move things along better as opposed to finding out six months into the process that there are significant problems that cause a dismissal or conversion of the case. Secured creditors would also be required to file a claim if the proposal takes effect. “Up to now, the current rules suggest that only unsecured creditors had to file a claim,” said Steel. “The claims deadline is being changed from 90 to 60 days after the petition for bankruptcy is filed. The change will impose additional burdens on creditors to quickly review the petitions.” He said the Chapter 13 process could be more akin to Chapter 11 business bankruptcy filings where discussions are held with secured lenders well in advance of filing because times frames are shorter and more importance is placed on the confirmation document. “I would expect debtors and attorneys to be paying more attention to what they are trying to accomplish in the bankruptcy plan,” Steel said. Current restrictions on Chapter 13 filings generally result in more high-income, high net-worth individuals filing Chapter 11 cases, Steel said, since Chapter 13 restricts how much unsecured debt a person can owe. “While the new changes may create a...

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