As you may know by now, many of the Official Forms for use in Bankruptcy Courts were replaced with revised, reformatted and renumbered forms that went into effect on December 1, 2015. The changes were made as part of a forms modernization effort that began in 2008 to improve the official bankruptcy forms and the interface between the forms and the courts’ case opening and electronic case management technology. According to Professor Elizabeth Gibson of the University of North Carolina School of Law, the process took seven years due to its scope, and involved bankruptcy and district court judges, bankruptcy clerks, a bankruptcy administrator and the United States Trustee’s office. The Bankruptcy Rules Committee even hired a professional forms consultant to assist in the project. Practitioners, trustees and software vendors all weighed in during the design phase, and comments were solicited over a three-year period. Finally, the new forms were tested before the roll out at the end of last year.
Among other things, the 2015 case opening forms – including the bankruptcy petition, list of 20 largest creditors, bankruptcy schedules, and the statement of financial affairs – now have customized versions for individual debtors, including married couples (the “100” series) and non-individual debtors, e.g., corporations, limited liability companies, and partnerships (the “200” series). The new forms are meant to be easier for debtors to understand and complete by using conversational language and checkboxes which guide the user, along with bolding and underlining to draw attention to areas of concern which may have been overlooked on the old forms. While this may make it easier for a person to file his or her own petition for relief under the Bankruptcy Code, the new forms actually include a general warning to potential pro se debtors that stresses the importance and gravity of a bankruptcy filing and states in no uncertain terms that the court expects a pro se debtor to follow the rules as if he or she had hired an attorney.
Other noteworthy changes to the forms include changes to Schedule C, Property Claimed as Exempt, which should clarify that debtors should check only one box per exemption, and a new schedule A/B, which combines both real and personal property. In addition, several categories of personal property have been added. Schedules for unsecured priority and non-priority claims have also been combined. The debtor’s certification regarding credit counseling is now included in the body of the voluntary petition for individuals, replacing the old Exhibit “D” to the voluntary petition. Furthermore, a separate declaration under penalty of perjury will be required with the filing of schedules and amended schedules.
For business debtors, the voluntary petition makes clear that assumed names and “doing business as” names used within the last eight years must be included. This form also recognizes that almost every company has a website and asks for the debtor’s URL. The question of whether the debtor owns or is in possession of any “property that poses or is alleged to pose a threat of imminent and identifiable harm to public health or safety” now asks for the identification of the hazard and asks whether the debtor owns or possesses property that “needs to be physically secured or protected from the weather” or includes perishable goods or assets. This could be helpful in protecting creditors’ collateral. And as times have changed, the top range for estimated assets and liabilities is now “more than $50 billion” versus the prior “more than $1 billion”.
In addition to new forms for debtors, there is also a cache of new forms for creditors wishing to file a claim. Of course, in some chapter 7 cases filed as “no asset”, a proof of claim should not be filed without first receiving notice from the Court that a bar date by which to file claims has been set. The new Proof of Claim Form (Form 410) used to assert a creditor’s claim in a bankruptcy case is particularly worth noting. Although Form 410 requires substantially the same information as its predecessor, Form 10, it has been completely reformatted. Significantly, there is now a requirement to attach a separate schedule to be filed with the Proof of Claim for creditors asserting a claim against an individual that is secured by the debtor’s primary residence. Such Proof of Claim must include a Mortgage Proof of Claim Attachment (Form 410A). This new form substantially changes reporting requirements for mortgage lenders and servicers collecting claims (including loans made for a business purpose) secured by a primary residence. While the prior form required an itemized report of missed payments as well as accrued and past due obligations, the new Form 410A requires a complete loan history – either to be filled in on the form itself in the spreadsheet provided or attached thereto. Notably, this payment history must run from the first date of the current default and must include a description of all payments made and how such payments were applied. There are also two supplemental forms for any mortgage payment changes (Supplement 1) or seeking to add any post-petition fees, expenses or charges (Supplement 2). It is important to include the Form 410A when circumstances dictate; otherwise, failing to file it when required may lead a bankruptcy court to bar the creditor from presenting this information later in a bankruptcy proceeding.
One other noteworthy change to the Proof of Claim Form 410 is that it explicitly provides an option for an attorney to sign on behalf of the creditor asserting the claim. The previous incarnation, Form 10, included a selection for the creditor’s “authorized agent” but did not include a reference to the creditor’s “attorney” outright. In fact, Form 10 was amended in 2011 to include the various options indicating who was signing the form, whereas previously a proof of claim form only included a signature block for the creditor or other person authorized to file the claim.
As tempting as it may be to have counsel sign a proof of claim, a bankruptcy case out of the Southern District of Texas, which arose following the Form 10 amendment to the signature block, warns that when a proof of claim, which serves as prima facie evidence as to a claim’s validity, is signed by a creditor’s attorney, the court may find that the attorney has become a fact witness, thereby waiving work-product and attorney-client privileges as to the facts alleged in the proof of claim. The bankruptcy court in In re Rodriguez, 2013 WL 2450925 (Bankr. S.D. Tex. 2013) (“Rodriguez”), likened signing the proof of claim to an affidavit supporting the merits of a case, thereby transforming the signing attorney into a fact witness. The court allowed the attorney to be deposed and questioned as to the basis for his factual assertions, reasoning that by signing the claim form, he had attested to having personal knowledge of the facts alleged in the claim. And as a result, questions which would normally be an improper intrusion into areas protected by privilege were allowed. Of course, the client, not the attorney, holds the privilege, and therefore the privilege cannot be waived by the attorney’s conduct without client consent. The Rodriguez court held, however, that the creditor’s express permission for its attorney to sign the proofs of claim at issue in the case constituted a waiver by the filing creditor.
Rodriguez underscores the need for creditors and counsel to be vigilant in preparing proofs of claim well before the bar date to avoid a last-minute scramble that could lead to counsel, rather than the creditor, having to sign the claim form. While Rodriguez is not binding in the jurisdictions covered by Burr & Forman LLP’s footprint, and there are currently no decisions citing to this case, it is possible that other courts will choose to follow Rodriguez, and the consequences of a waiver of the attorneyclient privilege could be severe. For example, a waiver may allow for disclosure of facts that compromise the allowance or amount of the claim, create exposure for the attorney signing the claim form, and could lead to increased litigation costs if disputes over the scope of the waiver arise. Debtor’s counsel may use the threat of conducting a deposition for strategic advantage in order to strike a more favorable resolution of a disputed claim. Thus, it becomes even more important in light of Rodriguez to delegate the task of signing the new Proof of Claim Form 410 to a business person who could act as a witness in any proceeding over a contested claim.
Lastly, it is important to keep in mind that the new forms, including Proof of Claim Form 410, must now be used. Although a bankruptcy court clerk should not refuse to accept documents for filing solely because they are not in the proper form as required by national or local rules, according to a 1993 Committee Note, the enforcement of the rules is within a judge’s discretion, and there may be consequences if deficiencies are not corrected in a timely manner.