Substantial changes to the Federal Rules of Bankruptcy Procedure (“FRBP”), which become effective as of December 1, 2017, could greatly affect the rights of various creditors.  One of the most significant changes is the adoption of an official form Chapter 13 Plan.  This is the first time Congress has implemented a national form Chapter 13 Plan.  The form Chapter 13 Plan will allow creditors to more easily identify how their claims are going to be treated and provide more uniformity amongst the various jurisdictions.  Districts have the ability to opt out of using the form Chapter 13 Plan as long as the district’s “local plan” complies with certain formality and disclosure requirements as set forth in the FRBP.  In another change from the previous rule, debtors may now utilize cram down and lien avoidance through the Chapter 13 Plan rather than having to file separate motions or claim objections.  In addition, all objections to the Chapter 13 Plan must be filed at least seven days before the confirmation hearing.

Another rule change significantly reduces the time to file proofs of claim.  Under the prior rule, proofs of claim were required to be filed within 90 days after the first date set for the 341 meeting of creditors.  Now, pursuant to FRBP 3002, proofs of claim must be filed within 70 days from the bankruptcy filing date or date of conversion to a Chapter 13.  The FRBP also clarifies that a secured creditor’s lien is not void merely because a creditor fails to timely file a proof of claim.  However, even if a secured proof of claim is filed, a secured creditor may be stuck with the amount of the secured claim asserted in a debtor’s plan if a plan objection is not timely filed.  A creditor may file a motion for an extension of time to file a proof of claim if: (1) the debtor failed to timely file the list of creditors’ names and addresses; or (2) notice of the bankruptcy was mailed to the wrong address.  This motion may be filed before or after the deadline to file proofs of claim.

Under the new rules, any claim objection and notice of hearing shall now be served on the claimant by first-class mail to the person designated on the claimant’s proof of claim to receive notices at the address indicated AND if the claimant is an “insured depository institution”, then the claimant shall also be served by certified mail to an officer of the institution unless it has appeared by an attorney.  As a result, banks will now receive a notice of claim objection to both an officer as well as the person designated for service in the proof of claim.

When the new rules go into effect, it is critical for a creditor to have a process in place to promptly act upon receiving a bankruptcy notice and protect its rights throughout the bankruptcy process.