Proposed revisions to the Federal Rules of Bankruptcy Procedure and Official Forms are now published for comment. The proposed revisions affect Rules 2002, 3002, 3007, 3012, 4003, 5009, 7001 and 9009. Most of the changes affect practice in chapter 13 cases.
The Bankruptcy Rules Committee has been engaged in a multi-year review of the Bankruptcy Rules, with careful focus on consumer practice. Part of the proposed Rule changes includes the addition of an Official Form for the Chapter 13 Plan. This effort is a critical step toward ultimate data-sharing and enabling efforts in chapter 13 cases. The current draft of the Official Form for the Chapter 13 Plan is included in the items published for review and comment.
The comment period expires on Feb. 17, 2015, after which the Advisory Committee will review all comments and consider further revisions or other action. Subsequently, the Standing Rules Committee will meet to consider approval of the proposed Rule amendments. After the Standing Committee has approved the Rule amendments, the proposed changes will be sent to the Supreme Court for adoption. At this stage, the proposed Rules will be published subject to adoption effective in December of that year. For the proposed Rules published currently, the effective date is therefore Dec. 1, 2016.
The proposed Rule amendments and the draft Official Form for the Chapter 13 Plan had been published for comment under a similar schedule in August 2013. The proposed Rules and form engendered a high volume of comments. The current versions of the Rules and the plan reflect adjustments based on the public comments. Some commenters protested that the Official Form would lead to unwanted changes in chapter 13 practice or burdens on chapter 13 practitioners and professionals from having to use a form that differs from a local form or a practitioner’s custom form. Other commenters requested the addition of particular phrases and specific description in the text. Finally, commenters feared that the use of an official form would dictate some legal stances, even if they are inappropriate.
Ultimately, the Advisory Committee decided that the form and rules should be revised but not eliminated. As revised, the form adds certain text as requested. Additionally, the Official Form for the Chapter 13 Plan contains a disclaimer that the Official Form does not supersede the law; merely the presence of an option on the form does not determine that it is permissible in every case. Along these lines, the revised form eliminates any directive regarding the order of disbursements, other than the statutory trustee commission. The Official Form accordingly allows flexibility to accommodate varying plan treatments permitted by the Code, as well local practice regarding disbursements, especially regarding attorney fees and ongoing mortgage payments. In the end, the practitioner can use the Official Form to provide for any chapter 13 treatment permissible under the Bankruptcy Code, case law and the Rules.
Despite the concern over the burden of adjusting to change, the Official Form for the Chapter 13 Plan is critical to address the profound alternations to consumer practice dictated after recent U.S. Supreme Court decisions, such as United Student Aid Funds Inc. v. Espinosa, 130 S. Ct. 1367 (2010). Espinosa held that an order confirming a chapter 13 plan is entitled to preclusive effect even as to non-standard provisions in the plan that are otherwise contrary to the law or rules. This outcome highlights the need to scrutinize non-standard plan provisions. As a result, the benefit of having non-standard provisions in a single uniform location in an official form outweighs the temporary inconvenience caused by adjusting to the use of a new form.
Additionally, the proposed Rule and Official Form revisions are necessary in part to accommodate current technological needs and advancements. The implementation of an official form plan is essential for employing data-sharing in chapter 13 cases.
Finally, the proposed revisions eliminate inconsistencies between the claims-allowance process and the chapter 13 plan confirmation process to reconcile these now divergent processes. The changes to the Rules and official forms are significant.
The comment period expires Feb. 17, 2015. Those interested in reviewing the current draft or commenting on the Rules and Official Forms should visit www.uscourts.gov/RulesAndPolicies/rules/proposed-amendments.aspx.