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Bankruptcy Chat: Amendments to Federal Rules Now Effective

The U.S. Supreme Court earlier this year adopted changes to the Federal Rules of Bankruptcy Procedure that address objections to petitions for recognition of foreign proceedings, notices of payment changes for claims secured by a debtor’s principal residence, the authority of bankruptcy judges to issue final orders in cases involving Stern claims, and the effect of electronic filing on response deadlines. Amendments to Bankruptcy Rules 1010, 1011, 2002, 3002.1, 7008, 7012, 7016, 9006, 9027, and 9033 became effective on December 1, 2016. A new Rule 1012 governs responses in Chapter 15 cases. The rule was effective on December 1.

Cross-Border Cases

Rule 1012 replaces Rule 1011 and provides that the debtor or a party in interest may contest a petition for recognition in Chapter 15 cross-border cases. Objections and other responses must be presented no later than seven days before the hearing on the petition.

In addition, Rule 2002 establishes notice and hearing requirements after a petition for recognition of a foreign proceeding has been filed by a foreign representative. Prior to December 1, notice and hearing requirements were contained in Rule 1010.

Payment Change Notices

Rule 3002.1 requires a creditor with a security interest in a Chapter 13 debtor’s principal residence to notify the debtor, the debtor’s attorney, and the trustee of post-petition payment changes and charges. As originally adopted in 2011, the rule applied to claims that were “provided for under § 1322(b)(5) of the Code in the debtor’s plan,” and did not seem to apply to claims that were being paid directly by the debtor, claims that had been withdrawn from the bankruptcy case, or when the debtor was not curing pre-petition arrears.

As amended, Rule 3002.1 requires that payment change notices be filed even if a mortgage is being paid outside the plan (as long as the plan provides that payments on the claim will be maintained by the debtor) or for which there are no pre-petition arrears to be cured through the plan. Further, the amended rule clarifies that payment change notices are not required after stay relief is granted.

Subject Matter Jurisdiction

A number of rules were amended regarding adversary proceedings in light of the Supreme Court’s decision in Wellness International Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015) in which the Court held that bankruptcy courts may decide Stern claims-claims for which a bankruptcy court has statutory authority to enter a final judgment but not the constitutional power to do so-submitted to them by consent. The amendments are intended to address the bankruptcy court’s authority to resolve Stern claims at the outset of an adversary proceeding and allow the bankruptcy judge to determine then the appropriate course of action.

Rules 7008, 7012, and 9027 were amended to require each party to an adversary proceeding to state whether the party consents to the bankruptcy court entering a final order or judgment in the case. Rules 7016 and 9033 authorize the bankruptcy court to enter a final order upon consent or, in the court’s discretion, to issue instead proposed findings of fact and conclusions of law.

Electronic Filing and Response Deadlines

Prior to December 1, Rule 9006(f) added three days to a time period to respond if that period was measured after being served and service was accomplished by certain methods, such as by mail or electronic delivery. The rule as amended removes service by electronic means from the modes of service that allow three added days to act after being served.