August 17, 2022
Comment Period Opens For Proposed Amendments To Federal Bankruptcy Rules
In keeping with its typical annual schedule, the Committee on Rules of Practice and Procedure of the Judicial Conference of the United States has published for public comment a host of amendments to existing Federal Rules of Bankruptcy Procedure and Official Forms. Many of the changes pertain to a years-long restyling project, but two changes merit special attention:
- The Advisory Committee on Bankruptcy Rules proposes a change to Rule 7001 to permit an individual debtor to seek a turn-over of tangible personal property through motions practice instead of the more formal and generally more time-consuming adversary proceedings. The proposed Rule change is in response to the Supreme Court’s holding in City of Chicago v. Fulton, 141 S. Ct. 585 (2021), that a creditor does not violate the automatic stay by retaining debtor property it possessed before the bankruptcy filing. In her concurrence, Justice Sotomayor opined that adversary proceedings are often lengthy and a debtor, as in the Fulton case, may be left without an automobile that is essential for continued employment and financing a chapter 13 repayment plan. In its report, the Advisory Committee noted that the proposed rule was narrowly tailored to address Justice Department concerns that the Government would be prejudiced by overly-shortened time periods or other requirements.
- In another important change, the Advisory Committee proposes a change to Part 3 of Official Form 410A pertaining to Proofs of Claim. The change would require holders of home mortgage claims to break-out the principal and interest instead of combining the amounts together. The proposed Committee Note accompanying the change states that the separate itemization may be needed by a debtor seeking to cure arrearages in accordance with the loan terms and applicable law.
The comment period opened August 15, 2022 and runs through February 16, 2023. The Committee also has set aside January 6 and January 13, 2023, for possible public hearings. If ultimately approved by Supreme Court and subject to Congressional review, the changes would be effective on December 1, 2024.