2022 Amendments to the Bankruptcy Rules
The latest amendments to the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) took effect on December 1, 2022. This collection of modifications may be broadly divided into two categories: (i) amendments and a new rule promulgated to account for the Small Business Reorganization Act of 2019 (the “SBRA”), and (ii) amendments clarifying or consolidating non-SBRA specific Bankruptcy Rules.
The enactment of the SBRA in 2020 created a subchapter V, within chapter 11, which offers a more cost effective and streamlined option than traditional chapter 11 for small businesses seeking to reorganize. Among other characteristics, subchapter V provides for the appointment of a trustee who ensures that reorganization remains attainable through facilitating the development of a consensual plan. See 11 U.S.C. § 1183. In addition, subchapter V eliminates the requirement that a debtor prepare a disclosure statement informing creditors of key provisions of the plan of reorganization. See 11 U.S.C. § 1181(b).
Given the significant differences between subchapter V cases and traditional chapter 11 cases, Congress approved the following amendments to the Bankruptcy Rules:
- Rule 1007(b)(5) – clarifies that the requirement of individual chapter 11 debtors filing statements of monthly income does not apply in subchapter V cases.
- Rule 1007(h) – clarifies that a subchapter V debtor’s duty to file supplemental schedules for interests acquired or arising post-petition terminates when a plan is confirmed, unless the plan is confirmed under § 1191(b), in which case the duty terminates at discharge.
- Rule 1020(a) – provides small business debtors the option to elect to proceed under subchapter V in their voluntary petitions or in statements filed within fourteen (14) days of the commencement of involuntary proceedings.
- Rule 1020(c) – deleted to reflect the elimination of creditors’ committees in small business debtor cases.
- Rule 1020(d) – clarifies that the service list for objections to or requests for determination of small business status will most likely not include a creditors’ committee given the elimination of such committees in small business debtor cases.
- Rules 2009(a) and (b) – eliminate creditors’ choice to elect trustees for jointly administered estates in subchapter V cases as 11 U.S.C. § 1183 requires the United States Trustee to appoint a trustee.
- Rule 2009(c) – clarifies that the United States Trustee may appoint trustees in jointly- administered subchapter V cases.
- Rule 2012(a) – includes subchapter V cases in the scenario where a trustee is automatically substituted for a debtor in possession in proceedings if the latter party is removed.
- Rule 2015(b) – clarifies the duties of the debtor, the debtor in possession, and the trustee because there is generally both a debtor in possession and a trustee in a subchapter V case.
- Rule 3010(b) – includes subchapter V cases in requirement that payments in amount less than $15 may not be distributed to creditors unless authorized by a local rule or court order.
- Rule 3011 – clarifies that a subchapter V trustee’s duties include filing a list of entities and the amounts they are entitled to be paid from unclaimed property.
- Rule 3014 – clarifies that the deadline to make an 11 U.S.C. § 1111(b)(2) election is fixed by the court rather than tied to the hearing on the disclosure statement, as there are generally no disclosure statements in subchapter V cases.
- Rule 3016(b) – clarifies that disclosure statements are not required in every subchapter V case.
- Rule 3016(d) – includes subchapter V cases as cases for which Official Forms are available for plans and disclosure statements, where required.
- Rule 3017.1(a) – clarifies that disclosure statements are not required in every subchapter V case.
- Rule 3017.2 – reflects that disclosure statements are generally not required in subchapter V cases, and therefore dates relating to plan acceptance and rejection, voting eligibility, confirmation hearing, plan transmission, and confirmation hearing notice are set by the court.
- Rule 3018(a) – acknowledges the court’s authority to set dates relating to plan acceptance and rejection in subchapter V cases.
- Rule 3019(c) – reflects that the post-confirmation plan modification requirements of Rule 3019(b) apply in subchapter V cases.
The following amendments were approved in addition to those pertaining specifically to the SBRA:
- Rule 3002(c)(6) – consolidates the standard for granting motions for extension of time to file proofs of claim in chapter 7, chapter 12, and chapter 13 cases regardless of whether a creditor has a domestic or foreign address. Such motions will be granted if notice was insufficient under the circumstances to give a creditor reasonable time to file a proof of claim.
- Rule 5005(b)(1) – eliminates the requirement of transmission to the United States Trustee by mail and/or delivery and instead recognizes that, subject to court order or local rule, transmission may be achieved by electronic filing.
- Rule 5005(b)(2) – eliminates the verification requirement for statements evidencing transmission to the United States Trustee by methods other than electronic filing.
- Rule 7004(i) – clarifies that service on a defendant corporation, partnership, or other unincorporated association is sufficient if the envelope is labelled with the defendant’s proper address and directed to the attention of an officer’s or agent’s position or title. In other words, officers and agents need not be named.
- Rule 8023(a) – clarifies that fees required to be paid prior to the stipulated dismissal of a bankruptcy appeal are court fees rather than attorney’s fees.
- Rule 8023(c) – requires a court order for relief other than the dismissal of an appeal.
- Rule 8023(d) – clarifies that rules governing court approval of settlement, payment, or other relief remain applicable notwithstanding Rule 8023.
A copy of the updated Bankruptcy Rules, as well as redlines showing the amendments and the related notes from the Advisory Committee on Bankruptcy Rules, can be found here.