The Proof Is in the Pudding: Skimming the New Bankruptcy Code Rules
by E. Andrew Keeney
Many credit unions are pleased, or at least temporarily pleased, with their current delinquency rate. All are concerned about potential increases in delinquencies in 2013, 2014, and beyond. As rates begin to climb, perhaps delinquencies will also begin to climb.
This Credit Union Legal Update discusses some significant changes and potential pitfalls for those filing proofs of claim in the federal bankruptcy courts. Some of this might be “old” news to you, but my bankruptcy partners thought I should alert my credit union contacts. At the end of last year, there were significant changes to the Federal Rules of Bankruptcy Procedure governing proofs of claim. These changes resulted in a new standard form for filing such proofs as well as some new requirements, particularly for proofs of claim in individual bankruptcies or claims secured by mortgages and deeds of trust.
The first thing to know is that internal forms for filing proofs of claim drafted before 2012 can no longer be used. Proof-of-claim forms are usually provided along with notices when an individual or entity files for bankruptcy. However, many credit unions have their own internal forms that they have created over the years. Those forms will be based on the outdated pre-2012 version of the proof of claim forms. Use of these forms may result in a claim being delayed or denied.
Next, there have been several changes requiring creditors to provide additional information. Some of these changes only apply in specific cases, i.e. cases against individuals or where the claim is secured, but others are more universal. Federal Rule of Bankruptcy Procedure 3001(c) was amended to require that, where a claim or lien is based on a document, a copy of the document must be attached. If the debtor is an individual, rather than a company or other entity, interest and fees that are part of the claim must be itemized. For any security interest against an individual debtor’s property, a payoff amount as of the date the individual filed bankruptcy must be included. A special attachment must be provided including escrow information if the claim is secured by a lien on an individual debtor’s principal residence. However, please be careful about the potential inadvertent disclosure of a member’s personal information. It should all be redacted. For more information on this subject, please review my credit union newsletter (Credit Union Legal Update – Fall 2009), which can be reviewed at http://www.kaufcan.com/news/articles/creditunionlegalupdate–fall2009.htm.
