New rule sets minimum standard for clarity in bankruptcy courts

By Christopher Knoll | Mar 2, 2017

EAST ST. LOUIS – The United States Bankruptcy Court for the Southern District of Illinois published a notice on Feb. 7 announcing greater clarity for the nation’s creditors as it pertains to Chapter 13 insolvencies. The newly added Rule 3015.1 requires, as of December 2017, the use of a national form for Chapter 13 plans unless a district already has a process that meets the requirements in the new rule.

EAST ST. LOUIS – The United States Bankruptcy Court for the Southern District of Illinois published a notice on Feb. 7 announcing greater clarity for the nation’s creditors as it pertains to Chapter 13 insolvencies. The newly added Rule 3015.1 requires, as of December 2017, the use of a national form for Chapter 13 plans unless a district already has a process that meets the requirements in the new rule.

According to the federal bankruptcy court system, a Chapter 13 insolvency “enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.”

The biggest advantage of this is that the plan allows a debtor to retain his or her home by ceasing foreclosure proceedings and possibly resolving delinquent mortgage payments.

The minimum requirements of Rule 3015.1 are:

- A district can only have one form.

- The opening paragraph must contain a clause allowing discussing limits to the amount of a secured claim based on valuation of the collateral or propose a method to avoid a lien.

- The form must follow several formatting and disclosure rules including numbering paragraphs, labeling in bold type, using separate paragraphs for the cure and maintenance of home mortgages, payment of domestic support obligations, treatment of secured claims, and surrender of property securing a claim.

- The last paragraph must discuss any nonstandard provisions, and include a statement that other nonstandard provisions appearing anywhere else in the plan are void.

A staff attorney with the U.S. Bankruptcy Court, who wished to remain unnamed, spoke with the Madison County Record about the added rule.

The attorney told the Record that the rule came about after a committee looked into the possibility of a national standard for Chapter 13 filings and sent out a request for comments to the nations’ bankruptcy courts. Based on feedback, it was determined that while a standard national form could be used, it was desired by many respondents that the states continue to have the right to develop plans of their own.

William A. Mueller, an attorney with the Bankruptcy Center office in Belleville, agreed with this assessment. Mueller told the Record that the impetus for the committee’s review, which he was a part of, was to bring about “uniformity in the forms related to filing Chapter 13” and was an idea that had been “kicking around for years.”

Creditors, Mueller said, faced a daunting task of keeping abreast of the multitude of different forms even within one single state.

“Every jurisdiction and every judge would have their own plan,” Mueller stated. And some districts had no forms at all.

In an attempt to bring order out of chaos, Judge Laura K. Grandy assembled a commission of court staffers and attorneys to propose what came to be termed a “National Plan."  Mueller said that the finalized plan was reviewed last year and was now finishing up the commentary phase. It was at this stage that the National Plan hit the major obstacle of preferences for local forms, which resulted in the plan going from a national standard to a tool of mandatory minimum requirements that all plans have to abide by. 

Want to get notified whenever we write about U.S. Bankruptcy Court for the Southern District of Illinois ?

Sign-up Next time we write about U.S. Bankruptcy Court for the Southern District of Illinois, we'll email you a link to the story. You may edit your settings or unsubscribe at any time.

Organizations in this Story

U.S. Bankruptcy Court for the Southern District of Illinois

More News

The Record Network