On December 1, a new bankruptcy rule that all creditors need to know about whet into effect. The rule shortens the time period during which a creditor can file a claim against a bankrupt debtor to 70 days, and subjects secured creditors to the rules other creditors have previously had to follow.
For years, creditors in bankruptcy cases have had 90 days to announce that they have a claim against someone who has filed for bankruptcy under Chapter 7, in which debtors liquidate assets; Chapter 12, which enables family farmers and fishermen to restructure their finances; or Chapter 13, which is sometimes known as the wage earner’s plan because it enables qualified individual filers to reschedule and make debt payments, allowing them to keep their homes and other property. Creditors now only have 70 days to make such a claim.
This new time limit also applies to secured creditors. Secured creditors were not previously mentioned in the text of Rule 3002 and that led to some confusion about when and how they should present their claims. Courts in different parts of the country had even set different timelines in different cases. The new rule provides clarity, which is a good thing, even though some secured creditors do not like the fact that the court is exerting more control over them.
Both changes to Rule 3002 are intended to make bankruptcies faster and more efficient.
The rule went into effect after a three-year rulemaking process during which comments on the proposed changes were solicited from the public. Now, we, and every other bankruptcy firm around the country, will be monitoring the new rule to see how it works in the real world. If it doesn’t do what was intended, or there are some unintended consequences, we will notify the courts and perhaps ask for additional changes to the rule.
We foresee some creditors missing the new deadline because they are not aware that it exists. Fortunately for them, the courts are allowing creditors to petition for an extension of the deadline. Hopefully judges will be liberal in granting these extensions if the creditor has a good reason for needing more time.