Changes to Bankruptcy Proof of Claim Rules Require Additional Detail Starting December 1, 2011

Filing proofs of claim in bankruptcy cases will require a greater level of detail starting December 1, 2011, due to amendments to the Federal Rule of Bankruptcy Procedure Rule 3001, which governs the filing of proofs of claim. Amended Rule 3001 is designed to prevent the filing of poorly documented and/or inaccurate proofs of claim and requires creditors to set out in greater detail the information accompanying a proof of claim. The Amendment will impact claims based on consumer debt as well as commercial debt extended to individuals. Further, all creditors are impacted by the new proof of claim form, which requires more information than the current form. Creditors should review and revise their procedures for filing proofs of claim in preparation for the Amendment to take effect. Failure to properly document a proof of claim may now carry harsh penalties, including, but not limited to, sanctions and the inability to introduce evidence in support of the claim at a hearing before the Bankruptcy Court. We anticipate that courts will be lenient in enforcing Amended Rule 3001 when it is first enacted to allow creditors to familiarize themselves with the new requirements. Enforcement of the requirements will be more strictly enforced as time goes by. 

Under the current rules, a creditor’s proof of claim could be evidenced solely by a Proof of Claim form setting out basic information regarding the claim. While attaching documents evidencing the debt was preferred at the time of filing a proof of claim, it was not required. After December 1, 2011, a creditor must include a copy of the appropriate documentation as an attachment to the proof of claim when a claim is based on a “writing” (for example, loan documents). This requirement to attach supporting documentation is applicable to all claims filed in any bankruptcy case. If the documentation is lost or no longer available, then the creditor must include a statement containing the reason why the document cannot be produced (the “Statement”). Most likely, the Statement will be similar to an affidavit produced in state court when original documents are lost or destroyed.

Pursuant to the Amendment, in all individual (non-corporate) bankruptcy cases the creditor must: (i) file the proof of claim form and attach all documentation related to the claim and (ii) attach the following items, calculated as of the bankruptcy filing date:

1. An itemized statement with the principal amount of the claim and a breakdown of all other sums owed (interest, fees, costs, attorneys’ fees, late charges). A loan history, if accurate and containing sufficient detail, may suffice[1];

2. A statement setting out the amount necessary to cure any default, if the claim is a secured claim[2];

3. An escrow statement in a form consistent with applicable non-bankruptcy law, if the claim is secured by a lien on the debtor’s residence and if the creditor holds an escrow account related to the loan; and

4. If the claim is secured by a lien on the debtor’s residence, the creditor must also complete and attach to its claim “the appropriate Official Form.”[3] See the attached “Official Forms” as proposed by the Rules Committee.  The final official forms will be released just prior to December 1, 2011 and should be available on the Bankruptcy Court websites.

The penalties for failure to provide any of the above information may be severe. The Court at its discretion may, after notice and hearing, prevent a creditor from presenting any information missing from the attachments as evidence at any contested hearing, or award “other appropriate relief,” such as sanctions.[4] Sanctions may be imposed by the Court in the form of reasonable expenses and attorneys’ fees (presumably to the debtor or the trustee) based on the creditor’s failure to comply with the requirements of amended Rule 3001.

It is now easier than ever for a creditor to make a misstep in navigating complex bankruptcy procedures, and the consequences of a misstep could lead to delays in payment of claims or the imposition of sanctions for failure to submit all required documentation and information. It is recommended that creditors actively review their proof of claim filing procedures and amend them where necessary to insure compliance with the new amendments to Rule 3001(c) which will take effect on December 1, 2011. 

Jennifer West and Robert Chappell are two of the attorneys at Spotts Fain PC who work with banks on a wide variety of issues including insolvency, workouts, creditors’ rights, bankruptcy and collections. 

[1] Fed. R. Bankr. P. 3001(c)(2)(A) (proposed April 26, 2011, effective December 1, 2011).

[2] Fed. R. Bankr. P. 3001(c)(2)(B) (proposed April 26, 2011, effective December 1, 2011).

[3] Fed. R. Bankr. P. 3001(c)(2)(C) (proposed April 26, 2011, effective December 1, 2011).

[4] Fed. R. Bankr. P. 3001(c)(2)(D) (proposed April 26, 2011, effective December 1, 2011).

Spotts Fain publications are provided as an educational service and are not meant to be and should not be construed as legal advice. Readers with particular needs on specific issues should retain the services of competent counsel.