New Bankruptcy Amendments Effective December 1st

An amendment to bankruptcy Rule 3007, which went into effect on December 1st along with several other new amendments, takes away some of the frustration and anxiety for creditors seeking to collect on debts, especially those involved in large bankruptcy proceedings.

Historically, in massive Chapter 11 cases, Omnibus Objections to Claims, allowed under Rule 3007, are standard practice for debtors. The rule was criticized for allowing huge inclusive objections that were so weighty and difficult to traverse that it ultimately resulted in failures of appropriate notice to creditors because it was arduous for claimants and their counsel to determine if their claim was even being objected to. There was no cap on the number of claims a debtor could clump together. A claimant was often required to wade through a number of omnibus objections, which were bogged down with layer upon layer of exhibits stacked with hundreds of claims leading to an unwieldy number of pages of documents to peruse. These omnibus objections could wipe out hundreds of claims in a single stroke and the missing of response deadlines by creditors was all too common.

Last September, the Committee on Rules of Practice and Procedure of the Judicial Conference decided to level the playing field for claimants.

The amended rule does not allow omnibus objections to claims for the most part, unless a court orders otherwise. It strictly prevents debtors from combining objections to more than one claim into a single objection. Furthermore, under the new amendment, an omnibus objection is allowed only if all the claims included within the objection were filed by the same entity, or duplicated other claims; have been amended by subsequently filed proofs of claim; are interests not claims; were not filed on time; the claims have been satisfied; the validity of the claims cannot be determined because of noncompliance with applicable rules or assert priority in an amount that exceeds the maximum amount under Section 507 of the Bankruptcy Code.

The amended rule also helps creditors in case an omnibus objection is permitted by having claimants listed alphabetically. Previously, claimants were only listed by number, with a cross-reference to the claim number. And, if possible, the claimants are to be listed by category of claims. Amended Rule 3007 also puts a cap that a debtor can only include 100 claims at a time in a single omnibus objection.

The new amendments also provide a new Form B10 for filing proofs of claim, which claimants can obtain from the bankruptcy court or online at http://www.uscourts.gov/rules/BK_Forms_08_Official/Form_10_1207.pdf.
Matthew Carr, NACM staff writer