Changes to the Federal Bankruptcy Code come into effect on December 1, 2021 – insolvency / bankruptcy / restructuring

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United States: Changes to the federal bankruptcy procedure code will take effect December 1, 2021

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Every year the Federal Rules of Bankruptcy Procedure, which regulate the handling of bankruptcy cases, are changed. The changes address issues identified by an advisory committee made up of federal judges, bankruptcy attorneys, and others. The rule changes are eventually adopted by the US Supreme Court and are technically subject to congressional rejection.

Just a handful of rule changes this year. This year, only four changes to bankruptcy rules are expected to come into effect on December 1, 2021. All of them are relatively minor technical or administrative revisions. That means you don’t have to worry about major changes in bankruptcy rules this year – good to know.

Here are the changes:

  • Rule 2005, which relates to the terms of release for a detained debtor, has been changed to refer to the correct section of Title 18.
  • Rule 3007, which governs the delivery of objections, has been changed to clarify that an insured custodian, now referred to only as “defined in Section 3 of the Federal Deposit Insurance Act”, must also be served under Rule 7004 (h). and its more stringent service requirements (including registered mail in some situations). While this is a minor change, it is a good reminder of the special service rules that apply to FDIC insured custodians. The committee’s note clarifies that this provision does not apply to credit unions as they are covered by National Credit Union Administration insurance instead of FDIC insurance.
  • Rule 7007.1, which covers disclosure of company property, has been changed to align with similar disclosure rules in the federal Appeals Code and the Federal Code of Civil Procedure. It has been revised to only apply to non-state companies, even if those companies intervene in bankruptcy and bankruptcy proceedings.
  • Rule 9036, which governs notifications and deliveries, has been changed to address recipients of large-volume paper communications and specify procedures for such recipients in connection with the Bankruptcy Notice Center (BNC).
  • Although it is not an insolvency code, the Federal Appeals Code 6, which regulates insolvency challenges, has also been slightly revised, but only to change the reference to a form in view of the changes to the Federal Appeals Court Order 3 (which in turn replaces the former Form 1 in Form 1A and Form 1B).

I need a redline. No question about it – the best way to see the changes (and how minor they are this year) is to check a redline. Follow the link in that sentence for that complete rule changes, including redlines showing the revisions made and the advisory committee explanations of each change. In addition to the changes to the Federal Judicial Code for Insolvency Proceedings discussed above (the redline changes begin on page 61), the linked document contains the changes to the Federal Code of Appeal for the appeal process.

December is almost here. These rule changes are slated to go into effect on December 1, 2021, before you know it (and therefore also in 2022).

Image used with permission from Flickr by Robert Lyle Bolton

The content of this article is intended to provide general guidance on the subject. Expert advice should be sought regarding your specific circumstances.

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