04 Feb Brett Weiss Testifies On Changes to Bankruptcy Claim Procedure
On February 4, 2011, I was honored to have been asked to testify on behalf of the National Association of Consumer Bankruptcy Attorneys (NACBA) before the Advisory Committee on Bankruptcy Rules. The Committee proposes changes to the Federal Rules of Bankruptcy Procedure, and submits them to the U.S. Supreme Court for adoption. Once adopted, they govern bankruptcy cases throughout the United States. Because of the importance and scope of the Rules, this is a lengthy and detailed process, typically taking two to three years from proposal to adoption.
My testimony dealt with proposed changes to Rule 3001, which governs Proofs of Claims by creditors, and Official Form 10, the Proof of Claim form itself. The Committee had proposed several changes to Rule 3001, most of which would affect debt buyers. If adopted, the Rule would require debt buyers to file with the Proof of Claim the name of the original creditor, the name of the entity from whom the debt was bought, the date of the last transaction, the date of the last payment, and the date the account was charged off. Additionally, on written request, it would have to provide the writing on which the debt is based.
While these changes are certainly an improvement, there remain areas that should be enhanced. Proof of the chain of title of ownership, that is, the documents showing that the debt buyer has the legal ownership of the account, should also be provided. Penalties for failing to provide the writing on which the debt is based should be added, as well as the timeframe for response.
The changes to Official Form 10, the Proof of Claim form, are more dramatic. Home mortgage lenders would be required to break out a number of elements in the claim, including the principal, interest (and whether the rate is fixed or adjustable), fees, expenses, and charges owed as of the filing date. Pre-petition arrearages must also be itemized, and an escrow account statement must be provided. As far as debt buyers are concerned, the current use of the “summary page” would be insufficient; actual documentation of the claim must be provided.
Finally, the person who signs the claim form must declare that the information in it is true and correct to the best of the signer’s knowledge, information and belief. I questioned whether this would really change anything; looking at a computer screen summary of the account and signing would seem to be sufficient. I urged the adoption of a “personal knowledge” standard or at least some reference in the Official Comment that something more than looking at the summary numbers was required.
If adopted by the Committee, the proposed Rules will be submitted to the U.S. Supreme Court for approval.
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