Posts Categorized: Rules

Brown Bag Lunch – Bankruptcy Rules! (September 20, 2016 at 12pm)

Bankruptcy Rules!

Please join us on September 20, 2016 at 12:00 for our welcome back Brown Bag. To celebrate the publication of the new and amended Local Bankruptcy Rules (effective August 1, 2016), we are dedicating the program to the Local Bankruptcy Rules.  Clerks of the bankruptcy court will highlight significant changes to the local rules, common procedural issues, and best practices.  We will be handing out copies of the new Local Rules book to everyone who RSVPs.

https://www.bostonbar.org/membership/events/event-details?ID=22495

New SJC Rule of Professional Responsibility: Treatment of Flat Fees

On March 15, the SJC promulgated new rules of Professional Responsibility, effective July 1, 2015 (available here).  Of interest to bankruptcy lawyers is comment 2A to Rule 1.15.  That comment provides that a lawyer is not required to deposit a “flat fee” (an all-in agreed amount for specific work) in a client trust account, and can immediately place the funds in the law firm’s operating account. The comment  originated with the SJC’s own Standing Advisory Committee on the Rules of Professional Conduct.  During the public-comment period, the BBA Bankruptcy Section championed the Advisory Committee’s proposed comment, while another Committee expressed concerns.  The BBA reported the views of the two constituencies to the SJC, which accepted the position of the Bankruptcy Section.

The new language protects lawyers who represent a chapter 7 debtor and, although more rare, counsel who represents a chapter 11 debtor—as compared with a debtor-in-possession.  The Bankruptcy Section’s concerns were that 1) any funds that were still subject to conditions at the time of a bankruptcy filing would become property of the estate, and 2) under Lamie v. U.S. Trustee, 540 U.S. 526 (2004), a debtor’s counsel is not entitled to compensation for post-petition work.  The combination of those two factors would make it impossible for a debtor’s attorney to access the funds to be paid for the services rendered once a petition for relief was filed, except to the extent that the lawyer could establish what percentage of the work had been completed pre-petition.

The comment makes clear that a lawyer must return money paid for services where the lawyer has failed to complete the anticipated work, as provided in Rule 1.16(d). Obviously this new rule does not affect the powers of the Bankruptcy Court to review fees and, where appropriate, order a lawyer to repay them or otherwise make provisions relating to fees.  Rather, the new rule removes any ethical taint from a lawyer’s election not to deposit a flat fee in a trust account.

A lawyer is still free to deposit flat fees into a trust account, in which event the lawyer must comply with all the rules applicable to such accounts.

New Standing Orders Change Local Rules for Professional Fees and Prepetition Retainers in Chapter 13 Cases

The Bankruptcy Court for the District of Massachusetts has adopted two new standing orders, which became effective on March 1, 2015. The first, Standing Order 2015-1, alters Massachusetts Local Bankruptcy Rule 13-7 on professional fees and prepetition retainers. Among other changes, counsel may use a new form, Official Local Form 17, to file an application for compensation in amounts less than $10,000 but above $3,500 prior to entry of a confirmation order or above $500 after the entry of a confirmation order. The second, Standing Order 2015-2, adds the new Form 17 to the Massachusetts Local Bankruptcy Rules.

The new Standing Orders may be viewed here: http://www.mab.uscourts.gov/mab/news/standing-orders-2015-01-2015-02

Upcoming Brown Bag Lunches

The November Brown Bag Luncheon will be held on November 8, 2011 from 12:00 to 1:30  and will focus on Amendments to the Federal Bankruptcy Rules effective December 1, 2011 .  The guest speakers will be John Rao discussing Rule 3001 changes and the new 3002.1; James Wilton and James Wright discussing Rule 2019, and John Fitzgerald from the US Trustee’s Office.  To RSVP for the 11/8 program, please click here.

Adrienne Walker will be hosting December 13’s brown bag luncheon beginning at 12:00.  The subject matter will be municipal bankruptcy filings. Further information will be posted when available.

Summary of Proposed Amendments to Massachusetts Local Bankruptcy Rules

The following summary was prepared by D. Ethan Jeffery of Hanify & King P.C. and Kenneth S. Leonetti of Foley Hoag LLP, co-chairs of Practice and Procedure Committee. The summary reflects the professional views of the authors and does not reflect the position of the Boston Bar Association or the Boston Bar Association Bankruptcy Law Section. The summary is provided for informational purposes only and should not be construed as legal advice on any subject matter.
— The Editors

The United States Bankruptcy Court for the District of Massachusetts is considering proposed amendments to the local rules.
If adopted, the proposed amendments would take effect on December 1, 2009. Comments are due no later than October 2, 2009. Practitioners are encouraged to review the changes before they take effect. A redline version can be found at http://www.mab.uscourts.gov/pdfdocuments/2009LRA_BL.pdf. Some of the more notable proposed amendments are summarized below.
General Comment: The proposed amendments would change the time periods for most of the notices required to be given, hearings to be scheduled, responses to be filed, etc., under many of the existing rules.
  1. Where such time period previously was 20 days, the proposed amendments generally provide for 21 days;
  2. Where previously 15 days, the proposed amendments provide for 14 days;
  3. Where previously 10 days, the proposed amendments provide for 14 days (most notably with respect to the period for objecting/responding to motions under Rule 9013-1(d)); and
  4. Where previously 5 days, the proposed amendments provide for 7 days.

Rule 1007-1: Failure to file an original matrix of creditors within 3 court days of the order for relief shall be cause for dismissal under 11 U.S.C § 109(g).

Rule 1017-1(h): Time periods that had been set forth under previous rule for scheduling hearings on motions to dismiss/convert Chapter 11 cases are eliminated.

Rule 3007-1(b): The rule governing objections to claims is modified slightly to require the objecting party to file a proposed form of notice with blank spaces to set the deadline for filing responses.

Rule 3017-2: The rule governing the filing of a plan and disclosure statement in small business cases now references a new Local Form 15, which is a sample Combined Small Business Plan of Reorganization and Disclosure Statement for Small Business Debtor.

Rule 4001-1: The time limits for setting a hearing date on a motion to continue the automatic stay or to impose the automatic stay are eliminated. Similarly, service time limits for the motion and for the opposition to any such motion are eliminated.

Rule 4001-2: Cash Collateral and DIP Motions no longer need to be accompanied by the loan agreement governing the credit to be extended or a summary of the same. The Motion itself must set forth certain required information in Rule 4001-2.

Rule 4001-3: There is a new rule governing permitted billing and settlement communications. When the automatic stay applies, it shall be deemed lifted in order to enable a secured creditor or its agent, representative or nominee (excluding its attorney) to:

  1. send WRITTEN correspondence to the debtor, with a copy to debtor’s counsel, consisting of statements, payment coupons, notices, analyses or accountings of any payment defaults, the status of insurance coverage, tax payments, and/or municipal charges on property used as collateral and other such correspondence that the creditor typically sends to its non‐debtor customers; EXCEPT that such correspondence shall not make demand for payment or threaten foreclosure or dismissal of the case; and
  2. discuss and/or negotiate with a debtor a proposed modification of the terms of any secured indebtedness, including, without limitation, a home mortgage; EXCEPT that all such negotiations and/or discussions shall be conducted through counsel for the debtor, if the debtor is represented by counsel and such counsel has not, in writing, granted permission for such direct communication by creditor representatives with the debtor. The secured creditor shall terminate the foregoing communications immediately upon receipt of written notice from the debtor or debtor’s counsel requesting that such contacts cease. Further, nothing herein shall authorize a debtor or creditor to enter into any loan modification without court authority, so long as the property which is collateral for the loan is property of the estate under § 541(a).

Rule 4002-1: Requires the Debtor to bring the personal identification and financial information required by FED. R. BANKR P. 4002(b) to the §341 meeting of creditors.

Rule 4008-1: Requires a reaffirmation agreement to be accompanied by the cover sheet prescribed by Official Form 27 to be enforceable.

Rule 6004-1: Sets forth new procedures by which a request for authorization to sell estate property must be made including the requirement that a motion be filed; a defined list of persons upon whom the motion must be served; different procedures for private sales, public auctions and internet auctions.

Rule 9010-1: Allows an attorney representing, without compensation, an otherwise pro se debtor to file a limited notice of appearance and to decline representation in other matters. However, the attorney may not withdraw without leave of court.

Rule 9013-1(g): Emergency and expedited motions are treated similarly as opposed to distinct forms of relief. Several changes are made to the procedure for seeking determination on an emergency or expedited basis:

  1. The motion for relief and the request for expedited or emergency determination of the motion are to be filed together in a single document.
  2. A movant seeking determination of the motion within 3 days after it is filed shall include in the title of the motion “Request for Emergency Determination” (it was previously two days). A movant seeking determination of the motion within 7 days after it is filed shall include in the title of the motion “Request for Expedited Determination.”
  3. The motion shall set forth in separate numbered paragraphs the justification for expedited or emergency determination of the underlying request for relief.
  4. The movant shall make a reasonable, good faith effort to advise all affected parties of the substance of the motion for relief, the request for an emergency or expedited determination, and the date and time of the hearing. Such reasonable, good faith efforts may include providing notice by telephone, facsimile transmission or email in appropriate circumstances. Federal R. Bankr. P. 2002 and MLBR 2002‐1 govern who is an “affected party.” Notice, at a minimum, shall be provided to the debtor, the debtor’s counsel, any trustee, the trustee’s counsel, the United States trustee, any directly affected creditor, and any party that has entered an appearance or has requested notices. In addition, the caption of the motion shall indicate if there is a request to limit notice.
  5. Written responses to a motion for emergency determination are not required, but are encouraged and may be filed up to the time of the hearing. Written responses to a motion for expedited determination appear to be required. If the Court does not set a response time, responses to a motion for expedited determination are due no later than 3 days before the hearing.

Appendix 1 – Chapter 13 Cases: Several major changes are made to the Local Rules governing Chapter 13 cases, including objections to claims, filing proofs of claims, and seeking relief from the stay in such cases.

Appendix 8 – Electronic Filing Rules: These are mostly technical changes. The one substantive amendment is that attorneys who appear in no more than three cases per year need not file electronically and may file documents in paper form at the Clerk’s Office.

Official Local Forms: There are changes to most of the Official Local Forms.