This is a post that will probably be more of interest to bankruptcy practitioners than bankruptcy debtors. However, there is potential for some substantial changes that will drastically impact how Chapter 13s are administered, so potential bankruptcy filers shouldn't completely blow this off.
Currently, each federal district has its own way of handling Chapter 13 Plans. Most if not all have a "model plan" which is the form template attorneys and debtors are encouraged to use when drafting the Chapter 13 repayment plan. Many districts have made use of their model plan mandatory. I was on the Local Rules Committee back in 2009, which ultimately made our model plan in the Eastern District of Wisconsin mandatory in early 2010, if memory serves (and over my sole objection). In districts without a mandatory plan, attorneys can and do have their own versions.
But even if each district adopted a mandatory model plan, it would still leave 94 different plans, which makes it difficult to create uniform case law. It also becomes burdensome to creditors who do business nationally (though as debtors' counsel, I care less about that).
So, for quite some time now, a committee has been established to draft and propose a national model plan for use everywhere in the United States. There are also proposals floating around to the Federal Rules of Bankruptcy Procedure to accommodate this national model plan. The proposal for FRBP 9009 would prohibit alteration of the model plan except in the special provisions area of the plan. That rule seems to suggest that the committee will recommend that the model plan be mandatory (and frankly, if it isn't mandatory, there isn't much point in having a model plan). The downside to a mandatory plan, of course, is that if the plan is not drawn up well, it will - at the very least - create some administrative problems. Worst case, it has the potential to force changes on the rules and procedures at the local level. Also, there are rumors that what is allowed in the special provisions section of the model plan will be far more restrictive than what we currently do in the Eastern District of Wisconsin (which is basically - 'anything goes', so long as it doesn't violate established law).
So what do we know? Well, the rule-making process is a long and arduous one. If everything remains on schedule, the earliest we expect to see implementation of this proposed national model plan is December 2015. That's right - 2.5 years from now. On the upside, this gives us more time to address concerns that exist concerning the current draft of the model plan.
It is worth noting that there is a form modernization project in the works (also referred to as the form lengthening project). Although there appears to be no set date yet, I expect the new forms to go into effect December 2013, roughly coinciding with the eight year anniversary of BAPCPA.
Because this is the early draft, and is likely to go through substantial changes after feedback has been submitted, there's not much point in going through the document line by line. I do want to highlight a few of the expected changes that I think will be the most dramatic.
FRBP 3002 - would shorten the time-frame for filing proofs of claim. Currently, it is 90 days after the sec. 341 meeting of creditors, which itself is scheduled between 21 and 50 days after the bankruptcy petition is filed. So all in all, creditors have upwards of 4-5 months to file a proof of claim. The government has 180 days (or 6 months) after the petition date to file its claim. This makes administration of a case difficult, as plans are often confirmable long before the bar date to file claims has passed, and feasibility can't really be addressed until all claims have come in. So, the new bar date should really help in administration. The catch is - the government's 180 days appears to be unaffected by the proposed rule change. I don't mind the government getting more time to file claims that private creditors, but 6 months seems excessive to me.
Certain actions to strip liens that have traditionally been done by separate motion or adversary proceeding. Those are now being folded into the plan, which does cut down on paperwork. To address notice requirements, however, Rule 3015 is expected to be amended to integrate enhanced service requirements of the Chapter 13 Plan in those circumstances.
The current draft of the plan is no doubt reflective of the districts that its chief authors hail from. There are a lot of references to confirmation hearings, which not all districts have (unless a creditor objects to confirmation). Our judges have stopped having confirmation hearings in cases that are not being contested (after the appropriate time to object has passed). At the moment, lessons learned in law school escape me, and I forget the relative authority of the federal rules to district court cases. But if this model plan doesn't force districts to hold confirmation hearings, the language is going to make administration of the plan tricky.
The current draft also is pretty rigid in how payments are structured. It doesn't provide for splitting payments between joint debtors, it doesn't provide for customization of payroll orders into weekly or bi-weekly pay periods, and it only provides for one step provision. Of course, these issues can be addressed in the special provisions section, but we could save a LOT of unnecessary special provisions by having a better structured paragraph. For the record, this is what I have been proposing for the last... oh, let's say two years...
2. Plan Payments and Length of Plan. Debtor shall pay the total amount of $0.00 by paying $0.00 per month for the period of 60 months by[ ] Direct Payments to the Trustee, or[ ] Periodic Payroll Deductions from the:
[ ] Debtor [ ] Joint Debtor in the amount of: $0.00 in the amount of: $0.00 [ ] weekly[ ] bi-weekly[ ] semi-monthly[ ] monthly [ ] weekly[ ] bi-weekly[ ] semi-monthly[ ] monthlyThe duration of the plan may be less if all allowed claims in every class, other than long-term claims, are paid in full.
The tax refund committal paragraph is similarly rigid and doesn't account for variances in local customs on the subject.
Another concern is that the plan allows certain "options" that are not available in all districts or not available in all circumstances. It is said that the Chapter 13 Plan is being drafted to help pro se debtors. Quite frankly, Chapter 13 is complicated enough that no debtor should try it without an attorney. Moreoever, without the legal knowledge, pro se debtors will be filing uncomfirmable plans because they won't know in which districts or in which circumstances certain plain provisions are available.
Other concerning language - the absence of a provision that discusses which aspects of administration are controlled by the plan and which aspects are controlled by the proof of claim; and language in the signature section allowing debtor's counsel to sign the plan without the debtors' signatures; the conduit mortgage provision isn't terribly detailed enough for districts that do not have conduits as a default. On the upside, this version provides for vesting of property of the estate upon "closing of the case" instead of upon "discharge", which helps resolve an ambiguity in attorneys who prefer not to have revestment on confirmation, but are filing cases in which a discharge is not available.
Those who wish to review the proposed rule changes or the proposed model plan can try the following links: