Revised Bankruptcy Forms Effective December 1

The Bankruptcy Rules Advisory Committee will conclude its multi-year forms modernization project to revise many of the Official Bankruptcy Forms. The first group of forms, the fee waiver, fee installment forms, and income and expenses schedules, went into effect on December 1, 2013. On December 1, 2014, revised bankruptcy appellate forms and means test forms went into effect. The Judicial Conference of the United States during its annual meeting in September 2015, approved all other individual debtor forms, as well as newly-created modernized forms for non-individual debtor cases, and will become effective on December 1, 2015. These are the most extensive forms changes that we have seen over the past 10 years. The remainder of this article provides an overview of the changes.

“Modernized” Bankruptcy Forms

The Forms Modernization Project began in 2008 with the stated purpose of making bankruptcy forms easier to understand, more user-friendly, and less error prone. The idea is that if the forms are made easier to understand, and open-ended questions are replaced with checkboxes and line items, pro se debtors and attorneys not experienced in bankruptcy will be able to provide more complete answers.

To accomplish the goal of making bankruptcy forms easier to understand and use, conversational language is used throughout the proposed forms. The forms make heavy use of checkboxes and instructions and employ various font characteristics such as bolding and underlining, to differentiate content. Questions that are not applicable to individual debtor cases are deleted from forms submitted by individual debtors, and two sets of forms are created: one set to be used in individual debtor cases and another set to be used in non-individual bankruptcy cases. The forms and schedules also are renumbered. For example, the petition, currently Official Form 1, becomes Official Form 101 for individuals and 201 for non-individuals. The schedules retain their existing letter designations. For example, Schedule 6D becomes Schedule 106D for individuals and 206D for non-individuals. In the case of combined schedules, such as 106A/B, both letters are retained.

Voluntary Petition

Questions pertaining to non-individual debtors are eliminated from the restyled voluntary petition, and a warning to pro se debtors is added about the difficulties of filing for bankruptcy without the assistance of an attorney. Exhibits A, B, C, and D also are eliminated because the requested information is asked in the form or does not apply to individual debtor cases.

Schedule A/B

Schedules A and B are combined into a single schedule for property. The combined asset schedule employ seven categories, or parts: real estate, vehicles, personal and household items, financial assets, business-related property and interests, farm- and commercial fishing-related property, and a catch-all category for property that is not listed elsewhere in the form. The debtor is guided through each category through the use of extensive checkboxes. The asset categories also are changed in the modernized schedule.

Schedule C

Modernized Schedule 106C addresses in-kind property exemptions by incorporating language suggested by the U.S. Supreme Court in Schwab v. Reilly, 560 U.S. 770 (2010). In Schwab v. Reilly, the Court held that a trustee is not required to object to a debtor’s exemptions in order to preserve his right to claim any value in the item that exceeds the value listed as exempt. In other words, when the debtor’s exemptions are within the statutory limits, the trustee is not required to object to preserve an argument that the asset is actually worth more than the debtor’s valuation. The Court also held that when property is undervalued at the time of the petition, or later appreciates in value, the benefit inures to the estate.

In its opinion, the Court explained that a debtor who intends to exempt “the full market value of the asset or the asset itself” may put the trustee on notice by listing the exempt value of the asset on Schedule C as “full fair market value (FMV)” or “100% of FMV.” Of course, some courts have had a problem with this designation because by using this language a debtor is seeking to exempt property “in-kind” even though the applicable exemption is capped at a certain dollar amount.

As originally drafted for comment, Schedule C included a checkbox for the “Full fair market value of the exempted property.” However, the Committee was concerned that the option would likely be found to be an impermissible designation under state exemption laws that cap exemptions to a dollar amount. Consequently, the proposed form contains two checkbox options under “Amount of the exemption you claim”: (1) a checkbox followed by a line with a dollar sign, and (2) a checkbox followed by “100% of fair market, up to any applicable statutory limit.”

Schedule D

Modernized Schedule D is divided into two parts. Creditors are listed in Part 1, and additional notice parties, for example, a collection agency or an attorney representing a creditor, are listed in Part 2. Checkboxes are added to describe the nature of the creditor’s lien.

Schedule E/F

Schedules E and F are combined into a single form for unsecured claims. Both priority and non-priority unsecured claims are reported in alphabetical order on the combined schedule, although priority claims are grouped separately from non-priority unsecured claims.

The proposal lists priority claims in Part 1 of the schedule, which includes four checkboxes for identifying the type of priority that applies to the claim. General unsecured non-priority claims are listed in Part 2. The “consideration for claim” question would be eliminated, and the proposed form no longer asks if claims are subject to setoff. Additional notice parties are listed in Part 3.

Schedule G

Revised Schedule G is a simplified version of the current form. The debtor is no longer required to make multiple assertions about each executory contract or unexpired lease. Instead, the debtor is asked to identify the name and address of the other party to the contract or lease and the nature and purpose of the agreement. Definitions and examples of executory contracts and unexpired leases are included in the separate instructions for the form.

Schedule H

The instructions to current Schedule H direct debtors to list former spouses with whom the debtor lived in a community property state within the last eight years prior to filing. Under the proposed changes, this instruction is replaced by a specific question regarding former spouses in community property states. In addition, for each codebtor listed in the modernized schedule, the debtor is required to indicate where on Schedule D or Schedule E/F the debt is listed. This requirement eliminates the need to repeat the name and address of the creditor in Schedule H.

Statement of Financial Affairs

The current statement of financial affairs has many open-ended questions and multiple-part instructions. The modernized form contains more specific questions. Checkboxes are used extensively in the revised form, and questions of a similar nature are grouped together. The instruction that married debtors filing under Chapter 12 or Chapter 13 must include information applicable to their non-filing spouses is eliminated from the new form.

Statement of Intention

Extensive instructions are added to the statement of intention. For example, the debtor is advised that the form must be filed within 30 days and that the debtor must deliver copies of the form to creditors and lessors listed on the form.

National Chapter 13 Plan Form

A national Chapter 13 plan form to be used by all debtors in all jurisdictions and amendments to the Federal Rules of Bankruptcy Procedure to implement the plan also are being considered for adoption by the Committee. The use of a national form plan is consistent with existing practice of using national forms for regular bankruptcy procedures. If approved as a package, the national plan form and implementing rules will likely go into effect on December 1, 2016.

Best Case Bankruptcy and CINcompass are well prepared to handle the forms changes. Please be assured that you can count on CINgroup, as you always have, to provide the highest quality software to the bankruptcy market.

About the Author:

George Basharis, JD

George Basharis, J.D. is a practicing bankruptcy attorney in the Northern District of Illinois. He has represented dozens of individuals and small businesses in federal bankruptcy proceedings and related matters. George also advises the CINgroup on a variety of aspects regarding bankruptcy law. He has authored books, white papers, customer newsletters and conducted speaking engagements regarding bankruptcy.