Insights

Supreme Court Approves Changes to Bankruptcy Rules

On April 23, 2008, the U.S. Supreme Court approved and forwarded to Congress amendments to the Federal Rules of Bankruptcy Procedure. The amendments generally reflect interim rules already adopted to implement the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”). The interim rules, which were adopted by nearly all bankruptcy courts in August 2005, are effective until permanent rules are put in place to implement each of BAPCPA’s provisions. The amended rules take effect on December 1, 2008, unless Congress acts affirmatively before that time to reject, modify, or defer them.

Among the rule changes affecting large business-bankruptcy cases are the following:

Rule 1007 continues to require debtors to file a variety of lists, schedules, statements, and other documents. The amendments require any chapter 15 petition filed on behalf of a foreign debtor to be accompanied by a list of entities with which the debtor has been engaged in litigation in the U.S.Amended Rule 1010 requires service of a summons and a chapter 15 petition (voluntary or involuntary) on any debtor with respect to which recognition of a foreign nonmain proceeding is sought, as well as any entity against which the foreign debtor’s representative is seeking provisional or additional relief. The rule also requires each corporate petitioner in an involuntary chapter 15 case to file a corporate-ownership disclosure statement.

Rule 1011 as amended provides that the debtor named in an involuntary chapter 11 petition, or a party in interest to a petition for recognition of a foreign proceeding, may contest the petition. It further provides that, in the case of an involuntary chapter 15 petition against a partnership, a nonpetitioning general partner, or a person who is alleged to be a general partner but denies the allegation, may contest the petition. The rule also now includes a requirement that any corporation responding to an involuntary or voluntary chapter 11 petition must file a corporate-ownership disclosure statement.

New Rule 1021 establishes procedures for designating a debtor as a health-care business.

Amendments to Rule 2002 require the bankruptcy court to provide notice to a foreign debtor and to entities against which relief is sought of a hearing on a petition for recognition of a foreign proceeding under chapter 15.

New Rule 2007.2 requires a patient-care ombudsman to be appointed in the first 30 days of any health-care business-bankruptcy case unless the court finds it is not necessary for the protection of patients. The rule also establishes procedures for a party in interest to seek or object to the appointment of an ombudsman.

Amended Rule 2015 requires a foreign representative in a chapter 15 case to file notice of a change in status in the foreign proceeding or in the representative’s appointment.

New Rule 2015.1 governs reports issued by a health-care ombudsman and the protection of patient privacy when the ombudsman requests access to patient records.

New Rule 2015.2 authorizes and prescribes procedures for the relocation of patients when a health-care debtor business is being closed.

New Rule 2015.3 requires a chapter 11 debtor-in-possession or trustee to file periodic reports of the value and profitability of any entity in which the debtor has a substantial or controlling interest.

Amended Rule 3003 provides that the bankruptcy court may extend the time for a creditor with a foreign address to file a proof of claim in a chapter 9 or chapter 11 case.
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