Effective December 1, 2024, significant bankruptcy rules changes have come into force. These changes include a simplified process for turnover of repossessed property, removal of the need for financial management course certifications, complete restyling of the rules, and important resources to navigate these updates.
Easier Process for Turnover of Repossessed Property
Amendments to Rule 7001 now allow debtors to recover repossessed property through a motion rather than an adversary proceeding. This streamlined process benefits debtors who need essential assets like cars or tools of trade to maintain employment or comply with Chapter 13 plans.
The 2021 Supreme Court case City of Chicago v. Fulton (592 U.S. 154) ruled that the automatic stay doesn’t compel creditors to return repossessed property. Before this decision, many creditors voluntarily returned vehicles to avoid stay violation sanctions. After Fulton, however, debtors faced delays and costs when creditors refused to return property voluntarily.
Justice Sotomayor, in her concurring opinion, highlighted how the lack of a streamlined process burdens debtors. She encouraged the Advisory Committee to amend procedural rules to ensure prompt resolutions. The updated Rule 7001 addresses this by allowing motions under Rule 9014 to enforce turnover under § 542(a).
NCLC’s Updated Sample Pleadings for Turnover
NCLC has revised its sample pleadings in Consumer Bankruptcy Law and Practice. The updated resources include:
- Form 46: A demand letter requesting immediate turnover of property.
- Form 47: A motion for turnover, which eliminates the need for separate motions for injunctions or temporary restraining orders.
Debtors can request emergency hearings on turnover motions while adhering to local court rules. In cases involving additional claims against creditors, adversary proceedings may still be appropriate.
Elimination of Financial Management Course Certification
Rule 1007(b)(7) no longer requires debtors to file Form 423 to confirm completion of a financial management course. Instead, course providers will submit proof directly to courts.
This change prevents cases from closing without a discharge due to missing certifications. Debtors excused from the course are also no longer required to file Form 423 or alternative certifications.
Amendments also revise related rules, including Rules 1007(c)(4), 4004(c), 5009(b), and 9006(b)(3)(B) and (c)(2), to replace references to “statement” with “certificate.”
Infographic highlighting major updates in bankruptcy rules effective December 2024, including easier repossession recovery, simplified certifications, and restyled procedural clarity.
Side-by-Side Comparison of Old and New Rules
The restyled bankruptcy rules changes adopt the clarity guidelines used in other federal procedural rules. This effort ensures consistency and simplifies understanding.
The NCLC provides a side-by-side comparison of the original and revised rules in Appendix B of Consumer Bankruptcy Law and Practice. Attorneys can access this resource to see changes in numbering and style.
Restyling Led to an Unintended Substantive Change
While the restyling aimed to preserve substance, it inadvertently altered Rule 3001. The sanction provision now excludes open-end or revolving consumer credit agreements.
Before the restyling, former Rule 3001(c)(2)(D) applied to all disclosures required under subdivision (c), including open-end credit agreements. After the restyling, the sanction provision under Rule 3001(c)(3) excludes requirements listed in Rule 3001(c)(4).
The NCLC has requested a correction to the Rules Committee. Until then, attorneys can argue that courts retain authority to oversee evidence production and sanction improper creditor behavior under general principles.
