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Initial Attorney Reactions to the New Bankruptcy Forms

posted by Pamela Foohey

Help ImageYesterday I spoke at the Oklahoma Bar Association's annual advanced bankruptcy seminar. My talk focused on my research into chapter 11 cases filed by churches, a few of which are from Oklahoma. But the seminar's timing aligned perfectly with the roll out of the new bankruptcy forms. And unsurprisingly the first hour of the seminar was devoted to introducing and discussing the forms. A debtor attorney who handles chapter 7, 11, 12, and 13 cases -- Brian Huckabee -- parsed through some of the forms and added some initial comments. My take-away is that debtor attorneys' chief concern is that the readability and understandability of the forms will make it easier for debtors to file pro se, taking work away from attorneys ("this is self-service!"), a concern which was raised during the public-comment period. A related concern was voiced by a chapter 7 trustee: that chapter 7 (and 13) trustees will end up spending more time working through each case.

Three items during the discussion stood out to me. The first two relate to the "self-service" nature of the forms, particularly the new forms' instructions and white space. The last item goes to an attachment to the proof of claim form, Form 410A -- Mortgage Proof of Claim Attachment. 

The old forms came with 14 pages of instructions. The new forms come with 42 pages. "What I would say they have done is create a 50 page workbook. They are trying to make it so completely clear to debtors what is being asked that they cannot give the wrong answers." Consumer debtor attorneys never (seldom?) sent their clients home with the instructions to the forms. But the new forms and instructions raise the question: should certain clients be referred to the instructions? As the speaker noted, anytime attorneys can get clients to assist them in doing their jobs, that is ultimately a good thing, even if the attorneys "may seem a little more mortal." I wonder if debtor attorneys will start giving the instructions and perhaps all of the forms to some of their clients.

Whether attorneys will do so I think relates to the second item of interest -- the effect of the length of the new forms. The length mainly is a function of the forms' white space, which was described as a "good thing" because it makes it harder to miss things that must be disclosed. But a question was raised about whether attorneys may need to adjust their practice of filing cases.

As described, a current scenario is: a client comes to the office, fills out information for the forms, and at around 3:30 pm sits down with the completed forms for a half hour and spots questions and issues. Then the attorney and client go through the questions, the client signs, and, bam, the forms are filed around 4:30 pm. Filing the forms that afternoon is particularly important when the debtor's house is set to be auctioned the next morning. But can debtors get through the new forms with the same speed? Or will they need to come back the next day, hence "forcing" attorneys to send some clients home with the forms. Alternatively, of course, the attorney can work later. Ultimately, I'm not sure either of these outcomes will materialize. Yes, the forms are longer, but they are easier to understand. Debtors should be able to get through them in same amount, if not less time.

Of course, the forms do not diminish the value that bankruptcy attorneys can and do add: systematic issue spotting, explanation of rules, evaluation of the usefulness of bankruptcy, and confidence that the case will be done right. Indeed, the forms now include conspicuous, unambiguous warnings about perjury and bankruptcy crimes. I wonder what effect that will have, if any, on deterring some people who may think about filing pro se because of the new forms to decide to find counsel nonetheless.

Finally, a significant amount of time was given to discussing Form 410A -- Mortgage Proof of Claim Attachment -- which was thought capable of "provid[ing] a lot of benefits once it is turned into reality." Mortgage servicers presently provide loan history in whatever format suits them. These formats sometimes prove difficult for attorneys to wade through, let alone explain to clients. It is hoped that the new attachment will aid creditors in disclosing correct information, which will decrease the instances in which chapter 13 plans need to be modified post-confirmation to correct arrearage payments, and which also will decrease objections to trustees' notifications of final cure payments. Best of all, perhaps the attachment will decrease the incidence of misbehavior and mistakes in mortgage claims.

Image courtesy of Shutterstock.


Two takeaways:
1) If clients were willing and able to fill out complex forms, they probably wouldn't be in bankruptcy. I could barely get my clients to fill out their names, addresses, and SSNs on a credit report request.
2) File a bare bones petition to stop the foreclosure and send them home with a packet. I never did same day forms and filing, because I wanted them to sleep on the asset disclosures.
3) Bonus takeaway, I'm so glad I don't do this anymore. So glad.

Speaking as a person who spends a lot of time looking at bankruptcy petitions, the new bankruptcy petition form is really frustrating. Information is spread across multiple pages instead of being summarized on one page meaning that it takes 2-3 times as long to abstract the information.

One funny element, the new petition asks for the filer to provide a four digit code for the filer's industry. First the request is buried in a section where most filers do not see it. Second, the code system that the form asks for (NAICS) is actually a SIX digit identification system (versus the 4 digit SIC code). What's a debtor to do? So far it seems the answer is: disregard the request.

My questionnaire asked make, model and year of car. Client wrote "green." Like BAPCPA, the paperwork has been increased to frustrate debtors and keep them from filing bk. Attorneys are just collateral damage.

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