December 7, 2016
Best Practices: New Bankruptcy Proof of Claim Forms and Revisiting Filing Requirements
by Greg T. Kupniewski
New federal bankruptcy forms become effective today regarding proofs of claim. These new forms provide templates for the notice required once an objection to a proof of claim is filed. Most lenders will never need to produce one of these forms. But many lenders, unfortunately, will be on the receiving end of an objection to the lender’s proof of claim.
The new forms can be found at: http://www.uscourts.gov/rules-policies/pending-rules-and-forms-amendments/pending-changes-bankruptcy-forms.
These new notice forms are part of the federal court’s overall modernization of the forms used in bankruptcy. As part of that modernization, the federal courts implemented a new proof of claim form one year ago today.
The “new” proof of claim form, called Official Form 410, can be found at: http://www.uscourts.gov/forms/bankruptcy-forms/proof-claim-0. The most significant change in Form 410 relates to claims secured by the Debtor’s primary residence. For such claims, Form 410 requires the inclusion of a full loan payment history from the time of the initial default on the loan. The information required is much more expansive than the information typically found in a mortgage-based claim.
Lenders can easily miss including the expansive mortgage information with Form 410 because the information needs to be provided on three additional forms that are related to (but separate from) Form 410. The additional forms are Form 410A, Form 410S-1 and Form 410S-2. They can be found in the right side pane of the link provided in the preceding paragraph. Form 410A is the form the lender will use to communicate the payment history.
Form 410S-1 is used to communicate any changes to the payment terms on the underlying loan. Lenders are required to supplement their proofs of claim with Form 410S-1 at least 21 days prior to the new payment terms becoming effective. This timing requirement creates a potential pitfall for SBA lenders. A common SBA loan structure involves a corporate borrower whose loan is guaranteed by the person who owns the corporation. The guarantee, in turn, is typically secured by a mortgage on the owners primary residence.
If the owner is in bankruptcy, but the corporate borrower is not, the lender would ordinarily be able to modify the payment terms of the loan without any consideration for the owner’s bankruptcy. Form 410S-1, however, now needs to be filed at least 21 days beform any such loan modification becomes effective. Failure to do so could adversely impact the lender’s recovery in the owner’s bankruptcy case (and perhaps lead to a repair on the SBA guaranty).
Form 410S-2 requires lenders to list all fees and other charges that are recoverable from the debtor or the collateral. Lenders should make a point of supplementing any proof of claim filed when it submits CPC tabs to the SBA on the underlying loan.
If you have any questions on filing claims using Form 410 or the related supplemental forms, please feel free to contact Greg at email@example.com