Consumer Bankruptcy Journal Winter 2016 - Page 10

COMMENTS OF THE NACBA NACBA recognizes that the Advisory Committee has done a great deal of work on this project, but we fear that in trying to salvage something from this work it is now falling victim to the “sunk costs” fallacy. We urge you to reject the proposal to permit districts to mandate the use of local form plans, at least if it does not include the safeguards described above that would protect the debtor’s ultimate right to propose a plan under Code § 1321. Stay Termination Upon Surrender Should Be An Optional Plan Provision Proposed Rule 3015.1(d)(5) states that a Local Form chapter 13 plan must include a separate plan provision that provides for “surrendering property that secures a claim with request that the stay be terminated as to the surrendered collateral.” NACBA does not oppose a rule that requires a separate paragraph in the Local Form that deals with surrender of collateral. However, the rule should not require that the debtor request that the stay be terminated. By requiring such a request, the rule adopts a legal position as to the effect of surrender and impermissibly exceeds the scope of a procedural rule. The proposed rule also imposes a mandate that is not set out in the Bankruptcy Code. Section 1325(a)(5)(C) states simply that the plan provides that “the debtor surrenders the property securing such claim to such holder.” It does not require the debtor to request stay termination as to the collateral. The Advisor y Committee should not impose a requirement on debtors that does not exist under the Code, particularly when courts are divided on the procedural requirements and substantive effect of surrender. A request for stay termination in the plan raises significant procedural concerns and imposes costs on the debtor. Requests for stay relief are governed by section 362(d) and Rule 4001(a). If the request for stay termination is made in the plan, the proposed plan will be treated as a motion under Rule 4001(a), and made in accordance with Rule 9014 and the service requirements under Rule 7004. If the plan is served when the petition is filed or shortly thereafter, in most districts the stay will terminate automatically under section 362(e) thirty days after the request is made, even before the court has conducted a confirmation hearing. If the plan is somehow not deemed effective as a request when the plan is filed, but rather at some later point such as when the plan is considered by the court at confirmation, the advance notice and hearing requirements under Rule 9014 may not be satisfied. Moreover, in many cases the debtor will incur the additional costs associated with the enhanced service requirements under Rule 7004(h), as many secured creditors are insured depository institutions. By forcing the debtor to make a request for stay termination that is not required by the Code, rather than have it listed on a Local Form as an available option, the proposed rule takes away the debtor’s right to propose the specific content of the plan. Moreover, there are good reasons why a debtor should not be compelled to seek stay termination. It is not uncommon for debtors to provide for surrender of collateral in the plan and at the same time be actively involved with 10 CONSUMER BANKRUPTCY JOURNAL 2 Winter 2016 National Association of Consumer Bankruptcy Attorneys