Are you and your institution ready for the Bankruptcy Rule 3002.1 amendments? Amendments to Bankruptcy Rule 3002.1 are scheduled to take effect on December 1, 2025. These amendments address notices relating to claims secured by a security interest in debtor’s principal residence in a Chapter 13 case. Below is an overview of five critical changes to Bankruptcy Rule 3002.1:

1. Expanded Scope

Bankruptcy Rule 3002.1 previously applied to claims “(1) that are secured by a security interest in the debtor’s principal residence, and (2) for which the plan provides that either the trustee or the debtor will make contractual installment payments.” The new rule similarly applies to claims secured by a security interest in the debtor’s principal residence but now applies when “the plan provides for the trustee or debtor to make payment on the debt.” This new language targets the previous exclusion of certain loans such as those that may be paid in full during the plan or reverse mortgages. This expanded scope is critical to servicers who operationally excluded these types of loans from 3002.1 filings, such as a Payment Change Notices (PCNs) or Post-Petition Fee Notices.

2. HELOC Notices of Payment Changes

Under Bankruptcy Rule 3002.1(b), creditors are generally required to file a notice of payment change prior to the actual change in payment to provide notice to the borrower and trustee. Home equity lines of credit (HELOCs) have historically been a pain point for creditors filing PCNs due to the frequency of payment changes, which are also often in small amounts. In addition to frequent filings, creditors often struggle to keep up with the timing requirements to sufficiently notice the changes because they are required to file a PCNs at least 21 days before the new payment is effective.

The amendments (theoretically) streamline this process – allowing creditors to instead file a PCN annually for HELOC loans, unless the payment changes by more than $10. The rule provides for certain content requirements for an annual HELOC PCN notice, including a reconciliation amount (net overpayment or underpayment for last year). Additionally, the servicer must ensure the first payment due after a timely annual notice be increased or decreased by any “reconciliation” amount.

3. Clarification of Effect of Untimely PCNs

The rule now clarifies the effect of an untimely PCN, which is currently considered an industry standard remediation practice:

• If the payment increased, the new payment should not become effective until at least 21 days after filing/service. Typically, this will be addressed via credit to borrower’s account for the difference between the old and new payment amount for each relevant month.
• If the payment decreased, the new payment becomes effective on the actual due date (even if prior to the notice).

4. Motion to Determine Status

The revisions include a new mechanism for the trustee or debtor – the “Motion to Determine Status,” which may be filed at any time after the bankruptcy filing until the End-of-Case Notice of Disbursements Made is filed (see below). If the creditor disagrees with the facts and amounts included in the motion, it must file a response within 28 days of the motion. This response must be filed on a designated form. If there is disagreement, the court will determine the status of the mortgage claim after notice and a hearing. The objective here is to provide a mid-case “check-in” to address any questions or accounting discrepancies prior to the end of the case. The industry will have to stay tuned to see how frequently this is used by trustees and/or the debtors’ bar and the downstream impact on servicers.

In addition to the official form response, servicers must provide additional documentation. The servicer must also provide a payoff statement and, if the claim holder says that the debtor is not current on all payments, it must attach an itemized payment history for the post-petition period.

5. End-of-Case Notice of Disbursements Made

The prior Bankruptcy Rule 3002.1 included a “Notice of the Final Cure Payment,” which served a similar objective to this notice. However, the trustee is now required to file a designated form that states the amount the trustee has paid to cure any default on the claim and whether the default has been cured. The creditor still must file a response within 28 days of the motion. This response must also be filed on a designated form. The trustee or debtor may file a motion to determine whether the debtor has cured all defaults and paid all required payments within 45 days after service of the creditor’s response or the trustee’s notice if the creditor did not file a response.

Takeaways

• It’s never too early to prepare! If your institution has not yet reflected on what these changes mean, it is important to consider how to operationalize these requirements, prepare to timely and accurately respond, and train team members handling these loans.
• For HELOC loans, consider whether to adopt the “annual” PCN notice or continue current filing practices.
  • Recall that there is now clarity on how to handle untimely PCNs and ensure appropriate remediation is complete in the event any notices are untimely due to the cadence and volume of HELOC changes.
• Evaluate and implement processes and procedures to address the new Motion to Determine Status filings and ensure timely and accurate responses.
  • Depending on how often the trustee or debtor makes such a request, this could be a significant operational burden, particularly if there is disagreement and a hearing is required.
• Evaluate and implement processes and procedures to address End-of-Case Notice of Disbursements Made and whether changes need to be made to existing Notice of Final Cure processes.
• Consider attorneys’ fees relating to these services, any potential allowable amounts, and whether creditors may seek to recover them as allowable post-petition fees.

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