TRANSCRIPT OF PROCEEDINGS

HERITAGE REPORTING CORPORATION

Official Reporters

1220 L Street, N.W., Suite 600

Washington, D.C. 20005-4018

(202) 628-4888

contracts@hrccourtreporters.com

IN THE MATTER OF: )

 )

BANKRUPTCY RULES COMMITTEE )

HEARING )

Pages: 1 through 90

Place: Washington, D.C.

Date: January 23, 2015
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ADMINISTRATIVE OFFICE OF THE UNITED STATES COURTS

IN THE MATTER OF: )

 )

BANKRUPTCY RULES COMMITTEE )

HEARING )

 Mecham Conference Center

Thurgood Marshall Federal

 Judiciary Building

One Columbus Circle, N.E.

Washington, D.C.

Friday,

January 23, 2015

The parties met, pursuant to the notice, at

9:56 a.m.

BEFORE: HONORABLE SANDRA SEGAL IKUTA

 Judge

APPEARANCES:

APPEARANCES:

HONORABLE STUART M. BERNSTEIN

HONORABLE DENNIS R. DOW

HONORABLE A. BENJAMIN GOLDGAR

HONORABLE ARTHUR I. HARRIS

HONORABLE ROBERT JAMES JONKER

HONORABLE ADALBERTO JORDAN

PROFESSOR S. ELIZABETH GIBSON

PROFESSOR TROY A. McKENZIE

RAMONA D. ELLIOTT, ESQUIRE

ROY T. ENGLERT, JR., ESQUIRE

DIANE L. ERBSEN, ESQUIRE

JEFFREY J. HARTLEY, ESQUIRE

BRIDGET HEALY, ESQUIRE

RICARDO I. KILPATRICK, ESQUIRE

THOMAS MOERS MAYER, ESQUIRE

JILL A. MICHAUX, ESQUIRE
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APPEARANCES: (Continued)

SCOTT MYERS, ESQUIRE

JAMES H. WANNAMAKER, ESQUIRE

JAMES J. WALDRON, CLERK OF BANKRUPTCY COURT,

 NEW JERSEY

WITNESSES:

JUDGE MARVIN ISGUR, U.S. Bankruptcy Court

JUDGE KEITH M. LUNDIN, U.S. Bankruptcy Court

RONDA WINNECOUR, Chapter 13 Standing Trustee

ALANE A. BECKET, Becket & Lee LLP

MICHAEL BATES, Wells Fargo Law Department

KAREN CORDRY, States' Association of

 Bankruptcy Attorneys

JUDGE BRIAN D. LYNCH, U.S. Bankruptcy Court

JUDGE REBECCA B. CONNELLY, Chief, U.S.

 Bankruptcy Court
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1 P R O C E E D I N G S

2 (9:56 a.m.)

3 JUDGE IKUTA: Good morning, everyone, and 

4 welcome to this public hearing on the proposed 

5 amendments to the Federal Rules of Bankruptcy 

6 Procedure. I'm Sandra Ikuta, the Chair of the 

7 Advisory Committee on Bankruptcy Rules.

8 Today we are hearing eight witnesses who 

9 have requested to testify regarding the proposed 

10 official Form 113 for Chapter 13 plans and related 

11 amendments to the rules which were published in August 

12 2014. We've also received a number of written 

13 comments on the official form and the rules.

14 So our procedure today, each of the 

15 witnesses will have five minutes to testify, and then 

16 there will be five minutes for questions by committee 

17 members. And the witnesses should be aware that the 

18 Committee has reviewed the written submissions by each 

19 of the witnesses, so the witnesses are encouraged to 

20 focus on the key points. We have a clock to help keep 

21 our hearing on schedule, and we'd appreciate the 

22 witnesses keeping an eye on the allotted time, and the 

23 Committee will try to do so as well so that everyone 

24 has the same opportunity to be heard.

25 At this point I'd like to ask the 
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1 Committee's reporters and the members of the Committee 

2 who are here today to introduce themselves. 

3 Elizabeth.

4 MS. GIBSON: I'm Elizabeth Gibson from the 

5 University of North Carolina, and I'm the reporter to 

6 this Rules Committee.

7 MR. McKENZIE: I'm Troy McKenzie. I'm at 

8 New York University School of Law, and I'm assistant 

9 reporter to the Rules Committee.

10 MR. ROSE: I'm Jonathan Rose, Chief of the 

11 Rules Committee Support Office.

12 JUDGE HARRIS: Art Harris, a Bankruptcy 

13 Judge from Cleveland, Ohio.

14 JUDGE BERNSTEIN: Stuart Bernstein, 

15 Bankruptcy Judge, Southern District of New York.

16 MR. KILPATRICK: Ricardo Kilpatrick, 

17 attorney from Detroit.

18 JUDGE GOLDGAR: Ben Goldgar, Bankruptcy 

19 Judge, Northern District of Illinois.

20 MS. MICHAUX: Jill Michaux, an attorney from 

21 Topeka, Kansas.

22 MR. WANNAMAKER: Jim Wannamaker, a 

23 consultant with the Committee.

24 MS. HEALY: I’m Bridget Healy. I'm staff 

25 support.
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1 MR. MYERS: Scott Myers. I also am staff 

2 support for the committee.

3 JUDGE JONKER: I'm Bob Jonker, a District 

4 Judge from the Western District of Michigan.

5 JUDGE JORDAN: I'm Bert Jordan, a Circuit 

6 Judge on the Eleventh Circuit.

7 MR. WALDRON: I'm Jim Waldron, the Clerk of 

8 the Bankruptcy Court, New Jersey.

9 MR. MAYER: Tom Mayer, attorney, New York 

10 City.

11 JUDGE DOW: Dennis Dow, Bankruptcy Judge, 

12 Western District of Missouri

13 MR. HARTLEY: I'm Jeff Hartley. I'm an 

14 attorney for the State Bar in Alabama.

15 MS. ERBSEN: Diane Erbsen, Tax Division, 

16 U.S. Department of Justice.

17 MR. ENGLERT: Roy Englert. I'm a lawyer in 

18 private practice in Washington, D.C. I'm liaison from 

19 the Standing Committee to the Bankruptcy Rules 

20 Committee.

21 MS. ELLIOTT: Good morning. I'm Ramona 

22 Elliott. I'm deputy director and general counsel for 

23 the U.S. Trustee Program, which is part of the 

24 Department of Justice.

25 JUDGE IKUTA: Okay. Thank you.
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1 We will have a transcript prepared of this 

2 hearing so that the members of the Committee who were 

3 not able to attend today will be able to review all 

4 the testimony, and the transcript will be posted on 

5 the U.S. Courts' Rules website.

6 I will call the witnesses in the order noted 

7 on the confirmed witness list, starting with Chief 

8 Judge Connelly, and could you please identify yourself 

9 for the record? Will you please come up to the 

10 podium?

11 JUDGE CONNELLY: Thank you, Judge Ikuta. My 

12 name is Rebecca Connelly. May I begin?

13 JUDGE IKUTA: Do we have the time? Okay, 

14 thank you.

15 JUDGE CONNELLY: Thank you. Thank you for 

16 this wonderful opportunity. Before becoming a 

17 Bankruptcy Judge I was a Chapter 13 trustee. I 

18 support the adoption of an official form plan for the 

19 Chapter 13 plan and I support the adoption of the 

20 proposed amended bankruptcy rules. An official form 

21 for the Chapter 13 plan will enhance access, will 

22 improve due process, will reduce costs, but it will 

23 not eliminate judicial discretion and judicial 

24 authority, nor will it result in or eliminate 

25 decentralization of case administration, local 
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1 flexibility, and local customization.

2 What an official form will do is it will 

3 provide a standard reporting of plan terms. That is 

4 critical in order for information sharing of those 

5 plan terms. Currently the only way Chapter 13 plan 

6 terms are provided to the court, the trustee, the 

7 creditors, the public is through a document. The 

8 document then requires someone to re-report that 

9 information. Through information sharing those plan 

10 terms can be immediately transferred. It can be 

11 accurate, efficient, and less expensively transmitted.

12 Currently the only way debtors can submit 

13 their plans and prepare their plans if they are not in 

14 a high volume Chapter 13 area is through a manual 

15 transmission. Those areas that are high volume 

16 Chapter 13 plans, Chapter 13 software programs are 

17 available, but they're not available to those debtors 

18 who don't reside in high volume areas. If the plan 

19 was consistent, the standard reporting of plan terms, 

20 all debtors could use the assistance of a software 

21 program to prepare, test, submit their Chapter 13 

22 plan.

23 Four and a half years ago the United States 

24 Supreme Court issued a decision that had the effect of 

25 abrogating rulings in nearly every circuit regarding 
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1 Chapter 13, the decision of United Student Aid Funds 

2 v. Espinoza. The Ninth Circuit was upheld, but in 

3 doing so every other circuit's decision was abrogated, 

4 and in that case the United States Supreme Court 

5 identified that a Chapter 13 plan confirmation would 

6 be binding, notwithstanding procedural defects and the 

7 fact that the provision was improper.

8 It was a term we call "discharge by 

9 declaration". "I declared in my plan that I'm 

10 discharging my student loan, therefore it is." The 

11 law didn't permit that. Every circuit had said if you 

12 didn't comply with procedural, fundamental procedural 

13 processes you had a violation of due process, but the 

14 Supreme Court saw that differently and found that that 

15 plan was binding, and the defect in due process was 

16 remedied by the bankruptcy judge reviewing the plan, 

17 every term in that plan to verify that it did not 

18 contain any improper provisions.

19 Given the volume of Chapter 13, that task is 

20 nearly impossible. I believe it's irresponsible for 

21 us not to consider an official form for the Chapter 13 

22 plan, in particular so that non-standard provisions 

23 are in one location. This will assist all bankruptcy 

24 judges, in particular new bankruptcy judges and any 

25 judge that has to travel among different districts and 
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1 different circuits to help out, as is currently the 

2 situation and will continue to be.

3 There are two important parts of the 

4 proposed rules that I would like to highlight and 

5 emphasize that I strongly encourage these rules for 

6 adoption, and the rules contemplate the use of an 

7 official form for the Chapter 13 plan.

8 The two areas are, first, the claims 

9 allowance process and the plan confirmation process 

10 today are two different procedures, time periods, and 

11 service requirements. The new rules have a compatible 

12 service requirements and time period so that rulings 

13 from the court which today are incompatible will no 

14 longer be incompatible because the Bankruptcy Code is 

15 not irreconcilable. It's the two different 

16 procedures.

17 But more importantly, the new rules address 

18 another aspect of Chapter 13, and that is secured 

19 claims, liens, and claims allowance and plan 

20 confirmation. Currently under the rules five 

21 different procedures: plan confirmation, one time 

22 period, one service requirement; claims allowance, a 

23 different time period service requirement; motion to 

24 allow a secured claim or determine a secured claim, 

25 different procedure, time period, service 
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1 requirements; and action to determine the extent, 

2 validity, and priority of a lien, different service 

3 requirements, time periods; and a motion to avoid a 

4 nonconsensual lien, different service requirements and 

5 time period.

6 What the new rules do is provide a 

7 compatible, consistent, coherent mechanism or 

8 procedure so that we have consistent service 

9 requirements, consistent, compatible time periods, and 

10 they provide an option, a very important option. Not 

11 a mandate. The rules use the term "may". A Chapter 

12 13 debtor may collapse and combine these five 

13 different procedures into one when the debtor uses an 

14 official form for the Chapter 13 plan, that is, 

15 uniform reporting of the information, standard 

16 reporting of the information and certain standard 

17 minimum notice requirements, minimum notice 

18 requirements, not maximum. That is, there is no 

19 indication that there can't be additional terms, 

20 additional notices, additional procedures, but minimum 

21 procedures are provided in this official form.

22 I believe it's an enhancement to Chapter 13. 

23 It will aid Chapter 13 debtors, enhance the ability 

24 to use Chapter 13. It will improve due process. It 

25 will reduce costs, but it will not eliminate judicial 
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1 discretion, judicial authority, local case 

2 administration, flexibility, and customization.

3 I appreciate the opportunity to be heard and 

4 I'm grateful to this Committee to take seriously these 

5 enhancements to Chapter 13.

6 Finally, I'd just like to note that there 

7 have been a number of concerns raised. I believe that 

8 we can have an official form and the new rules, and we 

9 can address the concerns that have been raised. This 

10 project is so vital to solve the defect in due 

11 process, to enhance access to Chapter 13, to reduce 

12 costs. We should not simply abandon or disprove of 

13 the project at this point because of the opposition. 

14 I believe instead we can respond, we can enhance and 

15 improve the structure that has been set up so that we 

16 can accommodate the concerns. It's too important.

17 Thank you again for considering Chapter 13. 

18 Thank you for considering the proposed amended rules, 

19 and most importantly, thank you for considering the 

20 adoption of an official form for the Chapter 13 plan.

21 JUDGE IKUTA: Thank you. Let me see if the 

22 Committee has questions. Troy?

23 JUDGE DOW: I've got some questions.

24 JUDGE IKUTA: Judge Dow.

25 JUDGE DOW: In your written testimony, and 
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1 you didn't mention it here, you talked about -- one of 

2 the objections that's been raised is the form plan may 

3 not accommodate all the things that are going on in 

4 various districts and will create problems in 

5 individual cases. You talked in your letter about a 

6 sample that you did in looking at the form plan and 

7 actual cases under your own local plan. Can you tell 

8 us about that? How big was the sample? What did you 

9 discover in that process?

10 JUDGE CONNELLY: The first thing I did is I 

11 took my plan, and the plan that we have is in 

12 Virginia. Two different districts use the same form 

13 plan. I took that plan and I did a chart just simply 

14 using word processing where I provided on one column 

15 the plan provisions on the Virginia plan and in the 

16 second column I described exactly how the debtor would 

17 report those provisions under the official form plan, 

18 and I was able to do so with every provision that we 

19 have in our Virginia plan, could map to a provision in 

20 the form plan.

21 I then did the same thing, I attempted to do 

22 so, that is, by pulling up a sampling of form plans. 

23 I did review the plan for the District of Kansas, I 

24 reviewed the plan for -- I reviewed the plan, I looked 

25 at Judge Isgur's plan, and I can't recall now the 
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1 other plans that I did. It was a small number, but I 

2 did intentionally take certain plans and was able to 

3 identify the -- oh, Tennessee, I looked at the plans 

4 in the districts of Tennessee, and you may note that 

5 currently in the Middle District of Tennessee they now 

6 are using this official form plan, but I went ahead 

7 and looked at the other districts in Tennessee and I 

8 on one column put down the plan provisions and on the 

9 other column indicated where those provisions would be 

10 dealt with in the official form plan, and I was unable 

11 to find any provisions that I could not map.

12 Now the difference is there are some 

13 instructions, there are additional terms added to some 

14 plans. I don't see that as an inhibitant, in any way 

15 inhibiting the use of an official form. The fact that 

16 there may be some additional instructions to assist a 

17 creditor regarding certain disbursement terms doesn't 

18 prevent the ability for those disbursement terms to be 

19 in standard format or standard location.

20 JUDGE IKUTA: Other questions?

21 JUDGE DOW: I've got one other if nobody 

22 else has any.

23 JUDGE IKUTA: Go ahead.

24 JUDGE DOW: One of the arguments that's been 

25 made by people who oppose the plan form is that 
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1 rolling the lien avoidance and valuation processes 

2 into the form and into the confirmation process will 

3 make that more complicated and more expensive overall 

4 for debtors. What is your own particular view on that 

5 particular argument?

6 JUDGE CONNELLY: Debtors have the 

7 opportunity to determine amount of secured debts to 

8 address liens in Chapter 13 cases. Whether they do so 

9 in separate proceedings or they do so in one 

10 proceeding doesn't change the fact that they have that 

11 right, and how a judge decides how they're going to 

12 handle a contested matter is not indicated at all by 

13 these rules.

14 So the debtor already has the right to deal 

15 with liens in Chapter 13. I don't think that giving 

16 them the opportunity to do so through a plan changes 

17 that in any way. It simply just gives the opportunity 

18 to do so in one document or one format and thereby 

19 providing a more efficient sharing of that 

20 information. It's up to the Court then to decide 

21 whether it's appropriate to approve it and how to do 

22 so in the face of any contest, any contested matter.

23 JUDGE IKUTA: Thank you, Chief Judge 

24 Connelly, for your testimony. We appreciate your 

25 coming here.
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1 JUDGE CONNELLY: Thank you. Thank you very 

2 much.

3 JUDGE IKUTA: Our next witness today is 

4 Chief Judge Keith Lundin.

5 JUDGE LUNDIN: Good morning. You can start 

6 this thing now. There it goes.

7 Madam Chairman and members of the Committee 

8 and friends and colleagues. I know most of the people 

9 in this room.

10 I'm Keith Lundin from the Middle District of 

11 Tennessee. I'm old, and I have a confession, an 

12 observation about a little history, and then a little 

13 bit of argument, and that's it.

14 My confession is I am a rules and forms 

15 junkie. I just am. It's geeky, I know. That's not a 

16 good confession to make. But I've been messing with 

17 this kind of thing since 1981. The first Advisory 

18 Committee argument discussion was with a guy named 

19 Alex Paskay. Some of you all remember Alex? And Bill 

20 Norton from the bankruptcy bench down in Atlanta. And 

21 it was a fight in 1982 about whether the Federal Rules 

22 of Civil Procedure were going to apply to adversary 

23 proceedings in Bankruptcy Court. Now think about it.

24 Why would I bring -- I lost that argument 

25 incidently. I argued they should, and instead we have 
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1 this mess of bankruptcy rules in adversary proceedings 

2 that are some federal rules, some not. Don't worry 

3 about it. That's not what we're here to talk about 

4 today. That's not what we're doing.

5 Here's the point. I've watched this process 

6 for 35 years, almost 35 years now. There has never --

7 and the allegation has been made that somehow the 

8 Advisory Committee has gone off the rails here with 

9 this official form for the Chapter 13 plan. It was on 

10 the agenda 30 years ago. We've been trying to get 

11 this done for three decades.

12 But more important than that, the claim has 

13 been made that the Committee hadn't done it right, 

14 that they didn't seek a consensus, that they didn't go 

15 out and talk to the bankruptcy community, that they 

16 didn't air the issues correctly, that they've made 

17 this thing up. They've made up a problem to solve.

18 Well, I've got to tell you nothing could be 

19 further from the truth, and it's important to make 

20 this point because some of you are new. Some of you 

21 are new to the Committee, and you haven't watched this 

22 process. I will tell you the Advisory Committee, 

23 there has never been an issue that was vetted as well 

24 as this one has been over the last four years. The 

25 people that reached out in the original group, Liz 
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1 Perris and Gene Wedoff and Peg Mahoney, and Ricardo 

2 came a little later and he started doing it, Larry 

3 Walters.

4 I mean, these people went all over the 

5 country. They talked to every public that there is 

6 that cares about bankruptcy, and the biggest single 

7 thing that's missing right now in consumer bankruptcy 

8 is the only thing that isn't a form is the Chapter 13 

9 plan, and it's nonsense that we don't have one. We've 

10 got forms for everything else.

11 And the sort of crazy arguments that somehow 

12 a form is going to change Chapter 13 practice, it's 

13 not going to change practice. It's just going to give 

14 us a way to do it all on the same pieces of paper. 

15 It's a form for god sakes. We're not rewriting a 

16 bankruptcy code.

17 And if you hear some frustration, it is that 

18 for four years now we've been making it better and 

19 better and better and better, and it's gotten -- it's 

20 almost there. It needs a little tweaking here and 

21 there, but that's going to happen in the next few 

22 months, and it will happen because people like Wedoff 

23 and others went out, sat down with the publics, and 

24 some of them are here, and collected all their ideas. 

25 There's nothing wrong with this system and there's 
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1 every reason why we need to go ahead with this.

2 The second point that I want to make is that 

3 I'm doing this already. I'm the only one who is, and 

4 I hope you'll ask me about that. I implemented this 

5 form in the Middle District of Tennessee, the most 

6 recent iteration of it, about 50 days ago, and we're 

7 through our first cycle, and the sky didn't fall. The 

8 only thing that happened, the only thing that happened 

9 was this wonderful new thing. I only have to look at 

10 Part 9. I don't have to read the rest of that 

11 garbage. I know what's in there.

12 And when I say "garbage", you know what, 

13 look at this room. There's like how many? Four, four 

14 bankruptcy judges I think, maybe five here, a bunch 

15 over there. Every bankruptcy judge in this room has a 

16 form for the Chapter 13 plan, and yet what is this? 

17 We're here to tell you it's a mistake to have a form 

18 and we all have one? That's not the problem. The 

19 problem is -- and we've got 200 of them, and it's a 

20 mess, and we need to fix it. We need to have one. I 

21 don't care.

22 Marvin, I love your form. Now it's 11 pages 

23 long. It's a little hard to read. And, Brian, I like 

24 your form too. It's five pages long. Five pages, 11 

25 pages. Over in Memphis it's one page. Thank God. 
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1 Now that's amazing. I'd like to have -- just give us 

2 one form, that's all, that's what we need, not 200. 

3 That's my whole message. I'm done and I've got 14 

4 seconds left.

5 (Laughter.)

6 JUDGE LUNDIN: What can I tell you? 

7 Anything?

8 JUDGE IKUTA: Do we have some questions?

9 JUDGE DOW: Well, since you invited us to 

10 ask you.

11 JUDGE LUNDIN: Go for it. Go for it.

12 JUDGE DOW: What have you discovered in the 

13 process of implementing the form?

14 JUDGE LUNDIN: Two things. One, I already 

15 told you, and it is, God, it's just, it's a godsend to 

16 have all of the weirdness in one place. That's 

17 brilliant, putting paragraph 9 in there in that 

18 checkbox in the beginning where you've got to check it 

19 if you're going to do something different than the 

20 rest of the form because I get to find all of that 

21 weirdness that comes from the county lawyers that 

22 don't file bankruptcy very often, right? That's the 

23 first thing that we found.

24 The second thing that we found is is that, 

25 and it's that the software providers got ahead of us. 
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1 They instantaneously made available the national form 

2 and put it online so that the lawyers who use Best 

3 Case and use these other software providers instantly 

4 were able to do it in their offices. There was no 

5 disruption at all, none at all. It just happened 

6 seamlessly, and all of the sort of fears that this is 

7 going to be more expensive, that it's going to create 

8 disruption, none of that materialized, nothing. Just 

9 wasn't there. It was just it happened. One day it 

10 was an old form and the next day it was your form. 

11 That's it. And we're the biggest district in the 

12 country dollar-wise. I mean, we're not doing this in 

13 a small way, and we went cold turkey. We did it 

14 December 1, period, no more. Mandatory.

15 MS. GIBSON: Judge Lundin, has there been 

16 any confusion by people of selecting options that have 

17 already been rejected by your court? I know a lot of 

18 people think that just because it's on the form that 

19 means everybody can select these things.

20 JUDGE LUNDIN: Professor Gibson, I've been 

21 there so long. Everybody knows what I'm going to do 

22 already. They already know, and they're not going to 

23 put something in the plan that they know isn't going 

24 to work because they can't afford to do it. The 

25 expense of filing the case and litigating with the 
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1 Chapter 13 trustee or with the United States trustee 

2 prohibits the kind of behavior that you're talking 

3 about. It just doesn't happen.

4 The one thing they did physically have a 

5 little trouble with is that collapsing mechanism, you 

6 know, the little collapsing mechanism where a 

7 paragraph collapses if you don't use it, and some of 

8 the lawyers don't understand collapsing, and they've 

9 collapsed the whole damn form.

10 (Laughter.)

11 JUDGE LUNDIN: I mean, that's been a little 

12 -- that was a little tricky.

13 MR. McKENZIE: Judge Lundin, could I ask you 

14 about your thoughts on implementing the form as you 

15 have done without having the rules in place and in 

16 particular the changes, for example, when proofs of 

17 claim would be due under 3002? Do you think that it 

18 would be feasible to go ahead with one without the 

19 other, or do you think that they really do need to be 

20 a package?

21 JUDGE LUNDIN: Wow, that's a tough one. 

22 That's a tough one because I don't want to give 

23 anything away here. I really don't. The package is 

24 fantastic because I was there a couple of years ago 

25 when it was like a light bulb in the room when 
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1 everybody realized wait a minute, this form is a 

2 fabulous idea, but we need to tweak the claims 

3 allowance process and the confirmation process and the 

4 lien avoidance process and all this. We need to get 

5 them all to align.

6 Well, I have to tell you we aligned them 30 

7 years ago in our district with local rules. That's 

8 exactly the way we've been doing it, so they're 

9 already together in some -- I'm a little biased. I've 

10 always done lien avoidance and all and valuation 

11 through the plan because I was a 13 trustee and I know 

12 that making people do those things separately is very 

13 expensive. So getting them all together is the way to 

14 do it.

15 Could you do it separately? If you -- you 

16 kind of throw away -- you throw away the synergy. I 

17 hate that word. You throw away the economics of this, 

18 the efficiency that comes from getting those processes 

19 together if you separate them. I hope you won't 

20 consider that. I hope you won't.

21 JUDGE HARRIS: Judge Lundin, we've got a 

22 petition from about 144 bankruptcy judges and another 

23 one from about 80 some Chapter 13 trustees around the 

24 country. How do you respond to the argument that with 

25 this much opposition we ought not to go forward?
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1 JUDGE LUNDIN: I've got to be careful about 

2 this because I get mad and then I say things about my 

3 friends and I regret it afterwards.

4 I've talked to a fair number of those 

5 people. Some of them are my closest friends on the 

6 bench. I've got to tell you most of them haven't even 

7 looked at that official form. They don't know what's

8 in it. And this was a lemmings moment. I don't know 

9 how else to describe it. It was just -- and I want to 

10 know where these folks have been for the last four 

11 years while we were having hundreds -- dozens and 

12 dozens of meetings all over the country and talking 

13 about all this stuff, and all of a sudden they show up 

14 like ninth inning and say you all haven't done this 

15 right. You haven't studied this correctly. You 

16 didn't develop a consensus.

17 I don't know what to make of it. I really 

18 don't. It's peculiar, it is, and it's dangerous. But 

19 I've got to say I think I know what's going on, I 

20 think I know what's going on, and it's something that 

21 Theresa Sullivan and Jay Westbrook and Elizabeth 

22 Warren, they saw it. They saw it 25 years ago, and 

23 they wrote about it, and they called it local culture. 

24 It's a wonderful phrase to describe what you can do 

25 is just fine, just don't do it in my back yard, the 
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1 old NIMBY idea. It is.

2 I know that Marvin, Brian and all of these 

3 144 -- if you look at them, almost all of them have 

4 their own form. They believe in having a form. They 

5 just want their form. And if the Committee would just 

6 adopt their form, the whole issue would go away and 

7 everybody would be happy. We just can't do it because 

8 we've got 200 different forms.

9 I think it's a local culture manifestation, 

10 and if you've got about an hour, I'll tell you why 

11 it's bad. I will. I'll show you why it's bad. I'll 

12 show you districts like this right here where 19 

13 percent of the cases are Chapter 13s in Brian's 

14 district. Sixty percent of them are Chapter 13 in 

15 Marvin's district. And I'm going to tell you that if 

16 you've got the hour I'm going to show you that it's 

17 this local culture that's doing this to us, and the 

18 last big piece that you can control -- you can't 

19 control whether Marvin's going to have an emergency 

20 fund and Brian isn't. You can't control that with a 

21 form.

22 But you can control where it appears on a 

23 piece of paper so that when Mike Bates back here --

24 where are you, Mike? I've lost him -- at Wells Fargo, 

25 when he has to open 400,000 plans a year, he can find 
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1 how he's treated, he can find it because it's always 

2 in the same place. That part you can control. The 

3 rest of it is this local culture thing. I think it's 

4 killing Chapter 13, but that's just my opinion.

5 JUDGE IKUTA: Thank you, Judge Lundin, for 

6 your testimony. We appreciate it.

7 JUDGE LUNDIN: I'm way over your time. I'll 

8 sit down.

9 JUDGE IKUTA: And we'll next hear from Chief 

10 Judge Brian Lynch.

11 JUDGE LYNCH: Good morning. Thank you for 

12 letting me participate.

13 A hundred forty-four judges did not sign our 

14 letter because they agreed with every jot and tittle 

15 of what we said in that letter. It's because overall 

16 they think the proponents of a mandatory form Chapter 

17 13 plan haven't made the case for the clear disruption 

18 that will take place in local Chapter 13 practice, and 

19 they're concerned because they feel by and large that 

20 Chapter 13 works in their jurisdictions.

21 This process has been in my view 

22 cattywampus. Here we are at the end talking about 

23 whether we should have a national form plan when it 

24 should have been the first discussion, but we never 

25 had that discussion. There's been no effort to try it 
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1 out, a model plan. I shouldn't say that. Judge 

2 Lundin tried to get people behind a model plan in 2004 

3 and he couldn't get people behind him. Now we've 

4 skipped the process of a model plan, trying it out in 

5 various places. We're going to mandate it, and we're 

6 going to mandate it on a plan that's not been tried 

7 out, all on a hypothesis that it will be better than 

8 the local plans that do work throughout our country.

9 And the thing that -- the last part of the 

10 cattywampus argument that I would like to make is it 

11 strikes me as an irrational process to come up with a 

12 solution before you've really analyzed the problem. 

13 This problem was posited somehow the lack of 

14 uniformity all by itself is the problem. What should 

15 have been done, and the data is there to check, is to 

16 say, okay, what kind of plans work well, have 

17 successful completion rates, are done cheaply around 

18 the country?

19 Analyze that and then say, okay, here's what 

20 we've seen the plan that works best. It's got a much 

21 better completion rate. That's when you get buy-in 

22 from local courts like my own. If you came to me and 

23 said, you know, if you do this, this, and this you're 

24 going to increase your completion rate from let's say 

25 on confirmed cases, from 40 percent or 50 percent up 
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1 to 75 percent, I listen. We're not irrational here.

2 That gets me to the second part of my 

3 argument, the rationales, which in my mind are either 

4 secondary or in some cases tertiary for drafting a 

5 national form plan and based largely on anecdote and 

6 intuition.

7 First of all, the Espinoza rationale. If 

8 you look since Espinoza was decided in 2010, on the 

9 appellate level there's six cases by my count, two of 

10 which have held that the provision in question was 

11 improper, but the creditor got due process. One held 

12 that there was due process but does not address 

13 whether the challenged provision was improper. That 

14 was involved -- excuse me -- there was not due 

15 process, and that was a lien strip interestingly. Two 

16 hold that the provisions are improper and the creditor 

17 was denied due process, and one held that the plan 

18 provision was improper and the Bankruptcy Court was 

19 right to deny confirmation.

20 What's my point? Two.

21 First of all, the Espinoza issue is an 

22 overblown issue. We are treating -- by and large 

23 local bankruptcy courts and trustees are catching 

24 improper provisions and stopping it. The Espinoza

25 problem is a much smaller problem.
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1 Secondly, if you really perceive Espinoza is 

2 the problem, all you have to do is to adopt a rule 

3 that says every plan, every local plan has to have a 

4 provision that requires that nonstandard provisions be 

5 located here. Call it out. You don't have to adopt a 

6 national mandatory form plan because of this little 

7 problem. It's an easy fix.

8 The second rationale is data enabling. You 

9 don't need a national mandatory form plan to data 

10 enable. Either in the petition or on a digital page 

11 you could require that certain data points from your 

12 local plan, most of which are located in every local 

13 form plan, be placed in some place where they're 

14 embedded and they can be drawn. There are lots of --

15 technology is not the problem. If we're talking about 

16 a mandatory national form plan because of data 

17 enabling, that is easily fixed.

18 The help the creditor argument. First of 

19 all, unsecured creditors -- any bankruptcy judge worth 

20 his or her salt would tell you unsecured creditors 

21 don't come, don't care, don't look. I shouldn't

22 say -- don't care is too strong. They look, they get 

23 incredible data from the National Data Center in terms 

24 of what their claims are, what cases they have, how 

25 much they're paid on their claims. It's a treasure 
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1 trove of information which is given to them in a 

2 digitized fashion which they manipulate in many ways 

3 to their advantage. But the confirmation process, 

4 they're nonparticipants.

5 Regarding mortgage creditors, I would say 

6 two things. First of all, the most well represented 

7 constituency in all of Chapter 13 are mortgage 

8 creditors, and strangely enough, for instance, in 

9 Washington and Oregon, the second and third most 

10 active mortgage firms are located in southern 

11 California, and the most active firm in Washington and 

12 Oregon, a firm up in Seattle, operates in 17 states 

13 from as far away as South Carolina on the east coast 

14 to California on the west.

15 The problem is not mortgage creditors. The 

16 problem is debtors and the problem that we're -- the 

17 concern of the 144 judges is the disruption to the 

18 debtors that could be caused by a national form plan 

19 which sweeps away plans which they're comfortable 

20 with, that work, and puts in its place a new form plan 

21 which they have no buy-in for. All the judges --

22 right now judges, trustees, attorneys have buy-in to 

23 their local plans. You're basically taking them out 

24 of the process and you're giving the process of a 

25 national form plan to a national bureaucracy who will 
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1 consider changes in due course, and meanwhile our 

2 voice is left to try to figure out how to work around 

3 the national form plan to the extent it's inconsistent 

4 with our plans.

5 The real issue is whether we require a 

6 national mandatory form plan. These other rationales 

7 in my mind are tertiary for lack of a better term. 

8 They're just not that important to the situation.

9 Is uniformity that exalted a concept? If 

10 you were to attend the creditors' meeting in Portland 

11 or Seattle or in Memphis, like I have, what you would 

12 see is that Chapter 13 works quite differently in 

13 quite different ways and helps people in different 

14 ways with uniquely -- quite different circumstances. 

15 Local judges and trustees and attorneys have come up 

16 with local plans with local innovative approaches 

17 suited to their communities.

18 Who does it best? We don't know because 

19 people have never studied it, and here we are on a 

20 hypothesis. All I hear is anecdote and hypothesis. I 

21 don't hear empirical data to say, well, this plan -- I 

22 used to do that as a trustee. I used to give my 

23 judges -- every year I'd look back at the five years 

24 and I'd say, okay, here's what our completion rate on 

25 confirmed plans was and here's what our dismissal rate 
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1 and conversion rate. That information is available.

2 We're going to do this on the bet that this 

3 particular tracking, and I realize that their argument 

4 is, well, it's options. Yes, but it's set up so that 

5 you try to do it a certain way. It made choices. It 

6 pushes you, it funnels you into a certain process 

7 without any study about whether that's the best way to 

8 go.

9 Chapter 13 is the most fragile chapter. 

10 It's voluntary. Consumers have other choices. When 

11 the value of a Chapter 13 is reduced or the cost of 

12 administering it is increased, it makes it less 

13 desirable. The tipping point gets closer when we 

14 burden the debtors, and that's a concern, one of my 

15 greatest concerns about this whole process is we make 

16 them -- we go through this period of disruption as we 

17 force out all the old plans and bring in new plans and 

18 in the process just make it a little harder for 

19 debtors to file Chapter 13, and that is a bad idea.

20 I know there's a temptation among the 

21 influential few to treat this as an effort to somehow 

22 create order out of chaos. Is there really a problem? 

23 Are your local communities telling you Chapter 13 is 

24 not working? And what is the problem? Is the 

25 solution that's being offered here really the 
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1 solution, or is it just trading a national bureaucracy 

2 for the local buy-in and investment of judges, 

3 trustees, and attorneys?

4 Before this committee charts this path which 

5 will be nigh on impossible to reverse once it's 

6 adopted it must be certain that it's the best thing 

7 for the debtors. Something more than anecdote and 

8 intuition ought to be driving the process. I suggest 

9 that much like the 144 judges who signed that letter 

10 that the proponents have not met their burden of 

11 proof.

12 JUDGE IKUTA: Thank you. Well, we've used 

13 up all our time, but we have time for a question or 

14 two.

15 JUDGE LYNCH: All right.

16 JUDGE IKUTA: Judge Goldgar.

17 JUDGE GOLDGAR: Judge Lynch, could you 

18 explain why having a particular form plan increases or 

19 decreases confirmation rates and case completion rates 

20 rather than say the quality of the lawyering, whether 

21 the debtor keeps a job, gets cancer or gets divorced 

22 and so on? Why does the plan affect that?

23 JUDGE LYNCH: Well, obviously good lawyering 

24 and the person's financial circumstances make a huge 

25 difference in confirmation rates. But we know 
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1 nationally that the ratios are quite different, and I 

2 guess what you're telling me is, well, it's just a 

3 function of the personal situation of the attorney and 

4 the individual.

5 I suggest to you that you might be wrong, 

6 that a form plan that tries to do too much at the 

7 beginning basically burdens the -- front loads the 

8 cost of the thing and makes it less desirable, and 

9 these choices ultimately affect the success rate of 

10 Chapter 13.

11 You know, I see it in my own jurisdiction. 

12 The more work that's done on a case the less likely it 

13 is to succeed. The best cases have the least amount 

14 of work involved in it. So it's not just what you've 

15 suggested. It's a lot of other things. The problem 

16 is nobody's tried to study this. This information is 

17 available. There's a lack of will I think in certain 

18 circles to say, okay, is Chapter 13 working? What's 

19 the success rate? What's the cost?

20 You know, for instance, I pointed out to you 

21 Chapter 13 in Portland, they void liens and they cram 

22 down values for secured claims in the plan. That 

23 requires 7004 service. It adds additional burdens. 

24 It makes it a more expensive -- I mean, Portland has 

25 some of the highest debtor fees per case in the 
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1 country. Seattle, similar demographic, across the 

2 river, has much smaller fees. I couldn't tell you all 

3 the reasons, but it seems to me before you start 

4 adopting national form plans you ought to be looking 

5 at that rather than positing what the issue is and 

6 then somehow by anecdote and intuition, and I think 

7 that's what's driving this. I don't think you've 

8 gotten much in the way of empirical information to 

9 support any of these ideas.

10 JUDGE IKUTA: We have time --

11 JUDGE LYNCH: Obviously, it hasn't sold the 

12 judges who signed our letter, and let me say the 

13 judges, we called them up. We didn't send any email 

14 blasts. This was done -- lemmings is an interesting 

15 thing to accuse bankruptcy judges of. I'm surprised 

16 at the use of that term because the way we handled it, 

17 we've been very careful, and we simply asked -- we're 

18 amazed as much as maybe they are and maybe you are how 

19 many judges agree with us that they haven't made the 

20 case.

21 JUDGE IKUTA: Okay. We have time for one 

22 more question.

23 JUDGE DOW: Yeah, you seem to assume that 

24 the process will somehow become more expensive and 

25 more delayed because these other issues are rolled 
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1 into confirmation rather than done separately, and I'm 

2 having trouble understanding that. If a debtor is 

3 going to have to value something anyway or avoid a 

4 lien anyway, how does it become more expensive because 

5 it's done in one document versus in several different 

6 documents if it's got to be done anyway?

7 JUDGE LYNCH: Well, and I will agree with 

8 you this much, Judge Dow. Empirically neither side 

9 has made the case, but in answer to your question, 

10 because a lot of cases don't even have lien avoidances 

11 and secured claim valuations.

12 JUDGE DOW: And they wouldn't be in the 

13 plan.

14 JUDGE LYNCH: They wouldn't be in the plan, 

15 but other cases it's done -- it can be done on the 

16 back end when the case is likely to succeed. Often 

17 cases fail early on, within the first six, nine 

18 months. You spend a whole bunch of time and money on 

19 a case that fails. Better to spend the money in the 

20 middle or the end if you even need to. Oftentimes the 

21 value issue goes away before you ever have to file a 

22 motion to determine the value. The parties work that 

23 out, it's in the plan, and nobody ever has to do 

24 anything.

25 What I'm suggesting is we haven't done any 
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1 kind of empirical test. And trust me, Judge Isgur, he 

2 values his in the plan, and he voids liens. I'm just 

3 saying we don't have the kind of information that you 

4 need to override the local practice that's worked well 

5 in that jurisdiction because you're going to sweep 

6 away a lot of local practice if you drop this national 

7 form plan.

8 JUDGE IKUTA: Thank you, Judge Lynch. We 

9 appreciate your testimony.

10 JUDGE LYNCH: Thank you.

11 JUDGE IKUTA: Thank you. And we'll next 

12 hear from Judge Marvin Isgur.

13 JUDGE ISGUR: Good morning, Judge Ikuta. 

14 I'm Marvin Isgur, a United States Bankruptcy Judge 

15 from Texas, and I appreciate the chance to testify 

16 today or to talk to you today.

17 I'd like to start by saying I was going to 

18 give Keith a chance to withdraw his lemming comment, 

19 but I'm going to have too much fun talking to Judge 

20 Karlin and Judge Rhodes, who is our representative to 

21 the Supreme Court, and to Judge Houser, the former 

22 NCBJ chair, telling them that for the first time in 

23 their lives they've been accused of lemming, so I'm 

24 going to let Keith's comment stand.

25 You know, the absence of a consensus did not 
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1 arise because there wasn't an effort, and if anybody 

2 thinks that our letter or any comments I've made say 

3 that people didn't try and get a consensus, that's 

4 wrong. There was a huge effort made to get a 

5 consensus. Gene Wedoff traveled anywhere anybody 

6 would listen to him, and he's a good man. He's about 

7 the most persuasive judge and maybe the most solid 

8 judge I know. He tried hard to build a consensus.

9 And so our goal when I first talked to Brian 

10 about doing this was, you know, maybe we will get 60 

11 judges that will be in the minority that I think Keith 

12 referred to when he sent out his blast email, some 

13 silent minority. Vocal minority I think we were 

14 called. We were shocked when there were 144 people 

15 who hadn't bought in because despite valiant effort 

16 there isn't a consensus, and that's a far different 

17 cry from saying nobody tried to get one. They did. 

18 It didn't work and it didn't work because it doesn't 

19 address the fundamental question that bothers most of 

20 us.

21 And it doesn't matter if you talk to me or 

22 talk to Brian or talk to Judge Connelly or talk to 

23 Judge Lundin. Our biggest concern is making these 

24 cases work. How do we make Chapter 13 work? And what 

25 this plan does is it locks us into one method of 
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1 trying to make plans work. It eliminates the ability 

2 to figure out what does work, and what needs to happen 

3 is you need to persuade us if you want to get 

4 consensus that this will enhance the success of 

5 Chapter 13 cases.

6 In my own district, we have implemented an 

7 integrated way of dealing with motions for leave from 

8 the state, plans, modifications. We've implemented 

9 automated payment methods, ACH drafts, electronic 

10 payments into our plan. We stopped the cycle where 

11 debtors can alternate between paying their mortgage 

12 one month and paying the Chapter 13 trustee the next 

13 month. We've reduced our lift-stay docket from about 

14 60 or 70 per week just before me down to six or seven 

15 per week just before me over the last decade. And we 

16 need to help, not hinder, the process.

17 All of us would jump at the opportunity, 

18 both the proponents and the opponents, to make Chapter 

19 13 more successful. I think we are accomplishing 

20 that, but like Judge Lynch says, we do not have the 

21 empirical data, nor do you, to know which way to go on 

22 the plan.

23 One of the letters, and I think it's from 

24 Judge Lundin, says, look, I've compared these things, 

25 and if you look at what's happened, he compares things 
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1 back in 2002, compares things in '95. There's been a 

2 whole new world of bankruptcy judges in the last 

3 decade, and a number of us are trying to make changes 

4 in the plan, to go to Judge Dow's question and to go 

5 to Judge Goldgar's question, where the plan can make 

6 cases more successful.

7 The most recent thing we've done in a plan 

8 is we have a savings provision where debtors can save 

9 money by making a deposit with the Chapter 13 trustee 

10 who charges no fee for administering an emergency 

11 savings fund. The biggest reason why I have cases 

12 fail is people have an emergency, and there's a reason 

13 why they're in Chapter 13. I want to be real about 

14 that. And if we can add some discipline where they 

15 have some savings, maybe we can make the cases more 

16 successful by virtue of what's in the plan.

17 The second thing that I want to address is 

18 the letter from my district identifies really major 

19 flaws in the sample plan that was circulated for 

20 comment. The sample plan as written, and these things 

21 are repairable, don't get me wrong, but as written, it 

22 takes away lien rights, it fails to preserve payments 

23 to holders of unsecured claims, and it makes it 

24 impossible to learn when secured debts have been paid 

25 off. Sure, those can be fixed, but why are we 
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1 adopting a national plan that doesn't work in the one 

2 sample that was published? It makes no sense to me to 

3 do that.

4 Third and very importantly, the plan 

5 impermissibly delegates authority about priorities to 

6 Chapter 13 trustees. You know, who gets paid first is 

7 often the single most important question in a Chapter 

8 13 case. But if you look at the sample plan, the way 

9 the sample plan works is it says the Chapter 13 

10 trustee will decide that. And the reason why it had 

11 to say that is because when the earlier version came 

12 out and the plan tried to address priorities it 

13 couldn't and it couldn't because there are all these 

14 different checkmarks that can occur in the plan.

15 You know, those checkmarks will produce, if 

16 you take sort of all the permutations, there's 1.9 

17 million permutations of how your plan can work, the 

18 one that's been proposed, 1.9 million. And if anybody 

19 thinks they can absorb what all the problems are from 

20 all 1.9 million permutations and put that into a 

21 priority when you can check all these different 

22 options and boxes, you can't do it, and so you had to 

23 delegate to the Chapter 13 trustee.

24 That's my job. That isn't the trustee's 

25 job. And if Wells Fargo thinks they're not getting 
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1 paid in the right order of priority, they need to be 

2 able to come and complain to the judge at the 

3 confirmation hearing, and they do, and we listen to 

4 them. Are we now going to take away their ability to 

5 come to Court because we confirmed a plan that says 

6 it's up to the 13 trustee to decide how to do it?

7 Fourth, I want to be clear that I think that 

8 the creditors who come and say that it's only fair if 

9 you do the plan that you do the rules as well or if 

10 you do the rules that you do the plan as well, those 

11 guys are right. I happen to like the rules, but I 

12 think it would do a disservice to the attempt to do 

13 consensus that was built at least amongst the creditor 

14 community to separate those two.

15 I am a big believer in the consensus 

16 building process and, frankly, you would do a great 

17 disservice to Wells Fargo to adopt one and not the 

18 other. But I'm worried that we'll still do that 

19 disservice. And as we said in my district's letter, 

20 we have grave concerns over whether the form plan is 

21 consistent with your authority under 2075. And if you 

22 adopt a form plan, and we have 144 judges out there 

23 and we have 83 Chapter 13 trustees, and someone 

24 challenges that plan, and let's say the plan gets 

25 tossed out, you're not going to have the rules and no 
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1 plan.

2 Or you wonder why we have 144 judges. The 

3 main reason we didn't get more is there were a lot of 

4 judges that said don't worry. I'm just going to 

5 handle all these problems in my confirmation order.

6 So what we're going to have is a form plan 

7 and a confirmation order that varies the form plan and 

8 that confirmation order isn't going to be published 

9 anywhere, and it will control over the plan. So 

10 you're going to have instead of what I have right now, 

11 which is a mandatory plan in my district where 

12 everybody knows exactly what we're going to do, I'm 

13 going to have a secret confirmation order at least in 

14 some districts that say here's what we're going to do 

15 and no one is going to get to review it. We're going 

16 to do the opposite of disclosure if we end up trying 

17 to force this down on people, and it's going to really 

18 hurt people that have worked hard in this trade, and 

19 it is the wrong thing to do.

20 And finally, the supporters of the form plan 

21 repeatedly claim that the from is simply a uniform way 

22 of achieving the same results that plans around the 

23 country produce. In our letter or in my testimony, my 

24 written testimony I submitted, I gave five things by 

25 just looking at my plan that this plan can't 
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1 accomplish, can't do them.

2 It can't adjust payments so that we can 

3 match mortgage payment changes. It requires 

4 modifications. Why are we doing that? Why are we 

5 taking away that right? We have a savings plan. That 

6 can't be built in here. The rules prohibit me from 

7 incorporating it in there. I can't fix your plan. 

8 This is a big mistake, and I really implore you not to 

9 do this. Thank you.

10 JUDGE IKUTA: Some questions? All right.

11 JUDGE JORDAN: Judge Isgur, if all these 

12 different localities have different plans and all have 

13 different varying rates of success in Chapter 13

14 plans --

15 JUDGE ISGUR: Right.

16 JUDGE JORDAN: -- even in the absence of an 

17 empirical study, doesn't that suggest that the form 

18 has relatively little to do with success rates? In 

19 other words, if you have an option in your plan that 

20 seems to work, the savings plan, for example, that you 

21 mentioned.

22 JUDGE ISGUR: We started that January 1 of 

23 this year.

24 JUDGE JORDAN: No, I know. I'm not talking 

25 about data.
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1 JUDGE ISGUR: Right.

2 JUDGE JORDAN: But you would think that that 

3 is an idea that regardless of locale, regardless of 

4 the type of debtor, regardless of the type of creditor 

5 would be a good idea to put in, but yet, if that sort 

6 of innovation on the part of one district isn't being 

7 used elsewhere, what does that say about the 

8 importance of the form plan?

9 JUDGE ISGUR: Well, a bunch of things. 

10 First of all, the biggest innovation that's come about 

11 in the last decade is payment of mortgages through the 

12 trustee, and although -- and I don't have exact data 

13 on this, so take these as sort of estimates. Fifteen 

14 years ago I would bet that there were fewer than three 

15 districts in the country that paid mortgage payments 

16 through the trustee. Today I think the number is 

17 about half the districts pay mortgage payments through 

18 the trustee. That's an idea that was an innovation 

19 that the rest of us saw and we adopted it into our 

20 form plan. I bought into that because I thought it 

21 was working in other districts.

22 The savings plan that we just came up with 

23 was an idea of one of our new judges came in and said, 

24 I'm having these cases fail because people can't meet 

25 emergencies. He talked to the trustees. We figured 
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1 out a way to do a savings plan and not charge debtors 

2 for it. We just started it. If it works, the first 

3 person who's going to adopt it is Judge Connelly. She 

4 wants her cases to work. But if you do this form 

5 plan, we'll never know. And if somebody else comes up 

6 with a good idea, we'll never know. So there is 

7 infection from one district to another as we see good 

8 ideas.

9 There are a lot of similarities. I have no 

10 problem if you all want to have a rule that says every 

11 district has to have a form plan. That solves the 

12 Espinoza problem. I've got no problem if you say 

13 every district has to have a form plan and all special 

14 provisions have to be in the last paragraph of the 

15 form plan. You know, I've done that for a decade.

16 I was shocked when I heard Keith say that 

17 the thing he likes most about the new plan is he can 

18 look at one paragraph and see all the changes. Most 

19 of us have done that for a very long time, and again, 

20 we stole that idea from somebody else. So there are 

21 ideas that get stolen and they get stolen because 

22 things are working. And this will stop innovation.

23 Is that responsive to your question?

24 JUDGE JORDAN: Yes.

25 JUDGE ISGUR: I'm trying to be.
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1 JUDGE JORDAN: Thank you very much.

2 JUDGE ISGUR: Thank you.

3 JUDGE IKUTA: Judge Harris, you had a 

4 question.

5 JUDGE HARRIS: Yeah. I think you touched on 

6 it a little bit, Judge Isgur, but the possibility of 

7 an incremental approach where there was a national 

8 form but an opt-out with a local form, so there was 

9 only one form in a particular district. Could you 

10 expand on that a little?

11 JUDGE ISGUR: This won't get all 144 judges 

12 that signed my letter and signed Brian's letter on 

13 board, but it will get 140 of us on board, which is 

14 most of us aren't opposed to the concept of saying 

15 that a form plan is a good idea. It's adopting a form 

16 plan like one that doesn't work or adopting a form 

17 plan that would stifle innovation that causes a 

18 problem.

19 So I think if what you do is say this is a 

20 mandatory form plan, but then the rule gets amended to 

21 say you don't have to use the mandatory form plan if 

22 your district has adopted its own mandatory form plan 

23 that meets the following minimum requirements, and one 

24 of the minimum requirements can be special provisions 

25 are in a special place.
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1 I'd be ecstatic with that. I'm ecstatic if 

2 what you do is say form plans have to be adopted in 

3 the same manner as local rules. You know, we do that 

4 anyway. When we make a change to our form plan, we 

5 put it out for public comment. The only thing we 

6 actually don't do with our form plan is the Circuit 

7 Court doesn't review it like they do our local rules. 

8 I'm perfectly happy having my form plan reviewed by 

9 the Circuit Court. If I've got something in there

10 that's inconsistent with circuit law, I don't want it 

11 there.

12 So you can put requirements that say that 

13 each district has to either use the national form 

14 plan, adopt its own, and when it adopts its own it has 

15 to do so in the same manner as it adopts a local rule. 

16 We have all the sunlight that you need, we can try 

17 new things, and we can make things work much better in 

18 a much less confusing way than what I think 1.9 

19 million options will give us.

20 Did that respond to your question?

21 JUDGE IKUTA: We have time for one more 

22 question.

23 JUDGE JONKER: Help me out, please. As a 

24 district judge who doesn't practice, when I hear you 

25 talk about the impact of the form, my immediate 
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1 response is why doesn't Part 9 solve all your 

2 problems? You just put your savings plan and all your 

3 other nonstandard provisions there.

4 JUDGE ISGUR: I've really got a couple of 

5 answers. That one is I happen to think that the rule 

6 that is proposed to go along with the form plan 

7 prohibits our local court from mandating the inclusion 

8 provisions in Part 9. If the rule were amended to 

9 allow a local rule of a court to mandate the inclusion 

10 provisions in Part 9, it would solve all of my 

11 problems except it would not accomplish what you all 

12 are trying to accomplish because I know what I'll 

13 include.

14 I'm going to put a statement in there. I'll 

15 say it's mandated you include a statement that the 

16 Chapter 13 plan procedures that are set forth on the 

17 Court's website are incorporated into this plan, and 

18 if there's any conflict, those procedures control, and 

19 I'm going to repeat exactly what I'm doing in my plan 

20 on my procedures, and I've taken away what you're 

21 trying to do.

22 So I think you've stopped me from doing it, 

23 and if you're going to do a mandatory form plan, you 

24 almost have to or else I'm going to undermine it, and 

25 I don't mean to be that -- I'm not trying to be rude 
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1 to you, Judge, but that's the practical problem is I'm 

2 a big believer in following the rules, and if you 

3 adopt a rule that says I can't change the plan, I'm 

4 not going to change it, and that's the rule that I 

5 think you've adopted, and so I'm going to be left with 

6 a choice of, since I'm going to follow the rule, 

7 either fixing this by saying that the plan is illegal, 

8 and by the way, I wouldn't be here if I'd already 

9 decided I was going to do that because I wouldn't 

10 bother to make the trip. I'd just issue it. I'm 

11 going to let that get litigated and see whether I 

12 think it's legal or not. I don't know if it's legal 

13 or illegal. I know there's a good chance I think it's 

14 illegal. Or I can just fix it in a confirmation 

15 order.

16 But, you know, I feel almost like I'm 

17 cheating when I say that those are my options because 

18 if you all are going to do this, I'm going to have 

19 great reluctance not to follow it, and it's going to 

20 make me follow something that I know will disserve 

21 debtors and creditors alike, and I really don't want 

22 to be doing that.

23 Does that answer your question? So, if 

24 you'll fix the rule, my problem goes away, but so does 

25 your solution.
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1 JUDGE IKUTA: Well, thank you, Judge Isgur, 

2 for your testimony.

3 JUDGE ISGUR: Thank you, Judge Ikuta.

4 JUDGE IKUTA: Appreciate it. We'll next 

5 hear from Karen Cordry.

6 MS. CORDRY: Thank you, Judge Ikuta, and 

7 members of the Committee. My name is Karen Cordry. 

8 I'm the bankruptcy counsel for the National 

9 Association of Attorneys General. Just to be clear, 

10 I'm not speaking hear as an official position of the 

11 Attorneys General. At this point we haven't done 

12 that. I'm speaking on behalf of the States' 

13 Association of Bankruptcy Attorneys, but certainly my 

14 experience does come, among other things, from working 

15 with state counsel across the country who have to deal 

16 with these issues.

17 It also comes from having written an 

18 unsuccessful brief in Espinoza, arguing to the Court 

19 that they should have kept with the eight I think it 

20 was circuits that said that there were due process 

21 problems with leaving creditors to search diligently 

22 through a thousand, a million different plans to find 

23 where the debtors chose not to follow the code or the 

24 rules and that the numbers of cases, the amounts of 

25 paper, and perhaps most importantly the lack of 
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1 resources available for creditors, especially people 

2 like state creditors with their very limited budgets 

3 and very limited time, to be able to try to search 

4 through and find these provisions made it imperative 

5 that the rules be followed, that the plans be 

6 structured, that you'd be able to find these things. 

7 We lost that argument in Espinoza. So be it.

8 It was based on that that we were one of the 

9 very first people who urged an adoption of a uniform 

10 national plan. We certainly recognize and appreciate 

11 the fact that a great number of the districts in this 

12 country have now adopted their own uniform plans. Of 

13 course, it's not just that there's a district plan. 

14 As I noted in my comments, a number of the districts 

15 can't even have a single plan within the district. 

16 Ohio has four in one district, in the Northern 

17 District. Texas's Western District has six within a 

18 district. The Northern District of California has 

19 four separate plans, and they aren't broken up by 

20 division. Apparently one judge uses one uniform plan 

21 and another judge in the same district uses a 

22 different uniform plan.

23 Two hundred or so uniform plans is better 

24 than an unlimited number of debtor-created plans. I 

25 don't dispute that. But for those of us who practice 
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1 nationwide it's not a great solution either. It's 

2 fine to say creditors don't participate. One of the 

3 reasons they don't is because the payouts are so low 

4 in the cases and then the debts are often low and then 

5 the payouts in them are so low that when you are 

6 trying to use your resources to deal with that it 

7 becomes very difficult if you can't deal with these 

8 things.

9 So that's one of the reasons why we have --

10 that's the primary reason why we have begged, pleaded, 

11 cajoled, to try to move towards this concept of a 

12 national uniform plan so that our people, when our 

13 student loan debtor who went to school in Florida and 

14 moves to California, that when they go to California 

15 they don't have to try to look through those six 

16 different plans; when our domestic support creditor 

17 moves from Texas to New Hampshire and so forth; and 

18 our taxes. People don't stay in the same place.

19 We're not -- for judges and debtors, they do 

20 typically only work within a single district. That's 

21 great. But that's two legs of the pie, but -- that's 

22 a mixed metaphor there -- but the third part of this 

23 tripod here is that there are creditors, and creditors 

24 are an equally important part of the system. It has 

25 to work for them as well, and when you are dealing 
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1 with a nationwide system this is a national law. It's 

2 not a bankruptcy law for Tennessee, it's not a 

3 bankruptcy law for New Hampshire. It is a federal 

4 national law with a requirement that it be uniform, 

5 and I think we have a really unique perspective on 

6 that.

7 The Supreme Court has told us that the 

8 requirement of uniformity in the bankruptcy law is so 

9 significant. It proves the states gave up their 

10 sovereign immunity with respect to bankruptcy.

11 We don't agree with that, but if it's 

12 important enough for us to do that, it certainly ought 

13 to be important enough to mean that we could look at a 

14 uniform national plan that we can deal with.

15 I've heard a number of questions here, and I 

16 did actually read all the prior comments the last time 

17 around, and it seems to me that one of the problems 

18 here with the plan is that everybody thinks there

19 is -- we heard -- everybody thinks their plan is 

20 perfect. It's just that everybody's plan is a little 

21 different from the next person's plan.

22 One of the reasons why this plan here 

23 perhaps has the number of permutations is it's trying 

24 to accommodate the people who each side says, yes, 

25 have a plan, but it must be my plan. If we actually 
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1 adopted some of these pieces where they were the 

2 choices that actually worked better, I have no problem 

3 with. I would like to see less choices in the plan 

4 and perhaps the kind of data, empirical data we're 

5 doing. I agree, conduit plans are probably the best, 

6 paying the mortgage, having these automatic wage 

7 transfers are probably the best choices. The problem, 

8 I think the plan was trying to accommodate prior 

9 comments who said I want to have my options in there.

10 I have put a couple of possibilities in my 

11 comments about ways that those could be done, but I 

12 think there's not a bad idea to actually go back and 

13 do some more research and perhaps pick some of these 

14 better choices. I think there may be questions as to 

15 whether or not in fact you can force a choice on 

16 people. That's a legal issue. But a lot of districts 

17 seem to be able to do that, so I think that's probably 

18 a great idea.

19 I think most of those questions are not 

20 about the question of having a uniform plan as such. 

21 It's a question of what should the plan do.

22 The other point -- I would just very quickly 

23 a couple of points I would make. Maybe the most 

24 important one is in these rules, and the rules say, 

25 yes, the plan must be here, it must be in a special 
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1 place. You need a form order too. And the order, I 

2 don't care what else it says, but the order must say 

3 that anything that is in this plan that doesn't follow 

4 those parts of the rules is not approved because 

5 unless you have it in the order we're right back in 

6 the Espinoza problem. And I know the rules say it has 

7 to do this, but we had lots of rules in Espinoza that 

8 weren't followed, so that's perhaps the most important 

9 part.

10 And the other one just as a matter of 

11 detail, and we'll have some more detailed comments 

12 coming by the February deadline just on practical 

13 matters. There are a number of ways in which the plan 

14 and the rules, which do work together, and some of the 

15 issues here I think really have to do with the 

16 questions about how the rules are setting up the 

17 process to work, when you put these together, there's 

18 a number of places where it says things like the claim 

19 will control over the plan or the plan will control 

20 over the claim or the government claim can come in 

21 after the bar date.

22 I don't think we still yet have a really 

23 clear understanding of what that means and how that's 

24 going to operate in practice. Is the plan going to be 

25 modified? When will it be modified? How do you make 
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1 those two pieces work together? We'll talk about them 

2 in more detail, but I think that is a part that still 

3 needs to be finely tweaked in the rules.

4 And I'm a little over. Sorry.

5 JUDGE IKUTA: Thank you.

6 MS. CORDRY: But thank you for allowing me 

7 to speak.

8 JUDGE IKUTA: Questions?

9 JUDGE DOW: Well, I'm sure that if we adopt 

10 your particular approach on the confirmation order 

11 it's going to disappoint Judge Isgur. But my question 

12 for you, I understand what you're saying, but do you 

13 think that that approach that you're suggesting, which 

14 is not really part of the current package, is 

15 consistent with the Bankruptcy Code, particularly 

16 Section 1327? And is it consistent with people being 

17 able to understand what parts of the plan were really 

18 confirmed and what parts were not confirmed?

19 MS. CORDRY: I think it's consistent because 

20 I think the bankruptcy judge does not have to approve 

21 anything he doesn't -- I mean, this is saying that if 

22 there is a provision in there that violates the rule, 

23 I have not approved that provision, if it somehow has 

24 snuck through.

25 My only concern is unless you say that it 
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1 doesn't matter what you put in the rules. It doesn't 

2 matter what you say the plan has to do if somehow --

3 you know, the rule says everything should be in Part 

4 9. But if in fact I don't put it in Part 9, I put in 

5 Part 4, you know, a completely separate provision that 

6 completely violates everything that's there, and the 

7 judge doesn't see it in Part 4 because, like Judge 

8 Lundin, he's now only looking at Part 9, which is 

9 where he's supposed to be able to look, and he signs a 

10 confirmation order and says I approve the plan, if 

11 it's in the wrong place, even though it's violated the 

12 rules and the plan and everything else, Espinoza says 

13 it still controls.

14 So you've got to deal with the fact that the 

15 order has to say I am approving the parts of this that 

16 follow the pieces. If it's not in Part 9, I'm not 

17 approving it if it contradicts, you know, the rest of 

18 the plan. I think as a practical matter there's no 

19 other way you can actually enforce that provision 

20 consistent with Espinoza, and that was the first thing 

21 I said when we -- the first time after Espinoza came 

22 out, and my first comment was, well, even if I put it 

23 in a rule it still has to -- you still have to deal 

24 with it in the order.

25 JUDGE IKUTA: What did you think of Judge 
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1 Isgur's suggestion that the rules should give 

2 districts the option of either using the national form 

3 or a form that meets minimum requirements?

4 MS. CORDRY: I think it still -- again, the 

5 more local forms there are the better, certainly to 

6 the extent a local form would require that so you 

7 could do that the better. That would be better than 

8 the current situation. It still leaves us with the 

9 position that anyone who comes in then has to research 

10 a whole new set of forms, try to become informed about 

11 a whole new set of requirements and things.

12 Again, when you're going all over the 

13 country, when you can't travel there, when you have 

14 very limited resources, it becomes that much more 

15 difficult to deal with. It's certainly better than 

16 nothing.

17 One other point. In listening to Judge 

18 Isgur's comments, the point about local innovations, I 

19 think it's a great idea, but I think the idea that if 

20 we have something like we have concluded that, and 

21 empirically you can probably demonstrate that mortgage 

22 payments through the trustee work better, why should 

23 we leave it that it slowly percolates one district at 

24 a time and takes 10 or 15 years to become a national 

25 provision?
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1 If that in fact works better, then why 

2 should it not -- you know, this plan is not set in 

3 stone. I would expect that it would be revisited 

4 perhaps every few years and these kind of innovations 

5 could be put in. The same thing with electronic fund 

6 transfers. I mean, that isn't something anybody could 

7 ever have done 15 years ago, but perhaps now that will 

8 be, you know, the growing approach. But it will come 

9 into effect much more usefully and be much more likely 

10 to make all plans succeed if it comes in nationally as 

11 opposed to having to be adopted in -- I'm not sure how 

12 many precise districts there are, but roughly 100 

13 districts or more and divisions within each one of 

14 those districts.

15 So I think there's a great deal to be said 

16 for -- I would never dispute looking at empirical data 

17 and trying to make the plan work better, but if those 

18 are the comments that -- if that's what the issue is, 

19 then that's a way of saying make the plan better. 

20 It's not a reason not to have a national plan.

21 JUDGE IKUTA: Okay. Thank you for your 

22 testimony.

23 MS. CORDRY: Thank you.

24 JUDGE IKUTA: We'll next hear from Mike 

25 Bates.
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1 MR. BATES: Good morning, Committee Members, 

2 and I'll apologize in advance because I'm probably 

3 going to read a little quicker than I would like to 

4 make sure I stick within the time constraints.

5 My name is Michael Bates, and I am a senior 

6 company counsel for Wells Fargo & Company where I have 

7 worked for 21 years providing legal support and 

8 guidance to all of Wells Fargo's consumer bankruptcy 

9 operations. Wells Fargo is the nation's leading 

10 residential mortgage lender, financing one out of 

11 every five home loans in the United States in 2013, 

12 and we service one out of every six loans in the 

13 United States. There are several reasons why Wells 

14 Fargo believes that the form plan merits its support.

15 First, like the Committee, Wells Fargo is an 

16 advocate for greater uniformity in Chapter 13 

17 practice, and we believe that this plan provides a 

18 template or a standardized format for listing out plan 

19 provisions in a manner which promotes that uniformity. 

20 As Judge Tallman of the United States Bankruptcy 

21 Court for the District of Colorado observed in the 

22 case of In Re: Butcher, and I quote:

23 "There seems to be no area of bankruptcy law 

24 practice that is more localized than Chapter 13 

25 practice. The nature of consumer credit means that 
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1 the majority of creditors appearing in Chapter 13 

2 cases are institutional creditors with national 

3 operations. Such creditors receive plans proposed by 

4 debtors from all over the country that vary 

5 substantially from district to district in format, 

6 language, and emphasis, and allow debtors unlimited 

7 latitude to customize provisions. This adds 

8 complexity and cost and serves no useful purpose."

9 Wells Fargo wholeheartedly agrees with Judge 

10 Tallman's opinion.

11 Second, implementing the form plan would 

12 greatly simplify and standardize training for 

13 creditors because creditors would not need to spend 

14 time training employees on hundreds of different plan 

15 forms from across the country that vary substantially 

16 district to district. Instead, creditors would be 

17 able to train employees in a manner that allowed an 

18 employee to know exactly where to look in a form to 

19 determine how a particular debtor addresses a 

20 particular issue or to determine how a particular 

21 debtor addressed the treatment of its particular 

22 claim.

23 Committee members, while Wells Fargo does 

24 support the adoption and implementation of the form 

25 plan, we do have one suggestion that we think would 
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1 make the form more effective if it were adopted. 

2 Based on our review of Part 3.5, which deals with the 

3 surrender of collateral and the related Advisory 

4 Committee note, we believe that the Committee intended 

5 that upon confirmation of the plan the automatic stay 

6 and co-debtor stay would be lifted as to any 

7 collateral surrendered by the debtor so that the 

8 credit could pursue its in rem rights.

9 Indeed, the Advisory Committee note, Part 

10 3.5, states that, and I quote: "Termination will be

11 effective upon confirmation of the plan."

12 Unfortunately, Wells Fargo does not believe 

13 that the current language in Part 3.5 is sufficient to 

14 accomplish the Committee's goal. Therefore, Wells 

15 Fargo would submit that Part 3.5 should directly state 

16 that upon confirmation of the plan the stay and co17 debtor stays are lifted as to any in rem rights a 

18 lender might have with respect to property surrendered 

19 in the plan. Wells Fargo believes that making such a 

20 statement in the plan would make the use of the plan

21 more efficient and save time and cost for debtors, 

22 trustees, creditors, and the Court.

23 The Committee has also solicited comments on 

24 whether the form plan and associated rule amendments 

25 should be considered as an integrated package. Wells 
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1 Fargo adamantly believes that the plan and associated 

2 rule amendments should be considered as an integrated 

3 package, and we strongly oppose the adoption of the 

4 rules without the adoption of the form plan.

5 Others have commented that imposing a new 

6 60-day bar date for proofs of claim and a shortened 

7 time period to object to confirmation might be very 

8 challenging and burdensome for some creditors. It can 

9 be argued that this reduction in time and the 

10 associated burdens are offset to a degree by the 

11 benefits of a standardized data-enabled form of 

12 Chapter 13 plan.

13 Similarly, allowing a debtor to determine 

14 the secured nature and priority of claims in a plan or 

15 avoid a lien through a plan and impose the binding 

16 effect of that treatment through Rule 3015 seems only 

17 fair and practical from an operational perspective if 

18 this form plan is implemented. If the Committee does 

19 not adopt the form plan and proposed rule changes as 

20 an integrated package, creditors will end up 

21 shouldering a series of new burdens without any 

22 corresponding benefit.

23 As a participant in this Committee's January 

24 2013 working group on these issues, I can honestly 

25 state that this is not the arrangement that the 
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1 working group contemplated.

2 In closing, let me state that I have read 

3 the comments from others that argued there is no need 

4 nor benefit to the adoption of the form plan. I 

5 respectfully disagree. As I have discussed this 

6 morning, there is a tremendous benefit to creditors to 

7 be able to efficiently review claim treatment in 

8 Chapter 13 cases and to know where to look for 

9 nonstandard plan provisions that may affect their 

10 claims.

11 I have also read comments that argue the 

12 Committee should not adopt the form plan because the 

13 Committee has not made an effort to develop a 

14 consensus opinion supporting the need for the plan. I 

15 don't disagree with the goal of consensus. It's a 

16 laudable goal when it's possible. However, sometimes 

17 consensus is just not possible. I submit this may be 

18 one of those times.

19 Back in 2005, I do not believe that Congress 

20 had the consensus of the industry when it adopted or 

21 implemented the Bankruptcy Abuse and Consumer 

22 Protection Act. I also don't believe that this 

23 Committee necessarily had industry consensus before it 

24 implemented Rule 3002.1. Nevertheless, I believe that 

25 our experiences with the implementation of that law 
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1 and that rule are examples of how new processes, while 

2 potentially painful to deal with and implement in the 

3 short run, actually go on to be the accepted norm, and

4 for these reasons Wells Fargo encourages the Committee 

5 to strike out and recommend the form plan and the 

6 proposed rule changes to the standing committee as an 

7 integrated package.

8 Wells Fargo appreciates the Committee's hard 

9 work in seeking to bring greater uniformity to the 

10 Chapter 13 practice and the opportunity to comment 

11 here today. Thank you.

12 JUDGE IKUTA: Questions?

13 One of the concerns that was expressed was 

14 that there is a lack of empirical data as to how the 

15 national, the proposed official form would work, and 

16 whether it would be effective and have a high success 

17 rate, and there was a suggestion to try it as a model 

18 plan perhaps in some districts. If that were the case 

19 and the rules didn't go forward, then we would not 

20 have empirical data about how the plan worked with the 

21 rules. Do you think there's any solution to that 

22 problem?

23 MR. BATES: From my participation in this 

24 process, Judge Ikuta, I feel like these rules and the 

25 amendments to these rules were tailored to go with 
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1 this form. If the Committee wants to test the form, 

2 and apparently it's more than being tested in Judge 

3 Lundin's district, and apparently their local rules 

4 seem to work with that form fine, I'm not sure that 

5 it's really necessary to go ahead and adopt the rules 

6 in total if all you're going to do is test this form. 

7 I think from my perspective it's more of a wholesale 

8 adoption.

9 And Judge Isgur's point about possibly 

10 modifying I think Rule 9009 to allow them to use a 

11 form plan, again, a step in the right direction, a 

12 positive step, but these rule amendments weren't put 

13 together in my opinion to deal with any form plan. 

14 They were put together to deal with this form plan. 

15 That's why we believe that they need to be adopted and 

16 recommended as an integrated package.

17 JUDGE IKUTA: Ricardo, did you -- no. Any 

18 other questions?

19 (No response.)

20 JUDGE IKUTA: Apparently not. Thank you 

21 very much for your testimony.

22 MR. BATES: Thank you.

23 JUDGE IKUTA: And we'll next hear from Alane 

24 Becket.

25 MS. BECKET: Good morning. I'm so far down 
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1 on the list that I'm not going to sound very original, 

2 so please forgive me for repeating some of what you've 

3 already heard. But my name is Alane Becket and I'm a 

4 managing partner with the law firm of Becket & Lee in 

5 Malvern, Pennsylvania. For almost 30 years Becket & 

6 Lee has specialized in the nationwide representation 

7 of large issuers of consumer credit and more recently 

8 purchasers of consumer accounts in bankruptcy matters. 

9 I have been in practice since 1992 and have extensive 

10 experience with the operational and legal challenges 

11 faced by large lenders managing portfolios of consumer 

12 bankruptcy cases.

13 My testimony relates primarily to my firm's 

14 interest in the implementation of an official form for 

15 Chapter 13 plans. Our experience in managing large 

16 portfolios of unsecured accounts leads us to conclude 

17 that a standard form for Chapter 13 plans is an 

18 important step in protecting the rights of both 

19 creditors and debtors. I'd like to begin by making a 

20 few comments that were not contained in my written 

21 testimony.

22 Because I have a nationwide practice, I have 

23 the opportunity to speak with practitioners from all 

24 over the country. After discussing the idea of an 

25 official form with many people what I have concluded 
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1 is that most jurisdictions do in fact have a mandatory 

2 form for Chapter 13 plans, as you've heard. 

3 Therefore, I don't believe the opposition is to the 

4 idea of a standard form. Rather, the problem seems to 

5 be the practitioners in these areas are happy with 

6 what they have and they don't want anybody to change 

7 it.

8 And more practically, there are some 

9 specific substantive provisions of the plan that 

10 individuals who are opposed to it have. However, that 

11 is what this comment process is for, and I know for a 

12 fact that this Committee reads, considers, and 

13 responds in some way to all comments that are 

14 submitted to it.

15 It goes without saying that creditors and 

16 especially secured creditors must review all plans. 

17 This Committee embarked on this process several years 

18 ago to address the Supreme Court's decision in United 

19 Student Aid Funds v. Espinoza, which did two things.

20 First, it held that the terms of a confirmed 

21 Chapter 13 plan were binding on all parties regardless 

22 of the legality of any of the provisions in it, and 

23 second, it put the burden on the bankruptcy judges to 

24 not confirm any plan that contained an illegal 

25 provision. As a result, this Committee recognized 
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1 that the need for the standardization of format for 

2 Chapter 13 plans to address both of those 

3 considerations.

4 Currently, there are dozens of Chapter 13 

5 plans in use throughout the country and some estimate 

6 that there are at least 200 forms. In addition, there 

7 are some jurisdictions where there is no standard form 

8 and anything goes. Changes to local form plans are 

9 assimilated into my firm's practices on an as10 discovered basis as there is no formalized process for 

11 communicating changes in plan forms to creditors.

12 As an experienced representative of 

13 unsecured creditors, our firm has developed processes 

14 and procedures for reviewing these many plan types. 

15 However, because of the lack of uniformity, this type 

16 of review is manual and time-consuming in an 

17 environment where the returns, especially for 

18 unsecured creditors, are small or nonexistent.

19 Due to time constraints I'm going to pass on 

20 my remarks about the benefits of a standard point from 

21 a technology standpoint, and you've heard most of what 

22 I would say, except to say that standardization 

23 presents many opportunities for all participants to 

24 leverage technology to make the process more smooth, 

25 efficient, and cost-effective.
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1 The November 18, 2014, letter from the 

2 Committee of Concerned Bankruptcy Judges to this 

3 Committee suggests that there is no need for nor 

4 benefit to an official form for Chapter 13 plans, and 

5 I respectfully disagree. As has been noted, there is 

6 tremendous benefit to all creditors to be able to 

7 efficiently review claim treatment in Chapter 13 cases 

8 and to know where to look for nonstandard plan 

9 provisions that may affect claims.

10 A section for nonstandard plan -- pardon me. 

11 Having nonstandard plan provisions in the same 

12 location on every plan along with the accompanying 

13 checkbox on page 1 of the form will not only 

14 facilitate identification of those provisions but will 

15 protect debtors who comply with the notification 

16 requirements from due process attacks on their plans.

17 A section for nonstandard provisions should 

18 also satisfy those who worry that certain provisions 

19 critical to the operation of Chapter 13 in their 

20 jurisdictions are not included in the form. Any 

21 provision not otherwise in contradiction to the form 

22 or the law can be implemented through that section.

23 However, this Committee should make clear 

24 that Part 9 should not be used to circumvent the use 

25 or operation of the proposed form and that deviations 
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1 from the form as permitted by the current proposed 

2 Rule 3015(c) should not be used to supplant the form, 

3 as has been suggested might happen.

4 These days consumer lenders are more heavily 

5 regulated than ever and are expected to maintain 

6 accurate and up-to-date records regarding consumer 

7 accounts. The ability to review and monitor claims in 

8 bankruptcy cases is a benefit to creditors, benefit to 

9 the bankruptcy system, and brings transparency to the 

10 bankruptcy process. We believe the overall benefit 

11 from having standardization in the format for similar 

12 activities, such as Chapter 13 plans, will outweigh 

13 any short-term pain.

14 Our experience with the implementation of 

15 the means test and accompanying form and rule changes 

16 is a good example of how imposition of a new process, 

17 while potentially causing a short-term disruption to 

18 established procedures, eventually becomes the norm.

19 I see that my time is up, but I would just 

20 also echo those who have strongly urged that the plan 

21 and the rules are not unbundled. Those rules are 

22 inherently burdensome for creditors. A shorter proof 

23 of claim deadline, determination of liens, and 

24 priorities in a plan will require creditors to act and 

25 act quickly. If the standard form is not in place, 
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1 there is a huge potential for exactly what happened in 

2 Espinoza to happen. So I strongly encourage that 

3 these be implemented as an integrated package, and I 

4 thank you for the opportunity to address you today.

5 JUDGE IKUTA: Questions? Judge Harris.

6 JUDGE HARRIS: Ms. Becket, trying to get 

7 more empirical information, for example, payments to 

8 unsecured creditors and how that might vary among 

9 districts and which districts have a better rate, I 

10 know there are a lot of factors because you could have 

11 some districts have a lot more 7s than 13s so that 

12 even if you have 100 percent payout in a 13, if only 5 

13 percent of the cases in that district are 13s, that 

14 may not be such a good distribution for you.

15 But do you have anything in observing 

16 unsecured creditors where you might be able to suggest 

17 we could get more empirical data and try and look at 

18 that?

19 MS. BECKET: I think someone earlier on 

20 spoke about the National Data Center and the 

21 information that they're able to provide on these 

22 issues.

23 Now, as a representative of not every 

24 creditor unfortunately, just certain creditors, I 

25 don't have access to all of the data that's available 
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1 from the NDC. But others with a different perspective 

2 may have access to that type of data.

3 I do know that success rates in Chapter 13 

4 is largely a factor of local culture, and I don't 

5 think that local culture, that local culture, for 

6 example, in some of the districts of Tennessee where 

7 70 percent of the plans that are filed are Chapter 13 

8 plans when right down the street or down another state 

9 only 5 percent are Chapter 13 plans. That is a 

10 function of local culture, but I don't think that type 

11 of local culture, which lends itself to success and 

12 just coming out of the box and not even considering 

13 Chapter 7 unless it's absolutely necessary, will not 

14 be overshadowed by the implementation of a 

15 standardization in format, which is really all I think 

16 we're saying here is all things that deal with 

17 unsecured claims go in Part 8. All things that deal 

18 with liens go in Part 5.

19 Judge Connelly made a really good point when 

20 she said she mapped out these elements that are common 

21 to plans and they can all be in a standardized format 

22 is really what I think is the most important thing 

23 here, is we're not looking to change any local 

24 culture. We're just looking for some standardization 

25 of form.
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1 JUDGE IKUTA: Other questions? Ricardo.

2 MR. KILPATRICK: Ms. Becket, I know that 

3 your practice spans the country. Have you had anyone 

4 do a mapping of the proposed model form plan to the 

5 existing plans that are out there to see if this plan 

6 would accommodate the local practices that exist 

7 throughout the country?

8 MS. BECKET: You know, I have not done that. 

9 I think maybe Judge Connelly did something of the 

10 sort, but the fact is I'm an unsecured creditor. I'm 

11 going to get what I'm going to get, and I can't 

12 influence that very much, but what I can do is try to 

13 do the best job for my clients in identifying parts of 

14 plans where they may need to take action. We may need 

15 to object to confirmation. Something else in the plan 

16 may affect our claim as happens from time to time.

17 So, if this plan were implemented, I would 

18 actually begin something in my practice that I can't 

19 do right now, which is every plan that comes through 

20 my door somebody would look at Part 9 or the checkbox 

21 in Part 1, whereas today I can't even begin to have 

22 the resources and staffing and training to go anywhere 

23 near that.

24 And I might also add although I do represent 

25 unsecured creditors I fully support what Mike Bates is 
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1 saying, and I'm really a proponent of the bankruptcy 

2 process and not just my client's interest, and my 

3 perspective is that the bankruptcy process will be 

4 improved by taking away the free-for-all, with no 

5 disrespect, that goes on from our perspective of the 

6 inability to kind of get our arms around all of these 

7 different plans and really represent our clients in 

8 the best way that we can.

9 MR. KILPATRICK: And although it was stated 

10 by Mr. Bates, and I probably should have asked him 

11 this question, how will it affect training within your 

12 organization, having a standardized form?

13 MS. BECKET: I think Mike and I would both 

14 agree that, wow, you know, that would be great, and 

15 once you get into data enabling, you know, talk about 

16 the savings in mailing costs, in printing out papers, 

17 in PACER costs, so data enabling is not part of this 

18 Committee's proposals at the moment, but we're never 

19 going to get there, we'll never get to data enabling 

20 unless we get standardization of formats.

21 But, you know, from day one of this new form 

22 look at the checkbox. For an unsecured creditor look 

23 at the checkbox on page 1, and if there's nothing 

24 checked there move on, and that's easy.

25 MR. KILPATRICK: Ms. Becket, would it be a 
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1 step forward for you then if the form plan -- a form 

2 plan simply said admin claims are here, secured are 

3 here, priorities here, unsecured, one, two, three, 

4 four, five, as opposed to the content and you could 

5 have what's going to happen locally, but you could 

6 teach your folks we're unsecured in this case, we need 

7 to look at number six? My job is to look at paragraph 

8 number six --

9 MS. BECKET: Yes.

10 MR. KILPATRICK: -- because nationally 

11 unsecured is treated at paragraph number six.

12 MS. BECKET: Speaking strictly from --

13 MR. KILPATRICK: That's a step forward from 

14 where you are now.

15 MS. BECKET: Sure, sure.

16 MR. KILPATRICK: Okay.

17 MS. BECKET: And to the extent that we can 

18 then use that data, it will enable us to get data 

19 where we just don't have the resources or it's not 

20 cost-effective to do it at this time. But just to be 

21 able to get that data and go back to our clients and 

22 say this is what you can expect from your, you know, 

23 portfolio, this is how it breaks down, and, you know, 

24 they can't deny that a lot of these companies sell 

25 their debt, sell this bankrupt debt to other companies 
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1 who are more than happy to participate in the 

2 bankruptcy process, and it helps them as well. You 

3 know the value of what you've got.

4 But strictly for an unsecured creditor, yes. 

5 If it was always in box nine, I wouldn't care less 

6 what the rest of the plan said. But as a proponent of 

7 the bankruptcy system, I have to say that everyone 

8 else's perspective is also very important.

9 JUDGE IKUTA: One more question.

10 JUDGE GOLDGAR: I wondered if you could 

11 answer the question that I posed to Judge Lynch, and 

12 it really was just a question and given your national 

13 practice, and that is whether in your view the form of 

14 a plan in a particular district influences 

15 confirmation rates or plan completion rates and, if 

16 you do think so, why you think that's true.

17 MS. BECKET: I can't really speak to that as 

18 an unsecured creditor because it doesn't do anything 

19 for me to figure that out. However -- for my clients 

20 I would say, and nobody else wants to pay me to do it. 

21 However, I think the success of Chapter 13 is not --

22 if you ask me based just on my experience doing

23 this -- is not dependent on what order everything is 

24 in in the plan. It's dependent on the trustee, the 

25 debtor attorney, the local culture, the bankruptcy 
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1 judges. They all manage their cases differently, and 

2 I don't think how the information is presented to the 

3 Court really affects the ultimate success of a case.

4 That's where local culture is. You can see 

5 obvious differences in local culture, but, again, I 

6 don't think that changing the format of the 

7 presentation of the information is going to have an 

8 impact on that.

9 JUDGE GOLDGAR: So, when you say local 

10 culture, you're not including the plan as part of the 

11 local culture. You're really talking about something 

12 else?

13 MS. BECKET: I am talking about something 

14 else because local culture is really the people in the 

15 area's view of bankruptcy and the goal of bankruptcy 

16 and what their role is in the process. You can look 

17 at a chart of the United States and see areas where 

18 almost every case that's filed at least starts out as 

19 Chapter 13, where success rates are higher than other 

20 rates, where payouts are higher than other rates, and 

21 a lot of that is a factor of how the participants, the 

22 everyday participants, the trustees, the debtor 

23 attorneys, and the judges approach bankruptcy cases.

24 Some courts would not confirm a zero percent 

25 plan, zero percent unsecured. They just won't. Some 
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1 courts won't, and this is probably a little more pre2 BAPCPA, but some courts wouldn't confirm a plan that 

3 was less than a 20 percent dividend, and so that's the 

4 kind of influence that local people can have on the 

5 process and therefore the outcome, and, again, I don't 

6 think the format of the information makes any 

7 difference really.

8 MR. HARTLEY: I'm sorry, but one more 

9 question. But in a district where you have a judge 

10 that will approve a zero percent plan and have a 

11 $3,500 no look for the debtor's counsel, you're going 

12 to have high 13s in that district, right?

13 MS. BECKET: You can, but the payouts are 

14 going to be low.

15 MR. HARTLEY: Sure.

16 MS. BECKET: So, yeah, you may have high 

17 13s, but again, the choice to go into Chapter 13 and 

18 submit yourself to three to five years of payments is 

19 largely due to the debtor's personal circumstances, 

20 whether they've got collateral they're trying to 

21 protect, you know, whether they're behind on their 

22 mortgage. But the fact still is that in some 

23 jurisdictions just out of the box the idea is let's 

24 see what you can do in a 13 because we pay our 

25 creditors back here if we can, and that's the local 
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1 culture in that area. In other areas they don't care. 

2 If your plan, you know, meets all of the checkboxes 

3 and it's confirmed, that's it. It doesn't matter what 

4 it pays out. So that's how local culture plays into 

5 the success of the payout I think in Chapter 13.

6 JUDGE IKUTA: Okay. Thank you very much, 

7 Ms. Becket, for your testimony.

8 MS. BECKET: Thank you.

9 JUDGE IKUTA: And our last witness today is 

10 Ronda Winnecour.

11 MS. WINNECOUR: Thank you, Judge Ikuta, 

12 members of the Committee.

13 I need to start out with a confession. I 

14 hate to do this, but I was wrong and you were right. 

15 I chaired the first -- no group of -- with all respect 

16 to the judges in this room and my friends who are 

17 creditors' attorneys and the debtors' attorneys who 

18 are also here, there is no group of individuals who 

19 will be more affected by a national plan than Chapter 

20 13 trustees, and despite the fact that everybody sort 

21 of seems to think that they didn't know about it, they 

22 did.

23 I chaired a program on this two years ago at 

24 the mid-winter meeting for the trustees when we were 

25 alone in Hawaii. I attended every board meeting, open 
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1 and closed, that addressed the plan form. I had the 

2 opportunity following it to serve as sort of a liaison 

3 on the committee that the Association formally put 

4 together on the plan form and rules, and I had the 

5 opportunity to meet with Judge Wedoff and Mr. 

6 Kilpatrick on several occasions to tweak the current 

7 plan form, and I was opposed all the way through it 

8 until this version.

9 It makes sense, and the thing that really 

10 made sense to me was reading the comments to the

11 rules. Everybody who is opposed to the form, the most 

12 vocal opponents are opposed because they have one, and 

13 they have one for the same reason I have for 15 years. 

14 It works, and there's nothing about my form that 

15 could not be incorporated into the national form.

16 The local practice and culture, the attitude 

17 of the trustee, the debtors' bar and the creditors' 

18 bar comes to the table in a really meaningful way when 

19 you look at the plan. It doesn't matter what it looks 

20 like on the paper. It does matter what the 

21 conformation order says, what the local rules apply.

22 In my district, like Judge Isgur's, I pay 

23 everything. Actually, I pay things, other than the 

24 savings account which I'm about to institute probably 

25 when I get back, I pay things that no other trustee in 
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1 the country does. I have made ongoing property tax 

2 payments, I have made ongoing utility payments, and I 

3 have done that to make plans work since I became 

4 trustee 15 years ago, and I incorporated the practice 

5 of my predecessor from 15 years before that, and he 

6 had a mandatory plan too. His was 14 pages long, 

7 single-spaced, font size 9, and was so complicated it 

8 contained a four-page plan summary on the top of it.

9 I'm not that kind of trustee. I like what 

10 he did and what he accomplished, but I'm an 

11 administrator trustee. So the first thing I did was 

12 dump the form and keep the summary. My judges have 

13 since expanded the form, and we're about six or seven 

14 pages now, but it's not significantly different from 

15 yours. None of the plans I looked at were 

16 significantly different from yours.

17 My colleagues have argued vehemently that 

18 the fact that there is a checkbox for the debtor will 

19 pay unsecured creditors outside the plan will mean 

20 that every debtor is going to try to do that, and you 

21 know what? They will. They absolutely will. Every 

22 one of my debtors' attorneys is going to sit there at 

23 a confirmation hearing or at a conciliation 

24 conference, we actually do an informal process for 

25 plan confirmation, and we do it at 341 so that we can 
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1 move money quickly, so every one of them is going to 

2 sit there and check that box and my staff's going to 

3 alert it, oh, yes, because it's data-enabled they're 

4 going to know about it without having to do it 

5 manually. They're going to alert it. My staff 

6 attorney or I are going to sit there and say you're 

7 kidding, right? You really think you want to make 

8 that work? Let's have a hearing, and it will go away 

9 in six months.

10 Nobody hates change more than bankruptcy 

11 lawyers. I know, I didn't used to be one, and I have 

12 never -- and it's what you want and it's what you want 

13 in a trustee and it's what you hope for in a judge. 

14 You hope for consistent administration of what is 

15 actually a financial institution. I move $140 million 

16 a year. To date, I have moved it all to the right 

17 place. I am very fortunate. It may not have happened 

18 since I haven't checked email this morning. That's 

19 really what we do.

20 We get it to the right place in the right 

21 amount in the right way, and the form for how we get 

22 there is really pretty much irrelevant. Yes, there's 

23 griping, and I get that people don't like it. I don't 

24 think that the plan form affects the success rate. 

25 I've actually done some research on it in my own area. 
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1 What is affecting plan success is trustee attitude 

2 about helping debtors complete, mandatory wage 

3 attachments, electronic funds transfers coming in, but 

4 it isn't affected -- mine isn't better than somebody 

5 else's because of the form I use.

6 Mine may be better because we pay 

7 everything, and when my debtors come out of Chapter 13 

8 they're coming out with a mortgage payment paid ahead. 

9 They're coming out with the cars fully paid. They're 

10 coming with, oh, yeah, the money I took all the time 

11 back in their pockets. So that increases 

12 effectiveness, but the form does not.

13 And I really want to thank you all. I 

14 really want to spend four seconds on the rules. They 

15 are necessary. They are essential, and if they are 

16 what it costs to get a plan and if it works in a way 

17 to get a form in place for creditors to be able to 

18 file proofs of claim in mortgage cases, to file a 

19 proof of claim within 60 days, to let us get that 

20 money out the door to them quicker, more accurately, 

21 and to require them to come to the table and give us 

22 the information we need to do it, there's nothing more 

23 important than this right now. Thank you.

24 JUDGE IKUTA: Questions?

25 JUDGE DOW: Ronda, you said that originally 
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1 you were opposed and for some time.

2 MS. WINNECOUR: Uh-huh.

3 JUDGE DOW: So what specifically was it that 

4 drove your opposition and what was it about the 

5 process or the changes to the form that changed your 

6 mind?

7 MS. WINNECOUR: One of them was the removal 

8 of the distribution sequence. I actually attended 

9 that session, and in fact the fact that trustee's fees 

10 are in place in the first line of distribution is 

11 probably no longer accurate too because the United 

12 States Trustee Program changed their policy on 

13 trustee's fees, and we now take fees on receipts in 

14 virtually every jurisdiction, so we aren't 

15 distributing them to ourselves. We've already taken 

16 them. They're gone.

17 But what really changed it was Judge 

18 Wedoff's willingness to meet with us over and over 

19 again and make it a neutral form. It doesn't 

20 incorporate the outcome. The outcome is in the 

21 orders. It's in the trustee's objections to 

22 confirmation. It's in the hearings that are going to 

23 go around, and it's in everybody doing the job they 

24 already have. The form doesn't do our jobs.

25 JUDGE DOW: Since you mentioned the 
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1 distribution scheme a number of the comments by those 

2 who oppose the form have been that there's a problem 

3 with that part of the form either because it permits 

4 debtors to adopt some distribution scheme that may be 

5 completely out of whack with the code or because it 

6 delegates it to the trustee and then it will be a 

7 secret process. What's your response on those 

8 concerns?

9 MS. WINNECOUR: The distribution scheme in 

10 my jurisdiction does not comply with the code, and 

11 I've had the objection raised by secured creditors 

12 that we don't comply with code because we don't make 

13 adequate protection payments to 910 car claims. We 

14 don't do any of that stuff, and we've litigated it, 

15 and judges said, gee, do it. Anytime a creditor 

16 objects we now do it. They don't object anymore. 

17 They get money faster. And to use the distribution 

18 sequence in place would have slowed down the 

19 distribution process for my district.

20 I think that it varies. I don't think 

21 there's any secrecy about it. The confirmation order 

22 establishes when the money is going to move. The plan 

23 form in my district shows it, the rules show it, and 

24 the creditor has the right to object to it. I don't 

25 see this as a big deal. I think mandating the 
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1 distribution sequence was the problem.

2 JUDGE IKUTA: One of the comments that we've 

3 heard is that adopting this national form would 

4 squelch innovation in the various districts because it 

5 would have to make any changes, would have to go 

6 through the forms modification process. What's your 

7 response to that concern?

8 MS. WINNECOUR: I think that to the extent 

9 that there might be something innovative or new, we 

10 would encourage the bar to include it in Provision 9. 

11 We would encourage the Court to include it in the 

12 court order confirming the plan.

13 I don't think that -- and to the extent that 

14 we think it's really great and we should share it, I 

15 will write it, my staff attorneys will write it, we'll 

16 get it out there. Thirteen trustees talk to each 

17 other all the time. As a matter of fact, I'm 

18 surprised you only got complaints from 84 of my 

19 colleagues. I've heard from petty much all of them 

20 this week. We talk to each other all the time. We 

21 are very close-knit, much in the same way the 

22 bankruptcy judge community is. We have a private 

23 email list. We just saw each other all last week. 

24 This is certainly a topic that is concerning to the 13 

25 community.
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1 But like I said, I can't see -- when you 

2 actually think it through, it works. That's why we do 

3 what we do, and making it work for everybody is an 

4 administrative boon. It's going to save me money, 

5 which means Alane's clients are going to get more. I 

6 don't have to have a person sit there and input every 

7 single piece of that plan. I've talked to the 

8 software provider. He said as long as it's on a 

9 platform they can incorporate all we're going to do is 

10 push a button.

11 Now my staff's going to go through and tell 

12 me what's wrong because the car payment will be in the 

13 wrong place, the mortgage payment will be in the wrong 

14 place, an adequate protection payment isn't yet 

15 provided for in your form. I made some suggestions, 

16 my colleagues have made others. It's all going to be 

17 in the wrong place, but it's going to be in my system 

18 with the push of a button. It's going to save 20 

19 manhours a week in my office.

20 JUDGE IKUTA: Other questions?

21 (No response.)

22 JUDGE IKUTA: We thank you for your 

23 testimony.

24 MS. WINNECOUR: Thank you.

25 JUDGE IKUTA: Thank you. That was our last 
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1 witness. I'd like to thank all of the witnesses for 

2 coming out here and giving us their testimony. This 

3 information is extremely important for our process. 

4 Our next meeting will be in Pasadena this April, and 

5 the information regarding the meeting will be posted 

6 on the U.S. Courts Rules website, and we'll also try 

7 to have very nice weather for you all. And with that 

8 we are adjourned. Thank you.

9 (Whereupon, at 11:46 a.m., the meeting in 

10 the above-entitled matter was concluded.)

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