New Bankruptcy Rules Would Require Proof from Creditors
Creditors in Chapter 13 bankruptcy cases would need to verify their claims to debts in order to be included in a repayment plan under new local rules currently under consideration in the U.S. Bankruptcy Court in the Eastern District of Wisconsin.
The requirement of secured creditors would provide more transparency for debtors whose loans may have been repackaged or resold, a common practice in the mortgage industry, according to the Wisconsin Journal of Law.
The proposed Wisconsin rule changes are scheduled for a public hearing today.
A similar rule was adopted by the Massachusetts bankruptcy courts at the beginning of December.
In a Chapter 13 bankruptcy case, secured creditors are given priority over unsecured creditors when the bankruptcy court is creating the debtor’s repayment plan.
However, if a debtor does not recognize the name of a creditor who has purchased the debt, that creditor may not receive the money owed. Worse, it could create grounds for the bankruptcy case to be dismissed or investigated for fraud.
