Doomsday Preppers, Rules Edition: The Judicial Conference Introduces New Bankruptcy Rule 9038, Permitting More Flexibility During Emergency Situations

During the COVID-19 pandemic, litigants’ struggles to meet deadlines have resulted in a patchwork of local rules and general orders aimed at easing the strain on the judicial system and litigants. The CARES Act tasked the Judicial Conference of the United States with formulating amendments to the Rules Enabling Act to “address emergency measures that may be taken by the Federal courts” when a national emergency has been declared. Recognizing the need for a more centralized mechanism to expand rules deadlines in emergency situations, the Judicial Conference has proposed three new rules: Civil Rule 87, Criminal Rule 62, and Bankruptcy Rule 9038. This article highlights new Bankruptcy Rule 9038.

The Existing Landscape: Rule 9006(b)

Pursuant to Rule 9006(b), courts may expand the deadlines contained in the rules for cause if the request is made prior to the expiration of the deadline; courts may permit late action if the request is made after the deadline has passed when the failure to act was due to excusable neglect. But Rule 9006(b) is limited in its application.

First, Rule 9006(b) may not expand the deadlines for:

• filing a list of the 20 largest unsecured creditors in chapter 9 and 11 cases;
• holding the meeting of creditors and addressing the election of trustees in chapter 7 cases;
• filing a motion to amend a judgment or for additional findings; or
• requesting a new trial or relief from judgment.

Second, the Rule is still constrained by the limitations contained in other specific rules. For example, Rule 1006(b)(2) sets a hard deadline of 180 days from the petition date for the filing fee to be paid, which cannot be expanded under Rule 9006(b).

Rule 9006(b) also cannot override the requirement that an extension request be filed prior to the expiration of the following deadlines:

• the deadline to file a motion to dismiss for abuse;
• the deadline for filing a governmental proof of claim; and
• the deadlines for objecting to claimed exemptions, objecting to discharge, or objecting to the dischargeability of a debt.

Rule 9006(b) also cannot override the specific guidelines for extensions contained in the following Rules:

• Rule 8002(d) regarding the deadline to file a notice of appeal;
• Rule 9033 regarding the deadline to object to proposed findings of fact and conclusions of law; and
• Rule 1007(c) regarding the deadline to file statements and schedules.

Last, Rule 9006(b) was intended for use in specific instances, for cause. Thus, it is not helpful for district-wide deadline expansions across multiple cases such as are needed when the entire system is affected, as with a pandemic.

The Bunker: New Bankruptcy Rule 9038

Set to go into effect in December of 2023, Rule 9038 is intended to fill the gaps in Rule 9006(b). The Rule is divided into three subsections: subsection (a) contains conditions for an emergency; subsection (b) governs declaring an emergency; and subsection (c) has provisions about tolling and extending time limits.

Subsection (a) gives only the Judicial Conference the power to declare a Bankruptcy Rules emergency. The Judicial Conference may declare a Bankruptcy Rules emergency if it finds “that extraordinary circumstances relating to public health or safety, or affecting physical or electronic access to a bankruptcy court, substantially impair the court’s ability to perform its functions in compliance with these rules.”

Subsection (b) describes the procedure for declaring a Bankruptcy Rules emergency. First, the declaration must designate the affected courts and state any restrictions on the granted authority, and the duration of the emergency must be ninety days or fewer. This allows for greater flexibility if the emergency is limited to a specific region or state. Additional declarations may be issued under Rule 9038, and the Judicial Conference may terminate the declaration for one or more courts early.

Subsection (c) is the meat of the new rule. A chief judge may order the extension or tolling of a specific Bankruptcy Rule, local rule, or general order and includes directives that actions must be taken “promptly,” “forthwith,” “immediately,” or “without delay.” That power is also extended to presiding bankruptcy judges in specific cases. Such tolling ends on the later of thirty days after the date the emergency declaration terminates or the expiration of the original time period, unless the extension expires sooner than thirty days after the termination of the declaration, in which case the extended deadline applies. Such extensions may be either lengthened or shortened by a presiding judge in a specific case for cause after notice and a hearing. Last, the only deadlines excepted from tolling under the proposed rule are those contained in a statute as opposed to the rules.

Conclusion

Able to fill in the gaps left by Rule 9006(b), Rule 9038 will provide the flexibility needed to permit continued access to bankruptcy courts and the administration of their dockets during emergency situations. It is not constrained to national emergencies and only statutory deadlines are excepted from its reach. It is the doomsday bunker we hope to never use.