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TITLE 11A–APPENDIX

BANKRUPTCY RULES

Part VI – Collection and Liquidation of the Estate


  • Rule 6001. Burden of Proof As to Validity of Post Petition Transfer
  • Any entity asserting the validity of a transfer under Sec. 549 of the Code shall have the burden of proof.

    NOTES OF ADVISORY COMMITTEE ON RULES--1983

    This rule is derived from former Bankruptcy Rule 603. The Act contained, in Sec. 70d, a provision placing the burden of proof on the same person as did Rule 603. The Code does not contain any directive with respect to the burden of proof. This omission, in all probability, resulted from the intention to leave matters affecting evidence to these rules. See H. Rep. No. 95-595, 95th Cong. 1st Sess. (1977) 293.

  • Rule 6002. Accounting by Prior Custodian of Property of the Estate
  • (a) Accounting Required

    Any custodian required by the Code to deliver property in the custodian's possession or control to the trustee shall promptly file and transmit to the United States trustee a report and account with respect to the property of the estate and the administration thereof.

    (b) Examination of Administration

    On the filing and transmittal of the report and account required by subdivision (a) of this rule and after an examination has been made into the superseded administration, after notice and a hearing, the court shall determine the propriety of the administration, including the reasonableness of all disbursements.

    (As amended Mar. 30, 1987, eff. Aug. 1, 1987; Apr. 30, 1991, eff. Aug. 1, 1991; Apr. 22, 1993, eff. Aug. 1, 1993.)

    NOTES OF ADVISORY COMMITTEE ON RULES--1983

    "Custodian" is defined in Sec. 101(10) of the Code. The definition includes a trustee or receiver appointed in proceedings not under the Code, as well as an assignee for the benefit of creditors.

    This rule prescribes the procedure to be followed by a custodian who under Sec. 543 of the Code is required to deliver property to the trustee and to account for its disposition. The examination under subdivision (b) may be initiated (1) on the motion of the custodian required to account under subdivision (a) for an approval of his account and discharge thereon, (2) on the motion of, or the filing of an objection to the custodian's account by, the trustee or any other party in interest, or (3) on the court's own initiative. Rule 9014 applies to any contested matter arising under this rule.

    Section 543(d) is similar to an abstention provision. It grants the bankruptcy court discretion to permit the custodian to remain in possession and control of the property. In that event, the custodian is excused from complying with Sec. 543(a)-(c) and thus would not be required to turn over the property to the trustee. When there is no duty to turn over to the trustee, Rule 6002 would not be applicable.

    NOTES OF ADVISORY COMMITTEE ON RULES--1991 AMENDMENT

    This rule is amended to enable the United States trustee to review, object to, or to otherwise be heard regarding the custodian's report and accounting. See Sec. 307 and 543 of the Code.

    NOTES OF ADVISORY COMMITTEE ON RULES--1993 AMENDMENT

    Subdivision (b) is amended to conform to the language of Sec. 102(1) of the Code.

  • [Rule 6003. Disbursement of Money of the Estate] (Abrogated Apr. 30, 1991, eff. Aug. 1, 1991)
  • NOTES OF ADVISORY COMMITTEE ON RULES--1991

    This rule is abrogated in view of the role of the United States trustee in supervising trustees. Use of estate funds by a trustee or debtor in possession is governed by Sec. 363 of the Code.

  • Rule 6004. Use, Sale, or Lease of Property
  • (a) Notice of Proposed Use, Sale, or Lease of Property

    Notice of a proposed use, sale, or lease of property, other than cash collateral, not in the ordinary course of business shall be given pursuant to Rule 2002(a)(2), (c)(1), (i), and (k) and, if applicable, in accordance with Sec. 363(b)(2) of the Code.

    (b) Objection to Proposal

    Except as provided in subdivisions (c) and (d) of this rule, an objection to a proposed use, sale, or lease of property shall be filed and served not less than five days before the date set for the proposed action or within the time fixed by the court. An objection to the proposed use, sale, or lease of property is governed by Rule 9014.

    (c) Sale Free and Clear of Liens and Other Interests

    A motion for authority to sell property free and clear of liens or other interests shall be made in accordance with Rule 9014 and shall be served on the parties who have liens or other interests in the property to be sold. The notice required by subdivision (a) of this rule shall include the date of the hearing on the motion and the time within which objections may be filed and served on the debtor in possession or trustee.

    (d) Sale of Property Under $2,500

    Notwithstanding subdivision (a) of this rule, when all of the nonexempt property of the estate has an aggregate gross value less than $2,500, it shall be sufficient to give a general notice of intent to sell such property other than in the ordinary course of business to all creditors, indenture trustees, committees appointed or elected pursuant to the Code, the United States trustee and other persons as the court may direct. An objection to any such sale may be filed and served by a party in interest within 15 days of the mailing of the notice, or within the time fixed by the court. An objection is governed by Rule 9014.

    (e) Hearing

    If a timely objection is made pursuant to subdivision (b) or (d) of this rule, the date of the hearing thereon may be set in the notice given pursuant to subdivision (a) of this rule.

    (f) Conduct of Sale Not in the Ordinary Course of Business

    (1) Public or Private Sale. All sales not in the ordinary course of business may be by private sale or by public auction. Unless it is impracticable, an itemized statement of the property sold, the name of each purchaser, and the price received for each item or lot or for the property as a whole if sold in bulk shall be filed on completion of a sale. If the property is sold by an auctioneer, the auctioneer shall file the statement, transmit a copy thereof to the United States trustee, and furnish a copy to the trustee, debtor in possession, or chapter 13 debtor. If the property is not sold by an auctioneer, the trustee, debtor in possession, or chapter 13 debtor shall file the statement and transmit a copy thereof to the United States trustee.

    (2) Execution of Instruments. After a sale in accordance with this rule the debtor, the trustee, or debtor in possession, as the case may be, shall execute any instrument necessary or ordered by the court to effectuate the transfer to the purchaser.

    (g) Stay of Order Authorizing Use, Sale, or Lease of Property

    An order authorizing the use, sale, or lease of property other than cash collateral is stayed until the expiration of 10 days after entry of the order, unless the court orders otherwise.

    (As amended Mar. 30, 1987, eff. Aug. 1, 1987; Apr. 30, 1991, eff. Aug. 1, 1991; Apr. 26, 1999, eff. Dec. 1, 1999.)

    NOTES OF ADVISORY COMMITTEE ON RULES--1983

    Subdivisions (a) and (b). Pursuant to Sec. 363(b) of the Code, a trustee or debtor in possession may use, sell, or lease property other than in the ordinary course of business only after notice and hearing. Rule 2002(a), (c) and (i) specifies the time when notice of sale is to be given, the contents of the notice and the persons to whom notice is to be given of sales of property. Subdivision (a) makes those provisions applicable as well to notices for proposed use and lease of property.

    The Code does not provide the time within which parties may file objections to a proposed sale. Subdivision (b) of the rule requires the objection to be in writing and filed not less than five days before the proposed action is to take place. The objection should also be served within that time on the person who is proposing to take the action which would be either the trustee or debtor in possession. This time period is subject to change by the court. In some instances there is a need to conduct a sale in a short period of time and the court is given discretion to tailor the requirements to the circumstances.

    Subdivision (c). In some situations a notice of sale for different pieces of property to all persons specified in Rule 2002(a) may be uneconomic and inefficient. This is particularly true in some chapter 7 liquidation cases when there is property of relatively little value which must be sold by the trustee. Subdivision (c) allows a general notice of intent to sell when the aggregate value of the estate's property is less than $2,500. The gross value is the value of the property without regard to the amount of any debt secured by a lien on the property. It is not necessary to give a detailed notice specifying the time and place of a particular sale. Thus, the requirements of Rule 2002(c) need not be met. If this method of providing notice of sales is used, the subdivision specifies that parties in interest may serve and file objections to the proposed sale of any property within the class and the time for service and filing is fixed at not later than 15 days after mailing the notice. The court may fix a different time. Subdivision (c) would have little utility in chapter 11 cases. Pursuant to Rule 2002(i), the court can limit notices of sale to the creditors' committee appointed under Sec. 1102 of the Code and the same burdens present in a small chapter 7 case would not exist.

    Subdivision (d). If a timely objection is filed, a hearing is required with respect to the use, sale, or lease of property. Subdivision (d) renders the filing of an objection tantamount to requesting a hearing so as to require a hearing pursuant to Sec. 363(b) and 102(l)(B)(i).

    Subdivision (e) is derived in part from former Bankruptcy Rule 606(b) but does not carry forward the requirement of that rule that court approval be obtained for sales of property. Pursuant to Sec. 363(b) court approval is not required unless timely objection is made to the proposed sale. The itemized statement or information required by the subdivision is not necessary when it would be impracticable to prepare it or set forth the information. For example, a liquidation sale of retail goods although not in the ordinary course of business may be on a daily ongoing basis and only summaries may be available.

    The duty imposed by paragraph (2) does not affect the power of the bankruptcy court to order third persons to execute instruments transferring property purchased at a sale under this subdivision. See, e.g., In re Rosenberg, 138 F.2d 409 (7th Cir. 1943).

    NOTES OF ADVISORY COMMITTEE ON RULES--1987 AMENDMENT

    Subdivision (a) is amended to conform to the 1984 amendments to Sec. 363(b)(2) of the Code.

    Subdivision (b) is amended to provide that an objection to a proposed use, sale, or lease of property creates a contested matter governed by Rule 9014. A similar amendment is made to subdivision (d), which was formerly subdivision (c).

    Subdivision (c) is new. Section 363(f) provides that sales free and clear of liens or other interests are only permitted if one of the five statutory requirements is satisfied. Rule 9013 requires that a motion state with particularity the grounds relied upon by the movant. A motion for approval of a sale free and clear of liens or other interests is subject to Rule 9014, service must be made on the parties holding liens or other interests in the property, and notice of the hearing on the motion and the time for filing objections must be included in the notice given under subdivision (a).

    NOTES OF ADVISORY COMMITTEE ON RULES--1991 AMENDMENT

    This rule is amended to provide notice to the United States trustee of a proposed use, sale or lease of property not in the ordinary course of business. See Rule 2002(k). Subdivision (f)(1) is amended to enable the United States trustee to monitor the progress of the case in accordance with 28 U.S.C. Sec. 586(a)(3)(G).

    The words "with the clerk" in subdivision (f)(1) are deleted as unnecessary. See Rules 5005(a) and 9001(3).

    COMMITTEE NOTES ON RULES--1999 AMENDMENT

    Subdivision (g) is added to provide sufficient time for a party to request a stay pending appeal of an order authorizing the use, sale, or lease of property under Sec. 363(b) of the Code before the order is implemented. It does not affect the time for filing a notice of appeal in accordance with Rule 8002.

    Rule 6004(g) does not apply to orders regarding the use of cash collateral and does not affect the trustee's right to use, sell, or lease property without a court order to the extent permitted under Sec. 363 of the Code.

    The court may, in its discretion, order that Rule 6004(g) is not applicable so that the property may be used, sold, or leased immediately in accordance with the order entered by the court. Alternatively, the court may order that the stay under Rule 6004(g) is for a fixed period less than 10 days.

    GAP Report on Rule 6004. No changes since publication.

  • Rule 6005. Appraisers and Auctioneers
  • The order of the court approving the employment of an appraiser or auctioneer shall fix the amount or rate of compensation. No officer or employee of the Judicial Branch of the United States or the United States Department of Justice shall be eligible to act as appraiser or auctioneer. No residence or licensing requirement shall disqualify an appraiser or auctioneer from employment.

    (As amended Apr. 30, 1991, eff. Aug. 1, 1991.)

    NOTES OF ADVISORY COMMITTEE ON RULES--1983

    This rule is derived from former Bankruptcy Rule 606(c) and implements Sec. 327 of the Code. Pursuant to Sec. 327, the trustee or debtor in possession may employ one or more appraisers or auctioneers, subject to court approval. This rule requires the court order approving such employment to fix the amount or rate of compensation. The second sentence of the former rule is retained to continue to safeguard against imputations of favoritism which detract from public confidence in bankruptcy administration. The final sentence is to guard against imposition of parochial requirements not warranted by any consideration having to do with sound bankruptcy administration.

    Reference should also be made to Rule 2013(a) regarding the limitation on employment of appraisers and auctioneers, and Rule 2014(a) regarding the application for appointment of an appraiser or auctioneer.

  • Rule 6006. Assumption, Rejection or Assignment of an Executory Contract or Unexpired Lease
  • (a) Proceeding To Assume, Reject, or Assign

    A proceeding to assume, reject, or assign an executory contract or unexpired lease, other than as part of a plan, is governed by Rule 9014.

    (b) Proceeding To Require Trustee To Act

    A proceeding by a party to an executory contract or unexpired lease in a chapter 9 municipality case, chapter 11 reorganization case, chapter 12 family farmer's debt adjustment case, or chapter 13 individual's debt adjustment case, to require the trustee, debtor in possession, or debtor to determine whether to assume or reject the contract or lease is governed by Rule 9014.

    (c) Notice

    Notice of a motion made pursuant to subdivision (a) or (b) of this rule shall be given to the other party to the contract or lease, to other parties in interest as the court may direct, and, except in a chapter 9 municipality case, to the United States trustee.

    (d) Stay of Order Authorizing Assignment

    An order authorizing the trustee to assign an executory contract or unexpired lease under Sec. 365(f) is stayed until the expiration of 10 days after the entry of the order, unless the court orders otherwise.

    (As amended Mar. 30, 1987, eff. Aug. 1, 1987; Apr. 30, 1991, eff. Aug. 1, 1991; Apr. 22, 1993, eff. Aug. 1, 1993; Apr. 26, 1999, eff. Dec. 1, 1999.)

    NOTES OF ADVISORY COMMITTEE ON RULES--1983

    Section 365(a) of the Code requires court approval for the assumption or rejection of an executory contract by the trustee or debtor in possession. The trustee or debtor in possession may also assign an executory contract, Sec. 365(f)(1), but must first assume the contract, Sec. 365(f)(2). Rule 6006 provides a procedure for obtaining court approval. It does not apply to the automatic rejection of contracts which are not assumed in chapter 7 liquidation cases within 60 days after the order for relief, or to the assumption or rejection of contracts in a plan pursuant to Sec. 1123(b)(2) or Sec. 1322(b)(7).

    Subdivision (a) by referring to Rule 9014 requires a motion to be brought for the assumption, rejection, or assignment of an executory contract. Normally, the motion will be brought by the trustee, debtor in possession or debtor in a chapter 9 or chapter 13 case. The authorization to assume a contract and to assign it may be sought in a single motion and determined by a single order.

    Subdivision (b) makes applicable the same motion procedure when the other party to the contract seeks to require the chapter officer to take some action. Section 365(d)(2) recognizes that this procedure is available to these contractual parties. This provision of the Code and subdivision of the rule apply only in chapter 9, 11 and 13 cases. A motion is not necessary in chapter 7 cases because in those cases a contract is deemed rejected if the trustee does not timely assume it.

    Subdivision (c) provides for the court to set a hearing on a motion made under subdivision (a) or (b). The other party to the contract should be given appropriate notice of the hearing and the court may order that other parties in interest, such as a creditors' committee, also be given notice.

    NOTES OF ADVISORY COMMITTEE ON RULES--1987 AMENDMENT

    Subdivisions (a) and (b) are amended to conform to the 1984 amendment to Sec. 365 of the Code, which governs assumption or rejection of time share interests.

    Section 1113, governing collective bargaining agreements, was added to the Code in 1984. It sets out requirements that must be met before a collective bargaining agreement may be rejected. The application to reject a collective bargaining agreement referred to in Sec. 1113 shall be made by motion. The motion to reject creates a contested matter under Rule 9014, and service is made pursuant to Rule 7004 on the representative of the employees. The time periods set forth in Sec. 1113(d) govern the scheduling of the hearing and disposition of a motion to reject the agreement.

    NOTES OF ADVISORY COMMITTEE ON RULES--1991 AMENDMENT

    References to time share interests are deleted as unnecessary. Time share interests are within the scope of this rule to the extent that they are governed by Sec. 365 of the Code.

    Subdivision (b) is amended to include chapter 12 cases.

    Subdivision (c) is amended to enable the United States trustee to appear and be heard on the issues relating to the assumption or rejection of executory contracts and unexpired leases. See Sec. 307, 365, and 1113 of the Code.

    NOTES OF ADVISORY COMMITTEE ON RULES--1993 AMENDMENT

    This rule is amended to delete the requirement for an actual hearing when no request for a hearing is made. See Rule 9014.

    COMMITTEE NOTES ON RULES--1999 AMENDMENT

    Subdivision (d) is added to provide sufficient time for a party to request a stay pending appeal of an order authorizing the assignment of an executory contract or unexpired lease under Sec. 365(f) of the Code before the assignment is consummated. The stay under subdivision (d) does not affect the time for filing a notice of appeal in accordance with Rule 8002.

    The court may, in its discretion, order that Rule 6006(d) is not applicable so that the executory contract or unexpired lease may be assigned immediately in accordance with the order entered by the court. Alternatively, the court may order that the stay under Rule 6006(d) is for a fixed period less than 10 days.

    GAP Report on Rule 6006. No changes since publication.

  • Rule 6007. Abandonment or Disposition of Property
  • (a) Notice of Proposed Abandonment or Disposition; Objections; Hearing

    Unless otherwise directed by the court, the trustee or debtor in possession shall give notice of a proposed abandonment or disposition of property to the United States trustee, all creditors, indenture trustees, and committees elected pursuant to Sec. 705 or appointed pursuant to Sec. 1102 of the Code. A party in interest may file and serve an objection within 15 days of the mailing of the notice, or within the time fixed by the court. If a timely objection is made, the court shall set a hearing on notice to the United States trustee and to other entities as the court may direct.

    (b) Motion by Party in Interest

    A party in interest may file and serve a motion requiring the trustee or debtor in possession to abandon property of the estate.

    [(c) Hearing] (Abrogated Apr. 22, 1993, eff. Aug. 1, 1993)

    (As amended Mar. 30, 1987, eff. Aug. 1, 1987; Apr. 30, 1991, eff. Aug. 1, 1991; Apr. 22, 1993, eff. Aug. 1, 1993.)

    NOTES OF ADVISORY COMMITTEE ON RULES--1983

    Sections 554 and 725 of the Code permit and require abandonment and disposition of property of the estate. Pursuant to Sec. 554, the trustee may abandon property but only after notice and hearing. This section is applicable in chapter 7, 11 and 13 cases. Section 725 requires the trustee to dispose of property in which someone other than the estate has an interest, prior to final distribution. It applies only in chapter 7 cases. Notice and hearing are also required conditions. Section 102(1) provides that "notice and hearing" is construed to mean appropriate notice and an opportunity for a hearing. Neither Sec. 554 nor Sec. 725 specify to whom the notices are to be sent. This rule does not apply to Sec. 554(c). Pursuant to that subsection, property is deemed abandoned if it is not administered. A hearing is not required by the statute.

    Subdivision (a) requires the notices to be sent to all creditors, indenture trustees, and committees elected under Sec. 705 or appointed under Sec. 1102 of the Code. This may appear burdensome, expensive and inefficient but the subdivision is in keeping with the Code's requirement for notice and the Code's intent to remove the bankruptcy judge from undisputed matters. The burden, expense and inefficiency can be alleviated in large measure by incorporating the notice into or together with the notice of the meeting of creditors so that separate notices would not be required.

    Subdivision (b) implements Sec. 554(b) which specifies that a party in interest may request an order that the trustee abandon property. The rule specifies that the request be by motion and, pursuant to the Code, lists the parties who should receive notice.

    Subdivision (c) requires a hearing when an objection under subdivision (a) is filed or a motion under subdivision (b) is made. Filing of an objection is sufficient to require a hearing; a separate or joined request for a hearing is unnecessary since the objection itself is tantamount to such a request.

    NOTES OF ADVISORY COMMITTEE ON RULES--1991 AMENDMENT

    This rule is amended to conform to the 1986 amendments to 28 U.S.C. Sec. 586(a) and to the Code. The United States trustee monitors the progress of the case and has standing to raise, appear and be heard on the issues relating to the abandonment or other disposition of property. See Sec. 307 and 554 of the Code. Committees of retired employees appointed under Sec. 1114 are not entitled to notice under subdivision (a) of this rule.

    NOTES OF ADVISORY COMMITTEE ON RULES--1993 AMENDMENT

    This rule is amended to clarify that when a motion is made pursuant to subdivision (b), a hearing is not required if a hearing is not requested or if there is no opposition to the motion. See Rule 9014. Other amendments are stylistic and make no substantive change.

  • Rule 6008. Redemption of Property from Lien or Sale
  • On motion by the debtor, trustee, or debtor in possession and after hearing on notice as the court may direct, the court may authorize the redemption of property from a lien or from a sale to enforce a lien in accordance with applicable law.

    NOTES OF ADVISORY COMMITTEE ON RULES--1983

    This rule is derived from former Bankruptcy Rule 609. No provision in the Code addresses the trustee's right of redemption. Ordinarily the secured creditor should be given notice of the trustee's motion so that any objection may be raised to the proposed redemption.

    The rule applies also to a debtor exercising a right of redemption pursuant to Sec. 722. A proceeding under that section is governed by Rule 9014.

  • Rule 6009. Prosecution and Defense of Proceedings by Trustee or Debtor in Possession
  • With or without court approval, the trustee or debtor in possession may prosecute or may enter an appearance and defend any pending action or proceeding by or against the debtor, or commence and prosecute any action or proceeding in behalf of the estate before any tribunal.

    NOTES OF ADVISORY COMMITTEE ON RULES--1983

    This rule is derived from former Bankruptcy Rule 610.

  • Rule 6010. Proceeding to Avoid Indemnifying Lien or Transfer to Surety
  • If a lien voidable under Sec. 547 of the Code has been dissolved by the furnishing of a bond or other obligation and the surety thereon has been indemnified by the transfer of, or the creation of a lien upon, nonexempt property of the debtor, the surety shall be joined as a defendant in any proceeding to avoid the indemnifying transfer or lien. Such proceeding is governed by the rules in Part VII.

    (As amended Apr. 30, 1991, eff. Aug. 1, 1991.)

    NOTES OF ADVISORY COMMITTEE ON RULES--1983

    This rule is derived from former Bankruptcy Rule 612.

    NOTES OF ADVISORY COMMITTEE ON RULES--1991 AMENDMENT

    This rule is amended to conform to Sec. 550(a) of the Code which provides that the trustee may recover the property transferred in a voidable transfer. The value of the property may be recovered in lieu of the property itself only if the court so orders.

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