Monday, March 21, 2022

Southern District of Texas Conducts Spring Cleaning of Noticing

Every day bankruptcy clerks sent out millions of required notifications to creditors and parties in interest. Creditors can bypass the paper notification by designating an email address for service pursuant to Fed.R.Bankr.P. 9036. Now the Bankruptcy Court for the Southern District of Texas is seeking to compel high volume creditors to sign up for electronic noticing.  On March 17, 2022, Judge Marvin Isgur instituted 328 orders requiring creditors to appear for a status conference through counsel to explain why they have not signed up for electronic noticing. 

While creditors are receiving the notices, the problem appears to be caused, at least in part, by debtors using different variants of a creditor’s address. In one case I reviewed, the same creditor was the subject of three orders. One involved notice sent to a post office box, one was addressed to a physical address minus the creditor’s suite and a third was sent to the physical address with an incorrect suite number.

The orders are being sent to “high-volume paper notice recipients” defined as parties receiving one hundred or more notices a month. The parties being haled into court seem to consist of debt collectors and creditors. When a debtor files a bankruptcy petition, it is good practice to include any debt collectors working on behalf of a creditor so that they receive notice and know to stop collection activities. Thus, debt collectors may find themselves on the receiving end of hundreds or thousands of notices without ever having appeared in a bankruptcy case.

The court has offered a simple remedy to avoid having to appear in court. Creditors may go to: and designate an email address for notices and then file a notice in the miscellaneous proceeding demonstrating that they have registered. Parties who fail to respond to the court’s invitation may be subject to “any appropriate sanctions” As well as “the cessation of paper noticing from the U.S. Bankruptcy Courts and the creation of an electronic account for you by the Bankruptcy Noticing Center.”

It is always a good idea to listen when a federal Bankruptcy Judge gives an order. However, there are other good reasons for complying with this requirement. It will reduce the cost to bankruptcy clerks across the country for sending out paper notices. It will also take some burden off the U.S. Postal Service. Finally, it will be good for the environment. Parties receiving these notices should act accordingly.

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