New Rules for Mortgage Lenders In Chapter 13 Bankruptcy Cases

This past December 2011, Congress enacted a new Federal Bankruptcy Rule, Rule 3002.1. This new rule governs how mortgage payments are to be treated. Specifically, when a debtor’s Chapter 13 plan provides to cure pre-petition arrears owed to the debtor’s mortgage company and the Trustee has paid those arrears in full, the Trustee must file a report with the court and send a copy of the report to the mortgage lender which indicates that the pre-petition arrears have been paid in full and that the debtor is current on his mortgage payments. If the mortgage company’s records indicate that the pre-petition arrears have not been paid in full or that the debtor is not current, it has 21 days from the date of the Trustee’s notice to file a response. If no response is filed by the mortgage lender, then the debtor will be considered current on his or her mortgage payments. This means that the mortgage lender is later precluded from claiming any payments are due from the debtor as of the date of the Trustee’s notice. This new law was enacted to prevent mortgage companies from claiming additional monies due from debtors after their Chapter 13 cases are discharged and closed.

If the lender files a timely opposition to the Trustee’s notice, the debtor has 31 days after the opposition is filed to file a response challenging the lender’s opposition. The court will then schedule a hearing and make a determination on the issue. If the lender does not file a timely opposition, it is precluded from presenting evidence at a subsequent hearing on the issue of the debtor’s payments.

The new rule also requires lenders to notify the court and the debtor if during the chapter 13 case it changes the amount of the debtor’s mortgage payment due to escrow changes or the loan was an adjustable rate loan or for any other reason. This notice must be filed with the court at least 21 days before the new payment amount is due. I had once case recently where the mortgage lender filed a notice in May 2012 of a payment change that took effect March 1, 2012. This was clearly not timely, and therefore, my client would not be responsible for the increase in payment during the months of March and April.

Finally, the new rule also requires that the mortgage lender file a notice with the court, with copies sent to the debtor and the debtor’s attorney, of any fee, cost or expense incurred by it during the Chapter 13 case which it considers the debtor’s liability. This notice must be filed within 180 of the date the lender incurred this fee, cost or expense. For example, if the lender wants to charge the debtor’s account for preparing and filing a proof of claim, it must notify the court of that expense within 180 days of the filing of the claim, or it will not be able to charge the debtor’s account for that expense.

Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. Our web site is located at: www.law-margulies.com. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.