Important Information for Debtors in Chapter 13 cases

Badillo Law Group P.C. > Important Bankruptcy Information > Important Information for Debtors in Chapter 13 cases
  • If you own a home and file for Chapter 13 bankruptcy there is some important information you should know.
  • Post Petition Mortgage Fees:
  • In a Chapter 13 bankruptcy, post-petition mortgage fees refer to charges incurred after the bankruptcy filing related to a debtor’s mortgage. These fees can include late fees, inspection fees, attorney fees, or other servicing costs. However, mortgage lenders must follow specific rules before charging these fees to a debtor in bankruptcy.
  • Key Aspects of Post-Petition Mortgage Fees in Chapter 13:
    • Notice Requirement (Rule 3002.1)
    • Types of Post-Petition Mortgage Fees
        • Late fees (if allowed under the mortgage contract)
        • Property inspection fees (e.g., drive-by inspections if the home is in default)
        • Attorney fees (for defending a motion or filing legal documents)
        • Payment change notices (for escrow or adjustable-rate mortgage changes)
    • Impact on the Debtor
        • If the fees are valid and not objected to, they become part of the debt owed to the mortgage lender.
        • If the debtor does not pay these fees before the end of the bankruptcy, they could face a default or foreclosure risk after discharge.
    • Objections and Challenges
        • Debtors or trustees can challenge fees if they seem unreasonable, excessive, or improperly assessed.
        • The court can disallow fees that are not properly noticed under Rule 3002.1.
    • Cure and Maintain Cases
        • If the debtor is using Chapter 13 to catch up on mortgage arrears (“cure and maintain”), these fees could increase the amount owed, affecting the plan.
    • Bottom Line
    • Post-petition mortgage fees in Chapter 13 are regulated to protect debtors from hidden or unfair charges. Mortgage lenders must provide timely notice of these fees, and debtors have the right to review and dispute them before they become due.
  • Mortgage statements:
  • If you are in a Chapter 13 bankruptcy and are not receiving mortgage statements, there could be several reasons for this. Mortgage servicers sometimes stop sending statements due to confusion over bankruptcy rules, but in many cases, you should still receive them unless the court orders otherwise.
  • Possible Reasons You’re Not Receiving Statements
    • Servicer Policy on Bankruptcy Cases
      • Some mortgage lenders automatically stop sending statements after a Chapter 13 filing, believing they might violate the automatic stay or debt collection laws.
      • However, federal law generally requires them to resume sending statements in most cases.
  • Bankruptcy Rule 3002.1 Requirements
      • If you are curing mortgage arrears through your Chapter 13 plan, your lender must file notices of payment changes and post-petition fees with the court.
      • If the servicer fails to comply, you might not receive statements or be unaware of changes in your payment amount.
  • The Mortgage Statement Exception
      • The Truth in Lending Act (TILA) Regulation Z requires mortgage servicers to send periodic statements, but there’s an exception for borrowers in bankruptcy.
      • Some servicers use this as a reason to stop sending statements, but many courts now require lenders to continue sending them.
  • Court or Trustee Orders
      • Some bankruptcy courts or trustees issue specific orders about mortgage statements.
      • If your case is in a jurisdiction where monthly statements are required, your lender should be sending them.
  • What You Can Do
  • Request Statements Directly from the Servicer
      • Contact your mortgage company and ask if they can resume sending statements.
      • If they refuse, ask if they require a written request or court order.
  • Monitor Mortgage Payment Notices in the Bankruptcy Case
      • Your lender must file notices of payment changes with the court.
      • You or your attorney can check the bankruptcy docket for updates.
  • Verify Payments with Your Trustee
      • If your Chapter 13 plan includes mortgage payments, check with the trustee to confirm the lender is receiving them.
  • Request a Payment History
  • You have the right to request an accounting of your mortgage paymentsto ensure they are being applied correctly.
  • Bottom Line
  • You may still be entitled to receive mortgage statements during Chapter 13. If you are not receiving them, check with your lender, review court rules, and consult with your bankruptcy attorney if needed.
  • Making Post-Petition Mortgage Payments in Chapter 13
  • If you are in Chapter 13 bankruptcy, it is crucial to ensure that your post-petition mortgage payments (payments due after filing) are made properly to avoid default or foreclosure. How you make these payments depends on your Chapter 13 plan and your agreement with the mortgage lender.
  • How Post-Petition Mortgage Payments Are Made
  • There are two main ways mortgage payments are handled in Chapter 13:
  1. Conduit Plan (Trustee Pays the Mortgage)
    • In some jurisdictions, the Chapter 13 trustee collects your mortgage payments along with your plan payments and sends them to the mortgage servicer.
    • The trustee ensures payments are made, but this can include additional fees for processing.
    • If you are in a conduit plan, you must ensure your trustee is making the correct payments and keep track of changes in payment amounts.
  1. Direct Pay (Debtor Pays the Mortgage
    • Many debtors are responsible for paying the post-petition mortgage payments directly to the lender, outside of the bankruptcy plan.
    • This is common when a debtor is current on mortgage payments at the time of filing.
    • You must make payments on time and in full to avoid post-petition default.
  • Best Practices for Making Post-Petition Mortgage Payments
    1. Verify the Correct Payment Amount
        • Mortgage servicers may adjust escrow, taxes, or insurance.
        • Under Bankruptcy Rule 3002.1, servicers must file notices of any payment changes with the court.
        • Regularly check the bankruptcy docket or request an updated payment amount.
  1. Use a Reliable Payment Method
        • Pay through bank transfers, online bill pay, or certified checks to maintain proof of payment.
        • Avoid sending cash or using unreliable payment methods.
  1. Keep Records of Payments
        • Maintain copies of checks, bank statements, or payment confirmations.
        • If a servicer claims you missed a payment, having records can help resolve disputes.
  1. Monitor Mortgage Statements (If Available)
        • If your lender continues sending statements, review them for errors.
        • If you are not receiving statements, you can request them from your lender.
  1. Confirm Payments Are Applied Correctly
        • Some mortgage servicers misapply payments or hold them in suspense accounts (which can cause problems later).
        • Periodically request an accounting statement from your lender.
  1. Address Payment Issues Immediately
        • If a payment is missed, catch up as soon as possible to avoid post-petition default.
        • If you experience financial hardship, speak with your bankruptcy attorney about options like modifying the Chapter 13 plan.
  1. Review Discharge and Final Payment Details
        • At the end of Chapter 13, ensure the mortgage is fully reinstated and all payments are correctly applied.
  • What If You Can’t Make Post-Petition Mortgage Payments?
    • If you fall behind on post-petition mortgage payments, your lender may file a Motion for Relief from Stay to foreclose.
    • You may be able to:
        • Get Caught up on payments BEFORE court (discuss this with your attorney)
        • Enter into a repayment plan for 6 months for this default
        • Modify your Chapter 13 plan to include missed payments.
        • Apply for a loan modification (with court approval).
        • Convert to Chapter 7 (if eligible).
        • Work out a repayment plan with your lender.
  • Bottom Line
  • Making post-petition mortgage payments in Chapter 13 is essential to keep your home. Whether you pay directly or through the trustee, always verify payments, keep records, and monitor your account to avoid surprises. If any issues arise, consult your bankruptcy attorney immediately.
  • NOTICE TO ASSIGNOR OF FILING OF ASSIGNMENT/TRANSFER OF CLAIM
  • A Notice of Assignor Transfer in bankruptcy typically refers to a notice filed when a claim or debt is transferred from one creditor (assignor) to another (assignee). This often happens when a lender, mortgage servicer, or debt buyer acquires a claim from the original creditor.
  • Key Aspects of a Notice of Assignor Transfer in Bankruptcy
  1. Purpose of the Notice
    • Informs the bankruptcy court, trustee, and debtor that a creditor has transferred or sold its claim to another entity.
    • Ensures that the correct party receives payments and legal notices.
  2. Who Files the Notice?
    • The new creditor (assignee) usually files the notice with the bankruptcy court.
    • In some cases, the original creditor (assignor) may also provide notice.
  3. Contents of the Notice
    A standard Notice of Transfer of Claim should include:
    • Bankruptcy case number
    • Debtor’s name
    • Assignor (original creditor)
    • Assignee (new creditor or debt buyer)
    • Claim number (if the claim has been filed)
    • Amount of the claim
    • Effective date of transfer
  4. Effect of the Transfer
    • The new creditor (assignee) becomes the party responsible for collecting payments or enforcing the claim.
    • The debtor and trustee must update their records to ensure payments go to the correct entity.
    • The debtor may dispute the transfer if there is an error or if they believe the claim is invalid.
  5. Objections and Disputes
    • If there are errors in the notice or the debtor disagrees with the claim transfer, they can object with the bankruptcy court.
    • Common reasons for objections include:
      • Incorrect claim amount
      • Invalid transfer or unauthorized assignment
      • Failure to provide proper documentation
  • What Should Debtors Do If They Receive a Notice of Transfer?
  •                 Most of the time you don’t have to do anything! But otherwise:
  • Verify the new creditor’s information to ensure payments are made to the right entity.
  • Check for errors, such as incorrect amounts or an unrecognized creditor.
  • Update payment instructions if paying a secured debt (e.g., mortgage or car loan).
  • Consult with your bankruptcy attorney if there are concerns about the validity of the transfer.