Tag Archives: bankruptcy

Mortgage Company Legal Fees in Bankruptcy

By Ryan C. Wood

Mortgage companies have an obligation to notify their customers who are in an active bankruptcy case that their mortgage payments have changed and/or provide notice if there have been any fees, expenses or charges added to their mortgage account or balance. Failure to do so may result in the bankruptcy court awarding appropriate expenses or attorney fees to the customers who are in the active bankruptcy case. See Federal Rules of Bankruptcy Procedure Rule 3002.1.

In a lot of cases we run into clients that have incurred numerous fees from their mortgage companies due to the fact that they have been late in paying their mortgage. A lot of fees and expenses are racked up and sometimes it is difficult to weed out what fees are appropriate. In the case of In Re: Olga Roife, Case No: 10-34070 (Bankruptcy Court for the Southern District of Texas) the mortgage customer fought back against some of these fees. In this case, Ms. Roife objected to the Notice of Post-Petition Mortgage Fees, Expenses and Charges that her mortgage company (Midfirst) filed with the court. Midfirst provided the Notice of Post-Petition Mortgage Fees, Expenses and Charges to her under Rule 3002.1. The Notice included late fees in the amount of $142.26 and legal fees in the amount of $125.00. Midfirst contended that their bankruptcy attorneys were entitled to their legal fees in preparing the Notice because the Bankruptcy Code requires that they send out the Notice and that failure to do so will result in sanctions for Midfirst. The bankruptcy court in this case agreed with the cases In re Boyd, 2013 WL 1844076 (Bankr. S.D. Tex. 2013) and In re Carr, 468 B.R. 806, 807 (Bankr. E.D. Va 2012). The Boyd case indicated that fees should not be charged for filing a Fee Notice because the creditor has a duty under non-bankruptcy law to inform their customers of the amounts due under a mortgage. In the Carr case the court decided that no fees should be charged because the Fee Notice can be easily derived and can be obtained from the creditors records with no significant burden on the creditor, that the Fee Notice is a business function and the preparation of the notice is not a practice of law and does not require any legal analysis.

The moral of the story is to always look through the documents that your bankruptcy attorney provides you to be sure the fees are correct. The mortgage companies may try to slip in a few expenses or fees they are not entitled to, such as fees to prepare notices required by the court. If you do not look at the documents you may end up paying more than you should be for your mortgage payments. If your mortgage payments include the payment of property taxes and insurance be sure to verify the amounts listed. You look through your property tax statement to see that it is consistent with what the mortgage company sends you. If you are lazy and decide to not double-check these figures you may end up overpaying.

What are Adequate Protection Payments and When are Adequate Payments Required?

By Ryan C. Wood

Adequate protection payments are paid to a secured creditor prior to the confirmation of a Chapter 13 plan or Chapter 11 plan or reorganization. As the name implies, the payment is to adequately protect the secured creditor’s interest your collateral. The most common adequate protection payments are made to creditors that use your car as collateral. There is a period of time between the filing of your Chapter 13 bankruptcy case to the confirmation or approval of your plan that the loan holder still needs to be paid. This period of time could last anywhere from two months to a year or more depending on your case. Your bankruptcy lawyer will be able to explain why there is delay in confirmation/approval or when confirmation/approval is anticipated. You are still driving your car during this period of time and therefore your car is depreciating in value. The adequate protection payments are to protect your secured creditor’s interest in the collateral during the time between when you first filed your Chapter 13 bankruptcy case to the confirmation of your plan. Once your Chapter 13 plan is confirmed your creditor will be paid based on the Chapter 13 plan filed.

Another use of the adequate protection payments are when you are behind on post-petition mortgage payments. Your Chapter 13 plan should pay back of your pre-petition mortgage arrears. You are responsible for making your regular monthly mortgage payments going forward. If you are behind on the post-petition mortgage payments your lender may file a motion to lift the automatic stay so they can proceed with foreclosure procedures on your house. Your bankruptcy lawyer should be able to set up some sort of payment plan with your mortgage lender and negotiate an adequate protection payment that is satisfactory to both parties. Your mortgage lender may then file an Adequate Protection Order with the court. This is an order signed by the court that provides the payment agreement you entered into with the mortgage lender. Failure to abide by the terms of the order may mean that your mortgage lender may continue with foreclosure proceedings.

Pursuant to 11 U.S.C. §1326, an adequate protection payment will need to be paid within 30 days of the filing of the bankruptcy petition or an order for relief. The order of relief may be granted once the secured creditor files a motion to lift the automatic stay so they can proceed to repossess a vehicle or foreclose on a home as indicated in the paragraph above. To avoid this result the person filing for bankruptcy would need to provide some sort of protection to the secured creditor in the form of payment for the asset.

How do you pay this adequate protection payment? You make the adequate protection payment to the Chapter 13 trustee as part of your Chapter 13 plan or directly to the creditor depending on your case. If you make the payment to the trustee, the trustee will then make the proper disbursements based on the plan filed with the court. Before the secured creditor could get any funds from the trustee they must first file a proof of claim with the court first. If a proof of claim is not filed they will not receive any of the disbursements. Your bankruptcy attorney should view the proof of claim for accuracy. Whether the trustee distributes the payments to the creditor before the plan is confirmed or after depends on the jurisdiction in which you filed your case. Some jurisdictions allow the payments to go to the secured creditor before the plan is confirmed, some jurisdictions allow the payments to go to the secured creditor if there is a direct order to that effect, and some jurisdictions make the secured creditor wait until the plan is confirmed before they receive their payments.

Are My Parking or Speeding Tickets Dischargeable in Bankruptcy?

By Ryan C. Wood

Have you ever parked somewhere and come back to your car and find a parking ticket on your windshield because you were just 1 minute past the allotted time on the parking meter? Or parked somewhere you were not supposed to? Or just drove a little faster than the speed limit posted on the road? If you have received a parking or speeding ticket you are not alone. Most likely you or someone you know has received one or more parking or speeding tickets in your lifetime. Some of the fines are manageable, but if you are already in a tight financial situation this ticket may be the straw that breaks the camel’s back. If you do not pay the fine the penalty accrues until even the once manageable fine has now exploded out of control. The question on a lot of people’s mind as they are deciding to file for bankruptcy is whether their parking and/or speeding tickets are dischargeable in bankruptcy.

As with most answers you may receive from a bankruptcy attorney, the answer is “it depends.” Whether your parking tickets are dischargeable in bankruptcy depends on what chapter of bankruptcy you are filing for protection under. Parking and speeding tickets are non-dischargeable in a Chapter 7 bankruptcy filing pursuant to 11 U.S.C. §523(a)(7). This section of the Bankruptcy Code indicates that a debt is non-dischargeable if it meets all three of these requirements: 1) the debt is for a fine, penalty, or forfeiture, 2) the debt is payable to and for the benefit of a governmental unit, and 3) is not compensation for actual pecuniary loss. Parking and speeding tickets are considered fines to the government and therefore not dischargeable in a Chapter 7 case. You would therefore still be responsible for the payment of the ticket after your other debts are discharged in your Chapter 7 case.

One silver lining is that these tickets are dischargeable in a Chapter 13 bankruptcy case pursuant to 11 U.S.C. §1328(a). This section of the Bankruptcy Code does not incorporate §523(a)(7) as part of the debts that are non-dischargeable. That means that once you complete the payment of your Chapter 13 plan payments (whether you are in a 3 year plan or 5 year plan depends on your particular circumstances) the rest of your debt that has not been paid will be discharged. This includes the parking and speeding tickets. The amount you pay to your unsecured creditors in your Chapter 13 plan may range from 0 to 100% of your debt depending on your circumstances. One thing to note is that your parking and speeding tickets are only discharged if you successfully complete your Chapter 13 plan payments. If you are unable to continue in a Chapter 13 because you need to convert your case to a Chapter 7 or if you receive a hardship discharge in your Chapter 13 case, those speeding and parking tickets remain not dischargeable.

You also need to be careful in the classification of your fine. If the debt you owe is for a fine that is criminal in nature then it would not be dischargeable in your Chapter 13 case. If your speeding ticket is considered criminal in nature then it would also not be dischargeable. Whether your speeding ticket is considered criminal or not depends on your particular’s state’s laws.

You should consult with an experienced bankruptcy lawyer to determine how to proceed in your bankruptcy case. The bankruptcy attorney can help you determine whether it is advisable to file a Chapter 7 or Chapter 13 bankruptcy case depending on your circumstances.

What Should I Expect at My Meeting of Creditors?

By Ryan C. Wood

When you file a bankruptcy case you are expected to attend a “meeting of creditors” pursuant to 11 U.S.C. §341. The meeting of creditors is sometimes called the “341” because the meeting is under §341 of the Bankruptcy Code. Failure to attend the meeting of creditors may result in the dismissal of your case. The name “meeting of creditors” sounds scary to some people because they think that they are going to be surrounded by their creditors grilling you in front of everyone. This is definitely not the case. This article will help explain what this meeting is and hopefully help dispel some of your fears.

First, the person that oversees the meeting of creditors is the trustee assigned to your bankruptcy case. It may be the Chapter 7 or Chapter 13 trustee depending on what chapter of bankruptcy you filed under. The trustee is not the judge. Therefore the meeting of creditors is not a “court date” that most people often confuse the meeting of creditors with. If your case is filed correctly and under the right circumstances you may never see the judge that is assigned to your case.

Secondly, you need to be sure you show up at the meeting on time and with the right documentation. The meeting will be held in a federal building. That means you will be going through security. You should be there at least 15 to 30 minutes early as there may sometimes be a long line. You need to bring your photo identification issued by the government. This could be a driver’s license or passport or anything issued by the government that has your picture on it. You need to be sure that the identification is unexpired. If it is expired, the marshals will not let you in the building even if you are the person pictured in the identification. You will also need to bring proof of your social security number issued by the government. The most common proof is your social security card. If you do not have a social security card you may bring your recent W2 or 1099 statements or tax transcripts that have your social security number on it. Normally the trustees require this proof to be your original copies so most trustees will not accept copies of your W2 or 1099. Normally the drivers license and social security card are the only documentation you need to bring with you to the meeting of creditors unless your bankruptcy lawyer or trustee indicate they want additional documentation.

After you make it through the security, you wait in the room indicated in your meeting of creditors notice. You would wait for your bankruptcy attorney there unless other arrangements have been made. There will be a number of cases that are assigned the same date and time as yours. The trustee will call cases up one by one to be sworn in under oath. Everything you say is recorded so if there is something the trustee asks you that you do not understand, ask the trustee to rephrase or repeat the question. Normally in a Chapter 7 no asset case, the trustee will ask about 5 minutes worth of questions. The questions are fairly easy. They would ask questions like: “Were you personally familiar with the information contained in your petition?” “Did you personally sign the petition?” “Is everything in your petition true and correct?” “Are all your assets and debts listed in the petition?” “Are there any changes you need to make in your petition?” “Have you filed for bankruptcy before?” “Have you transferred or sold any property in the past XX years?” “Have you filed all your tax returns?” Most of these questions only require a yes or no response. There is no need to give a long story. As I have indicated previously, everything is recorded. Even if you think the information you are providing is harmless, it may end up hurting you later as it can be used against you. In a Chapter 13 case, the trustee may ask additional questions regarding your Chapter 13 plan and whether you are on time with mortgage payments. They may ask if you are able to make the payments proposed in your Chapter 13 plan. Your bankruptcy attorney would most likely deal with all the Chapter 13 plan questions the trustee may have.

After the trustee finishes with the questioning, it is now time for any creditors to ask questions. Most of the time, creditors do not even show up. The creditors normally show up only if they believe that there has been some wrongdoing on your part and they want to prove that their debt is non-dischargeable so they ask certain questions related to your ability to pay those debts.

I see a lot of my clients get very nervous prior to the meeting of creditors because they believe they will be grilled and embarrassed in front of everyone. After the meeting is over, the most common comment I get is, “That’s it? Wow, that was a lot easier than I thought.” The best advice I can give to people going into a meeting of creditors is to relax and answer the questions truthfully and honestly and if everything in your petition was completed correctly, it should be a fairly easy process.

Judgment Liens and Filing Bankruptcy

By Ryan C. Wood

One of the main purposes of filing bankruptcy is to obtain the bankruptcy discharge. A discharge of your debts in bankruptcy releases you from personal liability for the payment of the debts. There are certain debts that cannot be discharged in bankruptcy (such as child support obligations, student loans (Undue Hardship Discharge exception), recent tax obligations, etc.). In addition to these nondischargeable debts, if you have any secured liens on your property (such as mortgages or car liens), those liens survive the bankruptcy. If you do not pay for the mortgage or the car, the house or car can be foreclosed or repossessed because you used your house or car as collateral for the debt. What happens if you have a judgment lien prior to the filing of your bankruptcy case? Is this judgment lien enforceable after your bankruptcy case is completed and the order of discharge entered? It depends.

Judgment Liens on Real Property

Judgment liens attached to your real property prior to the filing of your bankruptcy case can be avoided if they impair your exemptions. Your bankruptcy attorney should be able to help you file a motion to avoid the judgment lien if this is the case. This can be done in either a Chapter 7 or Chapter 13 bankruptcy case. If the judgment lien is avoided the lien is extinguished and is not enforceable after your bankruptcy case is completed and the order of discharge entered. If the lien cannot be avoided because it does not impair an exemption and there is sufficient equity in your home then the judgment lien remains even after your bankruptcy case is completed. If you have no equity in your home, you owe more on your mortgage than the house is worth, you can strip off judgment liens when filing a Chapter 13 bankruptcy. Your bankruptcy lawyer can help you file a motion to value the real property and strip off the judgment lien along with other junior liens like second mortgages or equity lines of credit in a Chapter 13 bankruptcy case.

Judgment Liens on Personal Property

If you did not own any real estate at the time you filed your bankruptcy case then whether or not the judgment lien attached to personal property depends on the jurisdiction you live in. If the lien did attach to personal property then you can file a motion to avoid the lien if it impairs your exemptions. If the judgment lien did not attach to any personal property, the lien is extinguished once you receive a discharge of your debt. The judgment lien cannot attach to any property you acquire after your bankruptcy case is closed. If any judgment creditor attempts to collect on the lien it would be a discharge violation and the judgment creditor can be subject to sanctions from the court.

My Title Company Refuses to Close on my After-Acquired House

There have been instances where the title company refuses to close on a new house that is acquired after your bankruptcy case is completed until the judgment lien is satisfied. That is contrary to the bankruptcy laws, especially 11 U.S.C. §524 that states that a discharge in the bankruptcy case voids any judgment and operates as an injunction for any commencement or continuation of any collection activity against the bankruptcy filer. If the title company refuses to close on your house for this reason, you have several different options: (1) explain to your title company or their attorney that their actions violate 11 U.S.C. §524 and are sanctionable, (2) fire your title company because they do not know what they are doing and hire a new title company, (3) file your discharge order in the county where the judgment lien is filed, (4) contact the judgment creditor and have them release the lien, (5) if the judgment creditor tries to place the lien on the after acquired property they can be sanctioned by the court for a discharge violation, or (6) reopen your case to file a motion to avoid the lien. Please be aware that in some jurisdictions the motion to avoid lien will be denied because the bankruptcy filer did not own any property on which the judgment lien had attached before the bankruptcy and therefore there was no lien for the bankruptcy filer to avoid. See in re Hamilton, 286 B.R. 291.