Consumer Bankruptcy Journal Summer 2015 - Page 40

Filing Proofs of Claim challenge the holder of a claim who has misapplied payments made during the bankruptcy, or failed to notice payment changes, fees, expenses and charges during the bankruptcy, or even challenge the validity of the charges under the underlying note or nonbankruptcy law. Even if the payment changes or the additional fees, expenses and charges were properly noticed under FRBP 3002.1(b) and (c), debtors who failed to object under FRBP 3002.1(e) may ask the court for a determination of whether the debtor has cured the default and paid all required postpetition amounts. Therefore, failure to object within one year of the service of notice under FRBP 3002.1(e) does not bar a debtor from objecting under subdivision (h) before discharge. Failure to Provide Required Notices During and After Bankruptcy If secured creditors fails to provide notice of changes in payment amounts or notice of additional fees, expenses, or charges in connection with the loan, they face serious consequences under FRBP 3002.1(i), which states: If the holder of a claim fails to provide any information as required by subdivision (b), (c), or (g) of this rule, the court may, after notice and hearing, take either or both of the following actions: (1) preclude the holder from presenting the omitted information, in any form, as evidence in any contested matter or adversary proceeding in the case, unless the court determines that the failure was substantially justified or is harmless; or (2) award other appropriate relief, including reasonable expenses and attorney’s fees caused by the failure. This provision grants the estate and the debtor a recourse for secured creditor’s failure to properly notify debtors, 40 CONSUMER BANKRUPTCY JOURNAL debtor’s attorney and the trustee of the change in the mortgage payment or the accrual of additional fees, expenses and charges. Unlike other subdivisions, FRBP 3002.1(i) does not state a deadline by which the debtor, debtor’s attorney or the trustee must file an action against a secured creditor who fails to provide the proper notices outlined in subdivisions (b), (c), or (g). The debtor, debtor’s attorney and the trustee may bring a motion at anytime during the plan term to redress secured creditor’s failure to provide proper notice. As stated previously, debtor attorneys should review all Motions for Relief from Stay to be sure that the defaults listed in the motion were not related to a failure of the secured creditor to provide notice of a payment changes under subdivision (b), or for additional fees, expenses and cost under subdivision (c). If a failure to notice in accordance to FRBP (b) and (c) is discovered, the debtor, debtor’s attorney or the trustee may chose to request that the omitted information be waived and attorney’s fees be awarded. Furthermore, the debtor, debtor’s attorney and the trustee may bring a motion or file an adversary proceeding against secured creditor holding a security interest in debtor’s principal residence after the discharge has been issued and the case has been closed. FRBP 3002.1(i) does not contain a time limitation. In addition, secured creditors are subject to the discharge injunction under 11 U.S.C. Section 524(i), which provides: The willful failure to a creditor to credit payments received under a plan confirmed under this title, unless the order confirming the plan is revoked, the plan is in default, or the creditor has not received payments required to be made under the plan in the manner required by the plan (including crediting the amounts required under the plan), shall constitute a violation Summer 2015 of an injunction under subsection (a) (2) if the act of the creditor to collect and failure to credit payments in the manner required by the plan caused material injury to the debtor. Together Section 524(i) and FRBP 3002.1(i) provide a means to reopen debtor’s bankruptcy after a discharge has been issued and the case has been closed. Furthermore, secured creditor’s failure to apply payments according the plan (e.g., postpetition mortgage payments being applied to the pre-petition arrears, thus accruing additional late fees, expenses and costs for the servicer), and its failure to provide notice of postpetition payments changes, fees, expenses and charges as required under FRBP 3002.1, together may constitute as a discharge violation, subject to contempt and sanctions under 11 U.S.C. Section 105(a), Section 524(a)(2) and FRBP 3002.1(i). The importance of FRBP 3002.1 cannot be overstated. It allows lenders and homeowner’s associations with a security interest in debtor’s principal residence to provide notices without fear of violating the stay. It provides the debtor, debtor’s attorney and the trustee notices that may affect the secured creditors claim and the chapter 13 plan and an opportunity to cure. It also provides a recourse for the debtor, debtor’s attorney and the trustee to hold secured creditors accountable for failure to provide required notices. Collectively, FRBP 3002.1 provides the tools to ensure a fresh start post chapter 13 discharge. National Association of Consumer Bankruptcy Attorneys