What do you really owe on your home mortgage when you get to the end of your Chapter 13 case?
For years, homeowners couldn’t tell where they were or how to get answers.
But with the recent changes to bankruptcy rules, you don’t have to wonder where you stand with your mortgage lender.
- Are you really, fully current with the mortgage?
- Are there fees and charges that you don’t know about?
- Are you ready to emerge from bankruptcy 100% paid up?
- Is the lender really poised to start foreclosure?
Starting December 1, 2016, your Chapter 13 trustee is required to flush out any surprises that lurk in your home loan servicer’s accounts.
And a federal judge stands by to sort it out.
When my client’s case was through, the rule resulted in her being $62,000 better off than she would have been otherwise.
Let’s hear it for Bankruptcy Rule 3002.1.
Why we needed this rule
Rule 3002.1 addresses the lack of transparency that used to exist about your home loan during a Chapter 13.
The Chapter 13 runs 3 to 5 years, and the automatic stay limits the lender’s ability to let you know what’s happening with the loan. (This assumes that the lender ever really wanted to let you know what’s happening, but that’s another rant, another day.)
Lots can happen during those years. Too often, before the rule was enacted, debtors would get their Chapter 13 discharge and a foreclosure notice practically in the same day’s mail.
It might be late fees, forced placed insurance, or just plain accounting mistakes. Whatever the reason, the consequences were horrific.
What the rule does
If your Chapter 13 plan provides for payment on your home mortgage, your lender (or the servicer for the lender) must give certain notices to you, the court, and the trustee during the case.
First, they must file a notice if the payment amount changes during the case. The notice must be given at least 21 days before the change takes place.
Second, they must file a notice of any fees, expenses or charges added to the loan balance that were incurred after the case was filed. The notice must be given within 180 days of the time when the charge was incurred.
If you dispute that the charge is allowable, you have a year from the filing of the notice to file a motion and schedule a hearing before the court about the charge.
Current at case end
When you’ve made the last payment to your Chapter 13 plan, the trustee must file a notice of final cure payment and send the notice to you, your attorney, and the creditor.
The notice says that the trustee believes you to have cured any pre bankruptcy default and alleges that you are fully current with payments and fees that came due after you filed.
The mortgage lender must file a responsive pleading within 21 days. If the lender claims that there are unpaid amounts, they must itemize the fees and expenses that they claim are still outstanding in a payment history.
Bingo: you have visibility. And you have a right to file a motion before the court to determine if you’ve cured the default and paid everything that is required of you afterwards.
If the lender screwed up
Chances are pretty high that the servicer has screwed up. Often that takes the form of failure to have given you timely notice of fees added to the loan. Remember, notice must be given within 180 days of when the fees were incurred.
If the lender has failed to give proper notice, the judge can bar the lender from offering evidence in the hearing to determine if you’re current and can award you your attorneys fees caused by the failure.
The rule in action
A lender’s failure to follow the rule in the case of one of my clients resulted in the lender having to forgive some $62,000 in post filing fees and taxes they’d paid without telling my client. In addition, they paid my fees for getting the charges wiped out.
You can read the court’s opinion with the details of each blunder the bank made.
I believe that such results are just the tip of the iceberg in this field.
Get through the maze
The beauty of Rule 3002.1 is that it gets to the heart of your dealings with your home mortgage lender while you still have access to a bankruptcy judge to make things right.
It’s up to you and your attorney to see that the trustee gives the required notice and to analyze the response of the lender and challenge behavior that isn’t compliant with the law.
Don’t miss out on getting all the relief that Chapter 13 entitles you to.