Are you familiar with the alternate language that Judge Radcliffe proposes here for this purpose? And you know debtors’ remedies under BAPCPA’s new §524(i) against creditors who willfully fail to credit plan payments?
2/12/08
In re Lee & Amanda Anderson; Case No. 07-60532-aer13
PUBLISHED opinion by Judge Albert E. Radcliffe
In this published opinion Judge Radcliffe analyzes, paragraph by verbatim paragraph, a set of 6 special Ch. 13 plan paragraphs that had been suggested in an article in NCLC Reports: Bankruptcy & Foreclosure Edition (Nov/Dec 2006 ed.). These paragraphs were intended to help implement BAPCPA’s § 524(i), which created a remedy for debtors against creditors who willfully fail to credit plan payments appropriately. So these suggested paragraphs directed how the 2 home lenders were to account for plan payments, how to deal with arrearage claims, and they proposed remedies for improper accounting of payments. Debtors argued that § 524(i) prevails over the “creditor’s rights” laid out in the anti-modification language of § 1322(b)(2) to the extent there was any conflict.
Upon objection by two creditors secured solely by debtors’ residence, Judge Radcliffe ruled that debtors’ rationale was flawed, and he methodically rejected virtually every word in every one of the proposed special paragraphs, mostly because they were “surplusage,” repetitive of what is already in the Plan boilerplate, or otherwise “unnecessary,” ambiguous, or “inappropriate” under § 1322(b)(11) by seeking to modify what can not be modified.
The sole and minor exception that he permitted was an expansion of a noticing requirement on creditors about changes to the escrow amounts, requiring notice to debtors’ attorney and to the trustee in addition to the usual notice just to debtor. The judge held that such “additional notice is more in the nature of a procedural requirement to aid Chapter 13 administration, than a modification and is therefore permissible.”
Judge Radcliffe acknowledged the worthiness of part of the debtors’ goal, to avoid surprises about the balance due on home mortgages at the end of a Plan, and in a final footnote to the opinion provided some guidance towards this goal, by suggesting some alternate Plan language.
“G.O. 97-1 already provides a set of procedures. However, its scope is limited. A plan provision expanding that scope, such as: “The procedures set out in G.O. 97-1 (as amended by G.O. 98-1), shall apply to all arrearage amounts (pre and post-petition), including all fees and costs, claimed by [the mortgage-secured creditors] Umpqua and Citifinancial,” would likely be “appropriate.” However, the court thinks it fair to alert the parties that this District’s Local Bankruptcy Rules are currently being revised, and it is probable that G.O. 97-1.4(b)(5)’s “deemed cure” provisions will not survive the revisions. If “deemed cure” language is in fact stricken from the revised local rules, insertion of similar language into a Chapter 13 plan, with the broadened scope outlined above, would also seem appropriate.”
Indeed these General Orders ARE all now superseded by the amended Local Bankruptcy Rules effective 8/08/08. This applies not just to the G. O. referred to in this footnote but also to the other G. O.’s and LBR’s referred to in this opinion. So look closely at the pertinent new LBR’s before relying on this opinion.
The other language suggested by the judge is:
“Post-petition mortgage payments to secured creditor shall be applied to the first postpetition payment due under the terms of the contract. Payments from the trustee to secured creditor shall be applied to its pre-petition loan arrears claim. As long as debtor timely pays all post-petition payments, secured creditor shall not assess any fees or other charges on the basis that a post-petition payment is late.
“Lender shall send such billing statements, coupons and statements regarding postpetition advances and/or charges on the loan directly to the debtor as it customarily sends when no bankruptcy has been filed.”
BOTTOM LINE: The remedy provided in BAPCPA through § 524(i) is limited, both by the specific conditions stated within it and the many other requirements in the Code, especially § 1322(b)(2), about what a Chapter. 13 plan may contain. But a good debtors’ attorney is mindful about protecting his clients from residential creditors’ misapplication of plan payments, both by understanding and using the § 524(i) remedy, and by incorporating appropriate special language into the plan consistent with Judge Radcliffe’s guidance here.
Upon objection by two creditors secured solely by debtors’ residence, Judge Radcliffe ruled that debtors’ rationale was flawed, and he methodically rejected virtually every word in every one of the proposed special paragraphs, mostly because they were “surplusage,” repetitive of what is already in the Plan boilerplate, or otherwise “unnecessary,” ambiguous, or “inappropriate” under § 1322(b)(11) by seeking to modify what can not be modified.
The sole and minor exception that he permitted was an expansion of a noticing requirement on creditors about changes to the escrow amounts, requiring notice to debtors’ attorney and to the trustee in addition to the usual notice just to debtor. The judge held that such “additional notice is more in the nature of a procedural requirement to aid Chapter 13 administration, than a modification and is therefore permissible.”
Judge Radcliffe acknowledged the worthiness of part of the debtors’ goal, to avoid surprises about the balance due on home mortgages at the end of a Plan, and in a final footnote to the opinion provided some guidance towards this goal, by suggesting some alternate Plan language.
“G.O. 97-1 already provides a set of procedures. However, its scope is limited. A plan provision expanding that scope, such as: “The procedures set out in G.O. 97-1 (as amended by G.O. 98-1), shall apply to all arrearage amounts (pre and post-petition), including all fees and costs, claimed by [the mortgage-secured creditors] Umpqua and Citifinancial,” would likely be “appropriate.” However, the court thinks it fair to alert the parties that this District’s Local Bankruptcy Rules are currently being revised, and it is probable that G.O. 97-1.4(b)(5)’s “deemed cure” provisions will not survive the revisions. If “deemed cure” language is in fact stricken from the revised local rules, insertion of similar language into a Chapter 13 plan, with the broadened scope outlined above, would also seem appropriate.”
Indeed these General Orders ARE all now superseded by the amended Local Bankruptcy Rules effective 8/08/08. This applies not just to the G. O. referred to in this footnote but also to the other G. O.’s and LBR’s referred to in this opinion. So look closely at the pertinent new LBR’s before relying on this opinion.
The other language suggested by the judge is:
“Post-petition mortgage payments to secured creditor shall be applied to the first postpetition payment due under the terms of the contract. Payments from the trustee to secured creditor shall be applied to its pre-petition loan arrears claim. As long as debtor timely pays all post-petition payments, secured creditor shall not assess any fees or other charges on the basis that a post-petition payment is late.
“Lender shall send such billing statements, coupons and statements regarding postpetition advances and/or charges on the loan directly to the debtor as it customarily sends when no bankruptcy has been filed.”
BOTTOM LINE: The remedy provided in BAPCPA through § 524(i) is limited, both by the specific conditions stated within it and the many other requirements in the Code, especially § 1322(b)(2), about what a Chapter. 13 plan may contain. But a good debtors’ attorney is mindful about protecting his clients from residential creditors’ misapplication of plan payments, both by understanding and using the § 524(i) remedy, and by incorporating appropriate special language into the plan consistent with Judge Radcliffe’s guidance here.
by Andrew Toth-Fejel, Bankruptcy Litigation Support for Attorneys, Andy@BLSforAttorneys.com
© 2008 Bankruptcy Litigation Support for Attorneys
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