A proof of claim amendment filed after the debtor successfully completed his chapter 13 plan was too late to increase the mortgage arrears. In re Mason, No. 10-4195, 2014 WL 5502385 (Bankr. S.D. Miss. Oct. 30, 2014). [Read more…] about Late Proof of Claim Amendment Rejected
No En Banc Rehearing in Crawford
The Eleventh Circuit declined to revisit its decision in Crawford v. LVNV Funding, No. 13-12389 (11th Cir. July 10, 2014), where it found that a proof of claim to collect a stale debt in chapter 13 bankruptcy violates the Fair Debt Collection Practices Act. See NCBRC Blog here. On September 18th, the court denied LVNV Funding and Resurgent Capital Services’s petition for rehearing en banc.
Some commentators predicted that the court might take on the rehearing because the decision upset a body of law prohibiting such FDCPA claims. See, e.g., Inside ARM blog here, and Bankruptcy Law Blog here. Specifically, the Crawford decision conflicts with Walls v. Wells Fargo Bank, N.A., 276 F. 3d 502 (9th Cir. 2002), where the court found that the Bankruptcy Code preempts the FDCPA and that, therefore, the debtor’s remedy for violation of the discharge injunction was limited to contempt under section 105 of the Bankruptcy Code.
In Crawford, the court side-stepped the question of preemption stating: “Some circuits hold that the Bankruptcy Code displaces the FDCPA in the bankruptcy context. See Simmons v. Roundup Funding, LLC, 622 F.3d 93, 96 (2d Cir. 2010); Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 510 (9th Cir. 2002). Other circuits hold the opposite. See Simon v. FIA Card Ser., N.A., 732 F.3d 259, 271−74 (3d Cir. 2013); Randolph v. IMBS, Inc., 368 F.3d 726, 730−33 (7th Cir. 2004). In any event, we need not address this issue because LVNV argues only that its conduct does not fall under the FDCPA or, alternatively, did not offend the FDCPA’s prohibitions. LVNV does not contend that the Bankruptcy Code displaces or “preempts” §§ 1692e and 1692f of the FDCPA.”
Ocwen’s Errors Force Debtors into Bankruptcy
A Delaware Bankruptcy Judge took on the task of calculating the debtors’ mortgage payment history in the face of erroneous calculations by Ocwen Loan Servicing, LLC. Judge Shannon found that the debtors were current on their payments when Ocwen initiated foreclosure proceedings and that Ocwen’s errors forced the debtors into bankruptcy to save their home. Williams v. Ocwen, No. 13-12234 (Bankr. D. Del. July 18, 2014). [Read more…] about Ocwen’s Errors Force Debtors into Bankruptcy
Failure to Follow Condition Precedent to Foreclosure Precludes Recovery for Costs
It pays to read mortgage documents carefully to determine whether the bank or Servicer complied with contractual conditions precedent prior to bringing adverse action against the debtor upon default. In In re Demers, No. 13-11539 (Bankr. R.I. June 5, 2014), American Servicing Co. (ASC) failed to comply with such conditions and was denied recovery of nearly $2,000.00 in claimed fees and costs associated with initiation of foreclosure proceedings. [Read more…] about Failure to Follow Condition Precedent to Foreclosure Precludes Recovery for Costs
No Presumption of Validity of Claim under Rule 3002.1
On January 3, 2013, the Chapter 13 trustee filed “Trustee’s Notice of Final Cure Payment and Motion to Deem Mortgage Current,” filed under Rule 3002.1(f) seeking an order that the debtor’s mortgagee was current, that all escrow deficiencies had been cured, and that all fees had been satisfied in full. The mortgage creditor filed a timely objection under Rule 3002.1(g), arguing that the debtor had incurred post-petition arrearages of $25,798.02. However, the creditor did not present any evidence of any disbursements to substantiate the arrearage. The court found that supplemental claims did not enjoy a presumption of validity and, because the debtor had made all payments required by the amended plan, it granted the trustee’s motion. In re Rodriguez, No. 08-80025 (Bankr. S.D. Tex. July 8, 2013). [Read more…] about No Presumption of Validity of Claim under Rule 3002.1
No Presumption of Validity for Payment Changes under Rule 3002.1
The bankruptcy court for the Northern District of Mississippi differentiated between the shifting burdens of proof under Rule 3001, which deals with proofs of claim generally, and Rule 3002.1, relating to notice of changes to mortgage payments on debtor’s residence. In re Taylor, No. 12-11463 (March 27, 2013). [Read more…] about No Presumption of Validity for Payment Changes under Rule 3002.1
Court Rejects Unsupported Escrow Charges
In In the Matter of Breit, the chapter 13 trustee filed an objection to JPMorgan Chase’s proof of claim relating to the debtor’s residential mortgage. No. 11-32461 (Bankr. N.D. Ind. March 27, 2013). In its POC, Chase claimed an arrearage in the amount of $27,897.09, encompassing unpaid monthly installments of $1,102.53 which represented a principal and interest component of $804.79, and an escrow component of $297.74. Under this calculation, Chase sought $7,145.76 attributable to the escrow deficiency. Although RESPA contemplates the creation of an escrow account to cover, among other things, tax and insurance payments that the mortgage servicer is forced to pay on behalf of a delinquent debtor, the trustee argued that the arrearage claim should be reduced by $3,379.35 because Chase had actually paid only $2,909.37 for those obligations. The court agreed. It rejected Chase’s “mathematical manipulation” (Chase’s phrase) in calculating the pre-petition escrow shortfall and permitted recovery only of those expenditures authorized by RESPA. Thus, even though Chase had met its initial burden of proof with respect to Rule 3001, it failed to counter the trustee’s evidence refuting the POC and therefore failed to meet its ultimate burden of proving the validity of the claim.
Bank is Sanctioned for Rule 3001 Violation
A bankruptcy court in Colorado sanctioned FirstBank for failure to comply with the itemization requirements of Rule 3001. In re Jimenez, No. 12-26282 (Bankr. Colo. Feb. 1, 2013). [Read more…] about Bank is Sanctioned for Rule 3001 Violation
Expert Testimony by NCLC Results in Debtor Victory Against Mortgage Servicer
In a victory for consumer debtors, the Bankruptcy Court for the Eastern District of Kentucky disallowed Ocwen’s proof of claim for late fees and charges, and awarded judgment, including punitive damages in the amount of $25,000.00, in favor of the debtor due to Ocwen’s “gross reckless[ness]” in accounting and servicing her mortgage. In re Tolliver, No. 09-21742, Adv. Proc. No. 09-2076 (Bankr. E.D. Ky. July 19, 2012).
In reaching its decision, the court held Ocwen’s feet to the fire demanding adequate explanation of Ocwen’s convoluted and contradictory accounting records. After finding Ocwen’s explanations just as slippery and unreliable as the records themselves, the court turned to the expert testimony of Margot Saunders from the National Consumer Rights Center. She sifted through the dust heap and offered the only reliable evidence as to the history of the loan, revealing a litany of mismanagement including collecting “unsubstantiated interest arrearage balance,” and “systematically assessing late charges, fees and costs in complete disregard of the terms of the [loan documents.]” Ocwen’s attempt to justify the charges with evidence of forbearance agreements was roundly rejected. The court found the debtor had been “bullied” into signing those agreements by repeated false representations that the debtor was in default and that foreclosure was imminent even though she had completely paid off the underlying loan. Ocwen’s outrageous conduct was found to violate state common laws including breach of contract, breach of implied covenant of good faith and fraud.
Debtor May File Protective POC for Tax Claim
The Sixth Circuit Court of Appeals found that, under section 501(c), a debtor could file a protective proof of claim for a tax debt that became due and payable post-petition. Michigan Dept. of Treasury v. Hight (In re Hight), No. 10-2103 (6th Cir. March 5, 2012). While the court agreed with the Michigan DOT that the debtor could not file the POC under section 1305, as that section only permits the creditor to file, it went on to find that section 1305 was not exclusive. The debtor could file the claim under section 501(c) if the claim is of the type specified in section 502(i) which permits treatment of post-petition claims as pre-petition if they have priority under section 507(a)(8)(A). Because the claim came due after three years before the filing of the bankruptcy petition, it had priority under section 507(a)(8)(A)(i), and section 502(i) applied. Therefore, the debtor was permitted to file the proof of claim under section 501(c).