Question About Car Loan Fees

[muneco]

We filed our case in July 2015 and had our 341 meeting about 30 days later. About three weeks after our 341 meeting the credit union that financed our car added $360.00 to the balance owed on the car. We were never notified by the credit union that these fees were added. We only found out about the $360.00 fee because we accessed our loan account online. The fee was shown as "insurance". We knew we had continuous insurance coverage on the car so we contacted the credit union to ask about the "insurance" fee. They stated the $360.00 charge was actually for expenses incurred by them because we had filed bankruptcy. The car was listed as "secured" when we filed our plan and it was determined by the trustee that we would pay the payment directly to the credit union, In addition, the credit union had added another $700.00 to the balance owed on the car when they filed their secure claim. My question is: did the credit union illegally add the $360.00 fee to our loan balance? It was my understanding that all fees had to be approved by the bankruptcy court?

[justbroke]

All fees do not need to be "approved" by the Court unless they are outside what is in their Proof of Claim. If they claimed attorney fees and your contract allows them to assess attorney fees, then their Proof of Claim can reflect their costs to file any motion, object to confirmation, and attend any confirmation hearings. In many Districts, these fees are "no look" or standardized (per hearing).

Think of the Proof of Claim as something that is tacityly approved by the Court. A Proof of Claim is what they call "prima facie" (correct until proven otherwise) evidence of what you owe. They can amend a Proof of Claim as well if they have additional fees. If you object to what's on their Claim, then you file an objection to proof of claim. If you lose the objection, they may tag more fees for having defended that objection to their claim. The cost of litigation.

These fees will be paid over the life of the Chapter 13. If you have DMI (disposable monthly income) in the plan, then I wouldn't worry about whether this $360 is allowable in your contract. It's not as if your payment is getting higher. However, if there is a real issue, then you should object to the claim. Your attorney can tell you whether it's worth objecting to the claim.

[muneco]

Thanks for your great response. The creditor did include an additional fee of $700.00 for legal expenses when they filed their claim. It just didn't seem proper to add on $360.00 to my loan balance without notifying me and then classifying it as "insurance". It is true the $360.00 will not increase the amount of the car payment but I will be paying interest on it over the life of the loan. As you stated, it will cost more in additional legal fees to object. I suppose, in the scheme of things, it is not too bad.

[justbroke]

The vehicle will be paid over the life of the Chapter 13. Your Chapter 13 bankruptcy estate may pay a little more interest (on $360), but it doesn't affect you overall because your vehicle will be paid off. In fact, most Chapter 13 Trustees pay the secured debt first (like vehicles) and don't pay priority (taxes) or unsecured creditors until the secured debt is paid. In many cases, debtors have their vehicle(s) paid off within the first 2 years of a 5 year Chapter 13. The debtor actually saves on interest because the debt is paid quicker.

[muneco]

Our two secured claims (car payment and mortgage) are not being paid through the trustee. We are making the payments directly to the credit union and mortgage holder. Our trustee is paying the priority claim (IRS) first and then will start paying the unsecured claims.

[justbroke]

muneco even given that you are paying "outside the plan", the amount budgeted should still represent the total claim value (plus interest).

[muneco]

justbroke Thanks for your expertise and insight.