Does your home mortgage need to be included in a Ch 13 bankruptcy

[Dennishiatt]

We recently had our Ch 13 discharged, however our 2nd mortgage 10 year equity line of credit matured with Wells Fargo shortly before discharge. To add to this, our first mortgage with Citibank was sold to Ceterus. Both companies refused to talk to us without written consent from our attorney, even though we had our discharge letter from the court. Our attorney refused to create a letter in the requested format (letterhead, signed), instead sent an email to Wells Fargo stating her approval. To make a long story short, she charged us $350 to create two letters for these companies.

My question is why the 2 loans were included in the first place? Our filing was for credit card debt, we were and have been current on both loans. She said it is the law that she had to include our loans and therefore create this mess for approval letters.

Any thoughts?

Thx. Dennis Hiatt

[justbroke]

If you keep the property in your Chapter 13, by continuing to make payments, then you have technically decided to keep the property. The only way to discharge those debts would be to either avoid the lien (typically on second mortgages), or to have surrendered the property and allowed the lienholder to foreclose.

It is not a mess. Lienholder can not talk to you until your case is actually closed. It is a little technical, but the case being closed (or dismissed) is the only thing that clearly removes the automatic stay protection. A lender could get through this by filing a motion for relief from the automatic stay (RFS), but that's not very cost conscience in most cases. Typically a letter from debtor's attorney will suffice.

I hope you now understand why the debt is "included" in a Chapter 13. if you "provide" for it in your plan, to be paid over the life of the Chapter 13 (even if you pay it directly and not "through" the Trustee), then it will not be discharged.

[Dennishiatt]

Wells Fargo and Ceterus refused to speak to me directly even after the letter of discharge was provided to them and showed as such on our credit report. They insisted that the case must be closed by the court. I no longer contest the need of the 2 loans being included in the filing. Our lawyer charged us $350 to complete the 2 letters, I think that is excessive. Thoughts or feedback?

[BNKRPTinNC]

Don't have an answer for the fees. When it comes to atty. fees their time is your money and they never come cheap.

Like you, my credit report, NDC and PACER all showed closed or discharged. As for the banks, my experience so far and what justbroke posted, is they will not discuss the particulars until they receive "official" notification from the court. I, too, had this discussion with lenders over mortgage payments and titles of vehicles that were paid off in the plan. According to the letter I received from the court, along with the discharge notice (2/18), that all parties that were listed in the 13 would be notified. With the way things move I figured at least a month before I would get titles and access my mortgage info online.

BTW - Congrats on completion!!!

[justbroke]

Wells Fargo and Ceterus refused to speak to me directly even after the letter of discharge was provided to them and showed as such on our credit report. They insisted that the case must be closed by the court. I no longer contest the need of the 2 loans being included in the filing. Our lawyer charged us $350 to complete the 2 letters, I think that is excessive. Thoughts or feedback?

They won't talk to you until the case is closed because past and more recent caselaw shows that all property remains property of the bankruptcy estate until the Trustee "explicitly" abandons the property (Motion to Abandon Property of Estate) and that is granted, or the case closes (period). The creditor does not want to get into a stay violation issue which can be costly.

Attorneys do not work for free. If you waited for the close, the need for the letters would be moot. I can't tell you if the value of the letter should be $250 or $350 but it should cost something.

[spidge]

Does the judge have to OK any new attorney fees since the case is not closed yet?

[justbroke]

The case is discharged and the fee agreement is post petition. It usually spells out costs for one-time things (charged hourly or a fraction of an hour). It may even have flat rates for certain things.

[Dennishiatt]

The lawyer argued with Wells Fargo for 3 Weeks saying a letter was not necessary as the case was discharged. I have the emails to prove it. Her justification for charging $350 was that she dealt with them via email and phone for the sum of an hour. My argument is that if she had just provided the letter, in 10 minutes the issue would have been solved. Secondly, our first mortgage had been sold from Citibank to Seterus who also refused to talk to us without a lawyer's letter. Waiting for the court to close the case involves all creditors cashing their checks from the trustee. . There are currently 30 checks that have not cleared according to the trustee last Wed. Having our house payment delayed until the case closed would at minimum resulted in late payment on our credit and possibly even foreclosure depending on the timing of the case closing. Omto thw nwxt issue. Can we be considered for refi to combine the 2 loans into one now, or do we have wait for a specified time period? If not, can Wells Fargo approve a loan modification prior to the case closing?

[justbroke]

There are currently 30 checks that have not cleared according to the trustee last Wed. Having our house payment delayed until the case closed would at minimum resulted in late payment on our credit and possibly even foreclosure depending on the timing of the case closing. Omto thw nwxt issue. Can we be considered for refi to combine the 2 loans into one now, or do we have wait for a specified time period? If not, can Wells Fargo approve a loan modification prior to the case closing?

it is true that the stay is lifted upon discharge, but smart creditors either wait for the close or require a letter from the attorney of record just to be sure. There has been some confusing cases where the discharge was not enough where property was being administered by the Trustee even though the discharge was entered. I guess that could be a reason why creditors are cautious.

It would be up to Wells Fargo to decide whether they want a court order in order to refi or do a modification without the case being closed. Typically a loan modification from a creditor requires that the stay is lifted, at a minimum, or a letter from the attorney of record indicating that it's okay to discuss the account. (I speak from experience on this one coming out of a Chapter 13 on a conversion. I did obtain a modification but only after the letter. My modification was finalized and executed prior to discharge!)

The letter will get you on the right path so you can at least speak with your creditor. You will need to figure out if a modification is better long term. Hopefully it all works in your favor.

[BNKRPTinNC]

The lawyer argued with Wells Fargo for 3 Weeks saying a letter was not necessary as the case was discharged. I have the emails to prove it. Her justification for charging $350 was that she dealt with them via email and phone for the sum of an hour. My argument is that if she had just provided the letter, in 10 minutes the issue would have been solved. Secondly, our first mortgage had been sold from Citibank to Seterus who also refused to talk to us without a lawyer's letter. Waiting for the court to close the case involves all creditors cashing their checks from the trustee. . There are currently 30 checks that have not cleared according to the trustee last Wed. Having our house payment delayed until the case closed would at minimum resulted in late payment on our credit and possibly even foreclosure depending on the timing of the case closing. Omto thw nwxt issue. Can we be considered for refi to combine the 2 loans into one now, or do we have wait for a specified time period? If not, can Wells Fargo approve a loan modification prior to the case closing?

Wow, what a mess. When I called my mortgage lender it was prior to discharge but getting ready to close. As I said, they would not discuss particulars but did manage to find out what my payment was and where to send it. Something I had not had to deal with for the past 5 years.

[justbroke]

The stay violation penalties are too costly. A single letter can be $1,000 in my district. A single phone call can be $500 or $1,000 depending on the judge.

One judge in Florida recently awarded damages of $80,000 for 80 phone calls made from Bank of America to a debtor demanding payment of a discharged debt. Those 80 calls came in after the debtor contact their attorney, and their attorney sent 2 letters. The debtor did not keep track of the calls prior to the letters.

That can be significant, and if it's egregious, imagine paying double punitive damages, or $160,000 for making 80 phone calls. It happens and "smart" creditors do not even want to appear that they have violated the stay or discharge injunction. A willful violation is pretty simple to prove; the creditor need only have knowledge of the bankruptcy and intended the act which caused the violation. So, please realize the extreme caution.