Notice of Post Petition Mortgage Fees, Expenses and Charges

[allboyz]

Hi! We filed in December 2013. Our plan has been confirmed. We have made all of the mortgage payments on time. Today we received a Postpetition Mortgage Fees, Expenses and Charges letter. It lists late fees of $442 for December-April. Then it lists $650 for a Bankruptcy/Proof of claim fees on 5/07/14 and 5/08/14. Then it lists $100 under notice of post petition. We paid according to the plan and on time. I don't understand how they can send us this letter. And of course we get it on a long weekend so I can't reach my attorney or her paralegal. If any of you have experience with this, I would greatly appreciate any info or advice. Thank you.

[justbroke]

Don't get too excited. The creditor could have those charges approved "if" they submitted them as a proof of claim in your bankruptcy. Otherwise, late fees can not accumulate on any amounts that you are curing through your bankruptcy. Think of it this way. If you were late before filing, that became an arrearage. The arrearage is filed as a "claim" in your bankruptcy, along with any fees such as the bankruptcy fee ($650 is about standard for a hearing) and maybe another small amount. Those are then paid through your bankruptcy plan. The creditor is not allowed to accrue any more interest on those amounts in arrears and provided for in the plan.

You will need to wait for your attorney to see exactly what this is. It may just be a notice that they filed a claim included those charges. Again, there should be no additional late fees unless you are actually paying outside the plan and paying late. If you are paying outside the plan and you had pre-petition issues (arrearage), then that's another story.

This is not an emergency issue and you can speak with your attorney next week.

[spidge]

Hi JB, It sounds like your well informed on this matter. I do have some late mortgage payments yet none of my informative statements show any additional fees and the lender has not made any noise, yet. I fear they are waiting for me to pay off the arrears and the value of the home to rise before they act.
If they wait until the end of the plan could this cause issues with my discharge?
Would these fees be an additional charge outside the BK after discharge?
Can they add to their claim within the BK even though the fees, interest, and late charges are post filing?
I am tempted to obtain a 401k loan to pay off the BK13 balance and bring the mortgage current. Is this allowed? Even though it would extend the payback time overall the monthly expense would be reduced to half what my BK13 payment is.

I fear what the lender might do, but I would think it is to their advantage to allow the 13 to complete and remove the 2nd as planned.

allboyz, I do hope you come back to update.

[justbroke]

This is actually a very common problem in Chapter 13 cases. Please allow me to offer an explanation.

In a Chapter 13, a good majority of debtors are attempting to protect Real Property (a home) and typically have arrears (past due payments) when they file and confirm their plan. The creditor files a claim and that claim typically includes a bankruptcy fee ($600-900) and at times includes some other "junk" fees which may total anywhere from $100 to several hundred dollars. The creditor's claim may also include "foreclosure" and pre-foreclosure fees which were incurred prior to the bankruptcy filing.

The Chapter 13 debtor files a plan and then attempts to cure the arrears. This is not a problem and is highly custom. The debtor continues to pay the normal mortgage payment while the Plan also pays those arrears and fees (contained in the claim). The problem is that most mortgage creditor systems, can't account for a.) the late payments (because the account is technically past due), and b.) the arrearage payments that are typically paid by the Trustee separately from the normal mortgage payment. The creditor systems create something the industry calls a "suspense" account. The suspense account holds the payments until you catch up and the amounts are applied.

The problem is that this suspense account can never "catch" up because the creditor system is also, in many cases, charging late fees each and every month! At the end of the Chapter 13 debtor is shocked when they see that they owe all these late fees and the creditor, in some cases, actually moves for a Motion for Release from the Stay (RFS) after the plan payments are complete (and before discharge)!

These issues are covered by the Chapter 13 and your attorney, or you, only need to insure that when the plan payments are complete, you follow up with the mortgage creditor and make sure they have applied all payments and that the account is "current". If the Trustee paid everything claimed and there is still money left over, it will be discharged at discharge.

Another problem occurs when the mortgage creditor doesn't understand that all the "pre-petition" arrearage is cured and that all of the late fees post-petition are not allowed. As such, they may complain but this too is dischargeable and discharged. The only way for a mortgage creditor to add additional fees is to petition the court during the Chapter 13 Plan for them to be allowed. Otherwise, they are both dischargeable and discharged at the end of the plan.

As for paying off a Chapter 13 by borrowing money, this does happen and could be a way to complete your plan. However, you should really talk to your financial (retirement) adviser about the impact on your retirement (when borrowing from your 401(k)). You should also speak with your attorney to make sure that the Trustee will allow you to payoff your Chapter 13 and the payoff amount. Never do these things on your own.

[spidge]

Thanks for the explanation. So if I read your post correctly even the post filing late fees while in a Ch13 are not allowed? Almost sounds to good to be true which may explain why lenders wait until just about all the arrears are paid in the 13 before taking action. On my informative statements there is a section for the suspense account, but I only see this statement a few times per year. Wish I could see them online or at least monthly.
Would you know if the informative statement includes all related balances? I do not see the transactions showing how the BK payment is applied but I can see when a payment from the trustee posts. The trustee payment does not effect the overall balance so it seems those arrears included in the bk13 plan are hidden. Would those arrears be included in the contractual amount?

My motivation with these questions is to just get a more clear picture so I know better where I may stand at the end. Shooting for stellar, you know.

[justbroke]

It's difficult to tell how a particular lender post and accounts for Plan and arrearage payments. The suspense account is the culprit in most of these cases. There is just no telling what the real balance is.

My theory is that the creditors post the payments as they would have if there was no bankruptcy. That way, if the Chapter 13 plan fails -- as it does in 65% of confirmed cases -- the bank is exactly in the position where it would have been, had the bankruptcy not been filed! This keeps their accounting exact. I then speculate that the bank, upon completion of a Chapter 13 bankruptcy plan, reconciles everything and insures that everything is back to "normal" (paid as agreed) by the time of discharge.

Of course, there are often balance issues between final plan payment and case closing. This is where the debtor's attorney, and moreso the debtor herself, needs to insure that the mortgage account is "current' with nothing past due and nothing owing. (Additionally, the period between the final plan payment, discharge and closing, could be problematic if the debtor forgets to resume directly paying the lender/creditor after the final Trustee payment!)

[allboyz]

Thank you

Thank you for all of the information justbroke. Your reply allowed me to enjoy my weekend without worrying too much. I just heard back from the paralegal and she requested for me to submit my proof of payment so that they could rebut the charges. I just did that so now we will wait for a response. I will post again once I hear something else. Thanks again!