Here’s a bankruptcy situation that is all too common: The debtors, a married couple called the Shepards, filed a Chapter 13 case in Boston in part because they were behind on their mortgage. On their bankruptcy petition, they listed the debt to the mortgage company as $227,000.
The mortgage company responded by filing a secured claim in the case. But their claim was for $254,000. What gives?
Well for one thing, the mortgage company tacked on to the bill a slew of charges in addition to the basic arrearage (late payments).
In this case (In re Shepard) , both the debtors and the lenders put on their gloves and said “lets fight this out in court.” The debtors objected to the lender’s claim, and the lenders objected to confirmation of the Chapter 13 plan.
The job of sorting these issues out fell into the lap of Boston bankruptcy Judge Joan Feeney. After examining the documents submitted by both parties, here is how she ruled:
* A $76 charge to “Record an order of Notice” was thrown out; the judge found it duplicated similar charges already collected.
* The judge threw out a $300 auctioneer’s fee (remember, because the debtor filed for bankruptcy, no actual auction was ever held). The judge didn’t think the fee was necessarily too high, but found there was no proof that any work was ever done, especially since the auction was cancelled by the bankruptcy.
* The judge allowed a $250 legal fee for “continuance of foreclosure sale” to stand. While the foreclosure sale was also put on hold by te bankruptcy, this was considered a basic and proper legal expense.
* The judge reduced certified mail fees from $109 to $83 becuase that is all the lender could support with receipts.
* The judge allowed almost $2, 600 in escrow shortage charges to stand, as the lenders provided a detailed account of how post-petition escrow balances were calculated.
So the result is a mixed bag, and perhaps the best lesson is this: questioning charges, fees and statements will sometimes pay off if you are planning a Chapter 13 case and need to confirm a plan on a tight budget.
By Doug Beaton