White v. NewRez LLC (In re White)
| Decision Date | 19 July 2022 |
| Docket Number | 21-60109-EJC |
| Parties | In re: SHALONDA M. WHITE, Debtor. v. NEWREZ LLC d/b/a SHELLPOINT MORTGAGE SERVICING, Respondent. SHALONDA M. WHITE, Movant, |
| Court | U.S. Bankruptcy Court — Southern District of Georgia |
OPINION ON MOTION TO DETERMINE MORTGAGE FEES AND EXPENSES
Before the Court is the Motion to Determine Mortgage Fees and Expenses (dckt. 36) filed by Shalonda M. White, the Debtor in this case. The Debtor filed this case on July 9,2021. Her largest creditor is NewRez LLC d/b/a Shellpoint Mortgage Servicing ("Shellpoint"), which holds a claim secured by a manufactured home. In her plan the Debtor proposed to bifurcate Shellpoint's claim limiting the secured portion of the claim to the amount of $7,300.00, the value of the manufactured home, pursuant to 11 U.S.C. § 506(a). Shellpoint filed a proof of claim in the fully secured amount of $26,528.77 on August 26, 2021 and objected to confirmation of the Debtor's plan on September 15,2021. By way of a consent order entered on October 5, 2021, Shellpoint's objection to confirmation was resolved, and its claim was allowed in the secured amount of $8,268.73, with the balance unsecured. After the Debtor's plan was confirmed, Shellpoint filed a Notice of Postpetition Mortgage Fees, Expenses, and Charges pursuant to Rule 3002.1 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules") on February 18, 2022, itemizing attorney's fees in the total amount of $1,275.00. In response, the Debtor filed the instant Motion to Determine Mortgage Fees and Expenses on March 31, 2022, asserting that Rule 3002.1 does not apply to Shellpoint's claim but also requesting that its asserted fees be disallowed. For the reasons set forth below, the Court finds that Rule 3002.1 does not apply and, further, that a determination of fees, expenses, and charges under Rule 3002.1 is not authorized.
This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334(a), 28 U.S.C. § 157(a), and the Standing Order of Reference signed by then Chief Judge Anthony A. Alaimo on July 13, 1984. This is a "core proceeding" under 28 U.S.C. § 157(b)(2)(A), (B). The Court makes the following findings of fact and conclusions of law pursuant to Bankruptcy Rules 9014(c) and 7052.
The facts of this case are undisputed. On July 9, 2021, the Debtor filed a Chapter 13 petition. (Dckt. 1). Part 1 of Schedule A/B requires a debtor to describe each residence, building, land, or similar property in which the debtor has an interest. In response, the Debtor listed a 1997 General Admiral 24x60 Mobile Home located at 125 Brittany Lane, Sylvania, Georgia 30467.[1] (Dckt. 1, p. 11, ¶ 1.1). The Debtor indicated that the value of the property was $7,300.00. (Dckt. 1, p. 11, ¶ 1.1). In her Schedule D, the Debtor disclosed that Shellpoint held a claim in the amount of $26,700.00 secured by "125 Brittany Lane[,] Sylvania, GA 30467 Screven County 1997 General Admiral 24x60 Mobile Home." (Dckt. 1, p. 19, ¶ 2.1). In her plan, the Debtor valued the claim at $7,300.00 pursuant to 11 U.S.C. § 506(a) and proposed to make payments on the secured portion of the claim in the amount of $175.00 per month at 5.00% interest. (Dckt. 4, p. 2, ¶ 4(f)). The unsecured portion of Shellpoint's claim would be treated as a general unsecured claim, with general unsecured creditors to receive the greater of a dividend of zero or a pro rata share of $300.00. (Dckt. 4, pp. 3-4, ¶¶ 4(f), 4(h)).
On August 26, 2021, Shellpoint filed a proof of claim in the amount of $26,528.77 secured by a "1997 General Manufactured HSG D2356F 60x4 Manufactured Home" pursuant to a retail installment sales contract. (Claim No. 2-1, p. 2, ¶¶ 7-9). As the contract makes clear, the collateral securing Shellpoint's claim consists solely of the manufactured home and does not include any real property.[2](Claim No. 2-1, p. 10). Subsequently, on September 15, 2021, Shellpoint objected to confirmation of the Debtor's plan. (Dckt. 20). Specifically, Shellpoint asserted that the Debtor's valuation of the manufactured home and proposed interest rate were both too low. Instead, Shellpoint sought a valuation of $13,692.22 and an interest rate of 6.25%. A consent order resolving Shellpoint's objection to confirmation was entered on October 5, 2021. (Dckt. 24). Under the terms of the consent order, Shellpoint's secured claim was valued at $8,268.73, which would be funded by the Chapter 13 Trustee with disbursements from the Debtor's plan payments at 5.75% interest, and the balance of the claim would be unsecured. (Dckt. 24, pp. 1-2). On October 19, 2021, the Trustee moved to confirm the plan as amended, reciting that the terms of the consent order would be incorporated into the plan. (Dckt. 30). The Court confirmed the Debtor's plan on November 8, 2021. (Dckt. 33).
On February 18, 2022, Shellpoint filed, ostensibly pursuant to Bankruptcy Rule 3002.1(c), a Notice of Postpetition Mortgage Fees, Expenses, and Charges, which appears on the claims register. In the notice, Shellpoint itemized the following fees: (1) $475.00 for "Bankruptcy/Proof of claim fees" incurred on August 26,2021; (2) $250.00 for "Proof of Claim 410A"[3] incurred on August 26, 2021; and (3) $550.00 for "Objection to Plan" incurred on September 15, 2021, for a total of $1,275.00. In response, the Debtor, on March 31, 2022, filed the instant Motion to Determine Mortgage Fees and Expenses under Bankruptcy Rule 3002.1(e). (Dckt. 36). Requesting that the itemized fees be entirely disallowed, the Debtor argued, first, that Bankruptcy Rule 3002.1 does not apply because the confirmed plan does not provide for contractual installment payments as required by subsection (a) of the rule and, second, that Shellpoint is not entitled to post-petition fees because it is an under-secured creditor for purposes of 11 U.S.C. § 506(b). (Dckt. 26, p. 2). Shellpoint did not respond to the Debtor's motion.
A hearing on the Motion to Determine Mortgage Fees and Expenses was held on May 23, 2022. (Dckt. 37). At the hearing, the Court heard argument from Debtor's counsel; Shellpoint did not appear at the hearing. Counsel for the Chapter 13 Trustee took no position on the matter. At the conclusion of the hearing, the Court took the motion under advisement and provided Debtor's counsel the opportunity to brief the matter within 20 days. The Debtor filed her brief in support of the motion on June 10,2022 (dckt. 40), and this matter is now ripe for ruling.
A. Bankruptcy Rule 3002.1 Prevents Surprise Mortgage Charges
"A Chapter 13 bankruptcy-sometimes called a 'wage earners plan'-enables a debtor with a regular income to repay all or part of his debts, typically over a three-to five-year period." MicrofLLC v. Cumbess (In re Cumbess), 960 F.3d 1325, 1330 (11th Cir. 2020). The Debtor in a Chapter 13 case must file a plan of reorganization which, if it conforms to the Bankruptcy Code, will be confirmed by the court. Upon confirmation, the plan "becomes binding on the debtor, the creditors, and the Chapter 13 trustee[.]" Id. at 1330-31. Section 1322 of the Bankruptcy Code specifies certain mandatory and permissive contents of a Chapter 13 plan, and § 1325 sets forth the requirements for confirmation.
Pertinent to this case, §§ 1322 and 1325, taken together, "offer[] two distinct and well-established options for treatment of secured claims, especially mortgage loans."/?? reBullard, 475 B.R. 304,307 (Bankr. D. Mass. 2012) (quoting/*? rePires, 2011 WL 5330772, at *3 (Bankr. D. Mass. Nov. 7, 2011)). The first option, discussed below, is that a plan may "modify the rights of holders of secured claims" under § 1322(b)(2). The second option, set forth in § 1322(b)(5), is that a plan may "provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any . . . secured claim on which the last payment is due after the date on which the final payment under the plan is due." 11 U.S.C. § 1322(b)(5). This Code section, which most often applies to a long-term real estate mortgage on the debtor's principal residence, "results in the reinstatement of the maturity of the obligation upon cure of defaults such that, at the conclusion of the case, the debtor is not in default" and "thus contemplates that the debtor will continue to make payments after the conclusion of the Chapter 13 case." Drake, Bonapfel, Goodman, Chapter 13 Practice and Procedure § 21:14 (2022 ed.).
The ability to cure defaults under § 1322(b)(5) "may be essential if the debtor cannot pay the full allowed secured claim over the term of the plan." Collier on Bankruptcy ¶ 1322.09 (16th ed. 2022)). But, until 2011, it also created opportunities for mischief. That is because a mortgage creditor may incur additional fees, expenses, or charges in connection with the claim during the pendency of the bankruptcy case. Prior to 2011, "mortgage lenders would forbear asserting new obligations in the bankruptcy proceedings for fear of violating the automatic stay" of 11 U.S.C. § 362(a), which prohibits most debt collection activities upon the filing of a bankruptcy petition. PHH Mortg. Corp. v. Sensenich (In re Gravel), 6 F.4th 503, 514 (2d Cir. 2021) (citing Collier ¶ 3002.1.RH (16th ed. 2020)). Consequently, "debtors who had completed their [C]hapter 13 plans were discovering that they had incurred new obligations and defaults." Id. In other words, a mortgage creditor might "silently accrue additional amounts and then spring a 'gotcha' foreclosure after the debtor has completed her plan and emerged from bankruptcy protection." In re Roper, 621 B.R. 899, 902 (Bankr. D. Colo. 2020).[4]
To remedy this problem, the Judicial...
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