Chapter 13 lets you catch up missed mortgage payments in a plan approved by the court. But what if your mortgage company still says you’re behind after your plan is over?
To learn more about how chapter 13 stops foreclosure, read my last blog post.
This post explains the types of lawsuits you can file against your mortgage company if it fails to account for the payments you made during your chapter 13 plan.
After chapter 13, many mortgage disputes can be fixed with a simple QWR letter. Read a sample dispute letter.
You are legally entitled to a fresh start after you finish chapter 13.
Your QWR letter should explain why you are current. Attach proof of all your payments. Attach copies of all mortgage-related documents filed in your chapter 13 case. Keep a copy of your QWR letter and the stamped envelope you mail it in.
If your QWR letter doesn’t fix the problem, you may file a lawsuit under one or more of the following laws.
The RESPA requires mortgage companies to resolve mortgage disputes within 45 days after receiving your QWR letter. Read 12 U.S. Code § 2605.
Your mortgage company must acknowledge receipt of your QWR letter within 5 days.
Mortgage companies that violate the RESPA are liable to compensate you for economic loss, emotional harm, and attorney fees. Read a sample RESPA complaint.
See related article: Oregon mortgage lawsuit: Portland homeowner wins round one
After your chapter 13 ends, your mortgage company may say you still owe outstanding fees that were incurred during your plan. First, you should review your chapter 13 court docket.
All fees incurred during your chapter 13 must be noticed. Your mortgage company must have filed its notice no later than 180 days after its fees were incurred. Read Rule 3002.1(c).
Mortgage fees are considered to be “incurred” on the date the service is performed, not the date the mortgage company was invoiced by its third party. Read In re Raygoza, 2016 WL 4574303 (Bankr. S.D. Tex. Sept. 1, 2016).
A mortgage company that attempts to collect fees that were not properly noticed is subject to sanctions. Read In re Gravel, 2016 WL 4765773 (Bankr. D. Vt. Sept. 12, 2016) (sanctioning mortgage company $375,000 for violating Rule 3002.1).
Committee Note to Rule 3002.1(i):
“If, after the chapter 13 debtor has completed payments under the plan and the case has been closed, the holder of a claim secured by the debtor’s principal residence seeks to recover amounts that should have been but were not disclosed under this rule, the debtor may move to have the case reopened in order to seek sanctions against the holder of the claim under subdivision (i).”
Your bankruptcy judge may sanction your mortgage company for any intentional bad faith conduct related to your chapter 13 plan. Read Law v. Siegel, 134 S. Ct. 1188, 1194 (2014) (bankruptcy courts have inherent authority to sanction bad faith conduct).
Read my contempt order against Wells Fargo In re Wells Fargo, 481 B.R. 650 (2012)
Bad faith conduct may include harassment, failure to properly account for mortgage payments, failure to respond to letters from homeowners, or repeated attempts to collect fees, interest, or escrow amounts that are not owed.
The Bankruptcy Code requires your mortgage company to properly credit the payments it received during your chapter 13 plan. Read 11 U.S. Code § 524(i).
You can bring a motion for sanctions against your mortgage company for failing to properly account for your payments. Mortgage companies that fail to comply with § 524(i) may be required to compensate borrowers and pay their attorney fees.
Read In re Scott, 2015 Bankr. LEXIS 2472 (U.S. Bankr. N.D. Okla. July 28, 2015) (“willfulness” under § 524(i) doesn’t require any evil intent on the part of a mortgage company).
At the end of your chapter 13 plan, your trustee will file a notice of final cure. The trustee has 30 days to file the notice. You can file the notice if your trustee does not. Read In re Bodrick, 498 B.R. 793 (Bankr. N.D. Ohio 2013).
If your mortgage company doesn’t respond to the notice of final cure, you should seek a court order that your mortgage is current at the end of your plan.
Keep a copy of the bankruptcy court order. If your mortgage company later says you are not current after chapter 13, you may file a motion for sanctions based on the court order.
If you caught up missed mortgage payments in chapter 13, the discharge order probably doesn’t apply to your mortgage debt. Read 11 U.S. Code § 1328.
If you were current when your chapter 13 was filed, you may bring a motion for contempt against your mortgage company for collecting fees or payments you don’t owe after bankruptcy.
In Oregon, borrowers can’t sue mortgage companies under the FDCPA for violating the bankruptcy rules. Read Walls v Wells Fargo, 276 F.3d 502 (9th Cir. 2002).
However, mortgage companies may be sued under the FDCPA for violations related to bankruptcy that arise independent of the Bankruptcy Code. Read my 2012 case: Walch v Columbia Collection, No. 3:12-cv-00345-HU (D. Ore. Sept. 17, 2012).
Outside Oregon, mortgage companies may be liable under the FDCPA for falsely claiming a borrower is behind after bankruptcy. Read Goodin v. Bank of Am., N.A., 114 F. Supp. 3d 1197, 1206 (M.D. Fla. 2015) (mortgage statements after bankruptcy that were inconsistent with final cure notice violated the FDCPA).
Read more about debt collection.
Borrowers should review their credit reports after chapter 13. You can view your credit reports for free at www.annualcreditreport.com. To speak with a FCRA expert, contact Justin Baxter or Robert Sola.
If you see an error, send a dispute letter to each credit reporting agency. Read a sample dispute letter.
Mortgage companies and credit reporting agencies that fail to properly reinvestigate dispute letters may be liable to pay compensation, punitive damages, and reimbursed attorney fees. Read May v. Nationstar Mortgage, 2015 WL 9185408, (E.D. Mo. Dec. 17, 2015) ($500,000 FCRA jury verdict against mortgage company).
Read more about credit reporting.
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