In December 2011, the new Federal Rule of Bankruptcy Procedure 3002.1 went into effect for Chapter 13 cases. Among other things, the new Rule 3002.1 requires lenders to file two different notices in Chapter 13 cases for any claim that is secured by the debtor’s principal residence: a notice of payment change and a notice of fees, expenses, and charges.
Notice of Payment Change
First, lenders are required to file and serve a Notice of Payment Change no later than 21 days before a new payment amount goes into effect. This notice is required whether the payment change is due to an interest rate adjustment, an escrow amount adjustment, or any other reason, such as a loan modification. Each notice, which should be filed on Official Form B10- Supplement 1, must be served on the debtor, debtor’s attorney and the Chapter 13 Trustee.
Notice of Fees, Expenses, and Charges
Second, lenders are required to file and serve a Notice of Fees, Expenses, and Charges for any fees or expenses that the lender asserts are recoverable against the debtor and were incurred in connection with the bankruptcy case. Examples of fees requiring notice include: late charges, NSF fees, attorney fees, filing fees and court costs, bankruptcy/proof of claim fees, appraisal/ BPO fees, property inspection fees, tax advances, insurance advances, and property preservation expenses. This notice must be filed within 180 days from the date that the charge is incurred and must be served on the debtor, debtor’s attorney and the Chapter 13 Trustee. Lenders should use Official Form B10-Supplement 2 to itemize the fees. The debtor and the Chapter 13 Trustee will have one year to challenge any fees. Depending on the jurisdiction, the trustee may fund the fees and expenses, or the debtor may pay them directly to the lender.
As the Notice of Fees, Expenses, and Charges must be filed within 180 days from the date the fees are incurred, we recommend reviewing every loan at least once every six months to insure compliance. Be aware that failure to comply with the rule may result in sanctions against the lender, including an award of reasonable expenses and attorney’s fees to the debtor challenging any undisclosed fees.
Unfortunately, in many jurisdictions, lenders may have to comply with these notice requirements until foreclosure-even after the automatic stay has been lifted or the residence has been surrendered to the lender. It is important that lenders consult with counsel before determining that the notice requirements no longer apply in each case. Furthermore, lenders will not likely be able to charge the debtor for their own attorney fees incurred from complying with the new notice requirements.