Evolving Bankruptcy Rules Place Additional Burdens on Lenders
Recent changes in the law require banks, mortgage lenders, and other holders of secured claims to follow additional rules in proving up their claims in bankruptcy court. When an individual debtor files bankruptcy, a creditor that owns a debt secured by the debtor’s principal residence must file a newly created legal form to show the court the loan documents, itemize the amount of its claim by principal, interest, fees, etc., and include an amount to cure a default. The lender also must show an escrow statement. Failure to do any of the above might prevent the lender from proving its claim in court. The new rules also require mortgage lenders to supplement original proofs of claim in Chapter 13 bankruptcies with any fees, expenses, or charges incurred since the filing of the bankruptcy petition.
In addition to changes in evidentiary requirements, new procedural rules can also trip up creditors. For example, within thirty days of the debtor’s last payment under a Chapter 13 plan, the bankruptcy trustee must serve a notice on the mortgage lender and the debtor stating that the debtor has paid in full the amount required to cure any default. Within twenty-one days of this notice, the creditor must serve a notice on the trustee and debtor agreeing that debtor is paid up; or if the creditor disagrees, an accompanying statement itemizing cure amounts.
These new rules create additional burdens on secured creditors seeking to protect their claim in bankruptcy. Our bankruptcy attorneys are experienced in handling creditors’ claims and can help creditors protect their claims under these new rules.