WW&R Bankruptcy practice group of Weltman, Weinberg & Reis, the nation's largest creditor's rights law firm, is your source for bankruptcy news and information. We are committed to helping clients thrive in these ever changing times.
On December 20, 2011, the United States Bankruptcy Court for the Western District of Pennsylvania held its Investiture Ceremony for the newly appointed Honorable Carlota M. Bohm.
Judge Bohm started her career as a law clerk to two Bankruptcy Judges and has concentrated her practice primarily in bankruptcy since 1981. Prior to being appointed and sworn in, Judge Bohm was a Bankruptcy Trustee on the U.S. Trustee’s Panel for the Western District of Pennsylvania and an attorney with the firm of Houston Harbaugh in Pittsburgh.
The United States Bankruptcy Court for the Western District of Pennsylvania sought a new judicial appointment after the untimely passing of the Honorable M. Bruce McCullough in November 2010.
According to statistics from the National Bankruptcy Research Center (NBKRC), bankruptcy filings have declined through the first three quarters of 2011. Total consumer bankruptcy filings totaled 144,722, which was down approximately 10% from the first three quarters of 2010. In addition, bankruptcy filings in September 2011 declined substantially, down 17% over the same period of last year. Bankruptcy filings for September 2011 totaled 108,517. Although filings continue to decline, the NBKRC still projects an estimated 1.35 million bankruptcies for 2011. Many factors have contributed to the 2011 decline in bankruptcy filings, including the lack of available credit to consumers, foreclosure moratoriums and reduced spending by debtors.
New Bankruptcy Rules and Forms effective December 1st: Is your organization ready?
On December 1, 2011, certain bankruptcy rule changes and new forms will become effective. These changes primarily deal with the filing of a Proof of Claim and relate to mortgage creditors as well as debt buyers. However, the change in the Proof of Claim form will affect all entities who file Proof of Claims in bankruptcy proceedings.
The major change to the form involves attachments that are required to lay out certain fees and costs, and a breakdown of arrearages on the mortgage claims. It also requires that mortgage creditors provide an escrow statement as of the date of the bankruptcy filing. The new form provides for payment change notifications to be filed with the Court and the specific form that needs to be used.
The new rule also changes the procedures that are necessary when a Trustee finishes paying a mortgage through a Chapter 13 Plan. Weltman, Weinberg & Reis Co., L.P.A. (WWR) will be providing extensive information and training sessions for clients through webinars over the next two months to ensure that you are ready for the changes.
In addition to the changes to the procedures and forms pertaining to Proof of Claims, there has also been a change in the Reaffirmation Agreement form. The B240 form has been altered by a technical amendment to clarify some of the language on the form. This does not affect the procedure and the information needed within the reaffirmation agreement itself. The additional language is as follows and can be found in the form on the United States Courts website:
“Even if you do not reaffirm and your personal liability on the debt is discharge because of the lien your Creditor may still have the right to take the property securing the lien if you do not pay the debt or default on it. If the lien is on an item of personal property that is exempt under your State’s Law or that the Trustee has abandoned, you may redeem the item rather than reaffirm the debt. To redeem, you must make a single payment to the Creditor equal to the amount of the allowed secured claim, as agreed by the parties or determined by the Court.”
The changes in this language indicate that the redemption, pursuant to 11 U.S.C. § 722, must be made by a single payment. It also changes the language to say that “the amount of the allowed secured claim which is different from the current value of the property”. This now becomes consistent with the language contained in § 722 of the Bankruptcy Code. Although this change does not affect the information that must be included in the Reaffirmation Agreement as to balances, interest rates, monthly payments and arrearages, it is important when preparing a Reaffirmation Agreement after December 1, 2011, that the correct B240A-B alt form is used.
WWR will continue to keep you advised as to breaking news and trends in bankruptcy proceedings. Should you require further information please do not hesitate to contact Alan C. Hochheiser, Managing Partner of the Bankruptcy Group. Al can be reached at 216.739.5069 and .
In Indiana, as in most states, a mortgage must be properly acknowledged in order to be valid. This means that the notary present at the mortgage closing must make a written statement confirming that the notary witnessed the mortgagors sign the mortgage documents. If the notary acknowledgement is incomplete or improperly formatted, the mortgage is invalid.
Bankruptcy trustees use their powers under 11 U.S.C. § 544 to avoid mortgages that are defective. In 2007, the Indiana legislature passed an amendment to the recording statute that provided mortgages with certain technical defects would be treated as properly recorded mortgages (a ‘curative’ statute). Despite this amendment, bankruptcy trustees continued to file actions to avoid defective mortgages, arguing that the 2007 Amendment only applied to mortgages executed after July 1, 2007, the date of the amendment.
The 7th Circuit Court of Appeals issued a decision on February 19, 2010 that clarified this issue. The Court held that the 2007 Amendment applied to all mortgages, regardless of when they were executed. This is a positive result for creditors. It means that, in cases filed after July 1, 2007, the bankruptcy trustees are unable to avoid mortgages based on technical defects in the notary acknowledgement. This case applies to mortgages filed in the state of Indiana.
If you have any questions, please contact Laura Faulkner at .
The Southern District of Indiana and the Southern District of Ohio are revising their Local Rules effective December 1, 2009. Both jurisdictions are revising their Rules to require creditors to attach a post-petition payment history to motions for relief from stay in Chapter 13 cases.
Additionally, the Southern District of Ohio will require additional documentation to be supplied with motions for relief from stay on real estate. Creditors will be required to attach a copy of the recorded deed upon which the debtor acquired the property to the motion for relief from stay.
Please include these additional documents when referring motions for relief form stay to our office in order for us to more quickly process the motion.
Effective January 1, 2010, the Western District of Pennsylvania Court Procedure will change regarding notifying the Court and the Debtor of monthly mortgage payment changes. The Chapter 13 Trustee is the acting disbursing agent for ongoing mortgage payments in this district.
Notice of Mortgage Payment Change must be filed with the Court at least twenty-one (21) days prior to the date that the change is to become effective or the Creditor is forever barred from collecting the difference in the change. In order to comply with this deadline, your attorney will need the information and documents as soon as possible after the escrow changes or the interest rate changes.
The Notice of Mortgage Payment Change must include:
A complete and accurate loan payment history;
A computation of the payment change “in a format which is readably understandable by the Court and the Parties-in-Interest;” and
A declaration under penalty of perjury by a competent official of the Creditor substantiating the veracity and accuracy of the requested change
The Notice can no longer simply state what the monthly payment is and the effective date, rather, we will have to compute and accumulate detailed information justifying the change.
If a loan is transferred or sold, the procedure will now require the new owner to file a copy of any applicable lien assignment evidencing the Creditor’s alleged right to payment if the Creditor is not currently a Creditor “of record”. The assignment must also include, on a separate page, a narrative summary of the chain of title evidencing the Creditor’s authority to act and be paid.
After a Notice of Mortgage Payment Change is filed, the Court will issue a standard order requiring the debtor to:
Amend the chapter 13 plan;
File a declaration that the existing chapter 13 plan is sufficient to fund the plan with the modified debt; or
File an objection to the Notice of Mortgage Payment Change as stated and the Court will schedule a hearing on the matter
If a Declaration is filed by the debtor that the monthly plan payment doesn’t need to change, we recommend a review of the Chapter 13 Trustee’s website to be sure that the changed monthly payment amount is disbursed. If an Objection to the Notice of Mortgage Payment Change is filed, additional documentation may be necessary to defend the Notice of Mortgage Payment Change.
If lenders want to be paid post petition fees, expenses or charges, then within 180 days from the date incurred, lenders must file a Notice of Post-Petition Fees, Expenses and Charges. Examples of fees incurred post petition are attorney fees, BPO fees, property inspections and other administrative fees. The notice must include an itemized list of the fees and expenses and when they were incurred. The Court will issue a standard Order giving the Debtor twenty-one (21) days to amend the plan, file a declaration, or object to the Notice.
Lenders must now be very diligent in administering loans secured by real estate and file the required notices with the court on a timely basis, or they will be barred from collecting increases in payments and other expenses. WWR is continuing to monitor these developments and will advise you as procedures change so that you can take the steps necessary to protect yourself while the debtor is in bankruptcy.
The Administrative Order implementing this new procedure can be found on the Western District of Pennsylvania Bankruptcy Court’s website at http://www.pawb.uscourts.gov.
If you have any questions regarding this client advisory, please contact Ms. Holly C. Thurman, Esq. Holly is an associate in the bankruptcy department within the Real Estate Default Group of Weltman, Weinberg & Reis Co., L.P.A., and is located in the Pittsburgh office. She can be reached directly at 412.338.7105 or via e-mail at .
