On May 11, 2009, the three presiding bankruptcy Judges for the Northern District of Ohio at Cleveland issued a series of Administrative Orders which will take effect on August 10, 2009 and will radically alter the way mortgage loans and other secured debts are administered in Chapter 13.
The Court announced that, for all cases filed on or after August 10, 2009, the Chapter 13 Trustee will make all pre-confirmation adequate protection payments to secured creditors unless a debtor's plan specifically provides otherwise. Previously, the default position had been that debtors were responsible for their own pre-confirmation adequate protection payments unless they petitioned the Court for the Trustee to assume the role.
Additionally, the Court announced that for any cases filed on or after August 10, all post-petition mortgage payments will be paid as a conduit payment through the Chapter 13 Trustee's office. These payments will be part of a debtor's larger Chapter 13 plan payment and will then be paid out by the Chapter 13 Trustee to mortgage creditors "as soon as practicable" once a proof of claim has been filed by the creditor. The Court will require that such creditors attach a fully executed new addendum form to their proof of claim which details the items that make up the regular monthly payment amount, a description of the real estate collateral, as well as contact information for the creditor and servicer of the loan (if applicable).
It should be noted that Alan Hochheiser, managing partner of the Bankruptcy Department at Weltman, Weinberg and Reis Co., LPA, was a member of the Advisory Committee charged with making recommendations to the Court for the implementation of Trustee conduit payments. Mr. Hochheiser was instrumental in protecting the rights of mortgage creditors by ensuring that any new provisions would include prompt and timely post-petition payments from the Trustee to creditors.
The Court further announced that, in the event the monthly mortgage payment amount changes during the life of the plan, the Court will now require the creditor to file and serve a Notice of Payment Change to the affected parties using a new form drafted by the Court. This notice must be filed prior to the actual payment change and interested parties will have 21 days to object to the proposed payment change. In the event no objections are filed timely, the Trustee will begin disbursing payments at the new amount.
The Court also provided new forms to be executed and filed by mortgage creditors in the event that a mortgage loan owner or servicer will be changing due to sale, assignment or other means for the purpose of putting interested parties on notice. This form must be served upon the debtor, its attorney and the Chapter 13 Trustee.
The Court is further requiring all mortgage creditors to file a 12-month account history for the loan, including any expenses, fees or charges incurred by the creditor in servicing the loan which it feels may be assessed against the debtor's account, within 45 days of the case being filed with the Court. Debtors are given the right under these new Administrative Orders to request updated account histories every 12 months from the creditor. The creditor is given 45 days to comply with the request.
Finally, the Court added a new provision allowing debtors to file a Motion at the conclusion of their case seeking a determination that the mortgage is deemed current by the Court. In the event that a debtor obtains such an order, a mortgage creditor will be precluded from seeking recovery of or foreclosing upon any portion of the obligation that came due prior to the filing of the case.
Weltman, Weinberg & Reis will continue to keep you updated on the upcoming changes in bankruptcy legislation. The Bankruptcy Department will also be providing more detailed information through future blog postings, seminars and webinars.
If you have any questions concerning this matter, please contact Mr. Scott Fink, Esq. Scott is an Associate in the Bankruptcy department of the Brooklyn Heights operations center of Weltman, Weinberg & Reis Co., L.P.A. He can be reached at (216) 739-5644 or via e-mail at sfink@weltman.com.
Client Advisory is published by Weltman, Weinberg & Reis Co., L.P.A., an organization providing comprehensive creditor representation. The information contained in this advisory is a summary of legal information and is not intended to constitute legal advice on specific matters or create an attorney-client relationship. Contact any of our offices or visit our website at realestatedefaultgroup.com for more real estate related information, company facts and attorney profiles. (c)2009