Chapter 13 Debtors had fallen behind on payment under their confirmed plan, wherein the mortgage held be Wells Fargo was paid directly by the Debtors. Instead of following the more customary path of seeking relief from the automatic stay, Wells Fargo instead sought dismissal of the Chapter 13 case. The Motion to Dismiss was resolved by bringing the payments “inside” the Chapter 13 plan, but the parties could not agree on the allowance of attorney’s fees in the amount of $350.00. Further, the Bankruptcy Administrator argued that Wells Fargo should instead have filed a Motion for Relief, with its required filing fee of $176.00.
The Court held that pursuant to 11 U.S.C. § 1307, a Motion to Dismiss was an appropriate vehicle for raising the Debtors’ default under the plan and awarded attorneys’ fees.
While it would still be the more considerate practice to seek a consent order before filing a Motion for Relief, which would also avoid the $176.00 filing fee, this seems like a fine method for raising defaults by Debtors. In fact, since most promissory notes and statutes only allow for “reasonable attorney’s fees and costs”, this opinion raises the question of whether requiring a Debtor to repay the filing fees for a Motion for Relief from Stay is ever reasonable, especially given that parties have a duty to mitigate damages, since a viable and less expensive alternative is available.
For a copy of the opinion, please see: