Bankr. W.D.N.C.: In re Owens- Rule 3002.1 Applies to Mortgage Fees even if Collection is Not Currently Attempted


PHH Mortgage assessed $472.25 in post-petition fees against the Debtor’s loan, but did not file and serve a notice pursuant to Rule 3002.1(c) of these fees within 180 days, asserting that these fees were not presently recoverable against the Debtor or their residence and will not be collectible unless the Debtors’ Chapter 13 case was dismissed or converted. PHH asserted that it was required by N.C.G.S. § 45-91 to send notice to the Debtors of these fees, even if not currently intended to be collected.

The bankruptcy court rejected this argument, finding that Rule 3002.1 applied to these fees as “[a]sserting a fee has been charged and then making a conditional promise to waive the fee if certain conditions are met is still an assertion of a fee as recoverable.” Further, as both the Supremacy Clause and N.C.G.S. § 45-91 itself require that compliance with N.C.G.S. § 45-91 not violate any provisions of the bankruptcy laws, its notice should either have stated in the assessment notices that:

(1) The fees will not be required to cure default upon the completion of the confirmed plan and that the fees will be waived upon entry of discharge, or
(2) Complied with the form and manner of notice required by Rule 3002.1(c) and then allowed Debtors’ counsel to seek disallowance of the fees unopposed.

Lastly, the bankruptcy court explicitly rejected the “Just Trust Us/Wait and See” approach advanced by the mortgage servicer, as disclosure requirement of Rule 3002.1 does not turn on the creditor’s intent regarding later collection.

No attorneys fees were awarded against PHH as this was a matter of first impression for the bankruptcy court, but such would not necessary be the result in the future.


Read with In re Saeed and In re Hillmon, these cases require compliance with both N.C.G.S. § 45-91 and Rule 3002.1.
Additionally, neither Rule 3002.1 nor N.C.G.S. § 45-91 condition the waiver of fees on completion of a Chapter 13 plan, with Rule 3002.1 specifically allowing preclusion of evidence of these amounts “in any contested matter or adversary proceeding in the case”, which should include a case converted to Chapter 7. Further, if a state court foreclosure or other court proceeding is brought involving these undisclosed fees, the debtor could argue that judicial estoppel, an equitable doctrine under which a party is precluded from asserting a claim in one legal proceeding that is inconsistent with a claim made in a previous proceeding, prevents the assertion of default based on fees that should have been disclosed in the bankruptcy case, either under Rule 3002.1 or N.C.G.S. § 45-91. As mortgage servicers seem very fond of using judicial estoppel following a foreclosure to prevent subsequent claims against by homeowners, this reciprocal use of the doctrine is a fine Gander Sauce. See Petri v. Bank of America.

For a copy of the opinion, please see:

Owens- Rule 3002.1 Applies to Mortgage Fees even if Collection is Not Currently Attempted

Saeed- Failure to provide Notice of Assessment of Fees



1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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