Jones Versus Wells Fargo Addresses The Rights Of Debtors In Bankruptcy Part Three
By Kevin Gipson, New Orleans Bankruptcy Attorney on Oct 22, 2007 in Bankruptcy Cases & Legislation, General Bankruptcy Information, Lawyer to Lawyer, Louisiana
In Part Two we discussed the Court’s analysis of the prepetition costs and expenses assessed by Wells Fargo against the debtor’s account in the case of In re Jones.
In this part, we will look at the Court’s analysis of the postpetition charges assessed to the account of Mr. Jones.
The Court found that Wells Fargo had charged Jones account with both postpetition, pre-confirmation costs as well as postpetition, post confirmation costs. Citing to statutes and decisions by the Fifth Circuit, the Court noted that both the pre-confirmation and post confirmation charges may be included in the plan and therefore must be disclosed by the lender to the debtor so that the debtor can make an informed decision about how to pay these additional expenses.
Wells Fargo had assessed $150.00 in postpetition pre-confirmation legal fees to Jones account which Wells Fargo acknowledged at trial that it had not disclosed to Jones. The court stated that these legal fees had to be reviewed by the Court for reasonableness under § 506(b) and Bankruptcy Rule 2016(a), and in order for Wells Fargo to prove such fees, an application should have been submitted to the court setting forth a detailed statement of “(1) the services rendered, time expended and expenses incurred, and (2) the amounts requested.”
Wells Fargo had also charged Jones with post confirmation attorney’s fees, inspection charges, and a “statutory expense.” As with the pre-confirmation fees, the existence of these fees were not previously disclosed to Jones, the Trustee or the Court.
Since Fifth Circuit cases permitted post confirmation modification of plans to include these various fees, the failure of Wells Fargo to disclose the fees prohibited Jones from exercising his option to either modify the plan, defer payment until the completion of the case, or pay the fees and charges outside of the plan.
The Court also expressed concern that the failure to disclose post confirmation charges could have the effect of causing a debtor to find himself in foreclosure the day after a discharge was granted, based solely on unpaid and undisclosed post confirmation charges and fees. This, the Court noted, would be contrary to the concept of a fresh start.
Regarding the pre-confirmation attorney’s fees, the Court denied the attorney’s fees as Wells Fargo had failed to provide any evidence as to the reasonableness of the fees, who performed the services, or the rate charged for the services.
Likewise, as with the pre-confirmation attorney’s fees, Wells Fargo offered no evidence as to the identity of the counsel who allegedly performed the post confirmation services, or any description regarding the services performed, time spent, or amounts charged. Absent such evidence the Court also denied the post confirmation attorney’s fees.
Wells Fargo also offered no explanation or evidence to support a “statutory charge” of $106.58, so it was denied, as well as charges for sixteen inspections ordered of the property of Mr. Jones.
In the next part of this series of articles, I will discuss the Court’s decision regarding the recovery by the debtor of the postpetition fees and costs that were improperly assessed by Wells Fargo.
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