This past December, Bankruptcy Judge Deasy of the District of New Hampshire decided In re Porter, 399 B.R. 113 (Bkrtcy.D.N.H. 2008). The debtor and home mortgage servicer in the case had submitted a reaffirmation agreement which added only one new provision to those of the original loan: that the debtor be liable for $350 in the bank’s attorney’s fees. On his own initiative, Judge Deasy issued an order to show cause as to why the fees should not be disallowed as unreasonable. After submissions by the parties, the Court held that the fees were not reasonable and disallowed them, opining that “The potential is high for a secured creditor to engage in coercive or abusive tactics when negotiating with an individual debtor over a reaffirmation agreement necessary for the debtor to retain their principal residence.”
The Court did not attempt to find whether there was actual coercion, intended or otherwise, in this case, but instead examined the fees for reasonableness. The Court held that creditors will not be able to charge debtors fees for standard reaffirmation agreements, which require only that a non-attorney fill out a court-approved form with data from a loan file. It is notable that this same logic could be employed to seek disallowance of fees for completing proof of claims. This decision will likely change state-wide practice in New Hampshire, as it was routine for creditors to seek fees for the completion of reaffirmation agreements.