22 Oct Jones Versus Wells Fargo Bankruptcy Court Addresses Debtor’s Rights (Part Three)
Bankruptcy is designed to allow a debtor to get a fresh start.
In this part, we will look at the analysis of the postpetition charges assessed by the creditor.
The Court found that Wells Fargo had charged Jones account with both pre as well as postpetition costs. Citing to statutes and decisions by the Fifth Circuit,it noted that both the pre 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 legal fees to the Debtor’s account whichthe creditoracknowledged at trial that it had not disclosed.
The court stated that these legal fees had to be reviewed by theit for reasonableness underÂ§ 506(b) and Bankruptcy Rule 2016(a), and in order for Wells Fargo to prove such fees, an application should have been submitted setting forth a detailed statement of “(1) the services rendered, time expended and expenses incurred, and (2) the amounts requested.
Chargeswere also assessed for 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 the creditor to disclose the fees prohibitedthe debtorfrom 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 charges and fees. This, Judge Magner noted, would be contrary to the concept of a fresh start.
Regarding the pre-confirmation attorney’s fees, the Court denied the creditor attorney’s fees as it 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, no evidence was offered 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.
The statutory charge of $106.58 was also denied, as well as charges for sixteen inspections ordered of the property of Mr. Jones.
In Part Four 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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