Jones Versus Wells Fargo Bankruptcy Court Addresses Debtor’s Rights (Part Three)

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 Part Two we discussed the Jones v. Wells Fargo 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 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 under§ 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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I've been a consumer bankruptcy lawyer for nearly 25 years. Since that time I have helped many people resolve their financial problems. I have been practicing law since 1986 and I am licensed to practice in all state and federal courts in the State of Louisiana. Because I am a sole practitioner, you know that your debt matters are being handled by me personally. In addition to my work with consumers, I am also frequently asked to speak at local seminars on bankruptcy law. I am member of the following organizations: • Louisiana Bar Association • National Association of Consumer Bankruptcy Attorneys • Bankruptcy Law Network My office is located at: 3920 General DeGaulle Drive, New Orleans, LA 70114 Telephone: (504) 368-4101

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