In four consolidated appeals the Bankruptcy Appellate Panel for the Ninth Circuit upheld the use of an optional form addendum in Chapter 13 cases. In re Herrera, No. 09-1175 (B.A.P. 9th Cir., January 5, 2010). The addendum, developed by bankruptcy judges in the Central District of California, increased a mortgage creditor’s reporting and accounting obligations in cases in which the debtors sought to pay mortgage arrearages through the plan, but to pay post-petition monthly mortgage payments directly to the mortgage creditors. The mortgage creditors argued that the reporting obligations imposed by the addendum were preempted by RESPA and violated 11 U.S.C. § 1322(b)’s prohibition against modification of the rights of creditors holding mortgages on residential properties.

The Panel rejected these arguments concluding that in enacting RESPA Congress did not intend to fully occupy the field, and that RESPA set forth only minimum reporting and accounting obligations on creditors. The court further found that the additional obligations imposed by the addendum were consistent with Congress’s intent with respect to the provisions of RESPA. In addressing the creditors’ argument that the reporting requirements of the addendum impermissibly modified the contractual rights of creditors in violation of section 1322, the court distinguished between a creditor’s “rights” and its “duties” under the lending agreement, finding that section 1322 did not prevent modification of a lender’s duties.

NACBA assisted on debtors’ consolidated appellate brief.