Bank’s Claim Allowed to Extent of State Court Foreclosure Judgment as Well as Post-Judgment Charges Reassessable Under State Law

Bank’s Claim Allowed to Extent of State Court Foreclosure Judgment as Well as Post-Judgment Charges Reassessable Under State Law

In this chapter 13 bankruptcy case, Debtor has filed a chapter 13 plan in which she proposes to pay off the entire residential mortgage claim of Bank of America (“BOA”) pursuant to 11 U.S.C. §1325(a) – (rather than curing the default under §1322(b)(5), as is far more common in chapter 13 cases involving residential mortgages). The Debtor’s approach is not surprising because the subject mortgage matured and was reduced to judgment in state court before the commencement of the bankruptcy case.

BOA filed a proof of claim in the amount of $47,189.43. The Debtorinvokes the  state law doctrine of merger and asserts the claim should disallowed, in part, because certain charges included in the claim are unenforceable under applicable state law.

The Debtor asserts that the allowed claim should be only $40,869.25.

On April 19, 1999, the Debtor entered a residential mortgage loan transaction with Full
Spectrum Lending. The loan was secured by her primary residence. The interest rate under the
associated note was 12%. This mortgage and note were eventually assigned to BOA. On December 6, 2016, on the basis of that mortgage and note, BOA obtained a default
foreclosure judgment against the Debtor for $39,847.41.

On June 1, 2017, Bank of America filed a secured proof of claim in the amount of $47,189.43. BOA calculated its claim from the Debtor’s payment history, and included late fees, attorney fees and court and title costs which were accrued both before and after the judgment. In effect, BOA calculated its claim as if no judgment had been entered and the proof of claim does not differentiate between charges assessed before the entry of the judgment from those assessed after the entry of judgment.

The Debtor filed the Objection on June 8, 2017. A hearing on the Objection was held on
July 25, 2017. At the hearing, the parties presented additional argument, but did not offer any
evidence aside from the note, mortgage, BOA’s Proof of Claim and the foreclosure case docket

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