491 B.R. 886
Bankr. N.D. Ill.2013Background
- Debtors filed a chapter 13 motion for sanctions against Chase for allegedly violating Rule 3002.1(b) by not filing/serving a notice of a post-petition escrow increase.
- The central issue is whether Rule 3002.1 applies in cases where the plan maintains monthly mortgage payments but does not provide for pre-petition arrears.
- Plan confirmed in 2009 required current monthly mortgage payments to be paid directly to the creditor; no provision to pay mortgage arrears.
- In Dec 2011 Chase informed debtors of a large escrow increase after paying property taxes; Chase did not file/serve the notice with the court or on debtors’ counsel/trustee.
- Debtors sought sanctions including declarations about tax liability and attorneys’ fees/punitive damages; the court decides Rule 3002.1 applies, sanctions are mostly denied but attorney’s fees may be available.
- The court ultimately denies most sanctions but allows a separate request for attorney’s fees to be filed with itemization within 10 days.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Rule 3002.1 apply to mortgage claims under 1322(b)(5) even when there are no pre-petition arrears? | Tollios asserts Rule 3002.1 applies to any ongoing mortgage payments. | Chase contends rule covers only plans with both current payments and arrears. | Rule 3002.1 applies to plans maintaining monthly mortgage payments regardless of arrears. |
| Did Chase violate Rule 3002.1 by failing to file/serve the escrow notice? | Debtors argue notice was required and not provided. | Chase maintains notice was not properly filed/served. | Yes, Chase violated Rule 3002.1 by failing to file/serve the notice. |
| Should sanctions be imposed for the Rule 3002.1 violation? | Debtors seek drastic relief including tax liability absolution and damages. | No harm shown; sanctions inappropriate; other remedies may be limited to fees. | Sanctions denied as to drastic relief; potential attorney’s fees may be awarded after proper briefing. |
Key Cases Cited
- In re Weigel, 485 B.R. 327 (Bankr.E.D. Va. 2012) (court discussions on applicability of 3002.1 to cases with/without pre-petition arrears)
- In re Chappell, 984 F.2d 775 (7th Cir. 1993) (discussion of §1322(b)(5) options for curing defaults and maintaining payments)
- In re Gilbert, 472 B.R. 126 (Bankr.S.D. Fla. 2012) (explains long-term debt treatment under 1322(b)(5) versus 1325(a)(5))