Many homeowners attempting to save their homes from foreclosure using Chapter 13 bankruptcy discover that sometimes mortgage creditors add unauthorized or excessive fees while the bankruptcy case is pending.
Some homeowners find themselves facing foreclosure after their Chapter 13 bankruptcy has been discharged because these "surprise" fees which the debtor is not aware of, go unpaid. The mortgage creditor begins foreclosure proceedings based on claims of unpaid fees which often include property inspections, attorney's fees or any number of other charges that were incurred unbeknownst to the debtor during the pending Chapter 13 bankruptcy case.
The new bankruptcy law, if passed by legislators, would include a provision allowing fees, costs or charges to be incurred during a pending Chapter 13 bankruptcy case only if all of the following applies:
- The charges, fees or costs are disclosed in a noticed filed with the bankruptcy court within 1 year after the fee, charge or cost is incurred or 60 days before the case closes.
- The fee, cost or charge is deemed lawful, reasonable and provided for in the agreement.
- The value of the secured property is worth more than the claim, including any fees, costs and charges.
Under the new proposed bankruptcy law, if the mortgage creditor fails to provide the notice, the fee, cost or charge would be waived. The proposed bankruptcy law also eliminates any prepayment penalty on a mortgage claim.