§ 138.2 — Claims for Creditors’ Attorneys’ Fees

Revised: June 17, 2004

[1]

Prepetition attorneys’ fees are a matter of contract between the debtor and creditor. If the contract between the debtor and the creditor calls for attorneys’ fees upon default or bankruptcy or some other event that has occurred, then the claim includes accrued prepetition fees that fall within the contract.1 Prepetition attorneys’ fees are appropriately added to the debt on the face of Official Bankruptcy Form 10, and the sum becomes the allowed amount of the claim.2 Prepetition attorneys’ fees added to a creditors’ proof of claim are subject to the usual contract and state law defenses available during the claims allowance process.3

[2]

Postpetition attorneys’ fees are more controversial. Some courts have held that postpetition attorneys’ fees are not allowable as part of an unsecured claim.4 It was held that an unsecured claim does not include postpetition attorneys’ fees even if called for by contract and even when creditor’s counsel substantially benefited all creditors by compelling the debtor to pay a higher percentage of claims.5 Section 503(b)(3)(D) does not apply in Chapter 13 cases: a creditor making a “substantial contribution” in a Chapter 13 case cannot claim an administrative expense for its attorneys’ fees.6 Reasoning by negative implication from the allowance of postpetition fees to oversecured creditors by § 506(b),7 several courts have held that undersecured claim holders are not entitled to attorneys’ fees for postpetition services.8

[3]

In contrast, one bankruptcy court has argued persuasively for allowance of postpetition attorneys’ fees as part of an unsecured claim when the loan contract obligates the debtor to pay attorneys’ fees. In In re Keaton,9 the undersecured claim holder had a contract right to attorneys’ fees in the event of default or litigation. The debtor insisted that attorneys’ fees were postpetition claims that were not allowable under § 502(b).10 Citing cases holding similar claims to be both provable and allowable under the former Bankruptcy Act, the court rejected the debtor’s arguments:

Mistakenly, the debtors refer to the attorney’s fees as “postpetition” fees. While the representation may have been performed after the petition was filed, Boatmen’s right to collect attorney’s fees arose out of the contract and is a prepetition claim. . . . [U]nder the . . . Bankruptcy Act . . . the courts finally established the rule that the creditor had a provable claim for attorney’s fees if the contingencies were removed postpetition, and the contract language entitled the creditor to the [sic] add the attorney’s fees under state law. . . . The Bankruptcy Code requires the same result. . . . The creditor has a prepetition, contingent, and unliquidated claim for attorney’s fees. . . . The result is actually more beneficial for debtors in bankruptcy. If the attorney’s fees are a postpetition debt, they will not be discharged in a Chapter 7 liquidation case. The creditor will have a right to collect them after the debtor receives a discharge. . . . Contingent, unliquidated attorney’s fees are not among those claims that may not be allowed, pursuant to § 502(b).11
[4]

An oversecured claim holder—a creditor with a claim that is less than the value of its collateral—is entitled to “reasonable fees, costs, or charges provided for under the agreement.”12 An oversecured claim holder can add postpetition attorneys’ fees to its claim, to the extent allowed by its agreement and subject to court review for reasonableness.13 Except when the plan cures default and §1322(e) is applicable,14 an oversecured claim holder is entitled to postpetition attorneys’ fees in a Chapter 13 case notwithstanding that state law prohibits collection of such fees—the allowance of reasonable postpetition attorneys’ fees under § 506(b) is not constrained by the normal claims allowance process under § 502 that would incorporate state law defenses.15

[5]

The contract becomes quite important. For example, a contract limiting the collection of attorneys’ fees to the “costs of suits” was strictly interpreted to permit an oversecured mortgage holder to recover only the $60 filing fee and no attorneys’ fees.16 An oversecured claim holder has no independent right to attorneys’ fees under § 506(b) absent a contract provision.17 Broad attorneys’ fees language in the contract may entitle the creditor to postpetition attorneys’ fees and expenses, including the costs of contesting confirmation of the plan.18 A defect in the creditor’s underlying contract can defeat the creditor’s claim for attorneys’ fees. For example, when the underlying note was determined to be usurious, the creditor was refused recovery of attorneys’ fees called for in the note.19

[6]

The oversecured claim holder has the burden of proving the reasonableness of its claim for postpetition attorneys’ fees. Especially when the contract or local practice fixes attorneys’ fees as a percentage of the amount to be collected, bankruptcy courts are required by the reasonableness limitation in § 506(b) to examine the efforts by creditor’s counsel and to measure that effort against the fees.20 It has been held that the filing of a proof of claim is not an enterprise that requires compensation of an attorney, and thus a creditor is not entitled to add $50 for filing a proof of claim.21 Oversecured claim holders have been refused fees and costs when the amount claimed is unreasonable in relation to the debt.22

[7]

The reasonableness requirement in § 506(b) protects the Chapter 13 estate from being required to finance foolish litigation decisions by oversecured creditors. For example, in In re Mathews,23 the bankruptcy court denied contractual attorneys’ fees to an oversecured mortgage holder because the creditor’s objection to modification of the plan and motion for relief from the stay were unreasonable and unnecessary. In Mathews, a year after confirmation, the debtor missed two mortgage payments because his wife changed jobs and the family car needed repairs. The debtor moved to modify the plan to make up the lost payments. The mortgage holder filed an (untimely) objection to modification and filed a motion for relief from the stay. In the meantime, the debtor began making higher payments to cover the missed installments and tendered regular payments to the mortgage holder, which were refused. The facts easily accessible to the creditor included that the debtor had an unblemished history of 19 years of payments on the mortgage and there was more than $8,000 of equity in the property. The bankruptcy court explained its refusal to reward the mortgage holder with attorneys’ fees as follows:

[T]he mortgagee did not act reasonably in employing its counsel . . . . When considering whether to file a motion for relief from stay, creditors must choose which cases warrant action and which do not. . . . This mortgagee took no action when the debtor’s amendment and request to modify were sent directly to the bankruptcy department of the mortgagee’s company. . . . With the slightest review, this mortgagee should have determined that the instant case was not a case where relief from stay should have been requested at the time the pending request was made. This debtor has acted in good faith. He has the ability to make his current mortgage payments and to cure his minimal post-confirmation default. He should be able to do so without the punitive imposition of unwarranted fees and expenses. Alabama law does not allow a party to recover fees and expenses based on a contractual relationship unless the work that is the basis of the recovery was reasonable, and neither will this Court.24
[8]

When an oversecured creditor wants fees or expenses as part of its claim under § 506(b), the Bankruptcy Rules may impose an additional hurdle: the filing of an application under Bankruptcy Rule 2016(a). The broad wording of Rule 2016(a) requires any “entity” seeking “reimbursement of necessary expenses from the estate” to “file an application” detailing the services performed, the time expended and expenses incurred.25 Oversecured creditors in Chapter 13 cases—especially home mortgage holders—do not routinely file Rule 2016(a) applications when adding attorneys’ fees and other collection costs to a proof of claim. This practice contains potential for trouble.

[9]

In Tate v. NationsBanc Mortgage Corp. (In re Tate),26 the bankruptcy court sustained a class action by Chapter 13 debtors against a mortgage holder for including in each proof of claim $125 designated as a “bankruptcy fee.” In addition to finding the fee “per se unreasonable,” the bankruptcy court concluded that the mortgage holder failed to comply with Bankruptcy Rule 2016(a):

The fees sought by NationsBanc under § 506(b) would be paid from property of the Chapter 13 estate; therefore NationsBanc must comply with Rule 2016. . . . NationsBanc failed to follow Rule 2016 when it inserted the disputed fee into its proof of claim. . . . [T]he claim objection mechanism is not a reasonable substitute for a fee reimbursement application. . . . Without a motion, notice to creditors, and court approval, the Attorney Fee cannot be termed “reasonable” under § 506. . . . [Section] 506(b) authorizes the payment of attorney fees to a creditor from estate assets when certain conditions are met. . . . However, Rule 2016 also places an affirmative duty on creditors who are seeking payment to file the requisite fee application.27
[10]

Although not all courts agree with Tate that an oversecured creditor must file a Bankruptcy Rule 2016(a) fee application to recover attorneys’ fees in a Chapter 13 case, the underlying message is widely acknowledged: creditors that include attorneys’ fees in their claims in Chapter 13 cases must do so in a way that discloses the nature and amount of the fees and permits evaluation of reasonableness. This message is perhaps most clearly developed in a series of class actions in the Southern District of Alabama.

[11]

Chapter 13 debtors brought adversary proceedings in the bankruptcy court in the Southern District of Alabama alleging that NationsBanc Mortgage Corporation, HomeSide Lending, Inc., Chrysler Financial Corporation, First Union Mortgage Corporation, Norwest Mortgage, Inc., and other national lenders failed to disclose attorneys’ fees added to proofs of claim in Chapter 13 cases. In a series of reported and unreported decisions, Bankruptcy Judge Mahoney produced a comprehensive study of the rights and wrongs of recovering attorneys’ fees in Chapter 13 cases.

[12]

With respect to Bankruptcy Rule 2016, Judge Mahoney disagreed with Tate: “the Court concludes that either filing an application for fees in compliance with § 503 and Rule 2016 or filing a proof of claim which specifically claims the postpetition fee is sufficient to comply with due process requirements for payment.”28 After trial, the bankruptcy court determined that Chrysler Financial Corporation adequately disclosed attorney fees by handwritten notations on proofs of claim, “includes $225 attorney fees.”

[13]

But with respect to First Union Mortgage Corporation and Norwest Mortgage, Inc., Judge Mahoney found that the lenders failed to disclose attorneys’ fees for the preparation of proofs of claim. In the First Union class action, the bankruptcy court found:

From 1993 or 1994 onward, First Union has had a consistent policy of not disclosing any attorneys fees charged for filing proofs of claim. It elected to outsource that function and put the cost on borrowers, but it never disclosed the cost. . . . The Court concludes that the nondisclosure should be sanctioned. First Union gave debtors no notice at all of a fee added to their accounts. . . . [D]ebtors should be awarded $2,000,000 in punitive damages. . . . [P]rejudgment interest should be paid to every plaintiff who has paid some or all of the attorneys fee posted to his or her account.29
[14]

In Slick v. Norwest Mortgage, Inc. (In re Slick),30 Judge Mahoney gave this detailed explanation why inadequate disclosure of attorneys’ fees in proofs of claim in Chapter 13 cases warranted multimillion-dollar sanctions:

[I]in September, 1997, Norwest . . . discontinue[d] disclosing the fee . . . . The nondisclosure of the claim preparation fees did not mean that they were no longer charged. The fees were still posted to debtors’ accounts. However, no debtor knew the fee was being assessed . . . . Since the fees are to be treated as part of Norwest’s secured claim, two things must happen. The proof of claim fee must be disclosed so that the debtor knows the fee is part of the secured claim. Second, the fee should be included in the arrearage claim portion of the debt so that debtor can pay the fee through his or her plan . . . . Norwest failed to disclose a $75–125 fee. . . . [O]nly “reasonable” attorneys fees are to be added to the debt. If the fees are not disclosed, no reasonableness determination can be made. . . . [D]ebtors that have had the fee posted to their accounts must have the fee expunged from their account records. Those who have paid the fee must have it returned. . . . When an attorneys fee for filing a proof of claim is completely undisclosed, it simply cannot be charged. . . . Norwest, to lower its costs, outsourced an activity it previously did in-house without attorneys. . . . The decision was a business and bottom line driven decision. . . . It benefited financially from that action. . . . [W]hen it encountered a court challenge to the fees it charged, . . . [i]t chose not to disclose the fees it charged anymore. . . . [T]he nondisclosure should be sanctioned. . . . $2,000,000 in punitive damages should be paid to the plaintiffs.31
[15]

Courts outside the Southern District of Alabama, including the Bankruptcy Appellate Panel for the Ninth Circuit, agree with Judge Mahoney that creditors can recover attorneys’ fees in Chapter 13 cases without filing a fee application under Bankruptcy Rule 2016(a); but there must be disclosure somewhere that attorneys’ fees were added, with sufficient specificity to permit review for reasonableness.32

[16]

The class action litigation in the Southern District of Alabama puts the credit community on notice that there are right ways and wrong ways to recover attorneys’ fees in Chapter 13 cases. The right way includes full disclosure by application under Bankruptcy Rule 2016(a) or by conspicuously listing fees in a proof of claim with supporting attachments. Hiding the recovery of attorneys’ fees in the gross amount on a proof of claim is multimillion-dollar foolishness.

[17]

Attorneys who regularly represent secured lenders should consider suggesting an audit of the procedures used for filing proofs of claim in Chapter 13 cases. In addition to the Alabama class actions, there is anecdotal evidence that many lenders routinely add attorneys’ fees and “administrative fees” to the gross amount of proofs of claim in Chapter 13 cases without disclosing the addition or attaching supporting documents. This practice probably extends outside the home mortgage industry to car lenders and other institutional lenders with broad portfolios. Although there is reported case law decriminalizing the practice of posting postpetition fees and other charges to the accounts of debtors in Chapter 13 cases,33 when account balances are transferred from computerized internal records to the face of a proof of claim, the benign recording of information becomes the active collection of debt with all attendant risks and responsibilities.

[18]

It has been held that § 506(b) only applies to allow the addition of postpetition attorneys’ fees to a creditor’s oversecured claim until confirmation. After confirmation, the oversecured creditor may be entitled to recover attorneys’ fees, but not based on § 506(b). For example, in Telfair v. First Union Mortgage Corp.,34 the debtor sought sanctions for violation of the automatic stay or the discharge injunction when the mortgage holder recovered postconfirmation attorneys’ fees from payments received through the Chapter 13 plan. The confirmed plan provided for the mortgage under § 1322(b)(5). The debtor was required to make the regular postconfirmation mortgage payments directly to the mortgage holder and to make “supplemental payments” to cure arrearages through the Chapter 13 trustee. The debtor defaulted, and the mortgage holder prosecuted three postconfirmation motions for relief from the stay. Apparently after discharge, the mortgage holder reimbursed itself for attorneys’ fees from the payments it received from the debtor or from the trustee. The debtor sought sanctions, and one of the debtor’s theories was that § 506(b) required the mortgage holder to seek an amendment to the plan rather than simply pay itself the attorneys’ fees. The U.S. Court of Appeals for the Eleventh Circuit rejected the debtor’s argument, concluding that § 506(b) does not control the recovery of a creditor’s attorneys’ fees after confirmation in a Chapter 13 case:

The district court affirmed the bankruptcy court’s conclusion that section 506(b) only governs fee petitions until the time of confirmation. Because the attorney’s fees incurred by First Union arose from its attempts to cure post-confirmation defaults, the bankruptcy and district courts determined that the terms of the Deed, without reference to section 506(b), governed the award of fees. . . . In this case, the attorney’s fees that First Union sought were not part of its secured claim; they arose apart from the plan and after confirmation.35
[19]

Creditors, whether secured, undersecured or unsecured, may recover contract attorneys’ fees when the debtor proposes to cure default and maintain payments on long-term debt under § 1322(b)(5).36 Even before the Supreme Court’s decision in Nobelman v. American Savings Bank,37 most courts concluded that a Chapter 13 debtor must pay postpetition attorneys’ fees called for by contract when the debtor cured default and maintained payments under § 1322(b)(5).38 The theory of these cases was that “curing of any default . . . and maintenance of payments” under § 1322(b)(5) reinstated the original contract, including any contract right to attorneys’ fees.

[20]

If the claim is protected from modification by § 1322(b)(2) because it is secured only by a security interest in real property that is the debtor’s principal residence,39 and if the underlying contract requires the debtor to pay attorneys’ fees, that contract right cannot be modified by the Chapter 13 plan. In Nobelman, the Supreme Court held it was impermissible modification under § 1322(b)(2) to bifurcate an undersecured claim under § 506(a) if the claim was secured only by real property that was the debtor’s principal residence. In the course of this holding, the Supreme Court reasoned that all of the contract and state law rights of the claim holder are protected from modification by § 1322(b)(2). The logic of Nobelman is compelling that any claim holder, protected from modification by § 1322(b)(2), is entitled to recover attorneys’ fees in accordance with its contract or state law rights.40

[21]

Prior to October 22, 1994, an oversecured creditor with a contract right to attorney fees was also entitled to postpetition interest until those fees were paid in full. As explained by the Supreme Court in Rake v. Wade,41 an oversecured claim holder provided for by the plan under § 1322(b)(5) was entitled to preconfirmation interest on its arrearages under § 506(b) and to postconfirmation interest on its arrearages under § 1325(a)(5).42 Contract attorney fees were identified by the Supreme Court as part of the arrearage claim that would accrue interest under Rake.43

[22]

A creditor’s right to postpetition attorney fees when the plan cures default under § 1322(b)(3) or 1322(b)(5) was dramatically changed in 1994. With the stated purpose of overruling Rake, Congress enacted § 1322(e).44 For agreements entered into after October 22, 1994, the amount necessary to cure default in a Chapter 13 case is “determined in accordance with the underlying agreement and applicable nonbankruptcy law.”45 After October 22, 1994, postpetition attorney fees (and interest) are recoverable as an element of curing default only if allowed by contract and supported by nonbankruptcy law. Failure of either condition—the absence of a contract provision or a prohibition under applicable nonbankruptcy law—will defeat recovery of attorney fees and/or interest on attorney fees as an element of curing default under § 1322(e).

[23]

Notice that § 1322(e) controls attorney fees as a component of curing default with respect to all kinds of claims—oversecured, secured, undersecured or wholly unsecured. An undersecured or unsecured claim provided for under § 1322(b)(5) with an agreement after October 22, 1994, would be entitled to attorney fees if allowed by contract and not prohibited by nonbankruptcy law.46

[24]

The enactment of § 1322(e) changed the rules for recovery of attorney fees when Chapter 13 plans cure default with respect to agreements after October 22, 1994. Under prior law, § 506(b) was the statutory source for recovery of preconfirmation attorney fees by oversecured claim holders and the “reasonableness” requirement in § 506(b) was the principal gatekeeper.47 As explained by the bankruptcy court in In re Plant,48 “[Section] 1322(e) [displaces] § 506(b)’s requirements not only as to interest on arrearages, but also to other fees and costs. . . . [O]ther charges on arrearages cured through a Chapter 13 plan are allowed only if they are (1) required under the original agreement and (2) not prohibited by state law.”49 The cross-reference to nonbankruptcy law in § 1322(e) limits or precludes a contract right to attorneys’ fees when there is contrary state (or federal) law. As explained by an Ohio bankruptcy court in In re Shaffer:50

Generally, an oversecured creditor’s preconfirmation fees are recoverable under § 506(b), notwithstanding state law to the contrary, so long as the fees are reasonable and contemplated by the parties’ agreement. . . . However, when the preconfirmation attorney’s fees are to be added to an arrearage claim, the general rule that state law does not apply has been superseded by Congress’s 1994 enactment of 11 U.S.C. § 1322(e). . . . Ohio law, made applicable in this context pursuant to § 1322(e), renders fee stipulations void as a matter of public policy.51
[25]

Under § 506(b) the oversecured creditor is entitled to add to its claim only “reasonable fees.” There is no reasonableness limitation on attorney fees as an element of curing default under § 1322(e), unless reasonableness is imposed by contract or by nonbankruptcy law. Nothing in the case law before or after the 1994 enactment of § 1322(e) suggests that bankruptcy courts will allow creditors to collect unreasonable attorney fees as an element of curing default through a Chapter 13 plan.52

[26]

A creditor’s right to recover postpetition attorney fees from a Chapter 13 debtor can be affected by events after the petition. For example, after relief from the stay in a Chapter 13 case, it has been held that a creditor is entitled to collect pre- and postpetition attorneys’ fees.53 One reported decision acknowledges that a postpetition creditor may be entitled to attorneys’ fees as part of its postpetition claim if the underlying contract includes a provision for attorneys’ fees.54

[27]

Beyond the contract, outside § 506(b), and without regard to whether the plan cures default under § 1322(e), there are a few reported decisions in which creditors have recovered attorneys’ fees based on misconduct by the debtor during the Chapter 13 case. For example in In re Famisaran,55 a creditor was awarded attorneys’ fees of $8,977.50 under Bankruptcy Rule 9011 based on the debtor’s filing of materially false schedules and statements.56 In In re Graffy,57 the IRS was awarded attorneys’ fees under Bankruptcy Rule 9011 when the debtor filed three bankruptcy cases with the sole motive of avoiding the filing of tax returns and interrupting tax collection, the debtor knowingly filed false documents and the debtor’s conduct fell “well below the level of veracity expected of pro se parties litigating in this Court.”58 Similarly, in In re Grigsby,59 a creditor was awarded $1,575 of attorneys’ fees under Bankruptcy Rule 9011 as a sanction for serial petitions by the debtor and the debtor’s wife that were filed to stop a foreclosure sale.60

[28]

Bankruptcy Rule 9011 is not a particularly stable platform for creditors seeking attorney fees in Chapter 13 cases. The technical requirements for sanctions under Rule 9011 are intricate, including a timely separate motion and a 21-day “safe harbor” in which offensive action may be undone or corrected (except the filing of a petition).61

[29]

When Bankruptcy Rule 9011 does not apply or will not work, creditors have occasionally convinced bankruptcy courts to award attorney fees through the exercise of “inherent authority.” For example, in Miller v. Cardinale (In re Deville),62 the Bankruptcy Appellate Panel for the Ninth Circuit held that a bankruptcy court can award compensatory damages, including attorney fees, for bad-faith serial filings of Chapter 13 cases and multiple removal motions intended to delay trial of a state court lawsuit. The BAP explained that inherent authority fills gaps in Bankruptcy Rule 9011:

The full $19,919.34 compensatory award for Cardinale’s reasonable attorneys’ fees and costs can be sustained on the basis of the court’s inherent authority, recognized in § 105(a), to impose sanctions for a pattern of bad faith conduct that transcends conduct addressed by particular rules or statutes. Chambers v. NASCO, Inc., 501 U.S. 32[, 111 S. Ct. 2123, 115 L. Ed. 2d 27 (1991)] . . . . Federal Rule of Bankruptcy Procedure 9011 does not suffice because the victim did not make the requisite motion following compliance with the mandatory “safe harbor” and because the court may not shift attorneys’ fees and costs on its own motion. . . . The inherent power to sanction bad-faith conduct is a separate and distinct source of authority, which is not displaced by the federal statutes and rules. . . . It is broader than Rule 9011 sanctions and “extends to a full range of litigation abuses.” . . . The sanctionable conduct of both Smith and Miller included complicity in bankruptcy filings and removal petitions, as part of an overall scheme to harass, delay and increase Cardinale’s litigation costs.63

 

1  See In re Fears, 258 B.R. 371, 373–74 (W.D. Ky. 2001) (Student loan creditor is entitled to include in its claim prepetition attorneys’ fees and collection costs calculated consistent with the contract and federal regulations authorizing a formula. “[T]he bankruptcy court misconstrued the impact of § 506(b) on unsecured creditors’ claims for fees, costs, and charges. . . . [Section 506(b)] does not address the extent to which an unsecured creditor has a claim for interest, fees, costs, and charges. . . . Although some courts have read § 506(b) to limit unsecured claims in various ways . . .  none has held that it prevents a creditor from including in its unsecured claim reasonable fees, costs, and charges assessed as of the date of the filing of the petition. . . . We conclude that § 506(b) does not preclude an unsecured creditor’s claim for reasonable fees, costs, and charges. . . . The bankruptcy court has the authority, under 11 U.S.C. § 502(b), to determine the amount of each of these claims and to address their reasonableness.”); In re Smith, 206 B.R. 113, 115 (Bankr. D. Md. 1997) (Prepetition attorney’s fees are allowable to an unsecured creditor to the extent provided by contract. “[W]here a pre-petition contract is the basis for a claim and contains an agreement between the parties which obligates the debtor to pay the creditor’s attorney’s fees reasonably incurred under the terms of such contract, such fees for pre-petition services are includable as a part of the allowed claim in a Chapter 13 case.”).

 

2  See § 131.1  Official Bankruptcy Form 410 and Variations and § 131.2  Official Form 410 after BAPCPA.

 

3  See, e.g., In re Prior, No. 02-10332, 2003 WL 22077707 (Bankr. D. Vt. Aug. 18, 2003) (unpublished) (Two percent limitation on attorney fees recoverable in a foreclosure action under Vermont Civil Rules was not applicable because Chapter 13 filing interrupted foreclosure action before a judgment could be entered.); In re Roach, 285 B.R. 676, 679 (Bankr. S.D. Ohio 2002) (Applying Dollar Bank v. Petroff (In re Petroff), No. 00-8085, 2001 WL 34041797 (B.A.P. 6th Cir. July 25, 2001), “Ohio law and public policy prohibit a lender from collecting attorneys fees incident to foreclosure in ordinary mortgage transactions.”); In re Hatcher, 202 B.R. 626 (Bankr. E.D. Okla. 1996) (Mortgage holder is entitled to prepetition attorney fees but limited by Oklahoma law to 15% of debt notwithstanding a foreclosure judgment that awarded fees in excess of 15%.), aff’d in part, dismissed in part for lack of jurisdiction, 208 B.R. 959 (B.A.P. 10th Cir. 1997).

 

4  In re Waller, 224 B.R. 876, 879 (Bankr. W.D. Tenn. 1998) (Creditor’s request for attorney fees in connection with debtor’s motion to reclassify the creditor as an unsecured claim holder after postconfirmation repossession of the debtor’s car is denied because “[t]here is no authority given to the court for an award of fees against the debtor when the creditor is no longer secured. Compare 11 U.S.C. § 506(b).”); In re Smith, 206 B.R. 113, 115 (Bankr. D. Md. 1997) (“Generally, attorney’s fees for representation of an unsecured creditor incurred subsequent to the filing of the bankruptcy petition are not allowable as a part of the claim in the bankruptcy case.”).

 

5  See Traylor v. Stafford, 30 B.R. 338 (Bankr. E.D. Ark. 1983) (Following the “American Rule,” court denies attorneys’ fees to a creditor who objected to the debtor’s plan and claimed to have compelled the debtor to amend to provide 100% payment.).

 

6  The “substantial contribution” administrative expense allowance applies only in cases under Chapter 9 or 11. 11 U.S.C. § 503(b)(3)(D).

 

7  See below in this section, and see § 78.5  Oversecured Claim Holders and § 78.6  Oversecured Claims after BAPCPA.

 

8  See In re Fears, 247 B.R. 219, 222–23 (Bankr. W.D. Ky. 2000) (“[S]tudent loans are not secured claims; they are unsecured claims and therefore, not entitled to additional fees and costs. Section 506(b) is clear in its directive that only in cases of secured claims, where the value of the collateral exceeds the amount of the lien, may a creditor add reasonable fees and charges to its claim. Conversely, the Code does not provide such treatment to unsecured claims.”), rev’d, 258 B.R. 371 (W.D. Ky. 2001); In re Hatcher, 202 B.R. 626 (Bankr. E.D. Okla. 1996) (Mortgage holder is not entitled to postpetition attorney fees because not oversecured and § 506(b) is not applicable.), aff’d in part, dismissed in part for lack of jurisdiction, 208 B.R. 959 (B.A.P. 10th Cir. 1997); In re Gray, 182 B.R. 15, 16–17 (Bankr. W.D. Va. 1995) (Undersecured mortgage holder is not entitled to attorneys’ fees under § 506(b); denial of fees does not violate antimodification provisions of § 1322(b)(2). “[W]here there is no equity in the collateral secured by the lien, attorney’s fees are not allowed under Bankruptcy Code § 506(b). . . . Although § 1322(b)(2) states that a Plan may not modify a creditor’s rights, ‘it does not prevent modification by another bankruptcy statute such as . . . § 506(b)’s limitation of attorney’s fees.’ . . . Empire Realty agrees that there is no equity in the property and, as such, the denial of attorney’s fees and late charges under § 506(b) ‘does not run afoul’ of the policy grounded in § 1322(b)(2).” Court cites In re Hart, 80 B.R. 107 (Bankr. E.D. Tenn. 1987), with approval.); In re Saunders, 130 B.R. 208 (Bankr. W.D. Va. 1991) (Undersecured and unsecured claim holders are not entitled to add contractual attorneys’ fees for work performed postpetition. Section 506(b) expressly authorizes oversecured creditors to add postpetition interest, contractual attorneys’ fees, costs and charges to their claims. No similar provision applies to undersecured or unsecured claim holders.); In re Mobley, 47 B.R. 62 (Bankr. N.D. Ga. 1985) (Undersecured creditor is not entitled to add attorneys’ fees.). But see the discussion of the entitlement of an undersecured claim holder to postpetition attorneys’ fees when the debtor proposes to cure defaults and maintain payments on a long-term undersecured debt under § 1322(b)(5), below in this section.

 

9  182 B.R. 203 (Bankr. E.D. Tenn. 1995), aff’d, 212 B.R. 587 (E.D. Tenn. 1997).

 

10  See also 11 U.S.C. § 1305, discussed in § 137.1  Postpetition Claims before BAPCPA and § 137.2  Postpetition Claims after BAPCPA.

 

11  182 B.R. at 205–07. Accord In re Byrd, 192 B.R. 917 (Bankr. E.D. Tenn. 1996) (Adopting In re Keaton, 182 B.R. 203 (Bankr. E.D. Tenn. 1995), overrules objection to creditor’s claim that included $300 for postpetition attorney’s fees.).

 

12  11 U.S.C. § 506(b). See § 78.5  Oversecured Claim Holders and § 78.6  Oversecured Claims after BAPCPA.

 

13  In re Waterman, 248 B.R. 567, 573 (B.A.P. 8th Cir. 2000) (Oversecured creditor is entitled to add pre- and postpetition attorneys’ fees to its claim to the extent allowed by contract. “[I]f Ditto was oversecured, she is entitled under § 506(b) to reasonable fees, costs or charges provided for under the agreement with Debtor and can add post-petition attorneys’ fees to her claim . . . . Ditto is an oversecured creditor and entitled to post-petition attorneys’ fees under § 506(b).”). Accord Atwood v. Chase Manhattan Mortgage Co. (In re Atwood), 293 B.R. 227 (B.A.P. 9th Cir. 2003) (Oversecured mortgage holder can include attorneys’ fees in its proof of claim, and need not file a separate application under Bankruptcy Rule 2016(a); however, creditor has burden to prove reasonableness of attorneys’ fees included in a proof of claim and naked statement of amount without supporting information is not entitled to the evidentiary presumption in Bankruptcy Rule 3001(f) and will not prove reasonableness.); In re Crowley, 293 B.R. 628, 631–32 (Bankr. D. Vt. 2003) (Oversecured mortgage holder is entitled to recover reasonable postpetition attorneys’ fees provided for by agreement under § 506(b). When mortgage provided, “Maker agrees to pay all costs for the collection of this Note, including reasonable attorneys’ fees, and to pay interest on all amounts not paid when due,” lender is entitled to reasonable fees for a modification agreement, a motion for relief from the stay, efforts to collect overdue payments after confirmation and fees for collecting legal fees and costs; however, hours claimed are unreasonable and no interest on late fees is allowed because the note does not provide a due date for late fees.); In re Shaffer, 287 B.R. 898, 900 (Bankr. S.D. Ohio 2002) (“Generally, an oversecured creditor’s preconfirmation fees are recoverable under § 506(b), notwithstanding state law to the contrary, so long as the fees are reasonable and contemplated by the parties’ agreement.”); Longwell v. Banco Mortgage Co., 38 B.R. 709 (N.D. Ohio 1984); In re Pak, 252 B.R. 215 (Bankr. M.D. Fla. 2000) (Oversecured mortgage holder is entitled to add attorneys’ fees to its claim, but fees of $6,948 are unreasonable when mortgage was current at the petition, plan proposed to continue making regular payments and to pay arrearages, debtor consented to adequate protection and case contained no unique issues. Fees and costs reduced to $1,882.31.); In re Good, 207 B.R. 686 (Bankr. D. Idaho 1997) (Oversecured mortgage holder is entitled to attorneys’ fees as part of curing default through Chapter 13 plan; however, reasonableness requirement applies.); In re Bristol, 92 B.R. 276 (Bankr. S.D. Ohio 1988); In re Colvin, 57 B.R. 299 (Bankr. D. Utah 1986); In re Schildknecht, 55 B.R. 352 (Bankr. W.D. Ky. 1985); Guccione v. First Fed. Sav. & Loan Ass’n of Suffern, 41 B.R. 289 (Bankr. S.D.N.Y. 1984); In re Christian, 35 B.R. 229 (Bankr. N.D. Ga. 1983); In re Calzaretta, 35 B.R. 92 (Bankr. N.D. Ill. 1983); In re Thorne, 34 B.R. 428 (Bankr. E.D. Tenn. 1983).

 

14  See below in this section, and see §§ 135.1 [ Section 1322(e): Contracts after October 22, 1994 ] § 83.2  Section 1322(e): Contracts after October 22, 1994 and 138.1 [ Late Charges, Attorneys' Fees, Costs and Other Charges ] § 83.6  Late Charges, Attorneys' Fees, Costs and Other Charges.

 

15  In re Bristol, 92 B.R. 276 (Bankr. S.D. Ohio 1988).

 

16  Federal Nat’l Mortgage Ass’n v. Cosby, 33 B.R. 949 (Bankr. E.D. Pa. 1983). See In re Kudlacek, 109 B.R. 424 (Bankr. D. Nev. 1989) (Standard HUD note and deed of trust permitted award of attorneys’ fees only from proceeds of foreclosure sale. Creditor is not entitled to recover attorneys’ fees as part of its claim in Chapter 13 case when there is no evidence that a foreclosure sale ever occurred.).

 

17  Cervantes v. General Elec. Mortgage Co. (In re Cervantes), 67 B.R. 816 (Bankr. E.D. Pa. 1986).

 

18  In re Spohn, 61 B.R. 264 (Bankr. W.D. Wis. 1986).

 

19  Wolfe v. Ebert, 37 B.R. 934 (D.S.C. 1983).

 

20  See Tate v. NationsBanc Mortgage Corp. (In re Tate), 253 B.R. 653, 665 (Bankr. W.D.N.C. 2000) (Sustains class action by Chapter 13 debtors against mortgage holder for including $125 “Bankruptcy Fee” in proofs of claim. NationsBanc contracted with Texas law firm to file proofs of claim in Chapter 13 cases. The claims filed routinely included a “Bankruptcy Fee” of $125 intended as reimbursement for legal costs. The court found that the attorneys’ fee was “per se unreasonable.”); In re Pak, 252 B.R. 215 (Bankr. M.D. Fla. 2000) (Oversecured mortgage holder’s request for $6,948 was unreasonable when mortgage was current at the petition, plan proposed to cure default and maintain regular payments and debtor consented to adequate protection. Fees and costs reduced to $1,882.31.); In re Rathe, 114 B.R. 253 (Bankr. D. Idaho 1990) (Although oversecured mortgage holder is entitled to fees, costs and late charges called for in its contract, the mortgage holder must seek court approval for the payment of interest, fees, costs or charges. Failure to demand payment until after the completion of payments under the plan precludes recovery of fees or charges.); In re Josephs, 108 B.R. 654 (Bankr. N.D. Ill. 1989) (Oversecured claim holder’s entitlement to attorneys’ fees is limited to “reasonable” fees as allowed by the mortgage instrument and § 506(b). Fees for unsuccessful appeal of issue of first impression concerning automatic stay are not reasonable and are not allowed.); In re Baker, 49 B.R. 240 (Bankr. E.D. Pa. 1985) (Mortgagee granted additional hearing at which to prove reasonableness and necessity of 10% attorneys’ fee added to claim.). See also In re Hatcher, 202 B.R. 626 (Bankr. E.D. Okla. 1996) (Undersecured mortgage holder is entitled to prepetition attorneys’ fees, but fees are limited by Oklahoma law to 15% of debt notwithstanding foreclosure judgment that awarded fees in excess of 15%.), aff’d in part, dismissed in part for lack of jurisdiction, 208 B.R. 959 (B.A.P. 10th Cir. 1997).

 

21  In re Dooley, 41 B.R. 31 (Bankr. N.D. Ga. 1984); In re Banks, 31 B.R. 173 (Bankr. N.D. Ala. 1982). But see Ballard v. Chrysler Fin. Corp. (In re Powe), 278 B.R. 539, 555–56 (Bankr. S.D. Ala. 2002) (After trial of a class action alleging failure to disclose and unreasonableness of fees added to oversecured claims, bankruptcy court found that disclosure of attorney fees on proofs of claim was adequate and Chrysler Financial Corporation could charge a reasonable fee for the preparation of a proof of claim. “[P]reparing and filing a proof of claim is not a simple task. . . . [An] attorney may properly be used to file a proof of claim if a reasonable fee is charged.”).

 

22  See, e.g., In re Lund, 187 B.R. 245, 254–55 (Bankr. N.D. Ill. 1995) (Oversecured claim holder entitled by contract to fees and costs can recover reasonable and necessary fees, costs and expenses. Attorneys’ fees of $41,000 for the collection of a $13,000 debt are “patently” unreasonable. Expense reimbursements are limited to the actual costs of copying and the like, because a creditor is not entitled to recover a profit on expenses. “As piling on is not permitted by the rules of football, neither is it allowed under § 506(b) to the taxing of an oversecured creditor’s attorneys’ fees to a debtor. . . . As an elephant is not needed to swat a fly, neither was a virtual squad of attorneys needed to obtain the orders to exterminate the roaches, clean up the debris and fix the water leak.”).

 

23  208 B.R. 506 (Bankr. N.D. Ala. 1997).

 

24  208 B.R. at 514–15.

 

25  Fed. R. Bankr. P. 2016(a) (emphasis added).

 

26  253 B.R. 653 (Bankr. W.D.N.C. 2000).

 

27  253 B.R. at 665–68. Accord In re Plant, 288 B.R. 635, 643–44 (Bankr. D. Mass. 2003) (Bankruptcy Rule 2016 controls the procedure for recovery of attorneys fees as part of the arrearage claim of an oversecured mortgage holder under § 1322(e). “While National City’s entitlement to attorney fees and the standards for determining the reasonableness of those fees are grounded in Massachusetts state law, the procedure employed in making that determination rests solely on federally prescribed rules of procedure. . . . The fees sought by National City would be paid from the Chapter 13 estate and accordingly, the requirements of FRBP 2016 apply.”).

 

28  Powe v. Chrysler Fin. Corp. (In re Powe), 281 B.R. 336, 346 (Bankr. S.D. Ala. 2001). See also Ballard v. Chrysler Fin. Corp. (In re Powe), 278 B.R. 539 (Bankr. S.D. Ala. 2002) (After trial of class action alleging failure to disclose and unreasonableness of fees added to oversecured claims by Chrysler Financial Corporation: listing attorneys’ fees on face of proof of claim was sufficient disclosure; both pre- and postpetition attorneys’ fees can be recovered on a proof of claim because reasonableness standard is the same after Welzel v. Advocate Realty Investments, Inc. (In re Welzel), 275 F.3d 1308 (11th Cir. 2001); reasonableness must be assessed on a district-by-district basis; and, in the Southern District of Alabama, a flat fee of $225 to $275 is reasonable.).

 

29  Harris v. First Union Mortgage Corp. (In re Harris), Case Nos. 96-14029-MAM, 00-11321-MAM, Adv. No. 99-1144 (Bankr. S.D. Ala. May 10, 2002) (Text available at www.alsb.uscourts.gov). See also Harris v. First Union Mortgage Corp. (In re Harris), 281 B.R. 327 (Bankr. S.D. Ala. 2001); Harris v. First Union Mortgage Corp. (In re Harris), 281 B.R. 323 (Bankr. S.D. Ala. 2001); Dean v. First Union Mortgage Corp. (In re Harris), 280 B.R. 876 (Bankr. S.D. Ala. 2001); Dean v. First Union Mortgage Corp. (In re Harris), 280 B.R. 724, 726 (Bankr. S.D. Ala. 2001) (“The proof of claim filed by First Union disclosed no postpetition fees with any specificity. Only a total arrearage sum was stated which may or may not have included the $150 attorneys fee the Court now knows was posted to Dean’s account.”).

 

30  Case No. 98-14378-MAM, Adv. No. 99-1136 (Bankr. S.D. Ala. May 10, 2002) (Text available at www.alsb.uscourts.gov).

 

31  Slick v. Norwest Mortgage, Inc. (In re Slick), Case No. 98-14378-MAM, Adv. No. 99-1136 (Bankr. S.D. Ala. May 10, 2002) (Text available at www.alsb.uscourts.gov). See also Slick v. Norwest Mortgage, Inc. (In re Slick), 280 B.R. 722 (Bankr. S.D. Ala. 2001) (Class certified with respect to all Chapter 13 cases in which Norwest Mortgage, Inc. did not disclose fees on its proofs of claim.).

 

32  See Atwood v. Chase Manhattan Mortgage Co. (In re Atwood), 293 B.R. 227 (B.A.P. 9th Cir. 2003) (Disagreeing with Tate v. NationsBanc Mortgage Corp. (In re Tate), 253 B.R. 653 (Bankr. W.D.N.C. 2000), and agreeing with In re Powe, 281 B.R. 336 (Bankr. S.D. Ala. 2001), oversecured mortgage holder can include attorney fees in its proof of claim and need not file a separate application under Bankruptcy Rule 2016(a); however, naked statement of amount without supporting information is not entitled to the evidentiary presumption in Bankruptcy Rule 3001(f) and will not prove reasonableness.). See also In re Araujo, 277 B.R. 166, 167 (Bankr. D.R.I. 2002) (Citing Telfair v. First Union Mortgage Corp., 216 F.3d 1333 (11th Cir. 2000), cert. denied, 531 U.S. 1073, 121 S. Ct. 765, 148 L. Ed. 2d 666, reh’g denied, 531 U.S. 1185, 121 S. Ct. 1173, 148 L. Ed. 2d 1030 (2001), and distinguishing Tate v. NationsBanc Mortgage Corp. (In re Tate), 253 B.R. 653 (Bankr. W.D.N.C. 2000), bankruptcy court rejects plan provision that would require mortgage holder to file an application for any postconfirmation fees or costs and would “retain exclusive jurisdiction” in the bankruptcy court to review attorney’s fees and costs after confirmation. “If such issues do arise, they are not part of Countrywide’s pre-confirmation secured claim and they will exist separate from the plan, and apart from this bankruptcy case. I agree with the Telfair holding that the terms of the note and mortgage . . . are not subject to modification, and . . . there is no presumption that . . . there are or will be abuses by secured lenders.”).

 

33  See, e.g., Mann v. Chase Manhattan Mortgage Corp., 316 F.3d 1, 3–4 (1st Cir. 2003) (Mortgage holder did not violate automatic stay by accruing postpetition attorney fees on its internal records. “[U]nilateral accruals of amounts assertedly due, but in no manner communicated to the debtor, the debtor’s other creditors, the bankruptcy court, nor any third party, plainly are not the sort of ‘act’ Congress sought to prescribe. . . . [A]bsent any overt attempt by Chase to recover these fees from the chapter 13 estate in the future . . . the Chase bookkeeping entries represent mere unilateral notations regarding attorney fees which is assertedly incurred, thereby according it no identifiable legal advantage over other creditors. . . . [T]hese postpetition entries do indeed pose the prospect that the amount due Chase, hence subject to its security interest, may increase. Nevertheless, a mere potentiality of future liability reasonably cannot be considered the ‘creation’ of a new and enlarged lien.”); Smith v. Fairbanks Capital Corp. (In re Smith), 299 B.R. 687, 690–93 (Bankr. S.D. Ga. 2003) (Debtor’s class action against Fairbanks Capital Corporation alleging improper assessment and collection of attorney fees fails to state a claim. “Plaintiff’s complaint alleges that Fairbanks posted postpetition, preconfirmation attorney fees to his account and collected those fees directly from Debtor. . . . As long as Fairbanks has not demanded and has not been paid more than the amount listed in its proof of claim, any allegation of improperly collecting attorney fees is anticipatory. . . . Debtor’s objection actually goes to the booking of certain attorney fees by Fairbanks and the allocation of money paid to those fees. . . . [U]ntil Fairbanks has collected or attempted to collect more than the amount listed on its proof of claim . . . its actions are not objectionable. . . . A creditor’s notation of accruing attorney fees does not by itself violate the automatic stay. . . . Mann v. Chase Manhattan Mortgage Corp., 316 F.3d 1, 3 (1st Cir. 2003). . . . [U]ntil Fairbanks demands from Debtor more than it is entitled to under its allowed proof of claim, it cannot be said to have taken any overt act to collect those fees.”).

 

34  216 F.3d 1333 (11th Cir. 2000), cert. denied, 531 U.S. 1073, 121 S. Ct. 765, 148 L. Ed. 2d 666, reh’g denied, 531 U.S. 1185, 121 S. Ct. 1173, 148 L. Ed. 2d 1030 (2001).

 

35  216 F.3d at 1339.

 

36  See §§ 115.1 [ Curing Default, Waiving Default, Maintaining Payments and Combinations ] § 78.4  Curing Default, Waiving Default, Maintaining Payments and Combinations, 134.1 [ In General: Rake and Contracts before October 22, 1994 ] § 83.1  In General: Rake and Contracts before October 22, 1994138.1 [ Late Charges, Attorneys' Fees, Costs and Other Charges ] § 83.6  Late Charges, Attorneys' Fees, Costs and Other Charges and 171.1 [ Curing Default and Maintaining Payments on Unsecured Debt ] § 101.4  Curing Default and Maintaining Payments on Unsecured Debt.

 

37  508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993).

 

38  See §§ 134.1 [ In General: Rake and Contracts before October 22, 1994 ] § 83.1  In General: Rake and Contracts before October 22, 1994, 136.1 [ Rate of Interest to Cure Default: Contracts before October 22, 1994 ] § 83.3  Rate of Interest to Cure Default: Contracts before October 22, 1994 and 138.1 [ Late Charges, Attorneys' Fees, Costs and Other Charges ] § 83.6  Late Charges, Attorneys' Fees, Costs and Other Charges. See, e.g., Longwell v. Banco Mortgage Co., 38 B.R. 709 (N.D. Ohio 1984) (Oversecured creditor is entitled to pre- and postpetition attorneys’ fees as an element of curing default.); In re Rathe, 114 B.R. 253 (Bankr. D. Idaho 1990) (Oversecured mortgage holder is entitled to include prepetition attorneys’ fees, late charges, professional fee and other charges in its arrearage claim. Mortgage holder’s failure to object to plan with respect to the amount and treatment of the prepetition arrearage claim precluded it from claiming such fees and charges after the completion of payments and the entry of discharge under § 1328(a)(1). Postpetition late charges, interest, fees and costs provided for under the mortgage are allowable, but the mortgage holder must seek court approval for the payment of such fees under § 506(b) during the life of the plan. Failure to raise the issue until after the plan is completed is fatal to the § 506(b) claim.); In re Brown, 91 B.R. 19 (Bankr. E.D. Va. 1988) (Mortgagee is entitled to costs and reasonable legal fees because provided for in deed of trust. Mortgagee is not entitled to interest on arrearages because not provided for in the loan contract.); In re Seibel, 82 B.R. 463 (Bankr. S.D. Ohio 1987) (Oversecured claim holder is entitled to “foreclosure costs” as part of its arrearage claim, but mortgagee failed to demonstrate a contractual right to legal fees and title examination costs.); In re Smith, 76 B.R. 426 (Bankr. E.D. Pa. 1987) (If the debtor’s plan is to pay the claim in full, § 506(b) is applicable, and pre- and postpetition attorneys’ fees are allowed if provided for under the agreement between the debtor and the mortgagee. If the debtor is merely curing a prepetition delinquency under § 1322(b)(5), § 506(b) is not applicable, and the mortagee’s right to recover attorneys’ fees must be found in the parties’ contract.); In re Harmon, 72 B.R. 458 (Bankr. E.D. Pa. 1987) (Oversecured mortgage holder is entitled to attorneys’ fees, but fees are disallowed in full because attorney failed to properly document.); Vitelli v. Cheltenham Fed. Sav. & Loan Ass’n (In re Vitelli), 93 B.R. 889 (Bankr. E.D. Pa. 1988); In re Jordan, 91 B.R. 673 (Bankr. E.D. Pa. 1988); Jackson v. Boulevard Mortgage Co. (In re Nickleberry), 76 B.R. 413 (Bankr. E.D. Pa. 1987); Cervantes v. General Elec. Mortgage Co. (In re Cervantes), 67 B.R. 816 (Bankr. E.D. Pa. 1986); In re Colvin, 57 B.R. 299 (Bankr. D. Utah 1986).

 

39  See discussion beginning at § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman

 

40  See discussion beginning at § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman.

 

41  508 U.S. 464, 113 S. Ct. 2187, 124 L. Ed. 2d 424 (1993). See § 134.1 [ In General: Rake and Contracts before October 22, 1994 ] § 83.1  In General: Rake and Contracts before October 22, 1994 for further discussion of Rake.

 

42  See § 83.1  In General: Rake and Contracts before October 22, 1994 and § 83.2  Section 1322(e): Contracts after October 22, 1994.

 

43  See § 138.1 [ Late Charges, Attorneys' Fees, Costs and Other Charges ] § 83.6  Late Charges, Attorneys' Fees, Costs and Other Charges.

 

44  See § 135.1 [ Section 1322(e): Contracts after October 22, 1994 ] § 83.2  Section 1322(e): Contracts after October 22, 1994 for further discussion of § 1322(e).

 

45  11 U.S.C. § 1322(e).

 

46  See § 137.1 [ Undersecured Mortgage and Interest to Cure Default ] § 83.5  Undersecured Mortgage and Interest to Cure Default for further discussion of undersecured claims and § 1322(e).

 

47  See §§ 136.1 [ Rate of Interest to Cure Default: Contracts before October 22, 1994 ] § 83.3  Rate of Interest to Cure Default: Contracts before October 22, 1994 and 138.1 [ Late Charges, Attorneys' Fees, Costs and Other Charges ] § 83.6  Late Charges, Attorneys' Fees, Costs and Other Charges.

 

48  288 B.R. 635 (Bankr. D. Mass. 2003).

 

49  288 B.R. at 641–42.

 

50  287 B.R. 898 (Bankr. S.D. Ohio 2002).

 

51  287 B.R. at 900. Accord In re Roach, 285 B.R. 676, 679 (Bankr. S.D. Ohio 2002) (Applying Dollar Bank v. Petroff (In re Petroff), No. 00-8085, 2001 WL 34041797 (B.A.P. 6th Cir. July 25, 2001), “Ohio law and public policy prohibit a lender from collecting attorneys fees incident to foreclosure in ordinary mortgage transactions.”).

 

52  See, e.g., Atwood v. Chase Manhattan Mortgage Co. (In re Atwood), 293 B.R. 227 (B.A.P. 9th Cir. 2003) (Oversecured mortgage holder can include attorney fees in its proof of claim and need not file a separate application under Bankruptcy Rule 2016(a); however, naked statement of amount without supporting documentation is not sufficient to prove reasonableness.); In re Crowley, 293 B.R. 628, 631–32 (Bankr. D. Vt. 2003) (When mortgage provided, “Maker agrees to pay all costs for the collection of this Note, including reasonable attorneys’ fees, and to pay interest on all amounts not paid when due,” lender is entitled to reasonable fees for a modification agreement, a motion for relief from the stay, efforts to collect overdue payments after confirmation and fees for collecting legal fees and costs; however, hours claimed are unreasonable and no interest on late fees is allowed because the note does not provide a due date for late fees.); In re Coates, 292 B.R. 894, 900–03 (Bankr. C.D. Ill. 2003) (“The party seeking recovery of attorney fees bears the burden of proving the fees are reasonable . . . . The DEBTOR was the only witness to testify at the hearing. She testified that she was not aware of any property inspections or appraisals done on her property. She also denied having been served with the foreclosure complaint and summons. . . . LITTON LOAN called no witnesses and presented no evidence.”); In re Plant, 288 B.R. 635, 642–43 (Bankr. D. Mass. 2003) (Recovery of attorney fees as part of the arrearage claim of an oversecured mortgage holder is controlled by § 1322(e), and “National City is, accordingly, entitled to recover reasonable attorneys fees as provided under its Note and Mortgage and Massachusetts law. . . . National City’s entitlement to attorney fees and the standards for determining the reasonableness of those fees are grounded in Massachusetts state law.”); In re Rambo, 199 B.R. 747 (Bankr. W.D. Okla. 1996) (Creditor’s claim for $9,770.52 for fees and expenses was reduced to $7,500 where time records were “less than fully complete,” travel time and tolls were calculated without a clear basis, and increments of a quarter of an hour could be evidence of padding.); In re Huang, 192 B.R. 184, 186 (Bankr. N.D. Ill. 1996) (Contractual guarantee required the debtor to pay reasonable costs and expenses including attorney fees. Fee was reduced by $539.50 to delete pursuit of a third party. Fee was reduced by 25% because attorneys did not document time.).

 

53  Lincoln Serv. Corp. v. Holliday, 60 B.R. 425 (N.D. Ill. 1986) (After relief from stay in a Chapter 13 case, mortgage holder is entitled to include pre- and postpetition attorneys’ fees in its foreclosure judgment. Deficiency must stand in rem and not as a personal judgment against the debtors.).

 

54  In re Bagby, 218 B.R. 878 (Bankr. W.D. Tenn. 1998) (Postpetition claims of check-cashing services are allowable under § 1305 but reduced to exclude attorneys’ fees because underlying contract does not authorize the collection of attorneys’ fees.).

 

55  224 B.R. 886 (Bankr. N.D. Ill. 1998).

 

56  224 B.R. at 894 (“Debtors’ Schedules I and J and the answers to the pertinent questions on the Statement of Financial Affairs are misleading, false and thus incorrect . . . . Debtors’ income was materially understated; the transfers to the insider relatives and expenditures for gambling were omitted; the various line items for average monthly expenditures on Schedule J were materially false as unsupported by the Debtors’ bank records and canceled checks. . . . [T]hese key papers were filed for an improper purpose, namely in an attempt to conceal income and the expenditures thereof thereby diverting such resources from payments to their creditors. . . . [S]anction under Bankruptcy Rule 9011 is warranted . . . to deter repetition of such conduct or comparable conduct by the Debtors or others similarly situated.”). Accord In re Nicola, 258 B.R. 329, 336 (Bankr. E.D. Pa. 2001) (Applying Bankruptcy Rule 9011, creditor is awarded sanctions against the debtor and the debtor’s counsel equal to the attorney’s fees and expenses incurred by the creditor in a Chapter 13 case filed solely to disrupt litigation in state court. “[A]ll of the Respondents’ actions throughout this bankruptcy case were the product of bad faith, without color, and were made for reasons of harassment and delay.” The debtor signed “patently false” bankruptcy schedules, and debtor’s counsel signed responses to motions for relief from the stay and to dismiss that violated Rule 9011.).

 

57  233 B.R. 894 (Bankr. M.D. Fla. 1999).

 

58  233 B.R. at 897.

 

59  233 B.R. 558 (Bankr. S.D. Fla. 1999).

 

60  Accord In re Copeland, 268 B.R. 273 (Bankr. D. Kan. 2001) (Citing Bankruptcy Rule 9011 and § 105(a), foreclosing mortgage holder is awarded attorney fees, publication costs and expenses totaling $5,150.95 when debtor and spouse filed three Chapter 13 cases to stop foreclosure.).

 

61  See, e.g., Hamblin v. Legacy Bank (In re Hamblin), No. WO-99-059, 2000 WL 297069, at *4 (B.A.P. 10th Cir. Mar. 22, 2000) (Table decision at 251 B.R. 441) (Bankruptcy court abused its discretion by awarding $750 to creditor as sanctions for debtor’s attorney’s failure to return three phone calls or to respond to letters inquiring about unconfirmed Chapter 13 case. “[M]ere incivility is not sanctionable conduct when it is not indicative of an effort to abuse the process of the court, to cause unwarranted delay, or to harass the other side.”); In re Slack, 280 B.R. 604, 608 (Bankr. D.N.J. 2002) (Pro se landlord’s request for $1,000 as “compensation in the nature of attorneys fees” under Bankruptcy Rule 9011(c) is rejected because the request was not brought separately as required by the Rule and attorneys fees are not an appropriate sanction for a pro se party.); In re McNichols, 258 B.R. 892, 903 (Bankr. N.D. Ill. 2001) (After denial of confirmation of third amended plan and dismissal of Chapter 13 case with prejudice, creditor’s motion for sanctions is denied under Bankruptcy Rule 9011 and § 105(a). “When Equity served the Debtor’s Counsel with the motion in open court on the day the motion was filed, it failed to afford the Debtor the twenty-one day period to withdraw the allegedly offending papers—the various versions of the Chapter 13 plan and Schedules the Debtor had filed. This mistake is fatal to Equity’s motion. Consequently, the Court hereby denies Equity’s motion for sanctions pursuant to Rule 9011.”).

 

62  280 B.R. 483 (B.A.P. 9th Cir. 2002).

 

63  280 B.R. at 494–96. Accord In re Conrad, 279 B.R. 320, 324 (Bankr. M.D. Fla. 2002) (Citing the “inherent power to impose sanctions under appropriate circumstances,” bankruptcy court charges debtor with attorney fees and costs of creditors that successfully dismissed fourth bankruptcy case filed for the “sole purpose” of avoiding the payment of a judgment in excess of $6 million.); In re Vanfossen, 258 B.R. 814, 823–24 (Bankr. N.D. Ala. 2001) (At dismissal of eighth Chapter 13 petition in less than six years, bankruptcy court sanctions the debtor to pay creditor’s attorney fees based on findings that eighth case was filed in bad faith and in violation of orders dismissing seventh case with prejudice to refiling for 180 days. “Under the inherent powers of this Court, after a finding of bad faith, this Court may impose sanctions against a debtor by awarding attorney fees to an opponent. . . . [S]uch sanctions are appropriate here.”); In re Peterson, 297 B.R. 467, 471–74 (Bankr. W.D.N.C. 2003) (Motion for sanctions against bank that twice violated automatic stay was “without foundation and was vexatious,” warranting an award of attorney’s fees. After confirmation, Chevy Chase Bank sent a letter to the debtor threatening repossession of a car. Debtor’s attorney contacted the bank, and Chevy Chase acknowledged that the letter was in error and apologized. Nine months later, the bank executed an automatic debit on the debtor’s checking account for a loan payment of $478.48. Without contacting the bank, debtor’s counsel filed a motion for sanctions. The bank immediately issued a refund to the debtor. “Chevy Chase Bank’s actions amount at most to an ‘innocent clerical error’ or simple mistake. . . . The creditor was notified of the bankruptcy case; there was a previous inappropriate contact that had been remedied; a subsequent collection event was triggered by an error made by an employee of the creditor; an inappropriate contract resulted; a motion for sanctions was filed; and the error was quickly remedied. . . . Chevy Chase’s actions do not constitute a willful violation of the automatic stay. . . . [D]ebtor’s counsel’s maintenance of this proceeding after Chevy Chase Bank repaid the debtor . . . was without foundation and was vexatious. It appears that counsel’s efforts were designed as much to mine fees out of this situation as it [sic] was to solve the problem for the debtor. . . . Counsel filed this Motion for sanctions without any attempt to contact Chevy Chase Bank. . . . The damages claimed in the prayer for relief are wholly excessive. The damage claim appears extortive rather than remedial. . . . Review of the court’s docket discloses a highly disproportionate number of sanctions motions filed by this attorney. . . . [I]t is appropriate for debtor’s counsel to bear the consequences of his actions by paying the respondent’s costs. . . . $3,233.68 is an appropriate amount of sanctions.”).