BK COURT FINDS SANCTIONS AGAINST MORTGAGEE WARRANTED | KEY POINTS
- diazanselmo
- Oct 27, 2022
- 2 min read
Updated: Mar 21
An Ohio bankruptcy court issued an order wherein it found the debtor’s mortgagee, HSBC, violated Fed. R. Bankr. P. 3002.1 when HSBC sought to collect a past tax advance after the debtor’s debt had been discharged and the bankruptcy case closed. In re Dewitt, No. 11-36341, 2022 WL 4588320 (Bankr. S.D. Ohio Sept. 30, 2022). The debtor, Dewitt, filed for bankruptcy protection under chapter 13 and received a discharge of her debts, including some past due amounts on her HSBC mortgage loan, in June 2017. Prior to entry of the discharge order, HSBC filed a sworn statement, under penalty of perjury pursuant to Rule 3002.1(f), stating Dewitt was current “on all postpetition payments due, including all fees, charges, escrow and costs.”
Notwithstanding its sworn statement to the contrary, in September 2019 HSBC filed foreclosure proceedings against Dewitt based on her refusal to repay property taxes which HSBC advanced on her behalf in April 2017. DeWitt responded to the complaint and asserted counterclaims against HSBC alleging the tax advances HSBC made were either paid, waived, or discharged by the discharge order entered in June 2017. Dewitt also moved to reopen her bankruptcy proceedings and sought sanctions for HSBC’s violations of Rule 3002.1.
The bankruptcy court agreed with Dewitt explaining “that Rule 3002.1 exists to prevent unexpected deficiencies in residential mortgage payments when a chapter 13 case is completed and closed.” The Court stated: “Rule 3002.1 is clear – creditors who intend to recover additional post-petition fees related to a § 1322(b)(5) mortgage claim secured by the debtor’s primary residence must timely disclose these fees.” The Court held Dewitt was entitled to sanctions against HSBC for its violations of 3002.1 and reserved jurisdiction to determine the type and amount of the sanctions award.
