ROBERT H. JACOBVITZ, Bankruptcy Judge.
This matter came before the Court on November 13, 2012 for a final hearing on the Chapter 13 Trustee's Notice of Final Cure Payment pursuant to Fed.R.Bankr.P. 3002.1(f) filed July 16, 2012 ("Notice of Final Cure Payment") and a response thereto ("Response") filed July 31, 2012 by Beneficial Financial I, Inc. as successor by merger to Beneficial New Mexico, Inc. ("Beneficial").
During oral argument the Chapter 13 Trustee raised concerns about the effect of Fed.R.Bankr.P. 3002.1 and whether the Debtors are precluded from receiving a discharge because they failed to make all of the regular post-petition mortgage payments due to Beneficial.
However, there is no pending motion before the Court requesting the entry of a discharge. Notice has not been given to creditors regarding the entry of a discharge, and no party in interest has objected to the Court granting the Debtors a discharge. Accordingly there is no controversy for the Court to decide regarding entry of a discharge. Any issue concerning the Debtors' eligibility for discharge implicated by the information contained in the Response to the Notice of Final Cure Payment that the Debtors have not made all direct payments required by the plan is, therefore, not ripe for determination. If the Court were to decide that issue at this time, it would be an improper advisory opinion. See In re Mile Hi Metal Systems, Inc., 899 F.2d 887, 891 n.3 (10
After consideration of the evidence and the arguments of counsel, and after careful review of the applicable Rule and relevant case law, the Court concludes that 1) Rule 3002.1 applies to Beneficial's claim secured by the Debtors' principal residence; and 2) Beneficial will be bound by the post-petition amount reported as due in its Response, unless it amends its Response.
In connection with the Court's ruling, the Court FINDS:
1. The Debtors filed a voluntary petition under Chapter 13 of the Bankruptcy Code on February 22, 2010.
2. The Debtors filed a Chapter 13 plan on the same date. See Docket No. 4.
3. The Chapter 13 plan provides for payments of $1,164.00 per month to the Chapter 13 Trustee for a period of 56 months. Id.
4. Paragraph 4.4 of the Chapter 13 plan provides that claims will be treated in one of the following ways:
Chapter 13 Plan, pp. 5-6 (Docket No. 4).
5. Paragraph 4.4.3 of the Chapter 13 plan provides that the "Trustee will pay the pre-petition arrearages set forth in an allowed proof of claim . . ." Id. at p. 6.
6. The Chapter 13 plan provides that the Debtors will make direct payments to Beneficial that become due post-petition under its mortgage secured by the Debtors' principal residence at the contract rate of interest in accordance with the terms of the mortgage. Id. at p. 5.
7. The Order Confirming Chapter 13 Plan was entered on May 5, 2010. See Docket No. 24.
8. Beneficial filed a proof of Claim on April 9, 2010 asserting a secured claim against the Debtors' principal residence. See Claim No. 11-1. Beneficial's Claim No. 11-1 included a claim for pre-petition arrearages in the amount of $5,583.28. Id.
9. The Chapter Trustee filed a Notice of Completed Plan on July 16, 2013 stating that the Debtors have "made all plan payments and [have] complied with all requirements as stated in the Chapter 13 Plan as confirmed and/or modified." See Docket No. 57.
10. The Debtors filed their Certification and Statements in Support of Entry of Chapter 13 Discharge. See Docket No. 65.
11. The Chapter 13 Trustee filed a Notice of Final Cure Payment pursuant to Fed.R.Bankr.P. 3002.1(f) on July 16, 2012. See Docket No. 59. The Notice of Final Cure Payment was served on Beneficial and the Debtors. Id.
12. The Notice of Final Cure Payment states that the amount required to cure the pre-petition default in Beneficial's Claim No. 11-1 has been paid in full. Id. The Notice of Final Cure Payment also states that the monthly ongoing mortgage payment is paid directly by the Debtors. Id.
13. On July 20, 2012 the Chapter 13 Trustee withdrew her Notice of Completed Plan. See Docket No. 64.
14. Beneficial filed its Response to the Notice of Final Cure Payment pursuant to Fed.R.Bankr.P. 3002.1(g) on July 31, 2012. See Docket Entry on July 31, 2012 relating to Claim 11-1.
15. The Response states that Beneficial agrees that the amount required to cure the pre-petition default to be paid through the Chapter 13 Plan has been paid in full, but that Beneficial does not agree that the Debtors have paid all post-petition amounts due to Beneficial. In the Response, Beneficial states that the post-petition amount of $4,711.07 remains due. See Response.
16. The Response includes an attachment containing an itemization of payments due post-petition that remain unpaid as of the date of statement that total $4,711.07. The statement is dated July 30, 2012. The statement includes the following language:
17. No motion seeking a determination as to whether the Debtors have cured the default and paid all required postpetition amounts has been filed pursuant to Fed.R.Bankr.P. 3002.1(h).
18. The Debtors agree that they did not make all of the regular post-petition mortgage payments to Beneficial and that the past-due amount identified in the Response represents the total of the unpaid regular post-petition mortgage payments.
19. The Debtors and Beneficial agree that the post-petition amount identified in the Response does not include any charges in addition to the amount of unpaid regular post-petition mortgage payments, such as late fees, insurance, or attorneys' fees that might otherwise be provided for under the terms of the mortgage.
Rule 3002.1, Fed.R.Bankr.P., became effective on December 1, 2011.
For Rule 3002.1 to apply, the creditor's claim must be "1) secured by a security interest in the debtor's principal residence, and 2) provided for under § 1322(b)(5) of the Code in the debtor's plan." Fed.R.Bankr.P. 3002.1(a). The parties have stipulated that Beneficial's claim No. 11-1 is secured by the Debtors' principal residence. Section 1322(b)(5) allows a debtor to cure a pre-petition default on a secured claim and maintain payments during the Chapter 13 case, provided the last payment to the secured creditor is due after the completion of all plan payments. See 11 U.S.C. § 1322(b)(5)(the plan may "provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any unsecured claim or secured claim on which the last payment is due after the date on which the final payment under the plan is due[.]"). The Debtors' plan provides for curing the pre-petition arrearages due to Beneficial, and provides further that the Debtors would continue making post-petition mortgage payments directly to Beneficial "outside" of the plan.
Beneficial filed its Response pursuant to Rule 3002.1(g), which provides:
The Response includes an itemization of the post-petition amounts which details the date the amount was assessed, the assessed amount, and the amount outstanding. See Response. Each assessed amount itemized in the Response is described as an "Installment Payment." Id.
Pursuant to subdivision (h) of Rule 3002.1, if the debtor disagrees with the amounts stated in a creditor's response, the debtor may file a motion seeking a judicial determination of whether the debtor has "paid all required post-petition amounts." Fed.R.Bankr.P. 3002.1(h). Here, the Debtors did not file a motion pursuant to Rule 3002.1(h). However, based on the information contained in the Response, the Debtors had no reason to file such a motion. The Debtors do not dispute that they failed to make all of the regular post-petition mortgage payments. The itemized post-petition amounts contained in the Response relate only to the regular installment payments.
Rule 3002.1 attempts to address the problem faced by many Chapter 13 debtors who would "emerge from bankruptcy only to face a substantial and previously undisclosed arrearage" resulting from unpaid late fees or other charges arising from their residential mortgage. In re Sheppard, 2012 WL 1344112, *2 (Bankr.E.D.Va. Apr. 18, 2012). Under Rule 3002.1(g), the creditor is obligated to itemize all arrearages still due and owing if the creditor contends that the debtor has not made all post-petition payments. Fed.R.Bankr.P. 3002.1(g). Beneficial filed its Response pursuant to Rule 3002.1(g), but asserts that it nevertheless may return to state court to foreclose the mortgage and seek additional charges or late fees not included in its Response that are provided for under the terms of the mortgage. This Court disagrees. Equitable estoppel principals bar Beneficial from seeking fees or other charges in excess of the unpaid regular mortgage installment payments included in the Response that may have accrued up through the date of the filing of the Response.
"Estoppel is an equitable doctrine invoked to avoid injustice in particular cases." Heckler v. Community Health Services of Crawford County, Inc., 467 U.S. 51, 59, 104 S.Ct. 2218, 2223, 81 L.Ed.2d 42 (1984). "Equitable estoppel allows one party to prevent another `from taking a legal position inconsistent with an earlier statement or action that places his adversary at a disadvantage.'" Kowalczyk v. Immigration and Naturalization Serv., 245 F.3d 1143, 1149 (10
All elements are present here. Beneficial was obligated to itemize all post-petition amounts it contended the Debtors still owed under the terms of the mortgage. Beneficial presumably knows the facts from its own records. The intended purpose of Rule 3002.1 is to provide debtors with a procedure for the bankruptcy court to establish the exact amounts of post-petition arrearages before the debtors lose the protection their bankruptcy case affords them from foreclosure of the mortgage. Consequently, the Debtors had a right to rely on the figures contained in the Response. The Debtors had no reason to know the exact amount of other post-petition charges. And, because the Debtors do not contest the fact that they have missed some of the regular monthly installment payments, they relied on the Response and had no reason to file a motion pursuant to Rule 3002.1(h). Under these circumstances, the Court grants the Debtors' oral motion to estop Beneficial from seeking additional post-petition charges that may have accrued under the terms of the mortgage through the date of the Response absent amendment of the Response with leave of the Court. Not binding Beneficial to its Response would undermine the intended purpose of Rule 3002.1.
Because the Beneficial's claim is secured by an interest in the Debtors' principal residence, and because the Debtors' plan provided for payment of Beneficial's claim under 11 U.S.C. § 1322(b)(5), Fed.R.Bankr.P. 3002.1 applies. Equitable estoppel principals bind Beneficial to the amounts reflected in its Response for the period up to the date of the Response. Whether the Debtors are nevertheless entitled to discharge despite their failure to make all of the regular post-petition mortgage payments directly to Beneficial as provided for in their confirmed Chapter 13 plan is not ripe for determination.
Under local practice in this District, the Chapter 13 Trustee issues a Notice of Completion of Plan Payments, which prompts the Clerk of the Court to issue the Clerk's Notice to Debtor of Deadline to File Certification and Statements in Support of Chapter 13 Discharge ("Notice"). The Notice directs the Debtors to file a certification and statements in support of entry of discharge in accordance with NM-LBR 2083-1 (the "Certification").
