PAUL M. BLACK, Bankruptcy Judge.
This matter comes before the Court on the Motion to Pay Notice of Postpetition Mortgage Fees, Expenses, and Charges (the "Motion") filed by the Chapter 13 Trustee, Christopher T. Micale (the "Chapter 13 Trustee"), in nine (9) separate Chapter 13 cases (collectively, the "Motions"), including the above-referenced matter. A Trial Brief in support of the Motions was filed on behalf of the Chapter 13 Trustee on November 20, 2015. A hearing was held on November 23, 2015, at which the Chapter 13 Trustee testified in support of the Motions. For the reasons set forth below, the Motions are granted in part, and denied in part.
The Chapter 13 Trustee filed the Motions in nine (9) separate Chapter 13 cases, which include the following: In re Robertson, Case No. 13-71986; In re Stuart, Case No. 14-71217; In re Whitlow, Case No. 14-71320; In re Jones, Case No. 14-71427; In re Keister, Case No. 14-71440; In re Pickeral, Case No. 14-71607; In re Robinson, Case No. 14-71777; In re Steele, Case No. 14-71501; and In re Beeken, Case No. 15-70206. In each of these cases, a Chapter 13 Plan was confirmed. In each Motion, the Chapter 13 Trustee seeks payment of postpetition mortgage fees, expenses, and charges not only in the above-referenced cases, but also "to pay any additional fees asserted hereafter in any notice filed pursuant to Rule 3002.1 in this case." Mot. ¶ 5 (emphasis added). However, in his Trial Brief, and at the hearing on the Motions, the Chapter 13 Trustee indicated that he is additionally "requesting a decision authorizing payment of Rule 3002.1 notices in other cases," subject to specified conditions. Trial Br. at 1 (emphasis added). The specific conditions requested by the Chapter 13 Trustee, in order for payment of Rule 3002.1 notices to be paid in the above cases and future cases, include the following: (1) payment will not negatively impact any applicable § 1325(a)(4) requirement ("Liquidation Requirement"); (2) a debtor is committing all disposable income to his or her plan; (3) payment will not reduce any noticed dividend of 100%; and (4) due process is satisfied with a provision in paragraph eleven of the form chapter 13 plan to the effect of:
Id.
The Chapter 13 Trustee also argues that, because in each of the above-referenced cases a Chapter 13 plan has been confirmed, ". . . unless the debtor has funds to pay the claim directly, the debtor would need to move to modify the confirmed plan to provide for payment in some fashion." Id. at 2. Further, the Chapter 13 Trustee notes that "any attempt to move to modify the plan to pay such claims could carry with it an additional attorney's fee of $400.00 pursuant to the Court's Standing Order No. 15-1." Id. The Chapter 13 Trustee argues that the alternative, i.e. direct payment by the debtor, is "troublesome" because "[d]ebtors with a troubled mortgage history would likely not pay the fees or expenses on their own" and "in cases where a debtor is committing all his [or her] disposable income to the chapter 13 plan, it's questionable whether he [or she] has the funds." Id.
According to the Chapter 13 Trustee's testimony, the Chapter 13 trustees in the Eastern District of Virginia and Chapter 13 trustee appearing before the other judge of this Court generally do not pay ongoing mortgages through their offices. Instead, they usually only pay mortgage arrears through the plan, with the debtors making ongoing mortgage payments directly to their home mortgage creditors. The Chapter 13 Trustee further testified that he has an internal "policy," not approved or disapproved by this Court, that if a certain number of post-petition mortgage payments are missed, those ongoing mortgage payments need to be brought inside the Chapter 13 plan such that the plan becomes a "conduit" plan where the trustee pays the ongoing mortgage payment through his office. This "policy" is not followed by the other Chapter 13 trustee in this district, and the Chapter 13 Trustee here testified that the district's other Chapter 13 trustee, in terms of the Rule 3002.1 fees and charges, "does not wish to pay these fees."
In support of his position that he be authorized to pay the Rule 3002.1 fees and charges through his office, the Chapter 13 Trustee cites, among other things, the procedure set up in the District of Kansas, where the judges have uniformly adopted a standing order that "[a]ny notice filed pursuant to Fed. R. Bankr. P. 3002.1(b) or (c) shall be treated as an amendment to the creditor's claim and Debtor's plan. The Trustee shall be authorized to disburse the new conduit payment or fees as soon as practicable and without seeking formal modification of the plan." Trustee's Exhibit 2, at ¶V(D).
In further support of his position, the Chapter 13 Trustee contends that due to his "policy," the number of cases where mortgages are paid inside the plan ("conduit plans") is growing, and he is getting more and more Rule 3002.1 notices with no way to pay them. Leaving payment to the debtors results in confusion and non-payment, according to the Chapter 13 Trustee, causing the debtors to be in default of their mortgage payments at the completion of their plan. The Chapter 13 Trustee asserts these fees and charges are generally not paid by the debtors either because they do not have the money, they do not understand the notices, or they simply do not pay them. Further, the Chapter 13 Trustee contends that allowing him to pay the Rule 3002.1 noticed fees and charges provides a convenient paper trail, such that he can show the mortgage creditor that the fees and charges were paid by his office if a dispute arises.
The Chapter 13 Trustee further contends that the source of the funds for payment should come from the pool of funds noticed to unsecured creditors. His proposed Chapter 13 plan language would put them on notice up front that their pool for distribution may be diminished if post-petition fees and charges need to paid under Rule 3002.1. The rationale for this is that the Chapter 13 Trustee contends it is the debtor's commitment of disposable income that is the focus of the Court, not the dividend being paid to unsecured creditors. So long as the disposable income test is met, and the liquidation test is not impaired, the Chapter 13 Trustee asserts unsecured creditors are no worse off by allowing the Chapter 13 Trustee to pay the Rule 3002.1 fees and charges from their pool of funds.
The Chapter 13 Trustee made much of the fact that the growing "conduit" payments necessitate the inclusion of additional language in future Chapter 13 plans to deal with the Rule 3002.1 payment issue, but the Court finds it curious that of the nine cases brought before the Court in the pending motion, only one of the nine is a "conduit" case. In all other cases, the debtors are paying the mortgage directly.
This Court has jurisdiction of this matter by virtue of the provisions of 28 U.S.C. §§ 1334(a) and 157(a) and the delegation made to this Court by Order from the District Court on December 6, 1994, and Rule 3 of the Local Rules of the United States District Court for the Western District of Virginia. This Court further concludes that this matter is a "core" bankruptcy proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A) and (L).
The history and purposes behind Bankruptcy Rule 3002.1 are thoroughly and succinctly set forth by Judge Huennekens in In re Sheppard, No. 10-33959-KRH, 2012 WL 1344112, 2012 Bankr. LEXIS 1696 (Bankr. E.D. Va. Apr. 18, 2012).
Id. at *2. Sheppard further provides that
Id. at *2-3.
Significantly, Sheppard held that "[t]he Court further concludes that the Chapter 13 Trustee has no obligation to make payments from estate property based upon notices filed under Bankruptcy Rule 3002.1 to supplement proofs of claim. The Trustee is only authorized to make payments based on proofs of claim filed under § 501 of the Bankruptcy Code that are allowed under § 502 of the Bankruptcy Code or upon specific order of the Court. A notice filed under Bankruptcy Code Rule 3002.1 to supplement a proof of claim is filed for informational purposes only and does not constitute or otherwise amend the proof of claim it is filed to supplement." Id. at *5 (emphasis added). Here, the Chapter 13 Trustee asks that this Court expand upon the phrase "or upon specific order of the Court" in Sheppard by doing two things: (1) authorize the payment of the post-petition charges noticed under Rule 3002.1 by the Chapter 13 Trustee in the cases at hand, and (2) pre-approve language to be included in the Court's form Chapter 13 Plan that would give the Chapter 13 Trustee authority to pay future Rule 3002.1 charges if certain conditions are met. In both circumstances, the Chapter 13 Trustee proposes that the Rule 3002.1 charges be paid from the pool of funds earmarked for unsecured creditors. For the reasons set forth below, the Court will approve the former request in part, allowing payment by the Chapter Trustee 13 by increasing the debtors' Chapter 13 plan payments without the necessity of filing a modified plan, but denying payment from the pool of funds earmarked for unsecured creditors. The request to pre-approve language in future cases will be denied in its entirety.
While the Chapter 13 Trustee's goals here are noble, the Court does not believe that circumstances are such that a rift need be established between the procedures in this Court and elsewhere in this district, much less the rest of the State. The desire to avoid a $400.00 fee to file an amended plan to address a post-petition charge of a nominal amount is understandable, but the Court believes this issue can be addressed in a less dramatic way. For example, the Chapter 13 Trustee went to great lengths to discuss the audit procedures that are conducted in the various cases he administers and to explain how the additional post-petition charges and fees noticed under Rule 3002.1 are discovered and monitored. If such fees and charges are caught, debtor's counsel can be alerted, if counsel is not also aware of the new charges, and efforts can be made to contact the debtor directly to make him or her aware of those fees—and the need to pay them—especially if the ongoing mortgage payment is one made directly by the debtor. Some debtors may want to pay them and simply get it over with. If direct payment by the debtor is something either the Chapter 13 Trustee or debtor's counsel believes is unworkable in a given case, a simple motion to increase plan payments—without the necessity of an amended plan— should be an adequate solution to modify plan payments. This motion can be filed by the Chapter 13 Trustee or by debtor's counsel, and the Court is not opposed to considering modifications to Standing Order 15-1 to address such a motion by the debtor. The post-petition charges asked to be paid are, for the most part, a small number in the overall scope of an average Chapter 13 plan, and increasing the plan payments a modest, if not miniscule, amount over the remaining life of the plan to curtail those charges should not be overly burdensome to either the Chapter 13 Trustee, the debtor, or debtor's counsel. This will also provide the paper trail that the Chapter 13 Trustee believes is necessary to provide the mortgage lenders at plan completion to show that the debtor is current, especially on "conduit" payments made through the plan. Further, Chapter 13 is not a debtor panacea. Because the Court believes that the cost of maintaining a debtor's principal residence should be shouldered by the debtor, which is consistent with the goals of 11 U.S.C. § 1322(b)(2), the Court does not believe a plan provision should be pre-sanctioned which takes the funds to pay additional charges to keep that residence from the pockets of the unsecured creditors.
In this particular case, the Chapter 13 Trustee "seeks authorization to pay [$200.00] from funds the Debtor(s) is(are) paying the Trustee pursuant to the confirmed plan, and to pay any additional fees asserted hereafter in any notice filed pursuant to Rule 3002.1 in this case." The Court will grant the relief requested, but will require the Debtors in this case to increase their plan payment, with the appropriate trustee's commission, to accommodate payment of the additional fee. The request to pay the fees from the pool of funds earmarked for unsecured creditors is denied. The request that this Court sanction the Chapter 13 Trustee's proposed language in future Chapter 13 plans is likewise denied.
A separate order consistent with the Court's ruling herein shall issue.
