One of the major lenders, Wells Fargo, recently was attempting to modify a Debtor’s loan in a Chapter 13 bankruptcy Case.
Wells Fargo filed a Notice of Mortgage Payment Change with the Court in order to notify all parties to the case of the loan modification. This loan modification called for a monthly increase in mortgage payments to be paid by the debtor to Wells Fargo.
The Court struck down and disallowed this practice.
In order to insure that such increase in mortgage payments are not merely entered into by default – and without substantial understanding and an opportunity for debtors to seek guidance and counsel from their attorneys – these increases/changes to mortgage payments must be approved by way of a formal motion from debtors through their counsel.
This process ensures that any loan modification is made with knowledge and is voluntary and in the debtor(s)’ best interests.
Changes in loan payments are outside the “ordinary course” and a motion is necessary and is the approved court procedure for any changes in loan payments.
This ensures that lenders are not simply filing the increases as a notice rather than an agreement for loan modification.
While in Chapter 13 bankruptcy, I have successfully obtained loan modifications for my debtors but they initiate the process with full agreement. I am in total support of the Court’s decision and protection of Chapter 13 bankruptcy debtors.