Late fees on an account discharged in BK7

[Delta98]

Long story short version; I filed BK7 June 08 discharged Oct 08. I kept the car but did not reaffirm the loan. I have continued to make the payments on the loan however back when the BK7 was filed the lender used some of the Aug 08 payment to cover some outstanding late fees and then said that my Aug 08 payment was late (due to it being less than a full payment because they took the money for late fees) I was never notified of this nor was my BK attorney. The lender continued to claim late payments and assess late fees thru out 2009 and into 2010 until they were taken over by another bank. The past due notice letters assessing the late fees stopped 5/2010 and the "prior late fees" changed to "previous past due amount".

My question is: Can a lender charge a late fee on a loan that was discharged in a BK7? The payments were never 30 days late but were beyond the "grace period" of the loan that was IIB.

Thank you for your help and advice.

[OMGWhatHaveIdone]

I would assume that they can charge late fees simply because you continued to pay on the vehicle. If you were delinquent prior to Aug 2008 then any payments they received from you in that month would automatically go towards covering the outstanding charges. If you knew that there were outstanding charges, then it is your responsibility to know that any payments applied to your account would cover any and all past due balances. I don't believe the creditor had to notify you or your attorney of this, as had the payments been made on time, there would be no outstanding charges.

Given all of that, if you still are unsure of your rights, speak with your attorney about this as they should be able to clarify things for you.

[WhoCares1000]

If you want to keep the car, you are going to have to pay the late fees unless you can negotiate your way out of them. If you do not mind losing the car, then call the lender and inform them to either remove the late fees or come get the car and there will be no deficency because I did not reaffirm the loan from BK. Then follow whatever path they decide to take.

[Denita]

They can charge a late fee after your filing date. If you want to keep the car, but not reaffirm the payment then you would have to pay the late fee to keep the car. HOWEVER, they can not report you late after your file date (and subsequent discharge date) as the tradeline is to show as iib.

I do have a question for you though, does your attorney know that they took some of the payment during the automatic stay period and applied it to late fees? Seems to me that the only exception to the above is during the automatic stay period from the filing date to the discharge date. This would be a good question for your attorney. Maybe jq26 or Mathuss will know too.

[Delta98]

Yes they did take the part of the payment from August 2008 to pay an existing late fee. I filed BK 7 June of 2008. I will contact my attorney regarding this and the fact that I continued to receive collection letters for 2 years after the filing date. The letters just stopped after the loan was taken over by another bank due to the failure of the original bank. Unfortunately I don't think the attorney will be inclined to pursue the matter as that would mean he would have to actually do some work.

Thank you for your help in this matter

[WhoCares1000]

Even if the lawyer will not do anything, you can put a stop to it by negotiating with the bank. Again, it depends on if you want to keep the car or not.

[Methuss]

The main issue here is the late fees.

I ask you this... How can you be "late" on a debt you are no longer legally responsible to pay?

Although I haven't done the research on this question yet, my nose is telling me this stinks. I don't believe the late fees are legal, especially if applied after the discharge. My understanding of it is that they would only be entitled to late fess leading up to the bankruptcy filing and if payments were late thereafter they either accept them or reposess the vehicle.

In all honesty, they were supposed to stop sending you bills altogether. Sending bill notices for due payments is a vioaltion of the discharge injunction because it presumes personaly liability to pay when none exists any longer.

Edited October 21, 2010 by Methuss

[jq26]

I agree. When you ride through and do not reaffirm, the lien is intact but the personal debt isn't. No late payment application. Tough cookies. They could have forced you to reaffirm or surrender the car during the open bankruptcy, but they lost that opportunity.

[jq26]

Wow. This is a hot topic. And not so cut and dry.

Check this out. When you don't reaffirm, redeem, or surrender, 521(a)(6) kicks in.

-----------------------------------

...11 U.S.C.S. § 521(a)(6) makes three things clear. First, it applies when the creditor has an "allowed claim" for the "purchase price" of an individual debtor's personal property. Second, if it applies, and if the debtor does not redeem the encumbered personal property, but desires to retain the encumbered personal property, the debtor must timely enter into an agreement pursuant to 11 U.S.C.S. § 524© (which discusses reaffirmation agreements) in order to do so. Finally, if 11 U.S.C.S. § 521(a)(6) applies and the debtor does not obey it, the automatic stay is terminated, the property is no longer part of the estate, and the creditor may take whatever action as to such property as is permitted by applicable nonbankruptcy law. 11 U.S.C.S. § 521(a). Such action would include invoking an ipso facto clause and (1) seeking to repossess the encumbered personal property in state court under state law and (2) seeking to obtain a deficiency judgment against the debtor for the difference between the value of the collateral and the amount due on the note. Coastal Fed. Credit Union v. Hardiman, 398 B.R. 161.

-----------------------------------

This rule was reaffirmed in the 4th and 10th circuit over and over again in 2009 and 2010. Worse, there is no negative case history IN ANY CIRCUIT, so presumably this issue hasn't been decided with certainty in Florida (11th circuit). But this case law is highly persuasive: if a deficiency judgment is acceptable, then certainly a late fee would be acceptable, subject to the terms in the underlying contract. So I would conclude that they have a plausible argument that you must pay it. Courts apparently interpret post 521(a)(6) inclusion into BAPCPA as meaning that ride through reinstates the underlying agreement.

Edited October 22, 2010 by jq26

[WhoCares1000]

This seems to give the creditor an unfair advantage because what would happen if you decide to surrender the property and have made an effort to do so but the creditor did nothing to acknowledge the effort or get the property? Would you have to do to the judge and have the judge force the creditor to take the property? Maybe it is up to either the trustee or the BK courts to enforce the performance of the law during the case, not 2 years later.

Of course, this is why when it comes to secured property in BK, I would rather have a disposition before the closing of the case, whether it be to redeem the property, surrender the property, or obtain a reaffirmation agreement. To just slide through causes way too many legal issues.

[Delta98]

ok if I am understanding this correctly, you are saying that if I want to avoid a deficiency judgment then I need to continue to make the payments and pay up the $124.00 they claim I owe in late fees.

also quick question; who is responsible to do the reaffirmation paper work?

I requested reaffirmation in the bankruptcy but nothing ever happened.

Thanks again for helping me through all of this

Edited October 21, 2010 by Delta98
additional info

[Methuss]

The creditor is responsible for preparing a reaffirmation agreement and getting it to the petitioner's bankruptcy attorney. There is no obligation for the creditor to do so though.

So there could be an argument here that a creditor that fails to agree to a reaffirmation has forfieted the right to hold the debtor to the agreement in ride through and it is discharged. But I think that is up to a judge to decide. I think a judge would take a rather narrow view of a creditor that deliberately avoids reaffirmation so they can collect deficiencies later.

[WhoCares1000]

The same goes IMHO for a creditor who avoids the surrender of the collateral item. I would think that there should be a time frame where the creditor has to decide whether they are going whether they are going to collect any property that has not been reaffirmed or redeemed, or if they are going to abandon their interest in the property. Otherwise, the idea of BK being a fresh start is moot because the creditor can simply ride through and then either collect on the deficiency after they collect the property years later or sue for the amount of the debt.

[Methuss]

The same goes IMHO for a creditor who avoids the surrender of the collateral item.

This has already been decided in at least two districts I am aware of. Creditor refusing to pick up a vehicle after discharge was found to be in violation of the injunction because in doing so it made it impossible for the debtor to dispose of the vehicle as the lien on the title prevented sale or even junking. (in re Pratt, 10th circuit) The concept is called "objective-coercion."

[WhoCares1000]

Sorry for the questions but I am trying to understand this. Based on what was said, the problem then comes in if the person who declared BK continues to pay the loan without reaffirming the loan. What happens though if the person intended to reaffirm but the bank did not send the proper paperwork (or was not interested in reaffirming and did not request the surrender of the item).

I think the question becomes, whose duty is it to make sure that one of the 3 options is done, the debtors or the creditors. Based on what I read here, the best thing the debtor could do not make any payments until there is at least a reaffirmation agreement. That would push the creditor to either doing one up or working with the debtor to surrender the item. Otherwise, the creditor can simply ignore the BK as if it never happened which defeats the purpose of BK.

I am wondering if maybe the judge should be required to force the issue of doing one of the 3 (probably with more paperwork unfortunately) before closing the case so that we do not have this situation. Maybe an affidavit for each encumbered property stating what has occurred and when it occurred. This to me seems to be the only fair way to solve this issue.

[Delta98]

okay, I received a complete payment history on the loan from Bank B.

Not only did Bank A take part of the Aug 2008 payment for late fees, they continued to charge late fees because the Aug 2008 was deemed to be a partial payment so they charged a late fee every month thereafter.

Then in May 2010 just before Bank B was to take over the account Bank A once again took part of the May 2010 payment and applied it to outstanding late fees. Then Bank A recorded the May 2010 payment as late.

Bank B said they do not assess late fees on accounts included in bankruptcy they simply request that all payments be made within 54 days of the due date.

Bank A clearly violated the automatic stay when they took the Aug 2008 payment and when the continued to assess late fees during the automatic stay period. Am I wrong in thinking that Bank B is responsible for the actions of Bank A especially since some of the dunning letters received have been on Bank B letterhead?

Can I pursue court action against Bank B? And what do I do about the credit report? The account has been listed under Bank B's name with Bank A's account number and now it is listed again under Bank B's name with a new account number. So it is listed twice. Looks like I defaulted on 2 separate car loans.

To make matters worse; in the account history it is stated that the account was not listed as IIB until June of 2010, a full 2 yrs after I filed bk 7. So now the CRA's keep picking up a BK 7 filing date of 6/2010 instead of 6/2008.

Can I force Bank B to remove one of the listings on my credit report? If so which one? So far they seem willing to work with me but I am not sure what or how much I should demand.

I intend to keep the car, I only owe a small amount on it and want to finish paying it and be done with this but I don't want to just let this matter go. The amount they have charged in late fees would almost pay off the loan and I certainly don't want 2 car loans to appear on my credit report as IIB when there was only one and I am paying that one off.

The attorney that handled my BK 7 is not willing to pursue any of this. He said write them a letter. So I would need to find a different attorney if I chose to go further with this. I am hoping that Bank B will just straighten things out and that will be that but if they are not willing to do that do I have a case to pursue in court or should I just give up?

Thank you for your help

[Opinion8]

CAN ANYONE TELL ME IF I MAY FIND CH. 7 PAPERWORK AVAILABLE ON LEGAL ZOOOM?

[Opinion8]

THANK YOU FOR ANY HELP BY THE WAY! I AM SO GLAD THAT I FOUND THIS SITE!!!

[WhoCares1000]

Opinon8:

First off, please turn off the Caps Lock key. It looks like you are shouting when you type everything in Caps online and turns many people off.

Second, Please make this request in your own thread rather than hijacking another thread for an issue that is not related to the thread.

After all that, you have to get your paper work from PACER which will charge you a per page fee.

[Denita]

Opinion8, if you are talking about the Ch 7 forms to fill out, you can search your states BK district for the forms. For example, if you are in the eastern district of TN, then the ch 7 forms link is here: http://www.tneb.uscourts.gov/php/index-forms.php

I don't know where you are located so I don't know your district. Check first to make sure you are getting the right forms. Some of the districts have local forms in addition to the regular Federal forms to be filled out.

[Methuss]

Am I wrong in thinking that Bank B is responsible for the actions of Bank A especially since some of the dunning letters received have been on Bank B letterhead?

And what do I do about the credit report?

Bank B is responsible for making good on the mistake. They took that responsibility on when they purchased the lien with all its incumberances. As long as they reverse all the inappropriate fees, no harm done.

As for the credit report, there should be no trade line for Bank B at all. Sorry but this was discharged and they have no right whatsoever to put a tradeline on your report for debt that ceased to exist before they even started taking your payments. You can show your payments as alternative credit by requesting periodic payment history from them. They should not be mailing you statements as that is a violation of the injunction. The bankruptcy law allows a debtor to pay discharged debts if they want. It does not allow a creditor that has been discharged to apply ANY sort of personal liability on the debtor.

Bank A's tradeline should read discharged in bankruptcy with a $0 balance and no payment history reported at all after the chapter 7 was filed. Period. Anything other than that is a violation of the injunction.

My bigger concern is that it appears Bank A was in total disregard of the bankruptcy. They continued to send statements, collect payments, levy late fees, report to the bureaus, and even sold the account to another bank for value as if it still carried personal liability for the debtor.

[WhoCares1000]

This is where I have a problem on all this. It almost sounds like the bank disregarded the entire BK process and now they will be rewarded for it. If that is the case, then there will be no incentive for banks to work out a reaffirmation agreement in the future because they can simply disregard the entire process from what other have said.

That is why I am wondering if there needs to be a process in place where the BK is not closed until all unsecured property is dealt with, either redeemed, surrendered, or reaffirmed. That would stop problems like this.

[Delta98]

Methuss,

Thank you so much for putting this in perspective for me. I now can deal with Bank B to get this resolved, knowing what is the proper way for this account to report and knowing that the fact that the account was never put in bankruptcy status until 2 years after the bankruptcy filing was a huge mistake on the part of Bank A, whether intentional or not and it needs to be fixed. I would be okay with this if Bank B is willing to go back and fix the bankruptcy dates and apply all the wrongfully assessed late fees that have been paid to the outstanding balance, also they need to remove the report of the account under the new account number so that only the original account is listed as IIB 6/2008. I don't think this is asking too much. I am supposed to call them at the end of the week after they have had a chance to research the account and I will update you when I get more info.

WhoCares1000,

I wholly agree with you that there needs to be something put in place to help debtors who file bk be assured that all of the proper procedures have been followed by the creditors involved. Filing a bankruptcy is a complicated matter that a person experiences only once (hopefully) and has no prior experience in the matter to guide them. If they are unfortunate to find themselves in the position where they must file but can't afford an attorney or worse, like me, hire an inept attorney and they go through the bankruptcy not knowing what is supposed to take place then they are prime candidates for being taken advantage of as I was in this matter. The sad thing is that unless I reopen the bankruptcy and file against the creditors involved I don't see that this issue will ever be brought to the attention of anyone who can make the process better for those who file in the future. ( stepping down from my soapbox now)

Again; thank all of you for your input, help and direction in this matter and I will keep the forum updated.

[Methuss]

This is where I have a problem on all this. It almost sounds like the bank disregarded the entire BK process and now they will be rewarded for it. If that is the case, then there will be no incentive for banks to work out a reaffirmation agreement in the future because they can simply disregard the entire process from what other have said.

That is why I am wondering if there needs to be a process in place where the BK is not closed until all unsecured property is dealt with, either redeemed, surrendered, or reaffirmed. That would stop problems like this.

Actually, there are a number of bankruptcy Judges who are equally concerned. Especially lately as it has come to light that there is a grey market for buying and selling discharged debts.

These judges are asking how anyone can sell these accounts for value when there is a federal injunction to prevent collection...clearly there is an intent to violate the injunction by the buyers. And a certain degree of vicarious liability on the sellers since they clearly know the buyers will try to collect.

Edited October 26, 2010 by Methuss