In re Evans

336 B.R. 749 (Bankr. S.D. Ohio, January 20, 2006) Judge Aug  (Undersecured creditor was not entitled to include charges for costs, title work, and pre- and post-petition attorney fees. as a mortgage arrearage in its secured claim, which was undersecured.)

In a Chapter 13 bankruptcy case, debtors objected to a proof of claim filed by creditor, a mortgagee. More specifically, they objected to the extent of creditor's claim. The court conducted a hearing on the objection.

Creditor asserted a secured claim for a mortgage arrearage of over $17,000. Debtors objected to the inclusion of charges for costs, title work, and pre- and post-petition attorney fees. While creditor might be entitled to recover those costs and fees, it was not entitled to include them as a mortgage arrearage in its secured claim, which was undersecured.

For its secured claim, creditor had to meet the requirements of both §506(b) and §1322(e). The legislative history indicated that the purpose of § 1322(e) was not to supplant but to supplement the requirements of §506(b). Section 506(b) first established the amount of the creditor's claim that was secured. If a fee could not be part of a creditor's secured claim in the first instance, it could not become a part of the secured arrearage claim.

The challenged attorney fees also were not allowed by state law; under Ohio law, attorney fee provisions in a mortgage contract were void and unenforceable as contrary to public policy. Further, curing of a default through a Chapter 13 plan and petition was not the equivalent of a "reinstatement."

The court sustained debtors' objection and disallowed more than $8,000 of creditor's claim.