Don’t Skimp On Service When Your Client’s House Is On The Line

Rule 3002.1 service


Is the Chapter 13 trustee jeopardizing the benefits to my client of Rule 3002.1 by sloppy service?

Unwilling to expend more than a single postage stamp to effect notice?  Just going through the motions here?

The short answer is: I don’t know yet.

But the issue stood out when, for reasons that are yet inexplicable, the trustee and my office each filed a Notice of Final Cure Payment with respect to the same loan on the same day.

The trustee sent notice to the notice address on the secured creditor’s proof of claim.  I gave notice to the president of the bank and eight additional parties, including the notice address on the POC.

The US Postal Service should love me.

Why minimalist service worries me

The remedies for debtors under Rule 3002.1 are powerful and potentially expensive.  A creditor’s failure to respond timely to the notice can result in being barred from presenting evidence as to the secured debt.

I have successfully argued that, absent a timely response, the mortgage debt should be deemed current.  After all, the articulated purpose of the rule is to give borrowers visibility into the state of the loan.

Failure to respond, or sloppy or incomprehensible responses, can have thousands of dollars worth of consequences, either at the point of a motion under the Rule, or in violation of discharge proceedings when the lender suddenly discovers that the debtor wasn’t fully current at plan’s end.  So, we can be talking big money here.

The other, non monetary issue is the debtor’s understandable desire to have all of this DONE.  So if later the creditor wants to be excused from non response, and seeks relief from its default, the entry of the debtor’s discharge gets further delayed, at least in the district in which I practice.

So, I want the Rule 3002.1 proceedings to be bulletproof.

Fingerprints are everywhere

The docket in most cases abounds with names of those associated with the claim.

You can look

  • on the claim
  • on notices of payment change
  • on notices of claim transfer
  • on the docket
  • on any objections to confirmation
  • on motions for relief from stay

You’ll usually find a passel of attorneys who’ve had some involvement in the case.  And then there’s the president of the FDIC insured bank or the agent for service of process for the servicer.

Flood the mailbox

I have little confidence that judges will be willing to impose what amounts to expensive damages in deeming mortgages current when the notice on which my motion is based was sent only to the mail stop in the bankruptcy department of Huge Bank.

So  my suggestion is to treat Notices of Final Cure Payment as if they were adversary proceedings and serve the notice in conformance with FRBP 704.  Give actual notice to every representative of the secured creditor found in the record.

Urge your trustees to do the same, or serve the trustee’s notice yourself on those involved.

The rule is a boon to debtors and we should see that its benefits are not depleted by sloppy service.

More on Rule 3002.1

When the creditor fails to respond

When the creditor awakes

Image courtesy of John Flannery and Flickr.