Most mortgage agreements give the lender the right to collect fees incurred to protect its rights in property, including fees for property inspections, broker's price opinions, foreclosures, bankruptcy.
When the borrower files a bankruptcy petition, pending foreclosure or collection efforts depend on the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure. If the lender intends to collect foreclosure or bankruptcy-related fees from a Chapter 13 debtor, the lender may include the fees in its Proof of Claim. If the lender does not include fees in its Proof of Claim, some bankruptcy courts require the lender to demonstrate the reasonableness of the fees and seek the bankruptcy court's approval before collecting fees.
The Bankruptcy Code prevents bankruptcy plans from modifying a mortgage lender's rights under a mortgage agreement, subject to the debtor's ability to satisfy a mortgage arrearage through the plan.
If lender fees are allowed, they will be included in the debtor's bankruptcy plan as part of the lender's secured claim and collected through the plan. The lender should file an application with the bankruptcy court to have the fees approved when the debtor falls behind paying, and the lender files a motion for relief from the bankruptcy stay and seeks the court's permission to foreclose. The court may deny the motion for relief, but allow the lender to add its attorney fees to the arrearage the debtor must pay during Chapter 13.
When a Chapter 13 debtor's bankruptcy case is dismissed, bankruptcy law no longer applies to fees collection. Collection of fees after dismissal of the bankruptcy case depends on the terms of the mortgage agreement and state law. Bankruptcy courts retain jurisdiction to enforce their orders after dismissal so it is not clear if lenders may collect fees when a Chapter 13 debtor's case is dismissed if the bankruptcy court did not previously approve the fees.
When the debtor receives a Chapter 13 discharge, the court enjoins a lender from collecting discharged fees. The lender should audit the borrower's account and to remove all attorneys' fees that have not been disclosed and approved. Attempts to collect the fees may subject the lender to sanctions for violating the discharge injunction.
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