IN RE: Matthew P. Himes and Jessica N. Himes (2025)

Chapter 13

DECISION AND ORDER GRANTING DEBTORS’ REQUEST FOR ATTORNEY'S FEES AND COSTS PURSUANT TO FEDERAL RULE OF BANKRUPTCY PROCEDURE 3002.1(i)

I

Flagstar Bank is the holder of a claim secured by debtor Matthew Himes's principal residence.¹ The debtors’ confirmed chapter 13 plan requires the debtors to maintain contractual installment payments to Flagstar and requires the chapter 13 trustee to use a portion of their plan payments to cure their prepetition arrearage to Flagstar. ECF Nos. 2, 40, & 45. On November 22, 2024, the trustee sent Flagstar the notice required by Federal Rule of Bankruptcy Procedure 3002.1(f), reporting that she had paid the prepetition arrearage, that the debtors had made all payments to her as required by the plan, and that Flagstar was required by Rule 3002.1(g) to file a response to the trustee's notice. ECF No. 80.

Flagstar responded on December 10, 2024 (the “Original Response”) using Director's Form 4100R, signed by Flagstar's counsel under penalty of perjury. ECF No. 84. Flagstar reported that the debtors had paid all amounts required to cure the prepetition default but stated that the debtors “are not current on all postpetition payments consistent with § 1322(b)(5) ․ , including all fees, charges, expenses, escrow, and costs” and that the debtors owed it $2,695.17 in “postpetition ongoing payments” “that first became due on” October 1, 2024. Id. at 1. The Original Response reported no outstanding postpetition fees, charges, costs, expenses, or escrow as a component of the alleged delinquency. Id. The Original Response also included a “Payment History” chart. Id. at 3–8. The chart neither contains the amount $2,695.17 nor explains how Flagstar purportedly calculated that amount. A column labeled “Manual Susp Bal” contains an entry on page five of the payment history for “(1820.90)” posted December 1, 2024, and in the row below that entry, the column labeled “comments” states, “Balance of PPFN fees $874.27.” Id. at 7. The sum of those numbers equals $2,695.17, which the Original Response reported as “[t]otal postpetition ongoing payments due”. Id. at 1.

As authorized by Rule 3002.1(h), debtors filed a motion for determination that they had made all payments to Flagstar required by their debt-adjustment plan and requested that the court award attorney's fees and costs pursuant to Rule 3002.1(i). ECF No. 89.

Flagstar then filed an amended Rule 3002.1(g) response (again signed by its counsel under penalty of perjury) (the “Amended Response”). ECF No. 91. The Amended Response reports that the debtors were current on postpetition payments through December 2024 (that is, until a time after they had completed all other plan payments) but owed Flagstar $1,275 in outstanding fees, charges, expenses, escrow, and costs. ECF No. 91. The Amended Response states,

$1275.00 PPFN fees based on re-accounting for suspense payments made direct by Mr. Himes[,] which previously had been applied to PPFN fees but which, per Mr. Himes[’] Motion, he does not want paid. Funds credited to PPFN will be recredited to Suspense. Debtor remains due for 1/1/25 payment.

Id. at 1.

Flagstar also filed an objection to the debtors’ motion. ECF No. 92. The objection concedes that Flagstar's Original Response failed to separately state amounts allegedly owed by the debtors for unpaid postpetition fees, charges, expenses, and delinquent mortgage payments, as required by the response to notice of final cure form. ECF No. 92, at 1. The objection explains that the Original Response's statement that the debtors were past due for $2,695.17 of postpetition payments resulted in part from how Flagstar accounted for the debtors’ making monthly payments that exceeded the regular amount due:

4. The primary issue was that each month, the Debtor[s] did not pay only the monthly amount due, but typically paid some additional amount (usually paying about $950 when about $910 was due). The overpayments of around $40 each month the Debtor[s are] now asserting should be placed in suspense and applied to future monthly payments. However, the overpayments had been credited against the PPFN.

5. By crediting the payments against the PPFN, the Debtor[s] appeared to be further behind on the regular monthly payments than [t]he[y] would have been had the suspense account payments been applied to regular monthly payments.

ECF No. 92, at 2. Flagstar contends that it correctly accounted for the monthly overage amounts, but, after the debtors filed their motion, Flagstar agreed to change course and apply overages to outstanding mortgage payments. The Amended Response reflects this change, showing the debtors to be current on monthly payments through December 2024 (though owing $1,275 in postpetition fees, charges, expenses, and escrow). ECF No. 91. Flagstar states, “The Creditor's amendment of its Notice of Final Cure was therefore to address the request of the Debtor/Borrower, though Creditor does not agree those payments were necessarily misapplied.” ECF No. 92, at 2. No itemization of the account accompanied Flagstar's Amended Response or its objection to the motion.

At a February 4 hearing on the motion, Flagstar's counsel offered further information about Flagstar's reports of overdue postpetition payments and unpaid fees, charges, expenses, escrow and costs. He conceded that Flagstar should have included a breakdown of the outstanding charges, costs, fees, expenses, and escrow, with its Original Response, but asserted that, even after all adjustments, the total amount the Original Response listed as due postpetition was correct (albeit not broken down in ongoing payment and expense categories as required by the form). Counsel also revealed to the court for the first time at the hearing (and to debtors’ counsel earlier that same day) that Flagstar had misapplied funds received from the trustee—incorrectly crediting $971.43 to postpetition mortgage payments, rather than to prepetition arrears. As a result of this error, Flagstar sent the debtors monthly statements that understated the amount the debtors needed to pay to remain current on required postpetition payments. Compare ECF Nos. 97-3, 97-4; 97-5; & 97-6. The parties reported at the February 4 hearing that they agreed that the statements Flagstar sent the debtors since October 2024 did not accurately reflect the debtors’ account status.

Based on the parties’ expectation that they could resolve the accounting discrepancies informally, the court adjourned the hearing on the debtors’ motion. The court took under advisement a single issue: whether the court should award the debtors attorney's fees and costs under Rule 3002.1(i)(2) because Flagstar's Original Response was inaccurate.

II

Rule 3002.1(g) required Flagstar to file a statement in response to the trustee's notice of final cure payment. The required statement had to report whether the debtors had paid any prepetition arrearage in full and whether they were “otherwise current on all payments under § 1322(b)(5)”—that is, on payments that became due before plan completion on a claim for which the final payment is not due until after plan completion.² Unless the statement indicated that the prepetition arrearage was paid in full and the debtors were current, the statement had to “itemize[ ] the required cure or postpetition amounts, if any, that the claim holder contends remain unpaid as of the statement's date.”³ Rule 3002.1(g)(1)(B).

If the creditor “fails to provide any information [ ] required by” Rule 3002.1(g), subsection (i)(2) authorizes the court to “award ․ appropriate relief, including reasonable expenses and attorney's fees caused by the failure”.⁴ The debtors ask the court to award attorney's fees sufficient to pay their counsel for filing and litigating their Rule 3002.1(h) motion. Flagstar objects.

As this decision explains, Flagstar “fail[ed] to provide ․ information as required by ․ [Rule 3002.1](g)”, and, as a result, this court may “award ․ appropriate relief, including reasonable expenses and attorney's fees caused by the failure.” Rule 3002.1(i)(2). As will also be explained, fees for filing the debtors’ motion for determination of final cure were “caused by” Flagstar's failure to provide the information required by Rule 3002.1(g), and a fee award is appropriate under the circumstances, as is an order prohibiting Flagstar from charging the debtors with bankruptcy related fees or expenses with respect to the Original Response, and any such fees or expenses incurred after December 10, 2024, the date on which Flagstar filed that response.

A

Flagstar's response to the notice of final cure failed to provide information required by Rule 3002.1(g). Flagstar's response to the trustee's notice of final cure failed to provide the information required by Rule 3002.1(g) for two reasons. First, the Original Response incorrectly stated that the debtors were not current on “Total postpetition ongoing payments due” in the amount of $2,695.17 and that no “Total fees, charges, expenses, escrow, and costs [were] outstanding”. ECF No. 84, at 1. Flagstar subsequently conceded that its Rule 3002.1(g) statement was incorrect and that the $2,695.17 total included both amounts that it contended were overdue ongoing payments and unpaid postpetition fees and expenses. At the hearing on the debtor's Rule 3002.1(h) motion, Flagstar's counsel acknowledged that the Original Response did not accurately report that $1,275 of the total amount owed was for the outstanding fees, charges, expenses, escrow, and costs, rather than delinquent mortgage payments. Consequently, Flagstar's Original Response both failed to provide accurate information and failed to “itemize[ ] the ․ postpetition amounts ․ that the claim holder contends remain unpaid as of the statement's date.” Fed. R. Bankr. P. 3002.1(g)(1)(B).

The purpose of Rule 3002.1 is to “provide[ ] a mechanism to ensure that the debtor has cured all arrearages and is current with respect to all mortgage obligations at the end of the case, [and] ․ also provide[ ] the information which the parties need to address any outstanding amounts due under the mortgage so that there are no ‘surprises’ later.” In re Dewitt, 651 B.R. 215, 225 (Bankr. S.D. Ohio 2023). That can hardly be done if the creditor supplies inaccurate information. As several courts have explained, to “provide the information”, as required by Rule 3002.1(g), the creditor must respond to a notice of final cure with accurate statements. See, e.g., In re Rayford, No. 16-29914, 2020 WL 8551780, at *5 (Bankr. W.D. Tenn. Dec. 17, 2020); In re Tollstrup, 2018 WL 1384378, at *3 (Bankr. D. Or. March 16, 2018) (“[T[he provision of inaccurate information is equivalent to a failure to provide information. The purpose of Rule 3002.1 ․ is served only if the creditor provides correct information.”); In re Ferrell, 580 B.R. 181, 187–88 (Bankr. D.S.C. 2017) (“The filing of an incorrect and inaccurate Rule 3002.1(g) statement is the equivalent of filing no statement at all. Indeed, an incorrect statement could be viewed as worse than no statement.”); In re Howard, 563 B.R. 308, 315 (Bankr. N.D. Cal. 2016) (“An inaccurate response under Rule 3002.1(g) complies neither with the letter nor the spirit of Rule 3002.1 and defeats the very purpose for which Rule 3002.1 was enacted.”).⁵ Flagstar's inaccurate response to the notice of final cure statement thus constitutes a failure to provide the information required by Rule 3002.1(g) for which subsection (i) authorizes an award of appropriate remedies.

Second, Flagstar's Original Response failed to “itemize[ ] the required cure or postpetition amounts ․ that the claim holder contends remain unpaid as of the statement's date”, in the manner required. “The itemization must be sufficiently detailed for a debtor to contest the holder's response under Bankruptcy Rule 3002.1(g).” Howard, 563 B.R. at 313–14; see also In re Nieves, 499 B.R. 222, 225 (Bankr. D.P.R. 2013) (quoting In re Carr, 468 B.R. 806, 808 (Bankr. E.D.Va. 2012) (“[t]he creditor must respond to that notice [of final cure payment] by acknowledging that it is correct, or if it is not correct, stating with particularity the amounts that remain unpaid.”)). Indeed, Director's Form 4100R, which Flagstar used to file the Original Response and the Amended Response, specifies that when a Rule 3002.1(g) response contends that the debtor is not current, the creditor must provide an itemized history of all payments and assessments:

If the creditor disagrees in Part 2 that the prepetition arrearage has been paid in full or states in Part 3 that the debtor(s) are not current with all postpetition payments, including all fees, charges, expenses, escrow, and costs, the creditor must attach an itemized payment history disclosing the following amounts from the date of the bankruptcy filing through the date of this response:

• all payments received;

• all fees, costs, escrow, and expenses assessed to the mortgage; and

• all amounts the creditor contends remain unpaid.

ECF No. 84, at 2 & ECF No. 91, at 2.

The chart that Flagstar filed with its response to the notice of final cure did not comply with Form 4100R's direction to disclose all assessed fees, costs, escrow, and expenses, payments received, and amounts remaining unpaid. While Flagstar's chart contains comments that some payments were applied to fees, the relevant transaction history is incomplete. The itemization required by Rule 3002.1(g) is one that is sufficiently detailed to allow the debtor, the trustee, and the court to understand the creditor's report of payment delinquencies or unpaid fees and expenses without consulting other documents, including other Rule 3002.1 filings. Flagstar failed to provide such an itemization; therefore, it failed to provide “information as required by” Rule 3002.1(g) within the meaning of Rule 3002.1(i) for this independent reason.

B

Flagstar's failure to provide all information required by Rule 3002.1(g) caused attorney's fees that are appropriate to award as a remedy under Rule 3002.1(i). The Original Response's inaccurate statements and inadequate itemization precipitated the debtors’ Rule 3002.1(h) motion requesting that the court determine they made all required postpetition payments. As a practical matter, the Original Response left the debtors no other choice: Its statement that the debtors had failed to make “postpetition ongoing payments” of $2,695.17, as required by the plan, meant that the debtors were not eligible for a discharge. See 11 U.S.C. § 1328(a) (“․ as soon as practicable after completion by the debtor of all payments under the plan ․ the court shall grant the debtor a discharge ․”); see also In re Bethe, No. 11-25388, 2017 WL 3994813, at *2–3 (Bankr. E.D. Wis. Sept. 8, 2017).

Flagstar contends in part that, although the Original Response's statement was inaccurate, its failures did not cause the debtors to incur additional attorney's fees. In support, Flagstar emphasizes that the debtors had failed to make regular payments and owed fees and expenses totaling $2,695.17 on December 10, 2024, when it filed that response—even though the debtors’ November 20, 2024 monthly account statement did not show any delinquent regular payments and the debtors’ December 12, 2024 monthly account statement only listed one “Overdue Payment” for December in the amount of $910.45.⁶ ECF No. 97-5 & 97-6. Flagstar later explained that it had misapplied a trustee payment on the prepetition arrearage as a credit against regular monthly payments, and it only discovered that error when it received the trustee's notice of final cure payment. Flagstar then corrected its accounting but did not explain the original error or the subsequent correction to the debtors until the day of the February 4 hearing. Therefore, the debtors had no obvious reason to question the November 20, 2024 monthly statement until Flagstar filed its Original Response.

If Flagstar's Original Response had provided correct information about payment delinquencies and fee and expense balances, as required by Rule 3002.1(g), including explaining the accounting error and subsequent correction with respect to trustee payments, the debtors might have timely cured any delinquency necessary to obtain discharges without filing a Rule 3002.1(h) motion. Instead, Flagstar's Original Response left the debtors attempting to reconcile Flagstar's erroneous and incomplete Rule 3002.1(g) response with Flagstar's monthly statements, which was made practically impossible by Flagstar's covert reversal of the $971.43 credit to correct its misapplication of the trustee payment—the accounting change that Flagstar did not disclose to the debtors until immediately before the February 4 hearing. While Flagstar and the debtors may have disagreed about the proper accounting for the debtors’ extra payments even if Flagstar's Rule 3002.1(g) statement had been complete and correct, armed with complete and correct information, the debtors could have made an informed choice about whether they would simply make an additional payment to cure any deficiency or file a motion under Rule 3002.1(h), either to challenge the accuracy of Flagstar's accounting or to determine whether unpaid fees and expenses were not then due for purposes of granting a discharge under § 1328(a). Because Flagstar's inaccurate and incomplete Rule 3002.1(g) statement failed to provide the required information necessary for the debtors to decide which of those courses to pursue, Flagstar's statement required—that is, caused—the debtors to file a motion under Rule 3002.1(h) to obtain the information that Rule 3002.1(g) mandated Flagstar provide in the first instance. Flagstar's failure to provide complete and correct information thus caused the attorney's fees incurred in the debtors’ subsequent efforts to determine the true status of the account and makes an award of those fees “appropriate” within the meaning of Rule 3002.1(i).

C

Contrary to Flagstar's argument, the court's presumed reasonable fee has no bearing on the issues presented here. Flagstar argues that resolving the issues raised in the debtors’ Rule 3002.1(h) motion constitutes a “standard” or “routine” duty for chapter 13 debtors’ counsel, making their resolution “part of [debtors’ counsel's] reasonable fee”, rather than attorney's fees caused by Flagstar's failure to file a complete and correct Rule 3002.1(g) statement. But, as explained above, Flagstar's incomplete and incorrect Rule 3002.1(g) statement required the debtors to resort to litigating the account status under Rule 3002.1(h), effectively foreclosing their ability to pursue a discharge by curing any deficiencies based on accurate information or requesting that the court determine whether Flagstar's accounting for the debtors’ additional payments was correct.

Moreover, contrary to Flagstar's argument, none of this is within the scope of the court's presumed reasonable fee for chapter 13 debtor's counsel (colloquially known as the “no-look fee”). See https://www.wieb.uscourts.gov/no-look-fees (amended and effective May 1, 2024) (last visited February 28, 2025). The no-look fee is a court policy that sets a presumptive reasonable fee for services generally provided by chapter 13 debtor's counsel. “The presumptively reasonable fees described [in the no-look fee policy] are just that—presumptions. Where the fee does not exceed the applicable presumptively reasonable amount and no party objects to the fee, the Court typically will not require counsel to file an application for compensation.” Id. at 3. The “no-look” policy, however, does not limit the amount of fees the court may allow debtors’ counsel under §§ 329 & 330; counsel may apply to the court for approval of compensation that exceeds the no-look amount when circumstances warrant. Debtors’ counsel's fee request (5.5 hours of her time at $300 per hour for a total of $1,650 through January 28, 2025) appears reasonable, considering both counsel's substantial experience and the amount of time devoted to the task. ECF No. 97, at 5. Flagstar did not dispute the reasonableness of the time spent or counsel's rate. In the interest of expediting the resolution of this dispute, the court will allow under § 330(a)(4)(B) (in addition to other fees and expenses paid by the debtors directly to counsel or through their plan), $1,650 to be paid to debtors’ counsel by Flagstar pursuant to Rule 3002.1(i). The court will also afford the debtors an opportunity to request any additional attorney's fees and expenses resulting from Flagstar's incomplete and inaccurate Rule 3002.1(g) statement.

Finally, the court concludes that an award of “other appropriate relief” allowed by Rule 3002.1(i)(2) is warranted under the circumstances. Specifically, Flagstar is prohibited from charging the debtors with any costs or expenses related to the Original Response, the Amended Response, or any services relating to this bankruptcy case that Flagstar or those acting on its behalf rendered after the filing of the Original Response.

III

For the reasons stated above, IT IS HEREBY ORDERED:

1. The debtors’ request for an award of attorney's fees and costs pursuant to Rule 3002.1(i)(2) is granted.

2. If debtors seek an award exceeding $1,650, they must file, no later than 14 days from the date on which this order is entered, a request that complies with Local Rule 2016.

3. If Flagstar contests the reasonableness of the requested fee award, it must file a response no later than 21 days after the date on which this order is entered; Flagstar's response must state the grounds for its objection with particularity and specify whether it requests an evidentiary hearing; Flagstar's failure to state a ground for objection with particularity or request an evidentiary hearing constitutes a forfeiture of any such objection and the right to present evidence.

4. Flagstar is prohibited from assessing the debtors’ account or otherwise charging the debtors for any fees or expenses for preparing the Rule 3002.1(g) statement filed on December 10, 2024, or for fees or expenses relating to these bankruptcy proceedings that were incurred on or after December 10, 2024, unless expressly permitted by a subsequent order of this court.

FOOTNOTES

1.   After the debtors filed this bankruptcy case, they obtained a divorce. In the divorce proceeding, Matthew Himes was awarded their residence at 673 Appleton Rd., Menasha, Wisconsin—the property that secures the debtors’ obligations to Flagstar—and the divorce judgment makes him solely responsibility for making the mortgage payments. See ECF Nos. 5, 11, 21, & 97-1, at ¶¶2–3. Still, the confirmed chapter 13 plan obligates both debtors to pay Flagstar's claim as provided in the plan. As a result, this decision refers to the debtors collectively. See ECF Nos. 2, 40, 45 & 97-1, at ¶¶2–3.

2.   All statutory citations are to the Bankruptcy Code, title 11 of the United States Code, unless stated otherwise.

3.   Rule 3002.1(g)(1) provides:(1) Required Statement. Within 21 days after the notice under (f) is served, the claim holder must file and serve a statement that:(A) indicates whether:(i) the claim holder agrees that the debtor has paid in full the amount required to cure any default on the claim; and(ii) the debtor is otherwise current on all payments under § 1322(b)(5); and(B) itemizes the required cure or postpetition amounts, if any, that the claim holder contends remain unpaid as of the statement's date.

4.   Rule 3002.1(i) provides:Failure to Give Notice. If the claim holder fails to provide any information as required by (b), (c), or (g), the court may, after notice and a hearing, take one or both of these actions:(1) preclude the holder from presenting the omitted information in any form as evidence in a contested matter or adversary proceeding in the case—unless the failure was substantially justified or is harmless; and (2) award other appropriate relief, including reasonable expenses and attorney's fees caused by the failure.

5.   Trevino v. HSBC Mortgage Services, Inc. (In re Trevino) reached a contrary conclusion, stating, “Rule 3002.1(i) provides relief in situations involving a lack of notice, rather than incorrect notice”. 615 B.R. 108, 146 (Bankr. S.D. Tex. 2020). But “Trevino provides little analysis”, and the contrary reasoning of the decisions cited above is more persuasive. In re Heard, No. 15-35564, 2021 WL 3540412, *2 (Bankr. D. Or. Aug. 11, 2021).

6.   Matthew Himes stated that he “believed that [he] was current on the mortgage on 12/10/2024” and that he also believed that he paid the December 2024 mortgage payment on December 12, 2024, within the 15-day grace period. ECF No. 97-1, at ¶5.

G. Michael Halfenger Chief United States Bankruptcy Judge