Ch. 13 Ruling Issues - Warning To Mortgage Servicers

Sep 15, 2026

Uploaded by Aran

Ruling in Orlansky v. Quicken Loans LLC, the Ninth Circuit Bankruptcy Appellate Panel held that a mortgage servicer violated the Bankruptcy Code’s automatic stay by sending Chapter 13 mortgage statements listing post-petition attorney fees within the current balance due. Despite informational disclaimers and notice obligations under Rule 3002.1(c), the BAP found the fee presentation could pressure debtors to pay prepetition-type amounts immediately. The decision emphasizes clear separation of amounts and careful wording in post-petition communications.

LanguageEnglish

CategoryLetters

FormatPDF

Pages6

Reading Time2 min

AccessFree to download

Key Considerations

Rule 3002.1 Defense and Appellate Rejection

Factual Background

Fee Notice and Monthly Statements

Objection, Withdrawal, and Contempt Motion

Best Practices

Ch. 13 Ruling Issues Warning To Mortgage Servicers By Justin Paget and Jennifer Wuebker Published in Law360 | May 19 , 2023 On April 14, the U.S. Bankruptcy Appellate Panel of the Ninth Circuit issued an opinion in Orlansky v. Quicken Loans LLC, holding that a mortgage servicer violated the automatic stay by sending mortgage statements to the debtors that included post-petition attorney fees the servicer had incurred filing a proof of claim against the debtors and reviewing their Chapter 13 plan. Although the monthly statements included a standard disclaimer that they were being provided for informational purposes only, the mortgage servicer listed the attorney fees as part of the current balance due, instead of including them in a separate section with the prepetition arrears. As a result, the BAP concluded the mortgage servicer had sought to recover the attorney fees in a manner that pressured or coerced the debtors to immediately make the payment. Thus, the BAP determined that the monthly statements violated the automatic stay of the U.S. Bankruptcy Code, Section 362(a) . Of particular note, the BAP stated that the mortgage servicer "could have easily averted the violation by listing the fees with prepetition arrears in the section which indicated those amounts were not part of ongoing payments." It further warned that it is "incumbent upon creditors who send post-petition communications to clarify they are not attempting to collect prepetition debts." Key Considerations The main defense of the mortgage servicer was that because Bankruptcy Rule 3002. 1(c) mandates the disclosure of post-petition fees, charges and expenses, such as the attorney fees in question, listing the attorney fees in the monthly statement could not have violated the automatic stay. While the U.S. Bankruptcy Court for the District of Nevada accepted this argument, the BAP rejected it on appeal. This is noteworthy because Rule 3002.1 was enacted to, among other things, require mortgage servicers to provide notice of such fees and monthly payment changes without fear of violating the automatic stay. While the BAP's decision in Orlansky was fact-intensive and nonprecedential, it suggests that bankruptcy courts in the Ninth Circuit may closely scrutinize post-petition communications with debtors as to how certain fees, expenses and other charges are presented. Mortgage servicers should not assume that they are insulated from automatic stay violations through compliance with Rule 3002.1 or the common informational-purposes-only disclaimers set forth on monthly statements. As the BAP in Orlansky cautioned, any confusion as to whether a communication to a debtor is an attempt to coerce payment of a prepetition debt—in violation of the automatic stay—is likely to be resolved in favor the debtor. We note below some best practices for mortgage servicers with respect to Rule 3002.1 notices and postpetition communications with debtors. Factual Background David and Sharon Lynn Orlansky filed their Chapter 13 bankruptcy petition in October 2020. At the time of filing, they had a first mortgage on their primary residence serviced by Rocket Mortgage LLC. Rocket filed a proof of claim in the amount of $160,855 .88, secured by the debtors' primary residence. On Dec. 10, 2020, pursuant to Rule 3002. 1(c), Rocket also filed a notice of post-petition mortgage fees, expenses and charges, in which it asserted a claim for attorney fees consisting of $500 for filing the proof of claim and $450 for reviewing the debtors' Chapter 13 plan. After the petition date, Rocket continued sending monthly mortgage statements to the debtors. The statements included the following disclaimer: Our records show that either you are a debtor in bankruptcy or you discharged personal liability foryour mortgage loan in bankruptcy. We are sending this statement to you for information and compliance purposes only. It is not an attempt to collect a debt agains

FAQs

What did the BAP hold about the mortgage servicer’s monthly statements?

The BAP concluded the statements violated the automatic stay because they listed post-petition attorney fees in the current balance due in a way that could pressure debtors to make immediate payment.

Why didn’t the servicer’s Rule 3002.1(c) disclosure argument prevent a violation finding?

The BAP rejected the argument on appeal, emphasizing that proper notice under Rule 3002.1 does not eliminate the need to clearly present fees so creditors are not perceived as collecting debts in violation of the automatic stay.

What best practices did the BAP suggest to avoid automatic stay problems?

Present post-petition fees separately from amounts associated with prepetition arrears and clarify that post-petition communications are not attempts to collect prepetition debts.

Sep 15, 2026

Uploaded by Aran