An opinion by U.S. Bankruptcy Judge Marvin Isgur from the Southern District of Texas, Houston Division bankruptcy court, indicates that mortgage companies and banks must follow our local bankruptcy court's rules, including a requirement that they attach a detailed mortgage account history to their Proofs of Claim. In re Armistead, Case No. 11-36535, in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division.

The National Bankruptcy Rules that govern how bankruptcy cases are handled were amended effective December 1, 2011. But with respect to Bankruptcy Rule 3001, the Southern District of Texas already had a rule which required that mortgage companies include a detailed loan history on their proofs of claim, which must be filed in chapter 13 cases, if the mortgage companies or banks want to be paid by the Chapter 13 Trustee.

In this legal case, Flagstar Bank argued that the new National rules pre-empted the local rules, so that attaching an account or loan history was no longer necessary. Wrong, the court indicated. You still have to follow our local rules, and attach the account history, that shows each payment due date, all payments and charges to the account, etc. However, failing to include the loan history does not in itself make the claim objectionable. What makes a claim subject to objection is set forth in the Bankruptcy Code.

But apparently a debtor can file a motion to compel the inclusion of the account history from now on, and the court will likely grant those. I would anticipate that after one or more motions to compel were granted against the same mortgage company, the Court would entertain sanctions, that is, order the non-complying mortgage company to pay attorney fees to the debtor's attorney. You may not think this is very important, but without an account history, it can be very difficult to tell for sure if a debtor's payments were properly credited to the loan.

J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization
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