In re Lombardi

551 B.R. 84

In re Laura Lombardi, Debtor

Case No. 11–10262–JNF

United States Bankruptcy Court, D. Massachusetts.

Signed June 7, 2016

Haneen Kutub, Liss Law, LLC, Brookline, MA, Walter Oney, Walter Oney, Attorney at Law, Fitchburg, MA, for Debtor.

MEMORANDUM

Joan N. Feeney, United States Bankruptcy Judge

I. INTRODUCTION

The matter before the Court is the Chapter 13 Trustee's Motion for Modification of Plan after Confirmation pursuant to 11 U.S.C. § 1329(a) ( “the Motion for Modification”). Laura Lombardi (the “Debtor”) filed an Opposition to the Chapter 13 Trustee's Motion for Modification, and the Chapter 13 Trustee, in turn, filed a Reply to the Debtor's Opposition. The Court heard the matter on March 31, 2016. The parties agreed that the Court would determine the matter based solely on their submissions without the necessity of an evidentiary hearing. The parties filed an Agreed Statement of Facts on April 15, 2016. Accordingly, the Court adopts the parties' recitation of facts as set forth in their Agreed Statement and finds and rules as follows.

II. FACTS

The Debtor filed her Chapter 13 case on January 13, 2011.¹ She filed her Chapter 13 plan approximately one month later on February 11, 2011. Pursuant to 11 U.S.C. § 1326, she was required to commence making payments not later than February 12, 2011.

On January 5, 2012, the Debtor filed a Second Amended Chapter 13 Plan (“the Confirmed Plan”).² Through that plan, the Debtor proposed to retain real property located at 1 Main Street Park, Malden, Massachusetts, which she valued at $301,000, and property located at 1134–1136 Buren Avenue, Venice, California, which she valued at $568,500. The Debtor listed both properties on Schedule A–Real Property which she filed on February 11, 2011.³

On September 11, 2012, this Court entered an Order Confirming [Second] Amended Chapter 13 Plan (“the Confirmation Order”). The Confirmation Order provided:

The Debtor(s) shall pay to the Chapter 13 Trustee the sum of $1,859.00* per month commencing February 1, 2011 which payments shall continue through the completion of the Plan and shall be made on the 1st day of each month unless otherwise ordered by the Court....

The effective date of confirmation of the Plan is February 1, 2011. ...

*As of January 31, 2012, the Debtor shall pay the sum of $12,936.00 to the Trustee. Commencing February 01, 2012, the Debtor shall pay the sum of $1,859.00 per month to the Trustee for the remaining 48 months.⁴

The total payments to be made under the Confirmed Plan equaled $102,168.00, an amount slightly higher than the total cost of the Confirmed Plan of $102,156.00 because monthly payments are rounded up to a whole number.

The Confirmed Plan provided for a dividend of no less than 0% to unsecured creditors whose claims totaled $173,963.00, including deficiency claims, totaling $89,196.00, of BAC Home Loan Services in the sum of $38,269.00 for the Debtor's real property located at 1 Main Street Park in Malden, Massachusetts and GMAC Mortgage in the sum of $50,927.00 for the Debtor's real property located at 1134–1136 Buren Avenue in Venice, California. The Debtor through the Confirmed Plan proposed to modify both of these secured claims and treat them as wholly unsecured.

Although the Debtor was obligated to pay $12,936.00 into her plan prior to February 1, 2012, she actually paid $11,632.00. The Debtor contends that she was not told by anyone that she needed to pay an additional $1,859 at that time.

The Debtor retained her present counsel in August 2015, following the withdrawal from Massachusetts bankruptcy practice of attorneys Haneen Katub and Jacob T. Simon. In August of 2015, Walter Oney, Esq. (“Attorney Oney”) obtained a case report from bankruptcylink.com (“EPIQ”), a web site operated by Epiq Systems, Inc. and used by the Trustee to provide information about Chapter 13 cases to debtors and their attorneys. Attorney Oney interpreted the report to show that the Debtor was entitled to a refund of approximately $11,000. Attorney Oney called the Chapter 13 Trustee's office in August of 2015 and spoke with a case administrator. Attorney Oney represents that an unnamed gentleman indicated that the Debtor had completed her plan payments and was, in fact, entitled to a sizeable refund. Attorney Oney filed a Notice of Appearance and a Disclosure of Compensation of Attorney for Debtor on September 22, 2015.

The Chapter Trustee does not dispute Attorney Oney's understanding of the conversation. The Chapter 13 Trustee, however, represents that there is no case note in her file maintained by her office of the conversation and the case administrator assigned to the Debtor's case has no recollection of the conversation.

On the strength of the information Attorney Oney obtained from EPIQ and his conversation with an employee of the Chapter 13 Trustee, he advised the Debtor to cease making plan payments, to take a debtor education course, and to sign an affidavit attesting to the facts required to obtain a discharge. The Debtor followed Attorney Oney's advice and made no payments to the Trustee during September and October 2015.

On October 16, 2015, the Debtor filed a Motion for Entry of Discharge. On October 20, 2015, the Trustee filed an Opposition to the Motion for Entry of Discharge, stating that the Debtor owed $11,297.00 to complete the Confirmed Plan and pay all allowed claims.

On October 20, 2015, Attorney Oney called Patricia Remer, Esq., Staff Attorney to the Chapter 13 Trustee (“Attorney Remer”), to discuss the Objection to the Motion for Entry of Discharge, at which time Attorney Remer explained to Attorney Oney why the Debtor still owed a balance to complete the Confirmed Plan. On October 20, 2015, the Debtor withdrew the Motion for Entry of Discharge. The Debtor resumed making monthly payments of $1,861 to the Trustee in November 2015.

The Debtor's mother died on January 8, 2016. The Debtor became entitled to share an inherited IRA and a brokerage account with her siblings. The probate estate has now been fully administered. The Debtor's share of the estate is approximately $120,000, which is presently deposited in a bank account over which the Debtor has control. The Debtor has pledged not to alienate these proceeds pending further orders from this Court.

On January 11, 2016, the Trustee filed a Motion for Order Dismissing Case for Failure to Make Plan Payments. The Trustee alleged in her Motion that the Debtor was in arrears in the amount of $5,716.00 which equaled 3.07 months of plan payments. Sometime in January of 2016, Attorney Oney called Attorney Remer and informed her that the Debtor might be receiving an inheritance. Counsel did not know the exact amount that the Debtor was entitled to receive at that time.

According to the parties, the last payment under the Confirmed Plan was due on January 1, 2016. As of January 31, 2016, the Debtor had not completed the required payments under the Confirmed Plan. On February 4, 2016, the Debtor filed a Response to the Motion to Dismiss in which she indicated that she intended to use some of the inheritance money to cure arrears. The Debtor indicated in a footnote that the inheritance might exceed $50,000.00.⁵

As of February 4, 2016, the Debtor had not completed the required payments under the Confirmed Plan. On March 4, 2016, the Trustee filed the Motion for Modification. At that time, the Debtor had not made all payments required under the Confirmed Plan. On March 14, 2016, the Trustee received an email from Attorney Oney asking her to explain to him the alleged discrepancy between the Trustee's records and the data available from EPIQ. Counsel indicated that the EPIQ report showed total payments of $109,977.00 and also showed an overpayment of $6,152.27. The Trustee sent a reply email explaining that the refund received in 2011 was due to the dismissal of the case and that it was not an actual refund due at this time.⁶

The Trustee then explained to Attorney Oney that the refund in the amount of $11,482.00 is included as a receipt because after it was issued the Debtor repaid it to the Trustee. Because it was repayment of a refund, it did not actually count as a receipt towards the cost of the Plan. When the amount of $11,482.00 was subtracted from the total receipts of $109,977.00, the receipts totaled $98,315.00 which was the actual amount of payments that had posted as of March 4, 2016. The amount due to pay all creditors in full under the Confirmed Plan was $102,168.00, which left a balance due of $3,853.00.

A receipt and refund history shows two (2) refunds issued to the Debtor. The first is in the amount of $10,028.00 dated October 7, 2011, and the second is in the amount of $1,454.00 dated November 7, 2011. These total $11,482.00. The refunds were issued because the Debtor's case was dismissed on September 19, 2011. On November 29, 2011 the Debtor moved to reopen the case. The Trustee filed a Limited Objection stating that the Debtor had received a refund and the Trustee was not holding any monies, adding that if the case were reinstated the Debtor would need to repay the refunded monies. On December 9, 2011, the Court issued an Order requiring the Debtor to file an Affidavit by December 16, 2011, stating that she had cured all plan arrears as set forth in the Trustee's Limited Objection. On December 13, 2011, the Debtor filed the required Affidavit stating that she had submitted a payment in the amount of $11,482.00 to the Trustee which resulted in the case being reopened on December 28, 2011. Therefore, as noted in the receipts and refund history, the funds paid in were in the amount of $113,658.00, the funds paid out were in the amount of $11,482.00, and the actual amount paid as of April 11, 2016 was $102,176.00.

At 7:49 a.m. on March 3, 2016, one day before the Trustee filed the Motion for Modification, the Debtor instructed tfsbillpay.com, a web site used by Chapter 13 trustees to handle plan payments, to pay $1,861.00 to the Trustee. That...