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Section 506 and chapter 13 (short version)
Today at the 13 mcle I got the impression many have not read 506. Pardon me if you have, but here is the short version of the applicability of 506 to chapter 13s.
506a says property is secured to the value of the security.
506b says fully secured creditors can add contract fees (including attorney's fees) to the loan, all the way up to the value of the security.
506c says a trustee may recover costs from a secured creditor if the trustee's preserving or selling of said property was for the benefit of the creditor (not relevant to this discussion)
506d says any lien not secured can be removed. (Dewsnup says not in a 7). we use Lam motions to remove the unsecured liens (by case law, only wholly unsecured liens).
So in chapter 13, the fully secured creditor can add all fees allowed by contract (but see new 524i)
Therefore the addendum is required whenever there is a loan on a property which is less than the value of the property (i.e. a lien for 400k on a 600k property can add contract fees, attorney's fees, etc., until the loan reaches the value of the property, $600k)
Therefore, also, no addendum is necessary for an undersecured loan (i.e. when the value of the property is $400k, but the loan is $600k, as fees cannot be added) Beware the rising market. If the property value is rising, the creditor will get fees once the value exceeds the loan.)
We used to find, at the end of a chapter 13, lenders sending new bills to the clients who just emerged for their 13's, for thousands of dollars for fees which accrued in their 13s. They came back screaming.)
109e discussion - the 506d math is done upon filing.
dennis
The post was migrated from Yahoo.