Bankruptcy: Notice of Final Cure Payment in Chapter 13 Cases – New Rule Effective December 1, 2024

Effective December 1, 2024, there is a new rule in Chapter 13 cases involving a secured interest in the debtor’s primary residence. If the plan provides for installment payments and the payments are completed during the Chapter 13 case, the debtor must file a certification that they have completed their payments. Failure to do so, or failure to make all payments, will result in a motion to dismiss without a discharge filed by the trustee, or a Notice of Final Cure Payment. 

RULE 3002.1-1 CLAIMS IN CHAPTER 13 CASES SECURED BY THE SECURITY INTEREST IN A DEBTOR’S PRINCIPAL RESIDENCE (NEW) 

(A) Debtor’s Certification: In any chapter 13 case (1) that involves any claim that is secured by a security interest in the debtor’s principal residence for which the plan provides that either the trustee or debtor will make contractual installment payments and (2) where there is no order terminating or annulling the automatic stay related to such claim, the debtor(s) shall file, within 30 days of completion of the plan payments due under the terms of any confirmed plan, a certification (in addition to the certification required under LBR 4008-2(A)) as to whether all contractual installment payments due during the life of the case have been made. If the debtor fails to timely file a certification, or if the debtor’s certification states that not all contractual installment payments were made during the Chapter 13 case, the standing trustee shall file a motion to dismiss without a discharge.  

(B) Hearing on Response to Notice of Final Cure Payment: The standing trustee shall file, pursuant to FRBP 3002.1(f), a Notice of Final Cure Payment, a sample of which is an exhibit to these Local Rules, as Exhibit 17. If, within 21 days of the service of the Notice of Final Cure Payment, the creditor files and serves a statement pursuant to FRBP 3002.1(g) indicating either (1) the debtor has not paid in full the amount required to cure the default on the claim or (2) the debtor is not otherwise current on all payments consistent with 11 U.S.C. § 1322(b)(5), then the debtor, if represented by counsel, shall set the matter for hearing in the ordinary course. If the debtor is not represented by counsel, the standing trustee shall set the matter for hearing in the ordinary course. 

(1) If a debtor, who is represented by counsel, fails to file a notice of hearing as contemplated by this Local Rule within 30 days after a creditor’s response is filed, the Court may consider whether a reduction of the approved amount of attorney’s fee is appropriate upon motion by the standing trustee.

If you have questions, please contact Eddie or Jennifer.

Collections: Sale of Collateral after Repossession - Updates to the Virginia Code and Forms

Effective July 1, 2025, there will be minor changes to the forms in Virginia Code Sections 8.9A-614 and 8.9A-616. These are important changes to prepare for before July 1, 2025 as they change your Notice of Disposition of Collateral and Notice of Calculation of Surplus or Deficiency. 

The changes are primarily to update and modernize language regarding communication. While the changes are likely not substantive enough to invalidate your current forms, it provides an excellent opportunity to review your current forms and procedures. 

The form and instructions in Virginia Code Sections 8.9A-614 and 8.9A-616 are a “safe harbor” for creditors. If you follow the statutory language, your letters will be deemed in compliance with the Code Sections. If you have questions about the language in the Code Sections or would like for us to review your forms, please contact Eddie or Jennifer. 

Foreclosure: Lost Notes

Virginia Code §55-59.1(B) addresses the situation where the noteholder has lost the original note. With the frequency of sales of notes on the secondary market, the loss of the original note documents occurs more often than might be expected. The Code provides that if the note or other evidence of indebtedness secured by a deed of trust cannot be produced, and, the beneficiary submits to the trustee an affidavit to that effect, the trustee may proceed to foreclosure. However, the beneficiary must send written notice to the person required to pay the instrument stating that the instrument is unavailable and that a request for sale will be made of the trustee upon the expiration of fourteen days from the date of the mailing of the notice. The notice must be sent by certified mail, return receipt requested, to the last known address of the person required to pay the instrument, as reflected in the records of the beneficiary, and shall include the same and the mailing address of the trustee. The notice must also advise the borrower if the borrower believes that he may be subject to claim by a person other than the beneficiary to enforce the instrument, the debtor may petition the circuit court of the county or city whether the property lies for an order requiring the beneficiary to provide adequate protection against any such claim. Failure to give the notice does not affect the validity of the sale.

Real Estate: Suit to Enforce Mechanic’s Liens

In recent editions of Creditor News we have been discussing the benefits of using real estate to improve creditors’ positions. This month we will discuss suit to enforce mechanic’s liens.

Virginia Code §43-17 provides that no suit to enforce a mechanic’s lien can be brought:

“…after six months from the time when the memorandum of lien was recorded or after sixty days from the time the building, structure or railroad was completed or the work thereon otherwise terminated, whichever time shall last occur; provided, however, that the filing of a petition to enforce any such lien in any suit wherein such petition may be properly filed shall be regarded as the institution of a suit under this section; and, provided further, that nothing herein shall extend the time within which such lien may be perfected.”

Virginia Code §43-17.1 provides that:

“Any party, having an interest in real property against which a lien has been filed, may, upon a showing of good cause, petition the court of equity having jurisdiction wherein the building, structure, other property, or railroad is located to hold a hearing to determine the validity of any perfected lien on the property. After reasonable notice to the lien claimant and any party to whom the benefit of the lien would inure and who has given notice as provided in §43-18 of the Code of Virginia, the court shall hold a hearing and determine the validity of the lien. If the court finds that the lien is invalid, it shall forthwith order that the memorandum or notice of lien be released from record.”

Virginia Code §43-18 provides:

“The perfected lien of a general contractor on any building or structure shall inure to the benefit of any subcontractor, and of any person performing labor or furnishing materials to a subcontractor who has not perfected a lien on such building or structure, provided such subcontractor, or person performing labor or furnishing materials shall give written notice of his claim against the general contractor, or subcontractor, as the case may be, to the owner or his agent before the amount of such lien is actually paid off or discharged.”

We have experienced attorneys and staff who can examine title, file mechanic’s liens, and litigate to enforce the same.