On May 19, 2023, the U.S. Bankruptcy Court for the Southern District of Ohio entered a decision on a motion for summary judgment that provides a comprehensive analysis of Rule 3002.1 of the Federal Rules of Bankruptcy Procedure. The opinion investigates the meaning of the rule, available remedies, and the jurisdiction of bankruptcy courts to impose damages or penalties for breaches of the rule.
The opinion revolves around an ongoing conflict between a debtor and a mortgagee, involving an alleged violation of Rule 3002.1(g) by the mortgagee due to the non-disclosure of a tax payment made on behalf of the debtor. The debtor sought an injunction from the court to prevent the Mortgagee from presenting evidence or referring to the charge as an act of default. The Mortgagee, on the other hand, contended that such relief is unwarranted, claiming that its actions had caused no harm.
The bankruptcy court commented that Rule 3002.1 enhances transparency in chapter 13 cases and facilitates a final reconciliation. With this in mind, the court considered whether a violation could result in the exclusion of evidence of the fee charged, compensatory damages, or punitive damages, and whether the court has the power to award such relief under Bankruptcy Code § 105(a).
Ultimately, the court granted the debtor’s motion for summary judgment, in part, and scheduled an evidentiary hearing on remaining issues. The court agreed with the debtor’s position, including the debtor’s request for an injunction against introducing evidence of default. But the court ruled out the recovery of damages beyond attorney fees and costs.