Debtors’ Chapter 13 repayment plan proposed a 100% repayment to the bank for the amount specified on the bank’s proof of claim. The bank’s proof of claim was for the principal amount owing on the Note.

The court found that the creditor was entitled to relief from the Codebtor Stay to pursue collection against codebtor to the extent that said creditor was not paid through the plan for principal, interest and attorney’s fees, even though creditor’s proof of claim did not seek interest and attorney’s fees. In re Stephen & Suzanne Pardue, 143 B.R. 434.

No claim was made for interest or attorney’s fees, both of which were provided for by the Note.

The bank filed a motion for relief from the Codebtor Stay, asserting that the express terms in the Note entitled them to interest and, in case of default, attorney’s fees. Accrued interest was more than $1,100 and attorney’s fees had accumulated to more than $2,900.

The debtors argued that the bank should be precluded from collecting the interest or attorney’s fees since it had not included those amounts in its proof of claim.

The bankruptcy court, however, ruled in favor of the bank and lifted the Codebtor Stay to permit the bank to pursue a regular collection action against the codebtor.

Author: Charles R. Harroun, Attorney at Law