Mortgagee’s Attorney Fees Secured by Mortgage and May Be Added to Proof of Claim, Subject to Court Determination of Reasonableness

In In re Misleh, the debtor filed a lawsuit against his mortgagee to stop foreclosure on his mortgage.  The lawsuit was settled and the debtor agreed to a judgment for $17,000 in attorney fees.  He subsequently filed a Chapter 13 bankruptcy.  The mortgagee filed a proof of claim for the mortgage, and included $25,000 in attorney fees.  The debtor objected to the proof of claim, arguing that the attorney fees should be only $17,000, and that they were not secured by the mortgage since they were the subject of a separate judgment.

The court overruled the objection, finding that the language in the mortgage supported the bank’s argument that the attorney fees were additional debt secured by the mortgage.  However, the court ruled that it would hold an evidentiary hearing to determine the reasonableness of the attorney fees.

© Steve Sowell 2018