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Ask Brent Blanchard Your Own Question
Brent Blanchard
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1975
Experience:  Twelve years experience in all aspects of debtor & creditor BK.
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I received a statement from my mortgage company about a surplus

Customer Question

I received a statement from my mortgage company about a surplus on my escrow account. We filed chapter 13 and the past due amount along with the current payments are being made from the Chapter 13. The mortgage letter says they are keeping the surplus. Is this allowed? The taxes and insurance have been paid. I am paying 1200.00 a month to get caught up on past due balances and current payments. Where is that money going? Will I ever see the surplus?
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  Terry L. replied 7 years ago.
This is regarding the property taxes. What they will do is re-adjust the taxes that you pay each year, depending if they have the right amount in reserve to pay them. If the reserve is below a certain percentage, they are allowed to keep them, sort of in a side account to pay taxes for next year. This is normal. Thanks.
Customer: replied 7 years ago.
It was my understanding that they are allowed to keep the 50.00 in a reserve account, but in the past I have always received a check in the amount of the surplus. Did I not receive the surplus check this year because of the Chapter 13 bankruptcy?
Expert:  Brent Blanchard replied 7 years ago.
Since Terry L. is apparently off-line for the rest of today, I'll chime in and let you know that his answer is sound.

Regardless of whether local state law limits an escrow company's retention of surplus funds to $50.00 the fact that the landowner is in a Chapter 13 and is under court supervision for five years is a sound reason for the escrow company to tread lightly and not distribute an surplus from one year unless instructed to by the Court or the Chapter 13 Trustee. Distributing money to a Chapter 13 Debtor carries some risk that if it winds up being improperly given away, the escrow company could be required to justify that action.

In my experience, escrow companies are extremely cautious. There's pretty high likelihood that the surplus might be a new-found asset which is not exempt and would be intercepted for the benefit of the Plan's creditors anyway, especially if your Plan is not a 100% "full pay" plan.

Thank you.


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Customer: replied 7 years ago.
I thank you both for the info. It would just make sense to me that the money be applied to the balance owed or the debt owed on the mortgage. I am in a Chapter 13 plan where I am paying the past due balance and the current mortgage pymts. I don't want the money tucked away somewhere and "forgotten" when the prudent thing is let it be applied to what I owe. That would be the Perfect world. But the botXXXXX XXXXXne is, I won't ever see that surplus. And that isn't the right thing to do. But thank you both for your answers.
Expert:  Brent Blanchard replied 7 years ago.
Oh, believe me, it's very, very rare for an escrow company to "forget" about funds they have on account. Part of their very chicken business practices is a willingness to apply to a court to "interplead" funds they don't know what to do with so they have NO legal obligation to keep them or decide who gets them if there is *any* doubt or dispute or some lack of instructions on who get the $$$. Sadly, they get to collect their costs and attorney's fees to do that, reducing the net amount available to the true owner.