ALEJANDRO MALDONADO RUIZ and NIDZA H SOBERAL DELGADO

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO

In re:

FILED & ENTERED
ALEJANDRO MALDONADO RUIZ, : Case No. 04-13004 (GAC)
NIDZA H. SOBERAL DELGADO, :

: (MAY. 1.6: 2005

Debtors : Chapter 13
U.S. BANKRUPTCY COURT
BAN JGAN, PUERTO RICO

DECISION AND ORDER

The debtors filed a petition under Chapter 13 of the
Bankruptcy Code on December 22, 2004. The debtors scheduled R&G
Premier Bank (*R&G”) with a secured claim of $25,000.00. At the
time of the filing, the debtors were current in mortgage payments
to R&G. The debtors filed a plan with their petition proposing
to maintain regular payments to R&G.

On January 5, 2005, the Law Offices of Ismael H. Herrero
TII, P.S.Cc. (“Herrero”) filed a notice of appearance and request
for service of notices, orders, pleadings and documents on benalt
of R&G. On the same date, Herrero filed a proof of claim on
behalf of R&G, claiming the amount of $24,587.78, plus $450.00 in
attorney’s fees, for a total secured claim of $25,137.78. The
proof of claim does not describe the property that serves as
collateral and Herrero did not attach any supporting documents to
the proof of claim.

On February 2, 2005, the debtors filed an objection to R&G’s
proof of claim, arguing that the claim for attorney's fees is

inappropriate since the debtors have never had arrears with R&G.

1

AUTHENTICATED
U.S. GOVERNMENT
INFORMATION

GPO

ne aH EEE

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Herrero filed a reply on March 4, 2005, contending that the fees
are reasonable. Herrero argues that the fees are for analysis of
the case, the schedules, the list of creditors and the proposed
Chapter 13 plan. He also indicates that the work involves a
careful study of the title situation and of the liens that
encumber the property.

R&G argues that it is entitled to attorney's fees pursuant
to 11 U.S.c. § 506(b). This section provides that:

[t]o the extent that an allowed secured claim is

secured by property the value of which, after any

recovery under subsection (c) of this section, is

greater than the amount of such claim, there shall be

allowed to the holder of such claim, interest on such

claim, and any reasonable fees, costs, or charges

provided for under the agreement under which such claim

arose.
As Herrero states, as an oversecured creditor, R&G “is entitled
to reasonable attorney’s fees to the extent allowed by the terms
of the contract and by the provisions of § 506(b) of the
Bankruptcy Code.” Since Herrero did not attach a copy of the
mortgage contract to the proof of claim, the Court is unable to
determine whether the agreement provides for attorney’s fees in
the situation where the debtor has not defaulted on the
promissory note.

Moreover, under 11 U.S.C. § 506(b}), there is a limitation on
a creditor's ability to collect attorney's fees. The Court must

determine that the fees are reasonable. As summarized by one

noted commentator, "courts have been far more uniform in holding

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that they have inherent power to determine the reasonableness of
the amount of attorney's fees to be allowed under section 506 (b)
and that reasonableness is to be determined in accordance with
federal standards." 4 Collier on Bankruptcy 4 506.04[3] [a] [iii]
(footnote omitted). In determining reasonableness,

[t]he bankruptcy courts will generally require the

party seeking allowance of attorneys' fees to carry the

burden of demonstrating reasonableness by providing a

detailed description of the services rendered,

supporting documentation, or other evidence prior to

making a determination on an application for payment.

The bankruptcy court may also inquire into whether the

services rendered are within the scope of the services

covered by the fees provision of the applicable

agreement, and whether the rendition of the services in

question was reasonably required under the

circumstances.

id. (footnotes omitted).

Courts should be wary of the potential for abuse of an
oversecured creditor's right to attorney’s fees and costs. With
the goal of avoiding the waste of an estate's assets, courts have
frequently disallowed or reduced fees sought by a secured

ereditor on finding that the legal work was unnecessary. See In

ve Josephs, 108 B.R. 654 (Bankr. N.D. I11l. 1989). The Court in

In re Hart, 80 B.R. 107 (Bankr. E.D. Tenn. 1987), indicated that
while a debtor's filing of a Chapter 13 case may cause a creditor
some concern about whether the debtor will make regular payments,
this is the kind of practical, factual concern that does not
necessarily require the services of an attorney.

In the present case, the debtors were not in arrears at the

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time of the filing the petition and they proposed from the time
of filing to maintain direct payments to R&G. Herrero did file a
notice of appearance and an incomplete proof of claim. He did
not attend the § 341 meeting of creditors. From this, the Court
can not conclude that R&G required the services of an attorney
merely because the debtors filed for bankruptcy relief.

Herrero contends that the bankruptcy fees claimed are
inferior to the bankruptcy fees being paid by mortgage industry
federal entities such as Fannie Mae, Freddie Mac, FHA and HUD.
Irrespective, the issue is not what the banks are paying to
engage bankruptcy counsel, the issue is whether the fees are
chargeable to a Chapter 13 bankruptcy estate when the debtors
have not defaulted on their mortgage. The Court concludes that
Herrero has failed to show his entitlement to the fees by not
including a copy of the agreement which provides for the fees and

by failing to demonstrate the reasonableness of the fee request.

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ORDER
Wherefore, IT IS ORDERED that the debtors’ objection to
Claim #1, filed by R&G Premier Bank, shall be, and it hereby is,
GRANTED. R&G's claim is allowed as a secured claim in the amount
of $24,687.78. The request for attorney’s fees is DENTED.

SO ORDERED.

San Juan, Puerto Rico this 7 aay of May, 2005.

Lia

Gerardo A. Carlo
Chief U.S. Bankruptcy Judge