The U.S. Bankruptcy Court for the Southern District of Georgia recently ruled in two cases that escrow overage payments arising from the debtor’s overpayment of post-confirmation mortgage payments are the property of the Chapter 13 bankruptcy estate.

In both cases, In re Doolittle and In re Jordan, the debtors were unknowingly paying too much on their monthly mortgage escrow payment. When the lender did an annual accounting these overage payments were sent to the Chapter 13 Trustee assigned to the cases respectively. Both debtors filed a Motion for Turnover of Excess Funds, asking the Court to require the Trustee to turn the funds over to the debtor.

In re Doolittle

In In re Doolittle the debtor, Cornelius Doolittle, motioned the Court requesting that the Chapter 13 Trustee turn over $3,139.41 excess funds mailed to the Trustee as a refund of “escrow overage.” The Trustee objected to turning over the funds to debtor arguing that the money “is the property of Debtor’s bankruptcy estate which Debtor has not disclosed or exempted.” Doolittle 1. The trustee divides the overage payment into three distinct time frames: (1) from pre-petition mortgage payments (totally $784.85); (2) from post-petition, pre-confirmation mortgage payments (totally $523.24); and (3) from post-conformation mortgage payments (totally $1,831.32). Id. 3.

The Court found that the mortgage payments made from Debtor’s post-petition wages are the property of the Chapter 13 bankruptcy estate pursuant to 11 U.S.C. §1306(a)(2). “Allowing the Trustee to retain the escrow overage is simply correcting the error of overestimating the amount of the mortgage payment, similar to a tax refund.” Id. 9.

The Court, therefore, denied debtor’s motion for the turnover as to the post-confirmation mortgage overage payments of $1,831.32. As to the pre-confirmation and pre-petition mortgage overage payments, the Court granted debtor 14 days to amend his bankruptcy schedules to disclose the escrow overage. And thereafter, the Trustee “shall promptly turnover to Debtor” the pre-confirmation escrow overage mortgage payments made by the debtor. Id. 11.

In re Jordan

The facts of In re Jordan are similar. As such, “The Court adopts and incorporates by reference the reasoning and holding set forth in Doolittle that the post-confirmation escrow overage is the property of the bankruptcy estate.” Jordan 4. However, in Jordan, the debtor has exemptions available that, if she amends her bankruptcy schedules, may be available to allow her to retain these funds (to receive them from the Trustee).

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