• Southern District of Florida Bankruptcy Court Launches Mediation Program
  • March 8, 2013
  • Law Firm: Weltman Weinberg Reis Co. L.P.A. - Cleveland Office
  • Following the lead of the Middle District of Florida, the Southern District Bankruptcy Court has initiated a new loss mitigation mediation ("LMM") program.  Unlike the Middle District, the Southern District's program has more requirements for all parties and encompasses debtors in all chapters - not just Chapter 13.  Below are the significant parts that will affect lenders and creditors.

    Starting April 1, 2013, debtors in all bankruptcy chapters are available to participate in LMM, however to achieve different results.  Chapter 7 debtors will use LMM to request a surrender of the property.  Chapter 11 and 12 debtors will use LMM to modify a mortgage, or surrender a property used as their primary residence.  LMM will be used by Chapter 13 debtors to request modification or surrender of any property for which they hold an interest.

    All participants in the LMM program must use the secure online portal ("LMM Portal") for the exchange of documents and communication.  Debtors will be required to use a court approved online program that facilitates the preparation of the loan modification package. The portal will be managed by Default Mitigation Management LLC ("DMM"), and the court has established free training sessions as well as online resources.

    The LMM process will begin with the debtor filing a verified Motion for Referral to LMM which will be served on the lender and their counsel.  The lender will have 14-days from the date of service to file a response.  Conversely, a lender may also file a request for referral to LMM.  Failure to object the motion will result in an order granting the motion.  Within 7-days of the order, the lender must register for the LMM Portal (if not already done, as it is a one time event) confirming all of the lender's initial loss mitigation requirements are available on the portal.

    Within seven days of the debtor's delivery of the required information, the lender shall (through the portal) acknowledge receipt of the debtor's information, advise of missing information, and designate a single point of contact and counsel, if any.  The lender and its counsel may appear at the mediation by phone.  The lender's representative must have authority to enter into a binding settlement agreement.

    The effect of the LMM process will continue or postpone any pending motions for relief from stay ("MFR").  And no MFR concerning a property subject to the LMM can be filed on negative notice.  Finally, while an LMM is pending, the debtor will be required to pay no less than 31% of the debtor's gross monthly income.  Such payments will be viewed as adequate protection.

    Finally, lenders will be required to pay a mediator fee of $300 which among other things, will include two one-hour loss mitigation conferences.