Leroy filed a Chapter 13 bankruptcy in order to strip the second mortgage from his property and rebuild some equity in his home. American Bank Corp., the entity that services Leroy's second mortgage, has filed a proof of claim in Leroy's case. Leroy feels that the amount of the claim is high and asks his attorney to dispute the bank's proof of claim. Before filing the objection, Leroy's attorney asks Leroy for his most current mortgage statements. He notices that in the months immediately before Leroy filed for bankruptcy, Leroy's mortgage payment increased significantly.
Itemized on the statements were charges for property insurance. Leroy has always maintained his own property insurance. His lender had improperly "force-placed" insurance on the property. This force-placed insurance was being billed at a rate three times that of normal homeowner's insurance. Instead of filing a typical objection to the proof of claim, Leroy's attorney drafted an adversary proceeding complaint alleging breach of contract and filed it as his objection to the proof of claim. The adversary proceeding ultimately settled with the bank agreeing to remove the charges for the force-placed insurance from its claim and paying Leroy's attorney's fees.