The Best Way To Cure Mortgage Arrears
There is only one way that you can cure or catch up on mortgage arrearages with the help of the bankruptcy system. That way involves the filing of a chapter 13 bankruptcy case. Chapter 13 bankruptcy is a unique way to save a home that’s either in foreclosure, heading into foreclosure, or on the eve of a Sheriff sale. Filing a chapter 13 will allow you to make the regular mortgage payment directly to the lender as well as a separate payment known as a trustee payment which will cure your mortgage arrearage over a three to five-year period.
How It Works
Here is how chapter 13 works. A petition under chapter 13 is filed with the clerk of the United States bankruptcy court. This petition has all of your information including your income, expenses, assets, liabilities, and statement of financial affairs. Within this document is a list of creditors. Creditors are people that you owe money to from any source. Obviously, your mortgage company and the arrearage portion is listed as a creditor. Approximately 4 weeks after your case is filed you will appear before a chapter 13 trustee who will examine you under oath. The purpose of the examination is to determine whether or not you are paying back all that you have available per month towards your creditors. If the trustee is satisfied that you are complying with the bankruptcy code and that all of your disposable income per month is going towards your repayment plan, then the trustee appointed by the court will stand up in front of the judge and recommend that your case be confirmed. Once your case is confirmed or approved, it is solid.
Creditor Must Accept Payments
What’s unique about chapter 13 is that your mortgage creditor must accept your regularly scheduled payment on time once again after your case is filed. Your lender might have been reluctant to accept anything other than a full payment before your case was filed. Under chapter 13 bankruptcy law, the creditor is mandated to accept the current monthly payment. Now the creditor is also going to accept a partial payment known as an arrearage payment. This amount is paid to a chapter 13 trustee who much like a dealer in poker, is going to pay a little bit per month to each creditor over a period of 3 to 5 years. At the end of the three to five-year period, your mortgage will be reinstated in that you will have no arrears whatsoever. You will also be current on your mortgage in that you have made all of your post-petition mortgage payments since the case was filed.
If You Fail
If you fail to make your chapter 13 plan payment or if you fail to make your current post-petition mortgage payment, then your case will either be dismissed by the trustee or your mortgage company will ask for relief from the bankruptcy court so that they can proceed with the foreclosure case. Chapter 13 is not an easy proposition. It is difficult to maintain not only your regular mortgage payment but also your chapter 13 payment. You must be disciplined. You must put your mortgage payment and your trustee payment ahead of all other payments. You must stay employed. You must not have any altering situations or financial hardships while you’re in your chapter 13. These would include losing your job, requiring money for repairs your home or auto or otherwise having a family emergency where your money gets diverted.
Benefits Of Chapter 13
Obviously, the benefits of chapter 13 are tremendous. I know of no other method or means whereby your mortgage company will be forced to accept a repayment plan over a three to five-year period. If your mortgage arrearages are $10,000, you may be looking at a payment plan of approximately $200 per month on top of your regular mortgage payment. This is a lot more manageable than trying to come up with a full $10,000 to catch up on your mortgage. Some mortgage companies will work with you with what they call loss mitigation options. However, there is nothing that I know of which is more powerful than a chapter 13 bankruptcy case to save a home.
If you are someone who is struggling to repay mortgage arrearages and if you’re worried about losing your home to foreclosure or to a Sheriff sale, I strongly suggest that you contact an experienced, bankruptcy attorney to discuss how chapter 13 can help you. My office is available at 847-520-8100. I have saved thousands of homes through chapter 13 bankruptcy. I may be able to help you.
