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Paying Mortgage Arrears Through Your Chapter 13 Plan

Jan. 9, 2018

In a Chapter 13, you can normally cure mortgage arrears that you owe on your home. It is important that you fully understand your obligations when you are paying mortgage arrears through a Chapter 13 plan. In this section we will advise you exactly what you have to do when you owe arrears on your mortgage, so that you can be sure your Chapter 13 proceeds forward in a successful fashion.

If you are behind in your mortgage payments, we can usually help you save your property. Chapter 13 gives you a very reasonable and realistic opportunity to save your property. While you are in Chapter 13 you are normally protected from your creditors coming after you and foreclosing against your property. You also have certain responsibilities. You must do certain things as required by the bankruptcy law if you want your case to be successful. This way you will be protected from foreclosure.

You are required to make regular monthly mortgage payments to the mortgage company starting the month after you file your bankruptcy petition. By way of example, let's assume you file your bankruptcy on June 1, and the mortgage is due on the first of the month. You do not have to make a mortgage payment until July 1. Starting on July 1 you have to make a mortgage payment directly to the mortgage company, and keep paying on time every single month thereafter.

Additionally, you will catch up on your monthly mortgage arrears by making certain monthly payments to the trustee. The trustee in the Camden area is Isabel Balboa. If you file your bankruptcy on June 1, for example, you must start making payments to Ms. Balboa (for your mortgage arrears) as of July 1, AND you must keep making payments on a regular monthly basis to Ms. Balboa for every month that your case continues.

Therefore, it is important that you understand that you have the following obligations:

  1. You must make your regular mortgage payments to your mortgage company every single month starting with the payment that is next due after we file your bankruptcy.

  2. You must make a payment to Ms. Balboa every single month starting with the first day of the month after we file your bankruptcy.

  3. Payments to Ms. Balboa must be sent by money order or certified check. Ms. Balboa does not accept personal checks.

  4. The money order or certified check must have your case number on it. Please make sure you know your case number and write your case number on the money order or certified check.

  5. The monthly money order or certified check must be sent to Isabel Balboa at PO Box 1978, Memphis, TN 38101-1978

Please also keep in mind that there is a ten percent commission paid to Ms. Balboa for all payments that are paid through the Chapter 13 plan. This is standard in any Chapter 13 case, and this is calculated in determining the amount of your monthly payment. Your fee balance to our office is also calculated in determining the amount of your monthly payment

The mortgage company has a right to claim that you owe more money on mortgage arrears than we have listed in your plan. If they make such a claim, then we will have the right to disagree with the claim that they are making. Normally, when there is a disagreement, we can resolve it with the mortgage company. Otherwise, the Judge will decide who is right.

You should be aware that under certain infrequent circumstances the mortgage company can ask for interest on the amount you are paying towards the arrears. Further, under certain circumstances they can ask for lawyer fees that may have been incurred in a previous foreclosure action or attorney fees that are related to the bankruptcy. If these claims are made and if they are allowed, this will require you to make a larger monthly payment in your plan. We will advise you of any documents that might be submitted by the mortgage company through their attorney in the event that they try to make a larger claim against you. If a larger claim is allowed, your monthly payments will be in a higher amount. The new amount you need to pay will be determined at a later date.

You must further understand that if you do not fulfill your responsibilities, your bankruptcy case is in jeopardy of being dismissed. You must also understand that if you do not pay the mortgage company, the mortgage company can ask the court for what is called relief from the automatic stay, so that they are permitted to pursue a foreclosure against your property.

If the mortgage company does not receive monthly payments on the mortgage after we have filed your bankruptcy petition, they normally will hire a lawyer to file a motion with the bankruptcy court for stay relief. Basically this means the following:

  1. The mortgage company will tell the judge that you have not been making your regular mortgage payments as required by law.

  2. The mortgage company will ask for permission from the bankruptcy court to obtain relief from the automatic stay which up to that point has legally prohibited them from foreclosing against your property. If the bankruptcy judge grants this motion, the mortgage company will be permitted to pursue foreclosure against your property.

It is therefore very important that you keep making regular payments to Ms. Balboa and to the mortgage company. If at any time you cannot make a regular payment to Ms. Balboa or to the mortgage company because of something unexpected or unforeseen happening, please let us know immediately. There are legal steps we can take to protect your rights and your legal interests. For example, in certain cases we can file a special motion with the bankruptcy court to ask for a temporary suspension for trustee payments and/or mortgage payments.

By way of illustration, let us assume that someone is hurt in a car accident or something happens such that the person cannot work and does not have normal income coming in. This is obviously an unexpected change of circumstances. The bankruptcy court realizes that things can happen in people's lives and the bankruptcy court is willing to give people a break if it is for a legitimate reason and purpose.

Therefore, if something unexpected happens to you and you cannot make a regular payment to the trustee or to the mortgage company, please make sure you let us know immediately so we can take steps to protect your interests. If you do not let us know and you simply do not make payments, your rights will be in jeopardy and your case can be dismissed. Further, the mortgage company could pursue foreclosure. Hopefully, nothing bad will happen to you. If it does, however, please let us know right away so we can try to protect your rights.

We wish you the best for the successful completion of your bankruptcy. We also want to let you know that if in the future you need to file a motion to suspend payments, there will be an additional fee normally awarded by the court for our office making such an application on your behalf. This fee would be in addition to our normal attorney fee for handling a Chapter 13 bankruptcy.

You should also know that if you do not pay your mortgage payments and the mortgage company attorney tries to get permission from the bankruptcy court to foreclose, we do have the right to try to make a settlement with the mortgage company attorney. Usually, if you have fallen behind for some reason that you can explain, and you have some money to try to catch up, we can often make an agreement with the mortgage company lawyer that will give you the opportunity to catch up. So even if you fall behind in mortgage payments, and the mortgage company tries to get permission from the bankruptcy court to proceed with foreclosure, we can still try to make a deal with the mortgage company. If you have a reasonable opportunity to catch up on your payments, and you have a good explanation as to why you have fallen behind in your payments, the mortgage company is usually willing to make a deal.

If the mortgage company attorney makes an application for stay relief with the bankruptcy court, and we reach a settlement with the mortgage company attorney, under the bankruptcy rules the mortgage company attorney is normally awarded a counsel fee of at least $250.00 to be paid by you, and court costs of $150.00 to be paid by you. Therefore, you need to realize that you will incur additional court expenses and attorney fees from the mortgage company attorney if you do not pay your mortgage on time, and the mortgage company attorney tries to obtain permission to foreclose.

The court normally also awards an attorney fee to our office of $300.00 for representing you against the mortgage company attorney when there is a motion for stay relief. This would be an additional fee beyond the normal fee charged in your Chapter 13 case.

Hopefully you can see that the best thing to do is make your regular mortgage payments and make your regular trustee payments. If for some reason you cannot make all payments as scheduled, make sure to contact our office so that we can do what can legally be done to fully protect your rights.

We are here to help, so feel free to ask any questions you might have at any time. We can also handle other legal matters for you, as we practice in many different areas of the law, not just bankruptcy. For example, we handle the following types of cases:

  1. We represent people injured in car accidents; job related injuries and other accidents so that they receive adequate legal compensation for their injuries. We also handle social security cases.

  2. We help people with traffic tickets such as careless driving, driving while revoked, DWI, driving without insurance and other traffic matters.

  3. We represent people in matrimonial and domestic or family matters, including adoption and name changes.

  4. We represent people in real estate transactions.

  5. We represent people in criminal cases.

  6. We handle wills and estates.

  7. We can help with medical malpractice or legal malpractice.

  8. We can help with problems on your job such as wrongful termination.

  9. We can try to help you get your driver's license back.

  10. If you have a legal problem in any area in which we do not normally perform legal services, we can help refer you to an attorney that specializes in your problem area.

We are here to help you, so please feel free to ask us any questions that you might have.