How a Chapter 13 Filing Affects Your Mortgage Payment Requirements

In chapter 13, mortgage payments are split into two categories which include the back payments and future payments. Back payments usually include mortgage arrearage (late fees and missed payments). However, the best part about filing chapter 13 bankruptcy is that it provides people facing or in foreclosure a way to save their homes to an automatic stay. The automatic stay prohibits creditors from initiating or continuing foreclosure proceedings, wage garnishments or lawsuits. Thus, once the bankruptcy cases are filed, creditors must stop all attempts to collect the mortgage debt or property.  

Chapter 13 Gives Individuals a Repayment Plan

An important requirement which affect mortgage payments is called a repayment plan. When people file for chapter 13 bankruptcy they are required to follow a repayment plan for three to five years. The plan includes the amount of money people are required to back to creditors. For instance, if someone has missed mortgage payments which total $15,000, the repayment plan will include that amount (any other debts). Individuals must make these monthly payments on time and to a bankruptcy trustee. The trustee distributes the money to mortgage lenders and any other creditors.

Current Mortgage Payments Must Be Paid When They Are Due

With chapter 13, mortgage payments from the time people file for bankruptcy forward are made to lenders. The payments must be paid on time and the full amount. In other words, each month people make one payment to the bankruptcy trustee for the back mortgage payments and one payment to their mortgage lenders.

Beware That Chapter 13 Is Extremely Strict and Affects Mortgage Payment Requirements

Typically, the back mortgage debt is eliminated in three to five years. There for this bankruptcy option to work, people must make both payments every month. If they miss one or more payments in the repayment plan or current mortgages, then there are tough consequences. For example, creditors can petition the U.S. Bankruptcy Court to lift the automatic stay. If granted, the creditors are allowed to continue foreclosure proceedings. Also, the bankruptcy trustee can also request that the chapter 13 bankruptcy be dismissed for non-payment.

Seek Legal Assistance about Chapter 13 Mortgage Payments

Bankruptcy Lawyers are experts in handling chapter 13 cases. More importantly, they can help people obtain bankruptcy modifications if they need to stop making chapter 13 payments for a short period of time to focus on making mortgage payments.