It's unfortunate, but sometimes debtors in Chapter 13 bankruptcy make all of the required payments to the bankruptcy trustee only to hit with a mortgage notice at the need of their bankruptcy saying that they are thousands of dollars behind in payments. How can this happen?
There a few causes of this type of mortgage snafu in bankruptcy:
- Sometimes mortgage companies will accrue late fees from every month that the debtor is in Chapter 13 bankruptcy. While mortgage companies are allowed to apply these charges if the bankruptcy case is dismissed, withdrawn or converted to Chapter 7 bankruptcy , they cannot charge the fees if the debtor has actually completed their Chapter 13 bankruptcy. If a debtor is being charged fees after the successful completion of their Chapter 13 bankruptcy, they may be able to have the charges reversed with the help of their bankruptcy attorney.
- The debtor's mortgage is an adjustable rate mortgage (ARM) and payments increased while the debtor was in Chapter 13 bankruptcy. However, the mortgage company did not report the increase to the debtor, the bankruptcy trustee or the bankruptcy attorney. Because of this omission, the bankruptcy trustee has underpaid the mortgage leaving the debtor with a whooping mortgage delinquency at the end of their Chapter 13 bankruptcy. If this is the case, the debtor may be able to work with their bankruptcy attorney to have the charges removed.
- There may have been changes to the debtor's escrow payments for insurance and taxes while they were in Chapter 13 bankruptcy. Changes in the amount of money a debtor needs to pay for insurance and taxes must be reported to the bankruptcy court. If they are not reported and the mortgage company pays the charges on the debtor's behalf they will hit the debtor with a large bill at their end of their Chapter 13 bankruptcy case. This type of mortgage snafu may also be resolved by with your bankruptcy attorney.
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