If you are behind on your mortgage and file for
Chapter 13 bankruptcy, your plan will have to include your mortgage payments (“conduit
mortgage payments”). Prior to the enactment of an order that requires
mortgage payments to be made within a Chapter 13 plan, debtors were able
to make payments directly to their mortgage company without the need to
go through a trustee. Now, however, debtors have to pay a 10% fee for
each conduit mortgage payment they make to their bankruptcy trustee within
the plan. For some people, this added expense is a huge burden that could
cost them the success of their case.
While it may be possible to petition the court to be excused from conduit
mortgage payments, judges are not likely to excuse a debtor without truly
extenuating circumstances. If they do make an exception and allow you
to opt out, however, there isn’t much wiggle room. In order to succeed
in a Chapter 13 case, it is imperative that you make all of your payments
on time and in full. If you fall behind on your payments, your lender
will file for a relief from stay and they will be able to move forward
with foreclosure, which defeats the entire purpose of your bankruptcy
filing. If you are only a few months behind on your mortgage, the best
thing to do is to get current on your payments
before you file for Chapter 13.
Most mortgage servicers will waive all late fees while a debtor is in bankruptcy.
As long as you stay current with your repayment plan, you will not be
responsible for paying late fees incurred during the bankruptcy process.
At the end of your case, your trustee will file a Motion to Deem Current
to address the state of your mortgage and determine how much, if anything,
it still owed.
The Advantages of Conduit Payments for Filers
Conduit payments do provide some advantages for bankruptcy filers. For
starters, making payments to a trustee results in more accurate and reliable
accounting of payments. This is especially important if there are disputes
over payments, penalties, or the status of the loan at the end of the
case. Secondly, making payments to a trustee reduces the likelihood of
a mortgage company filing a motion to lift stay and pursue a foreclosure.
This is a big time and money saver because it reduces the time spent fighting
these motions and reduces legal fees associated with doing so.
Chapter 13 Bankruptcy Attorney in Dallas
If you have fallen behind on your mortgage payments and are considering
filing for bankruptcy, talk to a Dallas bankruptcy attorney at Allmand
Law Firm, PLLC. We can review your filing options and explain how Chapter
13 bankruptcy may save you from foreclosure. We can also help you understand
the Chapter 13 process and what will be required of you when it comes
to making your mortgage payments.
Schedule a
free financial empowerment session with us when you call (214) 884-4020.