Why You Must Pay Your Mortgage Directly After Filing Chapter 13

If you are behind on your mortgage, you can use Chapter 13 to stop a pending foreclosure and repay missed payments over the 5 year term of your Chapter 13 plan. However, filing your Chapter 13 case is only the first step in saving your home.

In Atlanta area Chapter 13 cases, your repayment plan will include a section which says that you agree to send in your regular mortgage payments as they come due during the term of your Chapter 13 plan. Your Chapter 13 trustee payment includes payments to the mortgage company to repay missed payment. Ongoing, future payments, must be paid directly to the mortgage company outside your plan.

Making your mortgage payments directly to your mortgage lender is part of your plan obligations.  Both your mortgage payment obligation and your obligation to pay your trustee start immediately after you file your case.  In fact, you will not be able to get your Chapter 13 case confirmed (approved) by the judge if your post-petition mortgage payments are not up to date.

During the course of your case, if you fail to send in your ongoing monthly mortgage payments, several bad things will happen. First, there is a good chance that your mortgage lender will file a Motion for Relief from Stay and ask the bankruptcy judge to lift bankruptcy protection so the lender can restart foreclosure proceedings.

Second, your options to save your home will all but disappear.  Once a motion for relief has been filed, you cannot voluntarily dismiss your Chapter 13 and then refile – if you dismiss, you will not be allowed to refile for 180 days – plenty of time for the lender to complete a foreclosure sale.

Fortunately, most lenders will negotiate with you and your lawyer to allow you to catch up your delinquent post-filing mortgage payments. Obviously this will require cash flow but it is another opportunity to save your house.

Chapter 13 can be very confusing because of all the technical rules. The one thing that makes Chapter 13 work is money – payments to your Chapter 13 trustee and direct payments to your mortgage lender.

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