For a lot of people, Covid-19 or other issues may have caused you to fall behind in your mortgage payments. Perhaps the mortgage company allowed you to miss a few payments and now they are asking you to catch up and they’ve demanded a large catch-up payment. For whatever reason you may have, a Chapter 13 bankruptcy may be able to allow you to catch up on those missed payments and spread them out over a period of 36 to 60 months. Losing your house in 2021 would be devastating. First, there is the cost of relocation. Then, you’ll be shocked at the cost of rental in 2021. Whether you’re in Chandler, Gilbert, Scottsdale, Phoenix, Mesa, Tempe, Peoria, Goodyear, Litchfield Park, or anywhere else in Maricopa County or beyond, the rents have skyrocketed as much as the costs of houses. If you’re behind and need a Chapter 13 to help you keep your house, here is how that works:
Upon filing a Chapter 13, you would stop paying the mortgage directly to your mortgage company or mortgage servicer and, instead, you would make a payment to the Chapter 13 Trustee, instead. The first payment is due 30 days after you file your case. The mortgage company will then file a claim in your bankruptcy case indicating what the current payment is and how much you are behind on your mortgage. The amount that you are behind is called “arrears.” I often hear people call it “in the rears,” though, and it makes me secretly snicker. They may also file what is called a “Notice of Post-Petition Mortgage Costs and Fees” and THIS is really where they get you in the rears because these expenses are an absolute joke. Sadly, we are stuck with these stupid fees and they are usually $600-1,200 for reviewing the Plan, filing a claim and basically picking their nose.
Once these are filed, this is how the claims are classified and paid. First, the plan will propose that the mortgage is paid through the trustee and he adds his 10% trustee fee. Therefore, a $2,000 mortgage payment would become $2,200. The arrears and the post-petition fees are classified as secured claims and get paid without interest over the duration of your plan. If you have $6,000 in arrears and post-petition fees, that adds about $100 to your plan payment.
Obviously there are a lot of other factors that go into determining what your plan payment will be like your disposable income and other claims that are required to be paid (taxes, car payments, attorney fees) but this is a simplified explanation of how a Chapter 13 can help you save your house from foreclosure.
This portion includes any amount that you are behind in your mortgage up until the date of filing your case. Please note that, while many people think that they have until the 10th or 15th of the month to pay the mortgage without being late, the due date for every mortgage that I have seen is actually the first of the month. The end of the grace period is not relevant. So, if you haven’t paid the mortgage and the check hasn’t cleared by the day your case has been filed, that month’s payment will be added to the arrearage. Not a big problem, though.
If you were behind on your mortgage payment, the bankruptcy court in Arizona require that future mortgage payments be paid through the Trustee. This is a conduit payment. This is the portion of the claim for the regular post-petition mortgage payments commencing as outlined in your original, amended or modified Chapter 13 Plan. This claim will be paid by the Trustee immediately to ensure that there is no delay in the payment of your regular post-petition monthly mortgage payment. Therefore, it is extremely important that you are current on your plan payments to ensure that there is adequate money in your trust account so that the Trustee can send the mortgage company or servicer your monthly mortgage payment. If you fall behind in your plan payment, there may not be enough money to make the mortgage payment. Also, the trustee only sends out checks once a month, so if your funds aren’t in the trust account when he is sending out checks, the mortgage will not get paid until there is enough money in the account.
Until your case is confirmed, the money you send the trustee goes into a trust account. While the trustee will take his fees from your payments, and will pay the mortgage, most of the remaining funds will remain in the account until the case is confirmed and the judge approves disbursing all of the funds in your trust account.
The Trustee is the employee of the court that is in charge of overseeing your case. He receives the funds from you and deposits them into your trust account. He will pay the mortgage if you have a conduit case. He will also pay secured debts, your attorney, the pre-petition taxes that are not dischargeable. You can even check to see the status of all of the claims online at www.ndc.org but I wouldn’t recommend calling or emailing the trustee. They have a TON of cases and they are represent the creditors more than they represent you.