Chapter 13 will only be successful if the debtor can make their regular mortgage payment each month going forward and put something away towards the arrearage states Itasca bankruptcy attorney. If the debtor can only make the current mortgage payment but can’t make the trustee payment, the case will get dismissed or the mortgage company will ask to be relieved of the bankruptcy protection. Likewise, if the debtor can only make the trustee payment but can’t make the current mortgage payment, then the mortgage company is going to come in on a Motion to Modify the Automatic Stay and ask that they not be prohibited from collecting and foreclosing on the home of the debtor. So bankruptcy Chapter 13 can work in many situations but there has to be an underlying reason why they fell behind in the first place.
If a homeowner could not make the mortgage payment based on budget or based on income and there hasn’t been any significant change or reason why they fell behind, then what is going to change after they file the 13? Remember, with Chapter 13 bankruptcy case is more than just one payment. It’s one payment to the Chapter 13 and it’s your current first and/or second mortgage payment on time once again going forward. Now, when I say going forward, I mean for the duration of the Chapter 13 bankruptcy case which could last anywhere from 36 to 60 months. So to file Chapter 13 bankruptcy and really make it work, a homeowner, a debtor has to have the ability to make not only the trustee payment but the post-petition mortgage payment from the date of filing the forward. If the homeowner is able to do that, the foreclosure case will be thrown out.
As long as the property has not gone to a Sheriff’s sale yet, Chapter 13 can be filed to save a home. Obviously the longer a case is in the foreclosure process; the higher the mortgage arrearage is going to be. The mortgage arrearage has to be paid back through the Chapter 13 plan within 60 months; the higher the mortgage arrearage, the higher the monthly payment to the trustee meaning the higher the difficulty in bringing the payment each month to the trustee.
Now, if somebody is working, the Chapter 13 payment can be made out of a payroll control order. A payroll control order is an order signed by the judge that is sent to the debtor’s employer by the trustee. The order dictates how much is supposed to be paid out of the debtor’s paycheck per pay period and sent to the Chapter 13 trustee for administration. As long as the debtor stays employed during the course of the Chapter 13 bankruptcy case, the payroll order will stay in effect and the Chapter 13 trustee will be paid. Those are the bankruptcy basics of Chapter 13.