Chapter 13 will allow that homeowner to stop a foreclosure sale and stop a foreclosure proceeding right in its tracks states Mazon bankruptcy attorney. It basically says to the mortgage company, we are able to make our regular mortgage payment on time again and we’re going to pay you the part that we fell behind over the next three to five years and, as long as we make both of those payments, you have to accept our Chapter 13.
Chapter 13 bankruptcy is a difficult case because, not only are you making your regular mortgage payment again, but you’re making an additional payment to a Chapter 13 trustee who is going to pay that mortgage company the arrears back over the course of three to five years. Since we’re talking about a long case, the debtor has to be perfect in their payments to both the mortgage company directly and to the trustee. The trustee payment is made typically through a payroll control order where the money is extracted from the debtor’s payroll depending on whatever their pay frequency is. As long as the debtor stays employed we know, as their attorney, that they’re going to be able to make their bankruptcy Chapter 13 trustee payment.
The next question is can they make their post-petition mortgage payment directly to the mortgage company on time each month. Remember, you have to make both the regular mortgage payment plus the trustee payment on time for the next three to five years to have a successful Chapter 13 reorganization.
If you fall behind on your post-petition mortgage payments, the mortgage company is going to come in on what’s called a Motion to Modify the Automatic Stay. That motion has to be filed with the court and notice sent out to the debtor, the debtor’s bankruptcy lawyer and it has to be set out on a specific date with advance notice.
On that first court date, several things can happen. First, the debtor can either become current on their post-petition mortgage payment and cure the post-petition mortgage default on their own; two, the debtor can come up with a partial payment and we can work out a default repayment order to pay the rest; third, the debtor can come up with nothing, with no hope of ever repaying the mortgage arrears post-petition and the stay can be modified.