As a South Holland bankruptcy attorney, I have to advise clients as to what happens if a debtor fails to make a post-petition mortgage payment or fails to make a Chapter 13 plan payment. What happens is the mortgage company can bring a motion to modify the automatic stay or a motion to dismiss the Chapter 13 bankruptcy case for failure to make timely payments. The motion has to be brought before the bankruptcy court and notice must go to the debtor, the debtor’s attorney, and to the trustee. The case will come before the judge, and the debtor will have an opportunity to cure the default and get current. If the debtor cannot cure the default and get current on the first court date but he does have something towards the arrearage, then the court may, upon request of debtor’s Chapter 13 bankruptcy lawyer, put the matter over to another date, typically two to four weeks down the road. If on that second date, the debtor can become current, then the trustee will likely withdraw the motion and a default order will be entered.
The default order protects the creditor in that the creditor does not have to bring another formal motion to modify the automatic stay should the debtor fall behind in the future. The default order provides that the mortgage company can send notice to the debtor once the mortgage company is aware of a default, and the debtor will have typically 14 days to cure the default. If the debtor is unable to cure the default within the 14-day notice period, then the mortgage company can submit an order modifying the stay to the court for entry without hearing. Typically the debtor will get current with the mortgage company, and typically the debtor will be able to cure the default upon 14 days’ written notice that there is a default. This is true for an individual bankruptcy case and a joint bankruptcy case.
If the debtor is unable to cure the default and the stay is modified, then the mortgage company has the right to continue with foreclosure and pursue the debtor and the property. The debtor may actually want the case to be dismissed at that point so that he can refile a new Chapter 13 bankruptcy case and put the mortgage company who has opted out of the old bankruptcy case back under the protection of the current bankruptcy case. If a second bankruptcy case is filed within one year after the first case is dismissed, then the stay has to be extended; otherwise, the stay will expire after 30 days. A qualified Chapter 13 bankruptcy attorney is going to know how to bring that motion within 30 days to extend the automatic stay. If the motion is not brought within the 30-day period, then it cannot be brought at a later date. If the motion to extend the automatic stay is not brought, then the creditor can pursue the collateral once they bring a typical motion to modify the automatic stay.
For the best advice, contact a local bankruptcy lawyer who handles Chapter 13. If you cannot find an attorney, I would suggest that you contact your local bar association.