Recently, Mike, a visitor on our website, sent us a query that might resonate with many facing challenges during Chapter 13 bankruptcy. Mike and his family are three years into their Chapter 13 plan. They’ve encountered difficulties with mortgage and property taxes. Mike writes, “We are not sure what to do or if there is any way to turn this around or do we let the house go.” His situation highlights the complexities of such cases. But there are some possibilities to help him and many others in the same position.
First Things First…
I commend Mike’s resilience in navigating through three years of Chapter 13 bankruptcy. At Westgate Law, we recognize the tremendous effort required to remain committed to such a challenging financial path. His dedication is admirable and reflects a solid determination to regain financial stability.
Understanding Chapter 13
This is often termed a reorganization bankruptcy, typically lasting 3 to 5 years. It mandates processing structured monthly payments to a court-appointed trustee, who then reimburses the funds to the creditors. People use Chapter 13 for several reasons, and it helps them manage debt more efficiently while giving a chance to safeguard the property.
Addressing the Current Dilemma
Mike has hit a rough patch; he’s past the halfway mark of Chapter 13 but needs to catch up on the mortgage. He also needs help to pay his real estate taxes. His case calls for immediate and strategic actions, and here are some options to consider:
Negotiate With the Lender
Attempting to catch up on missed payments can be challenging but necessary. It means making regular mortgage payments plus an extra amount that helps cover the arrears. It’s doable, but only if the financial setback is temporary.
Modification of the Loan
Contrary to what some might believe, loan modification is still an option during bankruptcy. It just needs court approval, and the lender can work on the modification while the bankruptcy is active.
If a representative insists on court approval even to discuss the modification, RUN! You only need that for the lender to finalize the modification, not to talk to you about it.
In Mike’s case, as he recently became delinquent, his two years of consistent payments post-bankruptcy positions him well for potential approval. Lenders often favor modifications for those who’ve made at least 12 consecutive mortgage payments post-bankruptcy filing, although exceptions can be made for fewer payment.
Incorporate Delinquent Amounts into the Bankruptcy
This option is rare, and a bit tricky, but possible and proves effective. It involves amending the Chapter 13 plan to include post-filing delinquencies.
So, Mike would want to continue with his mortgage payments as before, along with his plan’s payment. The payment to the trustee would increase, but he could spread out the delinquent mortgage payments over the remainder of the bankruptcy period.
Re-File For Chapter 13
If the situation demands, Mike can dismiss the current case and re-file for another Chapter 13.
If you, too, consider this option, make sure you’re talking to an experienced bankruptcy attorney to address any case-specific complexities. Competent legal advice is necessary before taking any action.
Convert to Chapter 7
This is one of the riskiest options but also the most viable. Converting to a Chapter 7 bankruptcy requires an individual to evaluate their eligibility. It also demands understanding the lender’s loan modification willingness inside Chapter 7.
The Bottom Line
In bankruptcy, it’s crucial to stay informed and proactive and seek expert advice to overcome obstacles. In Mike’s case, we believe a loan modification could be the most practical solution, considering his record of consistent post-filing payments. However, every case is unique, and we recommend seeking professional legal advice to device the best course of action.
Take Control of Your Financial Journey with Us
If you’re in a similar situation and ready for a financial turnaround, take the first step towards regaining control. Call Westgate Law at 844-330-9710 to schedule a consultation today and explore the pathway to financial freedom. Our experienced and highly skilled legal team is dedicated to providing you with the needed legal support in your debt management process. Book your appointment today to get started.