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In Chapter 13, Keep Track of Your Mortgage Payments

In Chapter 13, you need to keep a chart of when you make your mortgage payment.

Now that you have filed Chapter 13, you need to keep a monthly chart of your mortgage payments. Over five years missing a payment or two can be easy to do and lead to disaster.

So start that chart, NOW.

Outside of Chapter 13, most people rely on the mortgage company to send accurate bills and to properly apply their payments.  In Chapter 13, you can’t count on that. Your account goes to a special handling department, where things often get messed up.

When you are in Chapter 13, the mortgage companies are required to keep track of your payments in two ways.  They track your current payments from when the Chapter 13 was filed.  And they track the catch up payments (if you are using Chapter 13 to catch up) that they get from the Chapter 13 Trustee.  They sometimes don’t do a good job of either. So you need to know exactly what payments you have made, in case the mortgage company messes up.

When you forget a payment, the mortgage company won’t call

If you forget a payment, the mortgage company won’t call and yell at you.  (Under the bankruptcy law they are not allowed to ask for a payment—reminding you that you’re late is asking for a payment. That’s not allowed.) Since you can’t count on the mortgage company to remind you, be sure to remind yourself.

If you stop getting your mortgage statements, please let me know.

For reasons known to them, sometimes the mortgage companies stop sending mortgage statements when you file Chapter 13. Regulations from the Consumer Finance Protection Bureau make it clear they are supposed to keep sending them.

If necessary, I’ll remind them,  And I’m looking for the right case to get this problem in front of the right judge.

In Chapter 13, do NOT send the mortgage company partial payments.

If you are a little short of money, it’s tempting to send a partial payment.  Don’t do it.  Wait until you have a full payment and then send a full payment.  That way if you are a month behind you know—and they know—you are a month behind.  When you send partial payments, both you and the mortgage company can lose track of exactly where you are.

If you slip behind, please tell me.

Too often, the first I hear someone is behind is when the mortgage company asks the bankruptcy judge for permission to foreclose.  (That permission is called “Relief From the Automatic Stay.”) Then we’re trying to work out a plan on an emergency basis. It’s much better if we start to work out a plan when we have enough time.

Chapter 13 Mortgage payment chart

Unless you are keeping track, you could slip three or four payments behind over five years and not notice.

Usually the mortgage company in Chapter 13 will just let you slide if you are two or even three payments behind.  If you skip a payment—then a year later skip another—and one after that, suddenly you are four payments behind and they are asking the bankruptcy judge for permission to foreclose you.

“Four!?!?  How can I be four payments behind—I know I’ve made every payment this year except for the last one.”  They let skipped payments here and there build up and then they hit you—and me—with a big problem all at once.

We can try to work out a catch up agreement

When the mortgage company goes running to the judge, they really don’t know what the judge will say. And I really don’t know either.  So the pressure is to work something out—if there is any way to work it out. Often there is.

At that point the chapter 13 trustee can get involved.  He can ask the judge to turn down any agreement we have with the mortgage company.  “If you can afford a catch-up payment, why haven’t you been paying more to the court?”  Or, “Since they haven’t been making the mortgage payment all along, shouldn’t they get tossed out of Chapter 13 and start over.”  The Chapter 13 trustee can object for any angle—and he often does.

You really need to be current by the end of your chapter 13 plan

A lot of judges all over the country have been saying you haven’t actually completed your Chapter 13 plan, if you have missed a payment with your mortgage company. (A judge in Norfolk VA was one of the first ones to say this.)  And since you didn’t complete your Chapter 13 plan, all the debts—or at least the interest on all the debts—comes back to life.

The judges here in Alexandria VA have been turning a blind eye to that legal theory. But they can’t ignore it forever and it would be really, really painful to get hit with it.