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JoeLawyer
JoeLawyer, Attorney
Category: Bankruptcy Law
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Experience:  Attorney in the practice of Bankruptcy Law since 1996
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hi- i am trying to find out if filing 7 or 13 will stop

Customer Question

hi-

i am trying to find out if filing 7 or 13 will stop the foreclosure process on my home, keeping me in it?
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  JoeLawyer replied 4 years ago.
Chapter 7 normally only temporarily stalls a foreclosure, but Chapter 13 can permanently end the foreclosure.

When one files Chapter 7, the case is usually over in about 3 1/2 months. If there are any debts you want to keep, you reaffirm those debts by signing a reaffirmation agreement. So, people who want to keep their homes sign a reaffirmation agreement on their mortgages and keep their homes. However, banks won't usually consent to a reaffirmation agreement if the payments are behind, so keeping a mortgage in Chapter 7 when the payments are behind does not usually work. Once the bankruptcy is over, the foreclosure then continues.

However, Chapter 13 is designed to help a person stop a foreclosure and keep a home, even if payments are behind. Chapter 13 is where you take your mortgage arrearage and pay it back to the bank through a payment you make to the court over 3 to 5 years, called your Chapter 13 Plan. As long as you are catching up the mortgage arrearage through the Plan, the mortgage lender is REQUIRED to stop the foreclosure and give you the 3 to 5 years to catch up. In addition to the Plan payments, you normally have to immediately start making mortgage payments again though. If you fall behind on the mortgage once the bankruptcy case is filed, or if you fall behind on the Plan payments, the mortgage lender will get permission from the court to foreclose again.

You can read more about the differences between Chapter 7 and Chapter 13 HERE.

I hope this helps!

Joe

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.
Customer: replied 4 years ago.
hiya Joe- thanks for the info. a coupla more ?s:

"Chapter 13 is where you take your mortgage arrearage and pay it back to the bank through a payment you make to the court over 3 to 5 years"

my arrearage (meaning the amount i'm behind only, amount + with the lender's added fees, or the total loan amount, plus lawyer fees/addt'l fees for foreclosure?) is, currently, $12k (7200 in actual missed pymt.s; 6 mos). either the 12k +, as the process continues, or the 7200 i will have 3-5 to pay back, under 13?

"In addition to the Plan payments, you normally have to immediately start making mortgage payments again though."

would a loan modification be applied, and fall under, the restart of the mortgage pymts DURING the 3-5 yr Plan period?
Expert:  JoeLawyer replied 4 years ago.
The bankruptcy cannot modify the mortgage; it can only cure the arrearage.

However, you can pursue modification on your own outside of the bankruptcy. You have to contact your lender and stay on them until they produce or deny a modification; they usually have a tendency to not be too motivated to do it unless you call them daily to check progress.

So here are some rough guesstimates, hypothetically:

House arrearage $12,000
Attorney fees $3,000
Unsecured debt $1,000 (you have to pay as much as you can afford)
Ch 13 Trustee fees (normally around 7% of total) $1,120
TOTAL $17,120

$17,120 divided over 60 months = $286/mo.

So, hypothetically, if one only owed the amounts above and the amounts were accurate, one could file Chapter 13, immediately start paying the court $286/mo for 60 months to catch up the house and discharge all other unsecured debts, and immediately start making mortgage payments again in addition to the $286/mo.

Of course these amounts are estimates, they do not take into account other secured creditors or priority debts you might have, the Means Test can impact the amount going to unsecured creditors (so if you make too much money, the $1,000 going to unsecured debt above could turn in to, say, $20,000, massively upping the payment), and trustees fees and attorney fees vary WIDELY from district to district, but assuming the numbers above are close to accurate, then a Chapter 13 Plan might cost around $286/mo in addition to your mortgage. Some districts also make you pay the mortgage through the Plan if the mortgage is behind when you file, so this would massively impact the numbers (i.e. instead of having a Plan payment and a mortgage payment, you would just have a Plan payment that would be higher by roughly the amount of your mortgage payment plus the trustee fee, then the court would make your mortgage payment from the Plan payment, so you would only have one payment each month to cover it all - again this varies by district whether this is an option, required, or forbidden). I am not quoting this to tell you an amount to expect (it would be a major coincidence if my number was accurate), but to give you an idea of the how the math will work. You will need a lawyer to review your information and make a determination of how much a Chapter 13 Plan will cost for your particular case.

Any more questions, let me know.

Joe


LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.

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