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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 38120
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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If my chapter 13 says 0 % interest on my current mortgage does

Customer Question

If my chapter 13 says 0 % interest on my current mortgage does that mean that my balance goes down by the full amount of the current payment?
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 5 years ago.
Yes, that's what it means. A Chapter 13 secured creditor is entitled to the discounted value of the debt as of the date of filing of the bankruptcy petition, paid in full over the course of the plan. So, if you owed $100,000 payable at 6% over a remaining 25 years, with $800 per month payments, and your plan is 60 months, then the discounted present value of the loan is $156,201.84. Divide that by 60 gives $2,603.36 per month, at 0% interest.

There are other ways to cure a defaulted mortgage in Chapter 13, but since you are stating 0% interest, I'm providing the most likely rationale for your plan provision.

Hope this helps.


And, if you need to contact me again, please put my user id on the title line of your question (“ToCustomerrdquo;), and the system will send me an alert. Thanks!

socrateaser and 2 other Bankruptcy Law Specialists are ready to help you
Customer: replied 5 years ago.

Sorry, but I'm still not quite understanding. This is the example. My mortgage amount was $271,000.00 to start. The monthly payment is $1,909.00 per month. The interest column says 0. To date it states I have paid approximately $93,000.00. So is my current loan balance the $271,000.00 minus the $93,000.00. I realize you don't have all the facts of my case, but I interpret that as yes, since it doesn't say I currently owe any interest. Hope I'm explaining that okay. Thank you.

Expert:  socrateaser replied 5 years ago.
Hello again,

When I run the numbers, nothing jumps out as obviously correct. If I assume 0% interest, 271,000-93,000 = 178,000 as your remaining loan balance, and a payment of 1909, then that leaves ~93 more payments, which is longer than a 60-month plan.

I'm guessing that you have a balloon payment at the end of the plan to pay off the rest of the amount (unless this mortgage is a 2nd TD, and your 1st TD balance is greater than the property's fair market value -- which means that the plan is proposing to strip the 2nd TD and make it unsecured, and any balance not paid by the end of the plan will be discharged).

Hope this helps.


And, if you need to contact me again, please put my user id on the title line of your question (“ToCustomerrdquo;), and the system will send me an alert. Thanks!

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