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Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 31733
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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Hello My question is We have been in a chapter 13 for 17

Resolved Question:

Hello: My question is: We have been in a chapter 13 for 17 months. No late payments to either chapter 13 trustee or Mortgage Co. At time of the Chapter 13 our rate was 4.9%. We just received notification that they are saying we are behine on our payments due to the rate change going up to 7.50% and they want to forclose. We were never notified of this rate change. We have to go back to Bankruptcy court. Our attorney we had does not know much about chapter 13 and our fault for hiring him but the price was right. Any legal advise when we go back to court?? Can theyjust forclose becaluse I did not know about the interest rate going up??
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  Roger replied 8 years ago.

The mortgage company cannot foreclose just because of a rate change. It can only foreclose if you fail to make the mortgage payment.


If the mortgage rate changed without you being notified, and your payment was not enough because of the unknown rate change, the court should not penalize you for that. You should have been notified.

Customer: replied 8 years ago.
What can they do? If they say because of the rate change - I was 200.00 short a month for about 6 months - what happens to the monies theysay I owe. Thanjs
Expert:  Roger replied 8 years ago.

You're in default if your payment is $0.01 short. Thus, you're techincally in default by shorting the payment unknowingly.


You should maintain that you were unaware of the rate change - nothing was sent to you by the creditor indicating that the rate had changed.


The creditor is going to claim that it could not contact you because of the automatic stay.


However, I believe the judge would find that you were paying in good faith and didn't know more was due. He will likely just order that you pay up the unpaid balance within a specified period of time and keep the note current.


Even if the stay was lifted to allow the bank to foreclose, you could get it out of bankruptcy by either paying the note current or refinancing.

Customer: replied 8 years ago.

Thanks for your feedback. One more question? When we filed for the chapter 13 - they took every penny we had to figure out the payment every month. Doesn't the chapter 13 law protect us against the interest after the chapter 13. ?? The mortgage is 370,000.

Are you saying that we would have to pay the note not to get penalized???

Expert:  Roger replied 8 years ago.

Generally, Chapter 13 repayment plans are interest free.


What I'm saying is that technically, you're in default. However, you've been making good faith efforts to pay your mortgage every month, and the only reason you're in default is because the interest rate increased unbeknownst to you. Therefore, I don't think the judge would penalize you and allow the bank to foreclose without giving you some time to catch the house up by paying the amount for the note increase and letting you keep your house.

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