Fresh Start with Your Mortgage - Post Bankruptcy

The goal every debtor has after filing bankruptcy is simple—a fresh start!  Chapter 7 Bankruptcy offers a fresh start much quicker than Chapter 13 simply because the unsecured creditor’s debts are erased and allows you to pay for the debts you want to keep direct such as a mortgage or car payment.  In Chapter 13, a plan typically is five years where you repay all or part of the debt you owe.  The mortgage is usually paid direct to the mortgage company with any arrears included in the Chapter 13 plan.

Behind on Mortgage During Bankruptcy

One issue that arises with Chapter 13 homeowners is when the mortgage company asserts you are behind on your mortgage just when you are about to complete your Chapter 13 plan and will receive a discharge.  The last thing you want to happen is a surprise assertion that you are behind on your mortgage upon the eve of discharge!  The Bankruptcy Code does have a rule that should help you make sure the amount asserted is correct or gives you the opportunity to prove you are current.

Notice of Final Cure

Bankruptcy Rule 3002.1 provides that the Chapter 13 Trustee file a Notice of Final Cure.  In layman’s terms, the trustee should file a notice within 30 days after completion of the Chapter 13 plan that puts the mortgage company on notice that the Trustee has paid the arrears owed through the Chapter 13 plan.  The mortgage company should then file a Response to the Notice of Final Cure Payment (Rule 3002.1(g)) within 21 days of service of the Trustee’s Notice of Final Cure as to whether it agrees to the Trustee’s notice that arrears are paid and whether you are current on direct payments post-petition.  If the mortgage company fails to respond, the Court may preclude it from presenting the omitted information as evidence in any subsequent contested matter or adversary proceeding unless it finds that the failure was “substantially justified or…harmless.”  The Court can also award other “appropriate relief”, including reasonable expenses and attorney’s fees caused by the failure.

If you do not agree to the Response filed by the mortgage company, a Motion for a Determination of Final Cure and Payment (Rule 3002.1(h)) can be filed for the Court to rule on the contested matter.

Utilizing this Rule can prove to be very helpful in insuring you receive the fresh start sought in Bankruptcy.

Please call one of our Bond & Botes offices to help you find your fresh start!