Chapter 13, Post-Petition Mortgage, and Forbearance

[flashoflight]

I know that mortgage payments have to be made throughout the plan. Not making the mortgage payment results in a relief from automatic stay and a material breach of the confirmed plan. So you lose both the discharge and the house. I'm unclear on the rules for forbearance and CH13, but I'm too chicken to try it out to pocket some mortgage payments in my savings account and will simply refinance out of the current mortgages.

But what happens when the original pre-petition mortgages are extinguished in favor of a new post-petition mortgage?

1) Can I be 1 or more months behind on the brand new post-petition mortgage at the end of the plan and still get the discharge?
2) Will strategic forbearance on the brand new post-petition mortgage be a way to free up money to pay the trustee? Looking at covid forbearance a form of insurance to do anything possible to get to the finish line even if there is a huge drop in income.

There is also the concern that I will not be able to convince/coerce the lender to take my preferred forbearance option which is to stick the arrears at the end so it would be risky to do strategic forbearance. Forbearance could make it more difficult to do another refinance.

I would welcome any thoughts on this.

[flashoflight]

bump to the top above the locked thread

[justbroke]

But what happens when the original pre-petition mortgages are extinguished in favor of a new post-petition mortgage?

The creditor would need to update their claim so that they don't continue to get paid. This requires some coordination and the debtor may need to poke the creditor. If the arrears are cured as part of the refinance, need to make sure the claim is updated and accurate.

1) Can I be 1 or more months behind on the brand new post-petition mortgage at the end of the plan and still get the discharge?

That's a question for the Chapter 13 Trustee. Technically the mortgage wouldn't be part of the Chapter 13 so you are not receiving the benefit of the (automatic) stay provisions in a bankruptcy.

2) Will strategic forbearance on the brand new post-petition mortgage be a way to free up money to pay the trustee? Looking at covid forbearance a form of insurance to do anything possible to get to the finish line even if there is a huge drop in income.

I don't know why anyone would want to pay the Chapter 13 Trustee any more money. Those over-the-median have to be careful as the Chapter 13 Trustee will just say "thank you and keep paying until the end." Most people would consider a conversion to a Chapter 7, a hardship discharge, or just a dismissal designee on circumstances. I don't see paying extra money to the Chapter 13 Trustee helping at all.

My opinion, you would be better off taking the payments which were in forbearance and building an emergency savings.

There is also the concern that I will not be able to convince/coerce the lender to take my preferred forbearance option which is to stick the arrears at the end so it would be risky to do strategic forbearance. Forbearance could make it more difficult to do another refinance.

Yes, forbearances are risky. Many result in foreclosure if the lender does not also do a modification of the mortgage (putting the payments at the end).

Just my thoughts. Don't take them as action items!

[flashoflight]

Yes, forbearances are risky. Many result in foreclosure if the lender does not also do a modification of the mortgage (putting the payments at the end).

Just my thoughts. Don't take them as action items!

I would love to do a strategic forbearance but yeah I'm too scared it will backfire on me. My planned refinance already gets me 2 skipped mortgage payments without all the headaches of forbearance. Hopefully someone more brave or more desperate than me will try forbearance with ch13 and let us know how it went with the trustee.

[akfugatt]

We are with loancare and on our house that we bought during 13 we utilized the forebearnce option. Just contacted loancare and told them we wanted the amount placed at the end and there response was no problem. They overnighted paperwork, we signed it. So in our case it was easy but once again house was bought during chapter 13 so it is not included

[justbroke]

akfugatt that's more a modification than a normal forbearance. Normally, a forbearance only excuses payments for a certain period of time (a few months), but then that all comes due after the forbearance period ends. A modification allows the payments to be either refactored into the loan (re-amortization), or added as additional payments at the end of the loan (lump sum or extended term).

It's pretty cool that your servicer has a very simple process. I think that the COVID-related changes to GSE backed mortgages (government sponsored entities like FNMA, FHLMC, USDA, VA and FHA) have helped make these forbearances much easier.

[flashoflight]

FHA forebearance ended Jun 30 so that ship has sailed for me. No more strategic forebearance for me.