Mortgage company objecting to plan confirmation because of escrow shortage

[PurplePanda]

I emailed my attorney about this and am waiting for a response. I am just interested to see if this has happened to anyone else. My confirmation hearing is scheduled for next month. My mortgage payment was not included in my initial plan and I was not aware of an escrow shortage. My mortgage company filed an objection and is requesting that my plan be amended to include my mortgage payment, or else be dismissed or converted.

Would it be possible for me to pay the escrow shortage to avoid this? I would prefer to pay my mortgage directly and keep it out of my plan.

Thank you!

[justbroke]

Is there some particular reason that you care about paying "outside" the plan? Paying inside the plan, unless you're in a 100% plan, costs you nothing, but provides you with protection. The protection comes because a.) anything paid outside the plan is not subject to the stay, and b.) any late payments by the Trustee are still considered on-time payments no matter how late the Trustee pays them.

That's just my thoughts on how the stay can be an advantage.

I don't think there should be any issue with you paying the shortage immediately... with consent of your attorney and notice to the Trustee. (Even though I don't think there's one, the question is whether it's an antecedent debt that came about before you filed. It will depend on how they -- the Trustee -- treat that escrow shortage.)

[PurplePanda]

Is there some particular reason that you care about paying "outside" the plan? Paying inside the plan, unless you're in a 100% plan, costs you nothing, but provides you with protection. The protection comes because a.) anything paid outside the plan is not subject to the stay, and b.) any late payments by the Trustee are still considered on-time payments no matter how late the Trustee pays them.

That's just my thoughts on how the stay can be an advantage.

I don't think there should be any issue with you paying the shortage immediately... with consent of your attorney and notice to the Trustee. (Even though I don't think there's one, the question is whether it's an antecedent debt that came about before you filed. It will depend on how they -- the Trustee -- treat that escrow shortage.)

I am not sure what my plan is referred to, it's probably more of a zero percent plan, if that's even possible? I am below median, I have high monthly expenses with mostly unsecured credit card debt. I also have my secured mortgage and a secured vehicle payment. I don't think much of anything will be paid to the unsecured creditors. But, if there is an escrow shortage, will that change things and force an increase in my payment? I already have almost no disposable income and my proposed plan payment is low.

It doesn't make much sense, but I think it's about feeling a sense of control. Logically, I know that I have no control over any of this, but having the ability to pay the mortgage myself, within my allowed grace period, has some kind of psychological benefit.

[justbroke]

Hopefully you won't run into any trouble paying the mortgage directly as some members have had issues with the creditor not accepting payments at first. It's eventually worked out. It reads as though you're in a Chapter 13 solely due to unsecured debt and you're paying back very little to those creditors. I was in a similar Chapter 13 but my home was paid in plan (due to escrow issues as well), and my tax debt was paid off.

Just let your attorney know that you prefer not to pay the mortgage in plan and you'd like to settle the escrow shortage.

[PurplePanda]

Hopefully you won't run into any trouble paying the mortgage directly as some members have had issues with the creditor not accepting payments at first. It's eventually worked out. It reads as though you're in a Chapter 13 solely due to unsecured debt and you're paying back very little to those creditors. I was in a similar Chapter 13 but my home was paid in plan (due to escrow issues as well), and my tax debt was paid off.

Just let your attorney know that you prefer not to pay the mortgage in plan and you'd like to settle the escrow shortage.

Thanks, justbroke. I have talked with my mortgage company already and was advised that I can make payments by phone, mail or even by automatic payment from my bank account. Hopefully my attorney confirms what you said and that I can pay the shortage directly.

I am in a Chapter 13 because of my home equity. I need to keep my home and I cannot risk losing it. Because of crazy high home values and the rigid Chapter 7 trustees in my district, I was advised to go this route. I am very familiar and educated about the the Chapter 7 process but this is all very new to me. I have many questions and so much anxiety about this process. I am overwhelmed.

Thanks, again, for your helpful advice. Much appreciated.

[flashoflight]

I am not sure what my plan is referred to, it's probably more of a zero percent plan, if that's even possible? I am below median, I have high monthly expenses with mostly unsecured credit card debt. I also have my secured mortgage and a secured vehicle payment. I don't think much of anything will be paid to the unsecured creditors. But, if there is an escrow shortage, will that change things and force an increase in my payment? I already have almost no disposable income and my proposed plan payment is low.

It doesn't make much sense, but I think it's about feeling a sense of control. Logically, I know that I have no control over any of this, but having the ability to pay the mortgage myself, within my allowed grace period, has some kind of psychological benefit.

1) Your payment will increase due to resolving the escrow shortage and the 10% trustee's fee. Plus you are buying mortgage protection services from the trustee. So no worries about a motion for relief from stay. If you are direct pay, the lender will play games with your mortgage. Both of mine did.

Another advantage with your mortgage going through the trustee is you can probably get away with paying the trustee late even though you're not allowed to, I've heard it takes at least 1-2 months to get a motion to dismiss unless you're on strict compliance. Check with your lawyer on local practices of your trustee. The date the trustee makes the payment doesn't matter even if it is 30-60 days late. If you are going to be more than a week or two late on the trustee payment, let your attorney know what is going on. He has more options the earlier you tell him. The options dwindle if you wait a month or two and your lawyer may not be able to convince the trustee to delay filing the MTD.

2) I strongly recommend you avoid using the grace period if direct pay. The real due date is the 1st. The last day to pay without the late fee is the 16th, but you are still 16 days late. 30 days late is just 2 weeks beyond that. If you get a motion for relief from stay in your case docketed, you will be subject to a 180 day bar on refiling and it will cost you legal fees to fight the RFS with no way to finance the legal fees due to the 0% plan. If you use the extra 16 days this month, you don't get any more benefit from the grace period until you start paying on the 1st again. You can use the grace period to resolve a cash flow problem because they're aren't filing the RFS for using the grace period, but plan on paying on the 1st.

I guess the bottom line is if you foresee the need to use the grace period frequently, think about paying the mortgage through the plan instead. It will buy you a lot more time and protection.

[crazytimes]

My home was included in the Ch13 due to a projected escrow shortage I was not aware of. I did not include my home loan in the ch13 but they some how added themselves stating there was a shortage. I paid my home loan outside the plan and the trustee paid the small amount of the shortage. I don’t know how that happened but it did. It is all clear now and last week I received a check from the trustee for almost $5K due to escrow over payment.