What is better? 1st Mortgage In or Out of BK?

[bkause]

If you are able to keep your 1st current while planning BK is it better for you? Is it better to keep it outside the BK? Does that open more opportunity for modification if it is outside the BK?

Also we are planning to lien strip our 2nd. Should we consider it a credit card at this point and stop payment? It is with the same lender as our first and I highly doubt we will receive a foreclosure notice before we file.

Could it be better to have arrears as part of your payment plan to build up a safety net prior to filing and do some needed repairs on your home?

Anyone with a similar thread please chime in.

[lrprn]

If you are able to keep your 1st current while planning BK is it better for you? Is it better to keep it outside the BK? Does that open more opportunity for modification if it is outside the BK?

First, since all debt (including mortgages) are included as debt when filing Ch 13, let's discuss what "inside" and "outside" Ch 13 typically mean.

Keeping your mortgage "inside" means your trustee makes your mortgage payment directly to your lender for you.

Keeping your mortgage "outside" means you make your own mortgage payment to your lender directly.

Most lawyers say it's best to make your own mortgage payments directly "outside" the plan, and here's why.

Your Ch 13 trustee is taking a % of your monthly Ch 13 payment as an administrative fee - that's how Ch 13 trustees get paid for their work. What % is taken is set by each bk district.

Let's say you are in a district that takes a 10% fee out of your monthly payment like ours does, and that your monthly mortgage payment is $1000.

For your trustee to make your mortgage payment for you, when your monthly Ch 13 payment is calculated, it will include the $1000 for the mortgage payment PLUS $100 to cover the 10% monthly trustee admin fee.

Why would you want your trustee to get $100/month for something you can do yourself?

A few districts require certain secured asset payments to be paid by the Ch 13 trustee, so check with your lawyer to see if yours is one of them.

[krielly]

While the trustee in that case described would get $100/mo for making the mortgage payment, it really has no impact on the debtor. The plan payment will be $XX/month, regardless of how it's divied up.....

If the $100 of a debtors payment is going to the trustee, or to unsecureds, it really makes no difference to the debtor one way or another, right???? (from that respect anyhow).

The only exception I see to this would be if the debtor's plan calls for 100% payback, then that is different.

We pay our payment outside of the plan. I am glad we do, but I also see a benefit to some who include it, if they feel they might have a hard time being disciplined about paying a mortgage AND a plan payment. I think some folks might like the "one payment" approach.

K