Chapter 13 and Mortgage payments

[greenthinker]

Hi Everyone,

My wife and I are meeting with an attorney tomorrow about filing Ch 13. We are above the median income in our state (Washington), so it definitely will be Ch 13, and our income would require the 5 year plan.

We are three payments behind on our mortgage due to my previous unemployment, but I am able to show stable income for the past 6 months. I want to proceed with the Ch 13 because of our huge amount of credit card debt, but I am not so sure that I want to use the Ch 13 plan to catch up on the mortgage. The lender will supposedly give us up to two years to catch up on the arrears, which would make the payments approximately the same as they would be through the Ch 13 due to the administrative expenses of the Ch 13. The difference is that it would take only two years outside the plan, but it would take 5 years through the plan and cost us much more over the life of the plan.

So, my question is this: If we are behind on our mortgage payments, do we HAVE to pay the mortgage and the arrears through the Ch 13 plan? Or, can we deal with that outside of the plan? And, if we could pay it outside of the plan, would it be a good idea to do so? Taking the route that saves the most money seems like the best idea to me, but I wouldn't want to do something that leaves us in a vulnerable position with our mortgage servicer (Bank of America).

Any thoughts or advice would be appreciated! Thanks!

[despritfreya]

Unless you have an iron-clad written agreement for the cure of the default, your Chapter 13 Plan must and should provide for the cure of the pre petition default. The lender, once the case is filed, IS NOT going to work with you outside the context of the Plan to simply cure the arrears (as opposed to seeking a loan modification). It will file a Proof of Claim that will include the arrears and, if your Plan is not properly funded, may require an increase in Plan payments.

[NoTomatoCan]

So, my question is this: If we are behind on our mortgage payments, do we HAVE to pay the mortgage and the arrears through the Ch 13 plan? Or, can we deal with that outside of the plan? And, if we could pay it outside of the plan, would it be a good idea to do so? Taking the route that saves the most money seems like the best idea to me, but I wouldn't want to do something that leaves us in a vulnerable position with our mortgage servicer (Bank of America).

Any thoughts or advice would be appreciated! Thanks!

I agree with Desprit. Too risky and too many variables to keep it outside the plan.

Also, you mention keeping it outside the plan will save money... are you in a 100% payback? If not, are you sure that paying the trustee admin fee on the arrears isn't just taking away from your unsecured creditors (and is cost neutral for you)?

[greenthinker]

Thank you, despritfreya and NoTomatoCan for your replies. You both reinforced what I already thought, which is that dealing with the mortgage outside the plan is too risky. We have not filed yet, but I am sure that we're going to end up with 100% payback because my disposable income is considerably higher than what would be required for 100% payback. We will save tens of thousands of dollars on credit card interest through the plan, but that will be offset somewhat by the admin fees of paying the mortgage and arrears through the plan. But, that's just the way it goes...I think we're still going to be grateful for the Ch 13 benefits.