Question regarding modification of Chapter 13 bankruptcy plan.

[stiller71]

Hello, I have a question. My bankruptcy that I filed back in 2019 is about to be discharged. There is a section in the proceedings that is asking me to surrender my house over to my mortgage company. Based off some research, I found out that if I surrender my home to the mortgage lender, then I will be giving up all my rights to my home including ownership. I do not want to surrender ownership of my home as it took me 20 years to even buy a home. Is there a way I can still do the discharge while maintaining ownership of my property? I am a US Veteran and got my home through the GI Bill.

Something about this whole deal isn't sitting right with me. I fought long and hard to maintain my payments and yet all that seems to be for naught.
Any answers anyone can give me would be greatly appreciated.

[justbroke]

Have you been making consistent and on-time mortgage payments throughout your Chapter 13? Generally speaking you will still own the property. The only way to take away your ownership rights, at least in Florida, is for a foreclosure lawsuit to be filed and for the foreclosure to be granted and the property sold. There is something in the filing known as the Statement of Intentions (SOI) and that may say something like "retain and pay" or "surrender." It looks like surrender may have been the intention but it's not what you did.

As I see that you have maintained your payments I would say that you are just looking at the SOI and it is meaningless at this point. Just keep doing what you are doing by paying on-time and maintaining your hazard insurance. If you want that form explained in more detail you'll have to see your attorney. I'm pretty sure you're looking at the SOI form.

Let me say this. If your mortgage and home are "provided for in the plan" -- which means that it says that you are keeping the home -- then the plan wins. A confirmed Chapter 13 plan is the last word on property and payments. If it shows you keeping the home and paying, then the plan wins, regardless of what the SOI reads.

[stiller71]

I have been maintaining my payments for almost 5 years but this past May, all that changed when I made the mistake of trying to do a loan modification. I claimed a hardship and asked that my payments be lowered. Yet instead of granting that, they redid the loan modification and raised my payments another 200 dollars. I called in and asked them to reconsider the amount as I couldn't afford that, but they claimed it was raised due to an escrow shortage. I'm pretty this would have never been the case had I not try the modification.

In any case, I signed the paper, but they turned around and denied the modification, claiming they never received the paperwork. So, I assumed the payment wouldn't change as a result and resumed my regular payments. When they instructed me to redo the modification, I changed my mind because I discovered the raised payment was more of a result from the raised rates than anything. But again, they acted with haste. They reopened the modification and approved it thus raising my payments. Again, they claimed it was due to an escrow shortage when there was none before. Now I received a notice from my bankruptcy attorney claiming that my mortgage lender filled a motion for release of my property. Claiming that I failed to honor the doomsday payments we had arranged which was not true. See, after they did the modification, I was told I was now current on my mortgage so how can I be in default of a doomsday payments arrangement when there was none because of the modification? Now my lawyer wants me to surrender my home during the discharge of my bankruptcy, but I don't want to surrender my home. I still want to discharge the bankruptcy but want to retain ownership of my home.

Not sure what I can do.

[despritfreya]

You cannot "assume" anything. If you failed to comply with your mortgage modification and/or the original mortgage loan, you are behind in payments. This is not necessarily a bankruptcy issue as if one fails to pay the mortgage, at some point, the lender has the right under State law to foreclose.

The lender filed a Motion for Relief From the Automatic Stay due to delinquent payments. You need to find a way to "cure" the default or you will eventually lose the home. You titled your thread "modification of Chapter 13 bankruptcy Plan", however, the Plan cannot go beyond 60 months. Are you already at 60 months? If not, have you discussed a Plan modification with your attny? Can you extend the Plan to cure the post petition default and, at the same time, resume the monthly mortgage payment at whatever level it is?

If you are already at 60 months and are about to get a discharge, another possibility is filing a new Chapter 13 once the discharge is entered. This may not "pay" if the default is small in amount. If the default amount is "small", just figure a way to quickly bring those payments current and move on from there.

Just FYI - the lifting of the stay does not mean you are "surrendering the home". It means that the lender is free to exercise its state law remedies as it relates to taking back its property. You still have whatever rights Wisconsin gives you to cure the default and stop the foreclosure - or, whatever rights filing another Chapter 13 will give you.

Des.

[justbroke]

Thank you for the additional information. That changes my answer and despritfreya has given you great information about the situation.

[stiller71]

Well first off thank you for your responses. However, I am pretty sure that had I never filed that loan modification none of this would be happening. I have been very consistent with my payments over the years. However, based off the forms I have... they are specifically asking me to surrender my house to the mortgage lender (they have the address of my home in parathesis listed on the forms they want me to sign). This makes me nervous as I am not sure I would be allowed to "cure" the default as you mentioned if I do as they ask. See, they are claiming that the reason for the Motion for Relief From the Automatic Stay is due to delinquent payments from a doomsday arrangement I had with my lender. I was current on those payments at the time I requested the loan modification and after the modification was done, that doomsday arrangement became null and void. See first they denied it then they reopened it and completed it even though I told them I couldn't afford the rise in my payments. In either case, wouldn't a loan modification override a doomsday payment arrangement? After all, it was them that stated I was now current on my payments so again...how can there be a default on my doomsday payment arrangements when the loan modification made that arrangement null and voided?

All I would like to know is..can I still discharge my bankruptcy which I want to do btw without surrendering my home? I do plan to find a way to cure the default as I was only able to make partial payments over the last few months after they raised my mortgage, but I would like to maintain ownership of my home. I was told by my lawyer that another chapter 13 is doable, I just want to make sure it's possible if I do as they ask and "surrender" my home under the wording and terms they presented to me.

Thank you

[justbroke]

Unfortunately an escrow shortage is not a modification of the loan. When taxes and/or insurance are included with a mortgage payment that is escrow. A lender will typically perform an escrow analysis annually so that there is no escrow shortage. if there is an escrow shortage your payment -- not your mortgage -- would be modified to account for the shortage plus the newly calculated escrow payment. This is not a "doomsday" modification. This reads simply as an escrow recalculation that resulted in a shortage and a new payment. I had the same thing happen in my Chapter 13, only I was paying my taxes/insurance outside the plan and the lender decided to add an escrow account! This caused my mortgage payment to go to just over $5,000/month.

Example: You have $2,400 in escrow payments each year with $1,200 of it insurance and $1,200 in taxes. This would add $200/month to your base mortgage (principal and interest) payment. If your taxes went up $2,400 a year, you'd have a $2,400 shortage PLUS a $200/month adjustment. For the next year your new monthly amount added to your mortgage would be $200 (original) plus $200 (to catch up the shortage) plus another $200 for the new escrow amount. This would result in a $600 escrow payment in year 2, but it would go back down to $400/month in year 3 if there are no other things which cause a recalculation in the escrow payment.

As your attorney has stated, you can do a new Chapter 13 where you wouldn't get a discharge, but could cure the escrow shortage. If it's not a significant amount of money I wouldn't want to go into a Chapter 13 again just to cure the arrears on the shortage.

My bottom line is that this reads as a misunderstanding when it comes to escrow payments. Escrow adjustments are not a modification of the mortgage. The lender impounds taxes, insurance, and in some cases HOA dues, to protect their interest in the property. Force-placed insurance is one of those things which will cause impounds and could even have a significant policy premium (north of $8,000/year) because it is lender placed.

(If you want to find out the escrow calculations you can ask the lender for their escrow calculations for any year. You can see the calculations yourself. When the new calculation is made your payment increases with or without your approval.)