Your mortgage payment needs to be on-the-dot current

In Chapter 13, in Virginia, your mortgage payment needs to be on-the-dot current.
Paying your mortgage payment by the 14th of the month (or later) gets your Chapter 13 case thrown out at the goal line. That’s because of a local bankruptcy rule, Rule 3002.1-1 in the Eastern District of Virginia
Why? Your mortgage is due on the first. They may give you a grace period until the 15th, but it’s due on the first. When you make your last Chapter 13 payment, the Chapter 13 trustee is required by Bankruptcy Rules 3002.1 to ask the mortgage company if you are current. That rule was considered a big victory for the consumer when it passed. The mortgage company had to say if they thought you were current or behind.
If you are your mortgage on the 14th instead of the first, your Chapter 13 will be disqualified at the goal line.
In this court, that victory turned into a nightmare, in a case called Evans. Now, if the mortgage company says you haven’t yet made this month’s payment, Thomas Gorman, the Chapter 13 Trustee, tells the Judge that your case should be thrown out. Unless you get caught up–and the mortgage company agrees in writing you are caught up–your case is tossed out. You are disqualified at the goal line.
What Should You Do?
When you are at the third to last payment on your Chapter 13, catch up the house! Make the mortgage payment on the first of the month. Eat oatmeal for a month, borrow from family, stop your 401k contribution, cut expenses everywhere. Get the mortgage payment in on the first of the month. Do what you have to do.
There is a detour
Suppose instead of being two weeks behind, you are three months behind on your mortgage payment. Sometimes that’s better. Why? The mortgage company will likley go to the judge and ask that your house be taken out of the Chapter 13 bankruptcy. That’s called relief from the automatic stay. If your house is taken out of the Chapter 13, then this problem doesn’t come up.  The Chapter 13 Trustee won’t ask the mortgage company at the end 0f the case if you are current, and the judge won’t throw your case out.
Of course you do have to catch the house up outside of the bankruptcy.
If you are close to the end of the case and sitting a few months behind, you may want the mortgage company to take your house out of the bankrutpcy by relief from the automatic stay.  If you can get close to caught up, they won’t forclose you. And the rest of your Chapter 13 debts can be cleared at discharge.
But if you are only close to caught up and the house is still inside the bankruptcy, your Chapter 13 is thrown out at the goal line. Those other debts you were paying in Chapter 13? They can all come back.
Do We Need to Talk?
Are you close to the end of your case and still struggling with the mortgage?  Not sure what to do?  Call Vanessa at 703-335-7793 and set up a time for us to talk.
 
 
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