House In Bankruptcy

SAVING A HOUSE IN A CHAPTER 13 CASE

CURING MORTGAGE ARREARS
A person may save their house from a foreclosure action in a chapter 13 bankruptcy case. The first option is to save a house by curing the mortgage arrears.  This requires the debtor to pay the total amount of the mortgage arrears, at the time of the filing, through monthly bankruptcy trustee payments. The amount that must be paid to the mortgage company, through the plan, each month, is the total mortgage arrears divided by the number of months in their bankruptcy plan. In addition to making trustee payments, the debtor must make their regular monthly mortgage payments, directly to the mortgage company, on a timely basis. A person may save their house, if he is able to make such monthly trustee and mortgage payments.

Please note that there may be additional funds that must be paid to other creditors, as well.

LOAN MODIFICATION PROCESS
The second option to saving a house in a chapter 13 case is to pursue a mortgage loan modification, within the bankruptcy case. Typically, the bankruptcy court allows a debtor approximately six months to pursue a loan modification, through the application process and the court’s Loss Mitigation Program. During this time, the foreclosure action and sheriff’s sale are stayed. Pending the loan modification process, the debtor must make monthly mortgage payments, directly to the mortgage company. Additionally, the debtor must make monthly trustee payments. The amount of the trustee payment varies based on numerous factors,  that are explained, in detail, in other portions of this website.

In most circumstances, the monthly trustee payment need not be sufficient to pay the total amount of the mortgage arrears through the life of the bankruptcy plan. However, if the mortgage arrears are enormous, the mortgage company may require the debtor to make a monthly trustee payment that is sufficient to cure all arrears over the life of the bankruptcy plan, in addition to paying regular monthly mortgage payments. Generally, in this scenario, it is unlikely that the debtor will be able to make such trustee payments. However, there may be circumstances that allow the debtor to pursue a loan modification, in such a situation, with affordable monthly trustee payments.

The loan modification process is typically facilitated through a website portal, which is used by the mortgage company and the debtor.  This process eliminates much of the communication issues that are usually related to the loan modification application process. The submitted loan modification documents are uploaded and held on the website’s server. Also, all communication between the mortgage company and debtor is saved on the website server for access.

If the loan modification is approved, typically, the monthly mortgage payment is changed and the arrears are incorporated into their future payments. This means that there are no longer any mortgage arrears. In this scenario, the debtor must file a modified chapter 13 plan and update certain schedules to reflect updated disposable income. The modified plan will remove payment of the mortgage arrears. Such modifications must also be filed, in the event that the debtor is denied a loan modification.

LOAN MODIFICATION AND CURE MORTGAGE ARREARS
A debtor may wish to pursue a loan modification and cure the arrears at the same time. This consists of combining the above referenced options concurrently. As a result, if the loan modification is denied, the person may save his house by continuing to make the monthly trustee payments that will cure the arrears. If a debtor pursues both options, the monthly plan and updated income and expenses must still be filed with the court upon the denial or approval of the loan modification.

GENERAL CHAPTER 13 INFORMATION THAT APPLIES TO ALL CHAPTER 13 CASES
The bankruptcy code requires every chapter 13 debtor to make monthly payments to a trustee for a period of 36 to 60 months. The amount of the payments depends on the debtors’ household income, expenses, type of debt and property values. A person cannot pick and chose which debt they wish to pay in a chapter 13. But rather, the bankruptcy code, coupled with the debtors’ intentions, dictate which creditors must be paid, through the bankruptcy plan. Certain types of debt, such as priority debt, must be paid through the bankruptcy plan. There are situations in which certain types of secured and/or unsecured debt may or may not be paid, through trustee payments.

This means that even though someone is filing a chapter 13 for the sole purpose of saving their house, he may be required to pay other debt, through the trustee payments, in addition to their mortgage arrears. If the debtor is unable to pay the necessary mortgage arrears through the bankruptcy plan, because he is also required to pay other types of debt, the debtor may not continue with the bankruptcy case. Such a plan is called unfeasible. Under this scenario, if the attorney is unable to resolve the feasibility issue, the case will be dismissed.

Contact Manchel New Jersey Bankruptcy Law at 866 503 5644 to discuss your bankruptcy questions.

What can happen to your house in a chapter 13
A chapter 13 trustee will never sell a debtor’s house no matter the value. Also, a chapter 13 was created to permit a debtor to save their house from foreclosure in the event of mortgage arrears.
Immediately upon the filing of a chapter 13 case, the mortgage foreclosure action ceases. If the debtor is behind with their mortgage payments, typically, she must cure the arrears over a period of 36 to 60 months, through a monthly bankruptcy plan. In addition to making the regular monthly mortgage payments directly to the mortgage company, the debtor must pay the pre filing arrears to the trustee. If the debtor has insufficient income to make the trustee payments and the regular monthly mortgage payments, the debtor will be unable to save the house.
The New Jersey bankruptcy courts provide a second option for saving their house from foreclosure in the event of mortgage arrears. The court will allow the debtor to participate in the loss mitigation process. Basically, this is a loan modification process, which is guided by way of the court system. The court does not possess the power to require the mortgage company to enter into a loan modification. The court only assists with the loan modification process and the facilitation of the documents between the parties. The mortgage company conforms to the same criteria in accepting the loan modification, as when the debtor is not in bankruptcy. However, the court time constraints and the ease of the flow of paper work expedites the process. During this process, the debtor must pay the monthly mortgage payments, or under certain circumstances, 60% of the regular monthly mortgage payments.
A chapter 13 is very flexible and may be modified, if a debtor changes their intent as to how they wish to proceed with their house. If a debtor is current with their mortgage payments and wishes to file for bankruptcy protection due to other issues, the debtor may keep the house and continue to make the regular mortgage payments. However, if the house has substantial equity, the debtor will be required to pay more funds to the unsecured debt. Also, for any reason, the debtor may wish to surrender their house and discharge the mortgage debt. Furthermore, the debtor may wish to sell the house during the bankruptcy filing. If the debtor’s residence is sold, the debtor may keep up to $21,625.00 of the sales’ proceeds.
NJ bankruptcy lawyer Robert Manchel,  can be reached at 1 (866) 503-5655 to discuss your bankruptcy questions.

What can happen to your house in a chapter 7
A New Jerseychapter 7 trustee will only sell a debtor’s house if the house has substantial value. It is very unlikely that a chapter 7 trustee will surprisingly sell a debtor’s house, because prior to the filing the debtor should know the house’s value and whether the trustee is permitted to sell the house.
The trustee is required to perform a liquidation analysis to determine if he can sell the debtor’s house. In general, the trustee will obtain the fair market value of the real estate from his source. The mortgage payoff(s) is subtracted from the value. Thereafter, 10% to 13% cost of sale is deducted. Subsequently, the debtor(s) co-owner’s $21,450 exemption is deducted. If there is a negative value after the deductions, the trustee is not permitted to sell the real estate. If there is a positive amount, the trustee may attempt to sell the house. However, the debtor may prevent the sale, by paying the trustee the amount that would have been received, if the house was sold. Under that scenario, the funds paid to the trustee, must come from a third party or from the debtor’s exempt funds. Please note that if a married couple files for bankruptcy protection, both of whom own the house, each spouse can apply their $21,450.00 exemption in the liquidation process.
Under virtually all circumstances, the filing of a chapter 7 bankruptcy case stops a mortgage foreclosure action. However, if a debtor is behind with their mortgage payments, the bankruptcy filing will not permit the debtor to save their property from foreclosure. Typically, if the debtor is behind with payments, the mortgage company will file documents with the court requesting permission to pursue or commence the foreclosure action. The court will grant the mortgage company’s request, if the debtor is behind with their payments and the trustee is not interested in selling the house. If the mortgage company pursues the foreclosure action, the debtor may reside in the property through the entire foreclosure process, through the date of the sheriff’s sale.
A debtor is permitted to pursue a loan modification at any time before or after the bankruptcy filing and discharge. The debtor may pursue a loan modification after the case is discharged, through the foreclosure process and prior to the sheriff’s sale.
A discharge in a chapter 7, discharges (eliminates) the mortgage company’s right to collect any of the mortgage debt (money) from the debtors. However, if the debtor is behind with their mortgage payments, the mortgage company can pursue the foreclosure action for the purpose of taking the real estate only.
Robert Manchel is an expert bankruptcy lawyer in New Jersey, whose practice is limited to bankruptcy law. Robert Manchel can be reached at 1 (866) 503-5655 for a free consultation regarding how bankruptcy protection can help you personally.

Homeowners in New Jersey are more seriously delinquent than homeowners in Connecticut and New York, according to a Wall Street Journal online article. Reportedly, the number of New Jersey loans in foreclosure reached 6.28%, while the number of seriously delinquent loans reached 10.54%. Comparatively speaking, the U.S. average during the same time period stood at 4.57% and 9.11%, respectively. New Jersey ranks behind only Florida and Nevada in terms of the number of loans in foreclosure.
While foreclosure seems like a hopeless process, there are options for homeowners who want to save their house. Many people fail to realize that filing for bankruptcy in New Jersey can actually allow an individual to remain in their home, provided they choose to file chapter 13 bankruptcy protection rather than chapter 7. While chapter 7 bankruptcy protection may, under some circumstances, allow an individual to save their home, it does not allow an individual to save a house once that house has gone into foreclosure. However, New Jersey chapter 13 bankruptcy protection does allow one to save their home once it goes into foreclosure.
Per your chapter 13 bankruptcy plan, a monthly payment will be paid each month to a trustee. These payments may last anywhere from 36-60 months. This payment may include unsecured sources of debt, such as credit card bills and hospital fees, in addition to the pre filing mortgage arrears. An individual who can make the monthly bankruptcy, as well as their monthly mortgage payments, will be allowed to remain in their house. At the end of the plan payments, their past mortgage payments will be considered settled, cured and resolved.
At the Law Offices of Robert Manchel, our experienced New Jersey bankruptcy attorneys will guide you every step of the way during your bankruptcy protection proceedings. For more information about how chapter 13 bankruptcy can save your home from foreclosure, please contact our office today at 866-503-5655.