Can you modify your mortgage loan to reduce your principal balance? your interest rate? other terms of your mortgage? Over the past few months, I have heard a lot about mortgage modifications but very few details have emerged and I know of no one who has actually and successfully modified his mortgage.
I may be on the right track in obtaining more information. One of my new colleagues at Solo Practice University (where I teach a class about creating a Social Security disability practice) is an attorney in New York who has actually represented clients and has obtained mortgage modifications. She will be teaching a class about real estate law at SPU and I hope to be able to pick her brain about mortgage modifications.
In the meantime, here is a link to a recent blog post that Stefanie wrote entitled The Top 5 Loan Modification Myths. I hope that more solid information from legitimate professionals who understand mortgage modification becomes available so I can bring it to you in the pages of this bankruptcy blog.
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As you may know, Chapter 13 cases function as payment plans whereby you send your Chapter 13 trustee a monthly payment and the trustee disburses those funds to creditors. Since Chapter 13 cases usually last five years it is not surprising that sometimes a debtor may fall behind on payments, even if the payments are made through an automatic payroll deduction.
A certain percentage of my Chapter 13 clients will fall behind because of illness, job loss, family emergencies, or an employer’s failure to send in withheld funds. Sometimes employers stop withholding funds for no particular reason.
Whatever the cause if you fall behind on your payment schedule to the Chapter 13 trustee, you will eventually face a trustee “Motion to Dismiss.” In the Northern District of Georgia, each of our three trustees use a computer system that periodically produces reports identifying cases that have gone delinquent and the system thereafter spits out a form motion to dismiss.
A motion to dismiss may also arise if claims (usually tax claims) come in higher than expected, thereby causing the plan to run more than 60 months.
What should you do if you receive a Motion to Dismiss in your case?More on Should I Oppose the Chapter 13 Trustee’s Motion to Dismiss
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Earlier this week, I wrote a post entitled Should I Oppose the Chapter 13 Trustee’s Motion to Dismiss. In that post I spoke about the relatively common scenario whereby a Chapter 13 debtor will fall behind on payments to the trustee or an unexpected claim will cause the plan to run longer than 60 months. In such a case, the trustee will file a motion to dismiss and the debtor and counsel will have an opportunity to propose a cure to the delinquency. Usually this cure takes the form of a lump sum payment immediately with the remaining delinquency paid to the trustee over time.
What happens if the proposed cure is not feasible for the debtor? In such a case, the judge would sustain the trustee’s motion to dismiss or the debtor would not oppose the motion. Either way, the debtor’s Chapter 13 case will be dismissed.
When a Chapter 13 case is dismissed, creditors can immediately pursue all non-bankruptcy alternatives. If there is a home and mortgage delinquency involved, the mortgage lender can start foreclosure proceedings. If there is a car payment involved, the car lender can immediately start the repossession process. Credit card lenders can restart collection efforts including calls and letters.More on What Happens if my Chapter 13 Case is Dismissed?
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