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If you receive forbearance on your mortgage payments under the CARES Act, when do you have to catch up on those missed payments?

Last week we presented the new law allowing forbearance—skipping payments—on federally backed mortgages during the pandemic. Basically, if you’ve been financially affected by the pandemic you can request and receive a 6-month forbearance on payments. This can be extended another 6 months if the declared emergency continues at that point.

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Resolve disputes with your lender in Chapter 13 about 1) additional fees and charges, and 2) whether you’ve cured the mortgage arrearage.

Last week we described a Chapter 13 procedure to force mortgage lenders to resolve mortgage accounting disputes. This procedure focuses on changes to the monthly mortgage payment amount during the case. These are often just the normal contractually mandated changes arising from adjustments to the mortgage interest rate, and in property taxes and homeowners’ insurance. You and your lender need to be on the same page on the monthly amount so that you can stay current. Because of the importance of this, Rule 3002.1 of the Federal Rules of Bankruptcy Procedure provides an enforceable way within Chapter 13 for you to timely learn about mortgage payment changes and to efficiently resolve any related disputes.

This Rule also addresses two other practical problems about mortgage accounting:

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Chapter 13 gives you valuable power to force your mortgage lender to be up front about how much you owe, and to efficiently dispute the amount.

Catching Up on Your Mortgage over Time

A Chapter 13 case gives you the power to catch up on your home mortgage(s) over an extended period. This “adjustment of debts” type of bankruptcy can give you up to 5 years to catch up.

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Chapter 13 gives you much more power over your mortgage and other home-related debts so that you can sell your home when it’s best for you.

Our last blog post was about using Chapter 7 “straight bankruptcy” to buy time to sell your home. The advantages of Chapter 7 are that it’s usually quite quick and costs less that Chapter 13. It also importantly focuses on your present income and on the present value of your home. If you expect either your income or your property’s value to increase substantially, Chapter 7 could be your better option.

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Bankruptcy frees up cash flow for your mortgage payments. Chapter 7 does so by writing off other debts. Chapter 13 does so more creatively.


Both Chapter 7 and Chapter 13 Improve Your Cash Flow

A Chapter 7 “straight bankruptcy” case would very likely quickly write off (“discharge”) many of your debts. For many people it discharges most of their debts, maybe even all of them except their home mortgage. That frees up cash flow so that you can better afford to pay your mortgage.

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