Filing a bankruptcy case is the first step in stopping a foreclosure on your home and the imposition of the “automatic stay” on collection activity stops the mortgage lender dead in their tracks, but for how long? Not long enough unless you do what the Bankruptcy Code requires.
Make your post petition mortgage payments on time.
Once you have filed a bankruptcy case, each and every mortgage payment that is due following the date of the filing must be paid when it is due. These are called “post petition” mortgage payments. The Bankruptcy Code requires that a mortgage lender (and any other creditor with an interest in your property) be paid regular monthly payments after the case is filed. The payments that were not made prior to the filing are made under the Plan of Reorganization that must be filed with the bankruptcy case or shortly thereafter. These missed payments are called “pre petition payments”. If you fail to make post petition payments the mortgage lender will ask the Court to allow it to have relief from the automatic stay on collection activity so that the mortgage foreclosure may continue pursuant to state law. While this action does not end your bankruptcy case, it does end the protection you have gained against a mortgage lender’s foreclosure.
A Bankruptcy Reorganization Plan does not change the terms of the mortgage on your principal residence.
While you have the right under the Bankruptcy Code to repay your pre petition mortgage payments under your Plan of Reorganization, you cannot alter the interest rate or the other terms of the residential mortgage. You must pay the arrears in full (missed payments) over thirty or sixty months depending on the terms of your Plan.
Do not miss a Plan payment.
A Bankruptcy Trustee will be administering your case. If you miss a scheduled plan payment the Trustee may ask the Court to dismiss your case.
If you decide to finance or get new credit, get the permission of the Court before you finalize the transaction.
You may decide that you want to refinance a mortgage that is being paid under a Plan of Reorganization. You may do so but only with the permission of the Bankruptcy Court. Do not enter into any new financing agreements without consulting with your bankruptcy attorney.
Filing a Bankruptcy Reorganization case is complex.
Bankruptcy Reorganization cases are rarely successful without the assistance of experienced counsel. If your case is dismissed for failure to follow the rules or the instructions of the Bankruptcy Court you may be prohibited from filing another case for a period of time and you may be unable to avoid a rescheduled foreclosure sale.