In traditional chapter 13 a filer is require to pay the regular monthly mortgage payments and the arrearages – the amount of payments they are behind when the chapter 13 is filed – through the plan for up to 60 months of the plan.  The arrearages must be paid in full prior to the expiration of the plan payment period.  If the filer is able to modify the mortgage in the plan the payments made int eh plan are all toward the mortgage and not the mortgage and the arrearage which can safe the filer a significant amount of money. There are costs to the mortgage modification.  They are the fees to their bankruptcy attorney to modify the plan and any cots that the mortgage holder charges for the modification.  However, a typical filer can recoup those costs in a bout 3 months of the plan payments.  

The mortgage modification is only a valid option if the program offered by that filer’s mortgage company can give them a savings that they would not have in a typical chapter 13.  The success rae nationwide for receiving a mortgage modification is about 70%.  If a mortgage modification is not granted then the traditional ‘save your home’ procedure of a chapter 13 is the best option.  The filer can be out the costs for the application and attorney fees if the mortgage modification fails.  If a filer fails at both of the chapter 13 plan and the mortgage modification and the result is the completion of the foreclosure process the filer can end up with additional expenses in higher interest rates and higher security deposit costs for rental property.  Additionally, a person with a foreclosure cannot buy new property for up to 3 years after the sale of the foreclosed property is completed.  So following through with either a lone modification of a traditional chapter 13 bankruptcy can save money now and over time. 

In most cases the attorney fees to assist with the mortgage modification can be paid over the whole plan period of up to 60 months instead of immediately out of pocket.  This gives the home owner the ability to save money and their home and pay over time through the plan. 

If you are facing foreclosure we at Moseman Law Office can help.  We have nearly 20 years of experience helping our clients save their homes through the use of both loan modifications and chapter 13 bankruptcies.  Let Moseman Law Office help you save your home in the way that is best for you and your family. 

Some information excerpted from “Can Debtors Afford Mortgage-Modification Programs?”  from the Journal fo Consumer Bankruptcy Fall 2022