Bankruptcy: Using Chapter 13 Bankruptcy to Repay Mortgage Arrears


For a lot of individuals, the idea of bankruptcy is a scary one and seems like a financial nuclear bomb. Most people believe that by filing bankruptcy they are committing financial suicide. The truth is that while Chapter 13 bankruptcy may have a wide-ranging impact, it should not be dismissed as a potential tool in saving homes. In fact, if you are currently behind on your mortgage, a Chapter 13 bankruptcy may help to save your home.

One of the ways that Chapter 13 bankruptcy allows a debtor to save his or her home is through the use of a mechanism called a “cure and maintain” in order to become current on a secured debt. The cure and maintain is provided for in the Bankruptcy Code and allows a debtor to “cure” or take the past due mortgage payments and repay same over a period of up to sixty (60) months. While curing the mortgage, the debtor must also “maintain” by making the regular ongoing payments that would otherwise have been due every month if the debt to the secured creditor were current. To use an example to illustrate the power of the cure and maintain tool: a homeowner with a monthly mortgage payment of $500.00 was unemployed for 12 months and was unable to pay his mortgage. With added late fees etc., the mortgage company is now stating that the homeowner is $7,000.00 behind. This $7,000.00 is the arrears on the mortgage. The homeowner is now employed, but the mortgage company is refusing to modify the mortgage or the modified mortgage terms as offered are not in the homeowner’s best interest. The homeowner, assuming that he can afford the monthly payments, is able to use the cure and maintain tool to save his home. In this scenario, the homeowner in a sixty (60) month plan would repay 1/60 of the arrears or $116.67 per month in addition to his regular monthly payment of $500.00. This would bring his monthly mortgage payments in the Chapter 13 plan to $616.67. Please keep in mind that this number may differ from the total plan payment as the total plan payment may payments for other debts, attorney’s and trustee’s fees. At the end of the sixty (60) month plan period, the debtor in this scenario would have repaid the arrears in full and also be current on the mortgage.

If you are behind on your mortgage and you believe that you may be able to afford to cure and maintain your mortgage, then it helps to have a knowledgeable bankruptcy team fighting on your behalf.

For more information about bankruptcy, please visit our website here.

Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 1,800 homes from foreclosure, eliminated $100,000,000 in mortgage principal and consumer debt, and have collected millions of dollars on behalf of our clients due to bank, loan servicer, and debt collector violations, negligence and fraud. Contact us for a free consultation to see how we may be able to help you.