If you have a mortgage on your residence and you decide to file a Chapter 13 bankruptcy, you may wonder what happens to your mortgage during and after your bankruptcy case. First, mortgages are not typically discharged through your Chapter 13 bankruptcy. You may continue to make your mortgage payments outside your Chapter 13 Plan directly to your mortgage company as you did prior to filing. Or you may be required to make your mortgage payments through the Chapter 13 Trustee while in your case.
Either way, when your case is finished the Trustee files what’s called a “Notice of Final Cure” noticing all parties that your Chapter 13 is finished, and, according to the Trustee’s records, you should be due for a date specific on your mortgage. Your mortgage company then has 21 days to either file a “Response in Agreement” or a “Response in Opposition”. The Court then issues an Order either agreeing with the Trustee, or an Order setting your next due date. You then receive your Discharge, and you are finished with your Chapter 13.
Many individuals think this is where they finally leave behind the court, the trustee, the case, and get their fresh start they so rightfully deserve. Yet often times this is where mortgage companies screw up. You should always look over your next mortgage statement very carefully for any fees, charges, or past due amounts. Frequently, mortgage companies cannot reconcile their computer systems to match what the Court has ordered. Say, the Court orders you to be due for your January 1, 2023 mortgage payment, but the mortgage company’s system says you are due for your November 1, 2022 mortgage payment. Their computer system has misapplied your mortgage payments in violation of your Discharge. Another example is their computer system has added $500 in attorney fees to your account without court approval. That action also violates your Discharge.
If you find yourself facing one of these scenarios, do not attempt to fix the issue directly with your mortgage company as that often delays a resolution. You need to contact our office. Our attorneys have many tools in our toolbox to dispute misapplication of payments or invalid fees or other charges. We can send a Notice of Error to the mortgage company demanding they correct the error. We can file a motion against the mortgage company for sanctions or contempt of court. We can even file a lawsuit against the mortgage company for a discharge violation.