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Reinstate Your Mortgage

A Chapter 13 bankruptcy provides you the opportunity to cure past due payments on your home.  Maybe something happened to you that caused you to get behind in your mortgage payments. The Bankruptcy Code allows you to spread out the past due mortgage payments over a period of time to allow you to cure the default.

Whether you can cure the mortgage in practical application comes down to whether you have enough income to make the payment required by the Bankruptcy Code. While you are in bankruptcy, you must pay your current mortgage payments timely and at the same time pay a little bit of the past due amount each month.  This payment must be paid through the Chapter 13 plan to the Trustee, who will be entitled to receive a 10% charge.

Example:  Let’s say that you have a mortgage payment of $1,000.00 per month and you are six months behind.  Your past due arrears is $6,000.00. If you filed a 60-month plan, the amount of your monthly payment would include $100.00 so that the arrears would be cured over the life of the plan. Since you are in default on the mortgage loan when you file you are required to pay all mortgage payments that come due after you file through the Trustee, who will charge the administrative fee to collect and pay out the money to your mortgage holder.  So, in  order just to cure the mortgage your monthly payment to the Trustee would be $1,210.00, which is the 1/60th of the arrears ($100.00), plus the current mortgage payment ($1,000.00) and 10% administrative fee ($110.00).

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