One of the most common reasons people file for Chapter 13 is to save their home from foreclosure. Chapter 13 stops the foreclosure process and gives you an opportunity to catch up on your payments. It is crucial that you know what all the rules for home ownership are under Chapter 13. You don’t want to make a simple mistake that could cost you your home. Catching up on your payments won’t do you any good if you don’t follow all of the other rules that apply in this situation.
How to Keep Your Home When You File for Bankruptcy
1. Make Sure You Read Your Chapter 13 Plan Carefully
Basically, the idea is that you will continue making your regular payments as they become due while you work to catch up on past due balance. The payments are usually made through one of the following methods:
- You make your payments to your mortgage lender the same way you did before you filed for Chapter 13.
- Or, you make your payments to your Chapter 13 trustee, who then sends the payments on to your mortgage lender.
It is essential that you read your Chapter 13 plan carefully and inform yourself of the payment method used in your area and that you know what dates your payments are due.
2. Keep Your Own Records
Make sure you keep an indisputable paper record of all payments you make, including the dates they were made. Discrepancies between you and your provider are almost a given, so it’s best to be prepared for it.
The key is to keep better records than your provider. Make sure your paper trail is detailed and easily presentable. Paying with personal checks is ideal because you will have your canceled check for indisputable proof of payment. Send your check by certified mail or some other method that provides proof of delivery. Your provider is required to credit your payments immediately, and this method will help you verify that they are doing their job.
It should be noted that automatic debits and electronic payments from your bank account usually won’t be accepted in this case.
3. Scrutinize Your Monthly Mortgage Statements
In the past, providers did not have to provide you with a detailed monthly statement, but they do now. By law, you must be provided with a monthly statement that breaks down the details of your loan, including the amount of arrearage owed before you filed and the amount you have paid since, and your current balance due. Always compare your statements to ensure they are identical and keep them for your own personal records in case there’s ever a discrepancy.
4. Watch for Changes in Your Payment Amount
Your amount due each month could change periodically throughout the duration of your Chapter 13. Sometimes the necessary amounts kept in escrow for insurance or taxes may need to be adjusted. Or, the interest rate on your loan might be adjustable or time-limited, which will also change your monthly amount due.
By law, your provider must provide you with sufficient notice of changes to your monthly payment amount. Those who live in an area where payments are made by the trustee should check with their attorney to see how payment changes are dealt with.
Your provider is also required by law to notify you of any charges, fees, or expenses that will be added to your balance during your bankruptcy period. Notification must be made to the court, your attorney, and you personally within 180 days of the added expense. It’s your right to ask for a hearing to challenge the added cost and evaluate whether or not it’s valid.
5. Don’t Forget to Pay Your Property Taxes On Time
One of the conditions of your loan will be keeping your property taxes current. Your loan terms will specify whether you pay your taxes directly to your local tax office or your loan provider.
Taxes that are paid through your loan provider will be escrowed, so that means they will be included as part of your monthly payments. If it’s your responsibility to pay the taxes directly, be sure to set aside money each month, so you have the full amount when it’s due.
6. Don’t Fall Behind on Your Payments
This may go without saying, but if you don’t make your payments on time, your provider is within their rights to request that the court lift the stay and allow your home to go into foreclosure.
7. Keep Track of How Much Interest You’re Paying
Be sure to keep track of the amount of interest you pay each year. Both the interest on your loan and your property taxes are usually tax deductible.
Avoid trouble before it starts by staying on top of these seven post-bankruptcy must do’s. You have a second chance to save your home, so learn these simple tactics to avoid making a mistake.