Chapter 13 Bankruptcy Case Example; Mortgage Arrears - Secured Creditors

Debt relief laws can sometimes be incredibly complicated. If you’re facing mortgage arrears or other secured debt payments you cannot catch up on, or an overwhelming amounts of general unsecured debt but do not qualify for chapter 7 protection, there are a few things you should know before filing for chapter 13 bankruptcy. First and foremost, a chapter 13 bankruptcy is also called a wage earner’s plan. It allows people with regular income to develop a plan to repay all or a portion of their debts, including most importantly arrearages owed to a debtor’s mortgage lenders and other secured creditors.

By way of example, in one memorable chapter 13 case, a client of The Law Office Marc G. Alster, the general manager of an upscale retail furniture store, filed a five-year chapter 13 plan, which gave him five years to catch up on the past due arrears he owed to his home mortgage lender. Under the terms of his chapter 13 plan, our client was obligated to pay a certain amount every month for five years. However, like many debtors this debtor was often late on his chapter 13 plan payments to the chapter 13 trustee as well as his regular post-petition regular monthly mortgage payments to his mortgage lender.

The client defaulted on his payment obligations to his mortgagee and the chapter 13 trustee an alarming number of times, he showed up for maybe one out of every three or four appointments with me over the five years his plan was in effect and when he did show up he was almost always at least a half an hour late. During the pendency above referred to debtor’s bankruptcy case, The Law Office of Marc G. Alster successfully applied for secured a new modified mortgage for him. After being approved for modification, which substantially lowered his interest rate; this client then defaulted on his trial period payment obligations to his mortgage lender prior to the recording of the new modified mortgage (all in violation of his chapter 13 payment obligations).

Despite the within referred to client’s behavior, the client still received his chapter 13 discharge at the end of his five year plan and all of his significant general unsecured debt were discharged without his creditors are receiving a single dollar. The above referred to case summary demonstrates the overall generosity and leniency of the U.S. Bankruptcy Court in New Jersey, though I would not suggest the any debtor recklessly fail to make their required payment obligations pursuant to their chapter 13 plan.

After he was discharged, Mr. Alster was able to procure a second mortgage modification approval for this client, even with his very spotty record. The second modification approved included a $107,000 forgiveness of part of his arrearages. The forgiveness was no doubt the result of his home being more than $200,000 underwater.

The skilled founding attorney of The Law Office of Marc G. Alster has been representing debtors and creditors in the United States Bankruptcy Court for the District of New Jersey and the Southern and Eastern Districts of New York for more than 23 years. For more information about this case, or to discuss your situation with an experienced Bergen County bankruptcy attorney, contact him at (201) 878-4630 or fill out the online form to schedule a free initial consultation.