Do I Have to Pay My Mortgage in Chapter 13 Bankruptcy?

You must pay your mortgage in Chapter 13 bankruptcy if you want to keep your home; however, there are some exceptions for wholly unsecured junior mortgages.

By , J.D. · California Western School of Law

If you want to keep your home during Chapter 13 bankruptcy, you must make your regular mortgage payments as they come due. You'll also have to make up missed payments over the course of your repayment plan. If you have a second mortgage, however, under certain circumstances you might not have to pay it outside of bankruptcy.

Read on to learn more about paying your mortgage in Chapter 13 bankruptcy. You can also find out more about what happens to your home in Chapter 13 bankruptcy.

Catching Up on Mortgage Arrears in Chapter 13 Bankruptcy

If you're behind on your mortgage payments, Chapter 13 bankruptcy has a mechanism not available in Chapter 7 that will help you keep your house. Specifically, you can pay off your arrears in your Chapter 13 plan and save your home.

Because Chapter 13 plans typically last three to five years, it can be affordable for debtors to catch up on their missed payments by stretching the arrears over a long repayment period.

But keep in mind that if you want to keep your home in Chapter 13 bankruptcy, you must make timely plan payments and continue to pay your ongoing mortgage obligations.

Making Mortgage Payments During Chapter 13 Bankruptcy

If you want to keep your home, you must make your regular mortgage payments during bankruptcy. Here's why.

Your mortgage lender will have a lien on your property that allows it to foreclose on your house if you default on your payments. Unless you are stripping (removing) a wholly unsecured second mortgage (or another junior lien) from your property, your discharge won't eliminate the mortgage lender's lien on your home (more below).

In most bankruptcy jurisdictions, you simply continue to pay your mortgage directly to your lender outside of bankruptcy. But some courts require debtors to send their mortgage payments to the bankruptcy trustee as part of their Chapter 13 plan—especially if you're late on your payment when you file.

Before you file your case and propose a repayment plan to the court, talk to a bankruptcy attorney in your area or research the rules in your jurisdiction to learn more about how your bankruptcy court treats mortgage payments in Chapter 13 bankruptcy.

Learn more about the Chapter 13 bankruptcy repayment plan.

Stripping a Junior Mortgage

If the balance on your first mortgage is greater than the value of your house, you might be able to get rid of your second mortgage (or other junior liens) in Chapter 13 bankruptcy through lien stripping.

When you strip your second mortgage, the lien will be eliminated when you complete your bankruptcy and the debt becomes unsecured. Like your credit cards and medical bills, the debt is unsecured because it isn't guaranteed with collateral.

Because your second mortgage lender is treated as an unsecured creditor and its lien will be eliminated when you complete your plan and obtain a discharge, you don't have to make your second mortgage payments during bankruptcy. Instead, any stripped junior mortgages will receive a pro rata share of any funds paid to other unsecured debts.

If you are not stripping your second mortgage, you have to continue paying it during your bankruptcy if you want to keep your home. Learn more about stripping your second mortgage in Chapter 13 bankruptcy.

If You Miss a Chapter 13 Mortgage Payment

Filing for Chapter 13 bankruptcy but not making your ongoing mortgage payments won't help you keep your home. When you file for Chapter 13 bankruptcy, an automatic stay goes into effect that prohibits your mortgage lender from initiating or continuing foreclosure proceedings against your property. But if you don't make your ongoing mortgage payments, your lender can file a motion with the court requesting the court to lift the automatic stay.

Learn when a creditor can lift the automatic stay.

Mortgage Payments After a Chapter 13 Plan

You'll also have to continue paying your mortgage after you pay off your Chapter 13 plan and obtain a discharge. An exception arises if you eliminated a junior mortgage lien through lien stripping.

The lien allows the lender to foreclose on your home if you miss a payment. Simply completing your Chapter 13 repayment plan and getting a discharge won't get rid of the first mortgage lender's lien on your home.

Find out more about releasing a lien in bankruptcy.

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