ch. 13 and mortgage ??

Avatar for windryderm
iVillage Member
Registered: 03-26-2003
ch. 13 and mortgage ??
5
Mon, 01-30-2006 - 5:22pm
My H and I filed for chapter 13 back in september before the new bankruptcy law went into effect and have a question. Our mortgage is boing paid in the garnishment payments from the bankruptcy, but our mortgage was on a fixed rate until November when the fixed rate turned into an adjustable rate and our mortgage company took advantage of that even though we were already well into our bankruptcy proceedings. The courts allowed them to raise the rates and we have been notified that they will continue to adjust the rates every 6 months. Our chapt. 13 is for 3 years. Is there any way besides continually being at the mercy and still risk losing our house this whole time we are doing our re-payment? Our attorney told us to see what we can to make more money, but had no other advise. I'm looking for work but am having a hard time finding anything since I have to work around kids' (elementary) school schedule (to avoid adding daycare/sitter costs to the list of bills to pay) and H's work schedules. H works 2 jobs right now and his whole paycheck right now is being garnished from his day job. His secondary job is all we are living off of right now. We are holding on but not much room for anything to come up. Anyone have any advise on what we might be able to do? We are really feeling pretty stuck right now. thanks
Community Leader
Registered: 03-17-2003
Mon, 01-30-2006 - 6:19pm

A few things come to mind.

First, if you have become unemployed since your plan was confirmed, or your expenses have substantially increased or your household income has decreased you can (and should) have your lawyer petition the court to modify your plan. That would reduce your monthly plan payment.

Second, you can have your lawyer petition the court to extend your plan from 3 to 4 or 5 years. That would reduce your plan payments and ease your court approved budget demand.

Third, shop around to see if you can refinance. If you can refinance from an adjustable to a fixed loan that would probably give you the stability you need to get through the Chapter 13. Even if it's what is called a "band-aid" loan (a little higher interest) you might be better off. You can check with your current lender or any number of reputable, nationwide lenders for their sub-prime loans. It doesn't cost to ask and believe me, people do this all the time.

Of course getting a job would help, but that may also boomerang on you if you file a copy of your tax return with the court. The trustee might want more of your extra household income. Doesn't happen often, but it can occur. Additionally you need to make sure that the numbers work for you: your income isn't spend in daycare, fuel, etc. There is no sense taking a job if it doesn't put more money in your pocket at the end of the day.

These are points to discuss with your lawyer. Also, any additional fees your lawyer may charge for this work MUST BE APPROVED BY THE COURT AND PAID THROUGH THE COURT. Lawyers like to try to get payment directly from you but this is illegal and they can be sanctioned by the bankruptcy court. I know. My lawyer tried to get me to pay $4,000 on the side because the court would only approve $500 in fees. The court was all over her. Point is you keep this information in mind.

You have a few options to explore ok.

Also keep in mind the court wants you to be successful with your Chapter 13. They will help you help yourself.

Carolyn

Avatar for windryderm
iVillage Member
Registered: 03-26-2003
Fri, 02-03-2006 - 12:15pm
Thank you for the suggestions. I finally got ahold of my lawyer and the way I understand it is that we still have to pay the full amount of our house payment since it is such a new debt (2 years old) so that one was not able to be reduced, but the others were for the chapt. 13. I am shopping around to see if any mortgage will even work with us on getting us locked into a fixed rate but not having much luck right now. I will keep trying though. thanks again.


Edited 2/3/2006 12:16 pm ET by windryderm
Community Leader
Registered: 03-17-2003
Sat, 02-04-2006 - 11:01am

If you call your mortgage company your account will have a bankruptcy flag on it and they may be reluctant to discuss your mortgage. You will have to talk with the department that manages the account and let them know you need to refinance. The person probably won't have much info to offer. Seems these staffers don't know much about bankruptcy but that's ok. You already know far more about it than they do.

When you call mortgage companies I would get as much information about refinancing as possible and not discuss your current situation in details. You just want information from different companies at this point. You are "shopping" with the purpose of refinancing to convert an adjustable rate mortgage to a fixed rate. You'll need to find out if your current credit:debt ratio, etc. will even put you in the ballpark. If not, then you'll need to step back from refinancing right now.

In time you will find something that will work. Just stay with the major mortgage companies. I would avoid AmeriQuest and some of the other companies that blanket e-mail and snail mail with offers (many are in court as defendants over their "business" practices). I would ask the person if they have any experience with refinancing an account that is in an active Chapter 13 debt repayment plan. Chances are they will say no and you'll have to explain the process: which is adding in the extra step of approval by the court. If your loan documents have a locked in rate they can hold that rate for you. Don't let them tell you they can't because that's simply not true. I've bought and sold a lot of real estate and refinanced my own home to take advantage of the low rates to know better, so if they tell you they can't hold the rate for you, then reply with, "Then let me talk to the person who can."

When the time comes to refinance the house your lawyer will petition the court to get approval. It is NOT a big deal. The reason is for all new debt over a certain dollar threshold (your comfirmation documents will have this information) you have to run it by the court and get their approval. You will need approval of the court so that variable rate mortgage can be closed out, paid off and the new loan funded. Remember how I mentioned your account has a bankruptcy flag? That means your mortgage company is complying with the court's automatic stay and won't release the flag without an order of the court. So you are taking care of this during escrow. Your lawyer will also be working with you and the lender to get the info pulled together to get the court's approval.

Now I have to tell you that a lot of people in Chapter 13 go out and buy cars then learn they needed court approval first, and the court will usually give it the OBM (ok by me). If you can reduce your debt by refinancing the court will certainly be in favor of your decision.

You are gaining a lot of information and learning how a lot of these matters work and that's something to be proud of. Hope you are able to see that despite the financial reversals you've experienced you are working through it and learning more than you ever thought you would know. That is definitely something to feel good about!

Chin up.

Carolyn

iVillage Member
Registered: 03-29-2003
Sat, 02-04-2006 - 11:10am

Welcome :)


I don't really have any advice on the mortgage part --- but for earning money - have you thought about being a substitute teacher?


A friend of mine is going to do this next year, when her youngest child starts K... and she has 3 other, older kids.

                            

Avatar for windryderm
iVillage Member
Registered: 03-26-2003
Wed, 02-15-2006 - 9:00pm
Thank you all for your replies. When my lawyer finally called us back, he said he would have to find out what the new laws say but he will get back to me about that. thanks again.