Mortgage Payments Now Inside the Plan for the Eastern District of North Carolina

08 Nov Mortgage Payments Now Inside the Plan for the Eastern District of North Carolina

This week, the United States Bankruptcy Court for the Eastern District of North Carolina entered an order mandating that mortgage payments will now be made through the debtors’ chapter 13 plan.  These are often called “conduit” plans because the chapter 13 trustee acts as a conduit for the mortgage servicer and collects payments on the mortgages.

Starting January 1, 2010, mortgage payments will be required to be paid through a debtor’s chapter 13 plan.  Ultimately, this is a positive development as it will bring another party into the mix to combat mortgage servicing abuses that have proven to run rampant through the bankruptcy system. 

The chapter 13 trustee will be able to monitor all payments made to the debtors’ mortgage creditor and will be able to document how much of each payment made to the mortgage creditor should be allocated to pre-petition arearages and how much is to be considered the on-going post-petition mortgage payment.

A further benefit of including the mortgages inside the plan will be that Section 524(i) of the Bankruptcy Code will then be included in all chapter 13 plans requiring mortgage creditors to properly allocate payments made on the mortgage to pre-petition and post-petition payments.  If additional fees or other charges are assessed but not properly presented, the fees and charges will be deemed waived and, upon the debtors’ successful completion of the chapter 13 plan, the mortgage will be deemed current.

Ultimately, this will be a positive development for debtors seeking a fresh start after their chapter 13 plans are completed and a discharge entered.

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Adrian Lapas, Esq.

I've been practicing bankruptcy law in North Carolina since 1993, and am certified as a specialist in consumer bankruptcy law by the North Carolina State Bar.
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