Paying Your Mortgage in a Chapter 13 Plan

06 Jan Paying Your Mortgage in a Chapter 13 Plan

Some time ago, I wrote an article on whether or not a debtor had to make on-going mortgage payments through a chapter 13 plan. The article focused on when you might be required to make the house payment through the plan.

In my district, the Eastern District of California, the general requirement is that if you are behind in your mortgage when you file a Chapter 13 bankruptcy, then you have to include the on-going mortgage payment in the plan. In other districts, inclusion has been optional.

The trustees generally like the mortgage to be made through the plan since their office gets a percentage of the amount of the payment. Thus, the larger the monthly payment, the large their piece.

The Ninth Circuit Court of Appeals recently upheld the Bankruptcy Appellate Panel’s decision to allow a debtor to make his mortgage payments outside of the plan even though he wasn’t current. They upheld and literally adopted the decision from In re Lopez.

The trustee involved in that case raised several arguments objecting to not paying the mortgage through the plan, none of which were persuasive. Thus, the rule today, at least in the 9th Circuit (the Western States) is that you can pay your mortgage as part of your plan payment, or not, as you (and a competent bankruptcy attorney) decide.

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Douglas Jacobs is a California bankruptcy attorney and partner in the Chico law firm of Jacobs, Anderson, Potter & Chaplin. Since 1988, Mr. Jacobs has taught Constitutional law and Debtor-Creditor/Bankruptcy law at the Cal Northern School of Law. He has served as Dean of Students since 1994. He is a frequent lecturer on the subject of consumer bankruptcy law, and has spoken at both state and national levels.
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