Mortgage Forbearance and Bankruptcy

Someone once said, “may you live in interesting times.” Considering what has been going on since March of 2020, I could stand to have a few boring times. Unfortunately, these are the times we are in and people considering bankruptcy can have a new series of interesting times to live in. One of these issues has been the broad use of mortgage forbearance programs. For those of you who have not been involved in one of these programs then you may want to read some other bankruptcy article from your Montgomery, Selma, and Central Alabama bankruptcy attorneys at The Sellers Law Firm. However, if you have been involved in a mortgage forbearance program and are considering Chapter 13 or Chapter 7 bankruptcy or are currently in bankruptcy then you need to read on.

Mortgage forbearance is simply when your mortgage company allows you to skip mortgage payments for one reason or another. We do know why some forbearances have been allowed and is because the 2020 Covid Aid, Relief, and Economic Security Act (CARES) and the Covid-19 Bankruptcy Relief Extension Act of 2021 allows borrowers with federally backed mortgages to obtain relief from mortgage payments though simplified processes when Covid impacted your ability to pay your mortgage. What is not fully understood is why mortgage companies that do not service federal backed mortgages have also followed the simplified processes of the federally backed mortgage companies. But for whatever reason we are seeing large numbers of clients that are in, coming out of, or have completed their forbearance periods. The mortgage company can decide what happens when the forbearance ends. They can require a lump sum of missed payments, additional payments to catch up, or they can agree to a loan modification that generally moves the missed payments to the end of the loan.

So, what does this have to do with someone considering bankruptcy? Well, plenty. If you are in a Chapter 13 bankruptcy and enter into a forbearance program, then you may not be living up to the terms that are found in your confirmed Chapter 13 plan. When you file for bankruptcy protection under Chapter 13 you propose to the Court a plan about what you are going to do with your debt. Unless you decide to surrender a property under a mortgage then you must tell the Court that you will make all payments that come due after your bankruptcy is filed. Previously if you fail to make those post-petition payments then the mortgage company can ask the Court for permission to foreclose on the property or the Court can deny a discharge is you were seeking to have some debt excused. Now the CARES act has temporarily allowed for a discharge to be granted even if there were missed payment on the mortgage during your bankruptcy. The CARES act did add language to the bankruptcy laws allowing a bankruptcy judge to grant discharge of debt as long as the debtor has modified the terms of their mortgage or has entered into a forbearance program. If you are considering filing a Chapter 13 or a Chapter 7 bankruptcy then The Sellers Law Firm attorneys in Montgomery, Selma, and Central Alabama will be able to assist you if you are in a mortgage forbearance program or considering a Chapter 13 bankruptcy and/or a mortgage forbearance program to help save your home. Don’ wait and call us today. Our phone lines are answered 24 hours a day, and all consultations are free! We have offices in Montgomery, Selma, Greenville, and Troy. Call or text us at 334-LAWYERS (529-9377). Doing nothing changes nothing so call us today!

If you are in a Chapter 13 bankruptcy and are considering a mortgage forbearance program it is extremely important that all parties to your bankruptcy are made aware of your intentions. These parties include the Chapter 13 trustee, the Court, and the bankruptcy administrator in Alabama. Failure to provide information about your proposed mortgage forbearance program to these parties can result in unintended negative results for you and your bankruptcy. The National Association of Chapter 13 Trustees has proposed several options for how this notice should be given, all of which involves the mortgage company performing some action. However, the issue with this is that there are generally no negative results for the mortgage company if they fail to provide adequate notice for the mortgage company but there could be plenty of issues for you if this notice is not provided. So, you will want to make sure that the parties in your bankruptcy are given adequate notice about your forbearance program. If you are considering bankruptcy and are also dealing with a possible mortgage forbearance program, then your Montgomery, Selma, and Central Alabama bankruptcy attorneys at The Sellers Law Firm will be able guide you through the process to best protect your rights.

We have four offices conveniently located in Montgomery, Selma, Troy and Greenville. All consultations are free, and our phone lines are answered 24 hours a day. We can usually see you within 48 hours of contacting us . Call or text us today at 334-LAWYERS (529-9377). You may also use the contact form on our website, or you may email us at bsellers@sellerslawfirm.com. Remember that doing nothing changes nothing so act now and contact us!

The Sellers Law Firm is designated a debt relief agency by an Act of Congress and the President of the United States. We have proudly assisted people seeking relief under the U.S. Bankruptcy Code for four decades.