Is your mortgage current after a Chapter 13 case?

Notice of Cure in a Chapter 13 case

A lot of clients ask how they know that they’re current on their mortgages after their Chapter 13 case has been completed. It’s actually ingenious, but in our district here in Western Pennsylvania, the Chapter 13 Trustee will file a notice with our Court called a “Notice of Cure” which states that the mortgage loan in the case is now current and fully up to date.  The mortgage company must file a response with the Court indicating that it either agrees with the Trustee aboiut the loan being current, or it must object to the Trustee.  If it objects, then the Judge schedules a hearing to determine the issue.

So basically, you shouldn’t be worried about later receiving notices from your mortgage company after your case is over about late fees or charges incurred that are bankruptcy-related.   If you have successfully completed your Chapter 13 plan payments, then your loan is going to be deemed current, and you shouldn’t later have issues.

How the Chapter 13 Case is Concluded

I’ll give you an example. Let’s say that you’ve completed your plan payments at the end of October, for example. Your attorney will notify the Trustee that the automatic payments should be terminated and a Court Order will be issued to stop your wage attachment with your employer. The Chapter 13 Trustee will send a letter to you that you must begin making payments directly to your mortgage lender, likely effective December or January, because in our Western Pennsylvania District, there are always two extra mortgage payments calculated into the plan base.

By our Local Court Rules, your attorney can file with the Court a Motion for Discharge no sooner than four months after the final plan payment. If the Trustee is in agreement that the required creditors have been paid, then the Court will issue your Discharge Order. Importantly, the Discharge Order specifically states that you are current with your mortgage! If, for example, you later receive a notice or statement from your mortgage lender that you are in arrears, then your attorney can charge your mortgage lender with violating the Discharge Order. And, if requested, judges do find that mortgage companies have violated Chapter 13 Discharge Orders.

For a fascinating case about this very situation, I suggest you read In re Hill, which was recently decided here in Pittsburgh, involving a woman who successfully completed her Chapter 13 case only to find that her mortgage company, Countrywide, claimed in billing statements that she was $4,700 behind on her mortgage. The Judge found that Countrywide had issued a series of falsified mortgage payment statements over the course of several years. But the relief that Ms. Hill’s attorneys sought was to file a Motion to Enforce Discharge Order, because the Countrywide billing statements violated the Discharge Order.

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