Mortgages while in C-13

[Slingerland]

This is more of a "what do you think" question... personal experience is welcome of course!

In many cases, a petitioner is not behind on their mortgage when filing for a C-13. In my district, if the petitioner is not behind on the mortgage, the trustees allow the petitioner to pay outside the plan (thereby not paying the trustee's 6% markup.)

But more and more there are situations where the mortgage service companies are abusing the fact that the petitioner filed: new "fees", misapplied payments (generating more fees) and lost correspondence. The big banks (Bank of America comes to mind) are infamous for refusing to fix their errors until a lawyer is involved.

So... thinking out loud... if the petitioner is paying the mortgage through the trustee, is the bank more likely to play by the rules? Would this be a legitimate reason to pay the mortgage through the trustee, even though the petitioner has the option not to?

Thanks!

[spidge]

Good question. I pay the mortgage outside my ch13 plan, but there are a couple back payments included. So to add to your question, when would the filer find out there is a shortfall?

[LadyInTheRed]

At least one BK forum member has reported a bank not properly applying mortgage payments received from the trustee. So, paying through the plan is no guaranty that the bank will behave.

As far as the increase in trustee payment is concerned, it may not really make a difference to the debtor. If you are paying enough to unsecured creditors, that extra trustee fee just reduces what the unsecured creditors receive. So, depending on the details of your plan, you may find it convenient to pay the mortgage as part of your plan payment, without making any difference to your bottom line. I wasn't required to make my car payment through the plan, but my attorney suggested I include it to make the trustee happy. Keeping the trustee happy at the expense of unsecured creditors sounded like a great idea to me! Including my mortgage payment in the plan would have increased the trustee commission enough to require me to pay more in the plan to cover the commission. I didn't want to make the trustee that happy, so I make the mortgage payment directly to Bank of America.

The only problem I've had with Bank of America is that if I pay more than the minimum payment, they don't automatically apply it to principal. So, I don't pay more than minimum. I get an "informational" statement every month so I can make sure payments are being applied correctly.