What Do I Do If I'm Too Far Behind On My Mortgage for a Chapter 13?
As the result of the Coronavirus Pandemic, the state and federal governments have temporarily stopped most foreclosures on homes. But this doesn't fix the problem; it just pushes it down the road. Eventually, the missed payments will come due. Because of this delay, the arrearages – the amount you’re behind on your mortgage–can be a lot of money.
When you go to most consumer bankruptcy attorneys to file for a Chapter 13 repayment plan, you’re told that the plan payments will be too high for you to afford, since the full amount of the arrearage must be paid over a maximum of five years. If the arrears are $60,000, for example, this would require at least a $1,000 per month payment on top of resuming your regular monthly payment. Most people just can’t afford it.
This may result in many people thinking that they have no alternative other than losing their home. But there may be another alternative: an individual Chapter 11.
Most people don’t even know that individuals can file for Chapter 11; they think that it’s just for big businesses. This is not the case. In fact, my colleague and friend Dan Press and I have written a book about individual Chapter 11 cases, Chapter 11 for Individual Debtors, and we teach other attorneys how to handle individual Chapter 11 cases through our Chapter 11 Bootcamps. Unlike a Chapter 13, in a Chapter 11 case there is no five-year limit on the repayment term for mortgage arrearages. In many of my Chapter 11 cases, I have obtained repayment terms of up to 30 years, without interest. In the example above, instead of a $1,000 per month payment, my client is looking at a monthly payment of $166.67. This is a lot more doable.
Chapter 11 isn’t for everyone. It is much more complex and expensive than a Chapter 13, and there aren’t a lot of consumer bankruptcy attorneys who know how to steer you through an individual Chapter 11.