Chapter 13 Has Major Benefits
Video Transcribed: I am Edward Kelley, a bankruptcy attorney in Oklahoma for Wirth Law Office. This is the final video in our series on how Chapter 13 can save you when your forbearance ends suddenly, and you owe a year’s worth of mortgage payments. That’ll just be an overview summary.
So as I’ve been talking about, COVID forbearances have been great, wonderful things, but rather moronically what a lot of people are finding is that they owe the entire amount at the end of the forbearance period. To me anyway, this doesn’t make much logical sense.
If you had that money available, you would have paid it as you went along, but that’s what people are finding. And there are ways to get a new loan or loan modifications.
It just depends on your lender, how easy they make it, but some are making it near impossible. So what do you do to not immediately be in foreclosure you can’t possibly pay off? Chapter 13 bankruptcy.
So Chapter 13 in Tulsa, Okla, as I stated, is based on what you can pay, not on what you owe. In this case, it’s based on what you have to come up with, which would be the regular mortgage payment, 500 in my example I’ve been using.
And then the 6,000… if you’ve been in forbearance for a year, that means you’re 6,000 behind. Take that divided by 60 months or five years. So 1/60 of that would be a hundred bucks.
Add that to the 500, 600. So in order for your plan, which is the document I create for you, to be feasible and able to be confirmed, these are the major terms in a 13 by the court, we need to make sure that you have 600 available.
If you don’t have that much disposable income, then we have to find an outside source and list that so that you can make it, or you won’t get confirmed. It’s the judge that confirms it, but it’s the trustee that administers it. So basically in this scenario, I’m just trying to negotiate and get things settled with the mortgage company’s attorney and with the trustee. Get it right with them, the judge will be fine with it.
If you have any additional funds leftover per month, then those will go to your other creditors, should you have any. If you don’t, and often you don’t in this scenario, because if you had extra money, you would have paid that.
You wouldn’t have been in forbearance. Then all of those debts get discharged 100%, just like they would in Chapter 7, which for most people is great. So that’s how Chapter 13 can save your butt coming out of a COVID forbearance.
