Since the beginning of 2020, and for the foreseeable future, everyone in the United States and across the world is dealing with some serious difficulties in the face of COVID-19. One of the most prominent issues many in the United States are struggling with is a lack of income due to shelter-in-place orders and nonessential business shutdowns. Combined with layoffs and other factors, the situation is worse for those who struggled with finances even before the outbreak of the virus. These people are having to take actions to protect themselves and they are working with creditors, banks, and other loan providers to come up with a sound financial plan.
The CARES Act was put into place this past March to provide relief to U.S. citizens and businesses through various means. For many, one of the most helpful parts of the CARES Act is the allowance of a mortgage forbearance for up to six months. However, for those working through a Chapter 13 repayment plan, the CARES Act may affect a mortgage forbearance differently than for other individuals. If you are considering filing a Chapter 13 bankruptcy in Waseca, MN, or the surrounding area during this time, Behm Law Group Ltd. can help you understand how the CARES Act could change a mortgage forbearance and other aspects of your finances.
For those not in a Chapter 13 bankruptcy, the CARES Act allows individuals to request a forbearance on their mortgage lasting up to six months. There may also be an option to delay making payments on mortgages through forbearance of an additional six months. Requesting this forbearance for those in a Chapter 13 bankruptcy, however, becomes a bit more complicated.
For any changes in a Chapter 13 repayment plan, including a mortgage forbearance, all parties involved must be notified. While requesting a mortgage forbearance on the bankruptcy filer’s end is almost the same as for individuals outside of a bankruptcy, the passing of information among the loan services, trustee, and bankruptcy attorney can be complicated. Because the COVID-19 pandemic is an unprecedented situation, the bankruptcy code doesn’t have in-place guidelines to handle issues related to it. Consequently, the reporting of mortgage forbearance requests to parties involved in a Chapter 13 bankruptcy depends on a local district bankruptcy court’s regulations.
To properly provide a temporary mortgage forbearance notification in a chapter 13 bankruptcy, the National Association of Chapter 13 Trustees has established a few basic ways mortgage lenders can provide forbearance information to parties involved in a bankruptcy proceeding.
- General notice: Mortgage lenders can file a general notice with the bankruptcy court outlining the forbearance terms in the court docket for a particular bankruptcy case.
- Claims register: Mortgage lenders can also file a claim on the claims register, which is typically more directly linked to the chapter 13 trustee’s system.
- Mail a letter: Mortgage lenders can send a physical letter to the bankruptcy filer, the chapter 13 trustee and all interested parties detailing the mortgage forbearance terms.
- Notice of payment change: Finally, mortgage lenders can file a notice of payment modification in the bankruptcy court claims register for a particular bankruptcy case.
All of these options have their advantages and disadvantages, depending on the locality. Mortgage lenders should be working through whichever process is best for each bankruptcy judicial district.
To learn more about mortgage forbearance in a Chapter 13 bankruptcy in Waseca, MN, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com today.
