Legal Question in Bankruptcy in California

Chapter 13 Plan to Cure Mortgage Arreages

Trying to do a Chapter 13 for myself. I only have one debt in the entire case: my mortgage. I'm about $15,000 in arrears on the mortgage on my home. Bank insists I have to pay all this up front (which I don't have) before it will accept the monthly mortgage payment from me again ($1,500 per month). My current income is such that I can pay the monthly mortage, no problem, and even after paying that off and all other monthly expenses, I have about $500/mo. left in disposable income. I'm thinking of proposing a Chapter 13 plan in which I will use the $500 to pay off the arrears in about 3 years. My questions are:

1. Do I have to include the $1,500/mo. regular mortgage payment as part of the Plan or can I pay the bank outside the Plan?

2. If the regular mortage payment has to part of the Plan, how do I assign the classes on the Official Chapter 13 Plan Form for the Central District of California, i.e., should the arrears be in Class Two while the regular mortgage be in Class Four (last payment due after final payment under Plan is due)?

3. What is the interest rate used for the Central District of California (9 or 10%)?

Thank you!


Asked on 3/26/00, 4:19 am

1 Answer from Attorneys
Mark Markus Law Office of Mark J. Markus

Re: Chapter 13 Plan to Cure Mortgage Arreages

You are basically on the right track as far as your choice of bankruptcy chapters and how you plan to deal with the mortgage arrears. However, your questions show an understandable, yet important, lack of knowledge of rules and procedures of Chapter 13. Even the simplest chapter 13 is fraught with peril, especially in the Central District of California, where there are significant local rules in addition to the Federal Rules of Bankruptcy Procedure. I could never in good conscience condone or recommmend a debtor representing themself in a Chapter 13. Sometimes in a Chapter 7 it is OK, but Ch. 13 is just too complicated. That having been said, I will answer your questions, but if you decide you would like representation, please give me a call. I will also tell you that most bankruptcy attorneys, including myself, will NOT take over a Ch. 13 case after it has been filed, so proceed at your own peril.

1. Ongoing mortgage payments are post petition obligations and have nothing to do with your Plan payments on arrearages. However, the ongoing payments must be provided for in the Plan in the appropriate place. Also, the Trustee in your case will have specific rules regarding submission of ongoing mortgage payments (as well as your regular plan payments) so you will need to find out that information as well.

2. I'm not sure what interest rate you are referring to. The Trustee's percentage should be estimated at 10% of distributions, but that is not an interest rate.

Sincerely,

Mark

http://www.bklaw.com/

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Answered on 3/28/00, 3:09 pm


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