If you want to keep your home, you must continue to pay your mortgage while in Chapter 13 bankruptcy. Chapter 13 bankruptcy may delay foreclosure. However, if you don’t make timely mortgage payments, your lender can still foreclose on your house during your Chapter 13 with court permission. Read on to learn more about what happens if you stop paying your mortgage while in Chapter 13 bankruptcy.
(For more on what happens to your home, mortgage, and second mortgages in Chapter 13, see Your Home in Chapter 13 Bankruptcy.)
If you have a mortgage, your lender typically has a lien on your house. This means that if you stop paying your mortgage, it can sell your house at a foreclosure sale to satisfy the loan. If you were behind on your mortgage prior to filing your Chapter 13, you can pay off those arrears through your repayment plan. As a result, your lender can’t foreclose on your house for pre-bankruptcy mortgage arrears as long as you are paying them off through your plan. (Learn more about how Chapter 13 bankruptcy can help with foreclosure.)
However, if you want to keep your house, you must continue making your ongoing mortgage payments as they come due during your Chapter 13. In most cases, you make your regular payments directly to your lender outside of bankruptcy. But some courts require you to make them to the bankruptcy trustee as part of your repayment plan. If you fail to pay your mortgage during your Chapter 13, your lender can seek court permission to foreclose on your house.
While you are in Chapter 13 bankruptcy you are protected by the automatic stay. This means that your lender can’t foreclose on your house without obtaining court permission first. However, if you don’t make mortgage payments during your Chapter 13, your lender can file a “motion for relief from the automatic stay” to get court consent to begin foreclosure proceedings. (To learn more, see Bankruptcy's Automatic Stay.)
Once a motion for relief is filed, you have approximately two weeks to oppose it. If you don’t oppose it, the court will usually grant the motion and lift the stay as to your mortgage lender (the stay remains in effect for your other creditors). When the stay is lifted, your lender is free to initiate or continue foreclosure proceedings.
If you oppose the lender’s motion for relief, there will be a hearing in front of the judge. At the hearing, the judge can grant or deny the lender’s motion. However, in most cases, the judge or your lender will agree to give you a certain amount of time to catch up on your missed payments (this is referred to as an adequate protection order). If you are able to catch up, the stay will remain in effect. However, if you fail to comply with the adequate protection order, the stay will usually be lifted without further hearing.