When your income drops, and your budget is tight, there is a risk that the largest thing in your budget doesn’t get paid – that’s your mortgage. Lot’s of people say that they would pay their mortgage first, but if your income has decreased to the point you can’t pay everything, there is no way that you are going to go without utilities, food and gas so that you can make your house payment.
Missing house payments gives the mortgage company the grounds to ask the court for permission to deal with you directly. That could be as simple as working out a payment arrangement, or as difficult as posting your house for foreclosure.
In a Chapter 7, I insist that the client be current on their mortgage at the time of filing and that they can stay current during the 90 days that the Chapter 7 is open.
If you fall behind on payments while you are in a Chapter 13 bankruptcy, the mortgage company can file a motion to ask the bankruptcy court to lift the bankruptcy protection for the house. It takes time for the mortgage company and their attorney to prepare the motion, so it usually includes more than one missed payment. The motion is set for a hearing 30 days later, which gives us time to work out a payment arrangement regarding the missed payments with the mortgage company’s attorney. That payment arrangement takes the form of a court order allowing you to stay in the house as long as
you 1) pay your ongoing house payment on-time and in-full, and 2) pay according to your payment arrangement with the mortgage company.