Chapter 13 Plans

• In a Chapter 13 bankruptcy, the court appoints a trustee that manages your bankruptcy estate. You give this trustee detailed information about your income, so the court can decide what payment plan you can afford. The trustee will then choose debts that you must repay through the plan. Typically, you must repay debts on secured loans like mortgages so you can keep possession of your house. If there are any debts remaining after the plan ends, they are canceled completely.
  
  

Plan Limitations

• Because of the way a Chapter 13 bankruptcy is structured, you can make mortgage payments through the plan, but only payments you are late in. This means that your mortgage must be in default before the plan will affect it at all. If you have kept up on your mortgage payments before you file, then the plan will not include the mortgage at all. Chapter 13 will only cover debts that you have created before filing. If you miss payments after filing, the bankruptcy will not deal with them.
  
  

Mortgage Payment Details

• When faced with a bankruptcy, debtors and creditors often come to new loan terms that benefit both parties. The trustee may rework the payment plan so that the late payments are absorbed back into the mortgage. The creditor will restructure the mortgage so that it lasts for a longer term or has slightly higher payments to make up the difference, but you get to keep your property. However, no matter your plan, you will probably have to make both current mortgage payments and payments on your bankruptcy plan, whether that plan included previously owed mortgage payments.
  
  

Exceptions

• The rules of a Chapter 13 bankruptcy make it difficult to pay all your mortgage payments through the plan, especially since it is set up by the trustee and only lasts for a limited amount of time. The primary exception to this occurs if you default on your loan only a short time before you would have finished paying for it. This is very unwise, because it needlessly lowers your credit rating and puts your property in danger, but if your last mortgage payments are in default the plan will probably have you pay them entirely.