Bankruptcy

Create a Document File When You File Chapter 13

By Jonathan Ginsberg, Atlanta Bankruptcy Attorney

This afternoon, I appeared at a Section 341 meeting of creditors hearing with a married couple who I represent in a Chapter 13 case.  One of the questions asked by the trustee had to do with mortgage payments – specifically, were the debtors current with their post-petition mortgage loan payments.  In the Northern District of Georgia, where I practice, debtors pay their ongoing mortgage payments directly to the mortgage lenders, as opposed to paying mortgage companies through their Chapter 13 plans.

My clients were able to answer that they were current, and the trustee responded with a very good suggestion – that they keep copies of all payments made so that they would have proof of these payments if the mortgage company filed a motion for relief from stay that did not reflect all of these payments.  The trustee also wisely suggested that they keep proof of tax and insurance payments if those were not being escrowed.

The Chapter 13 trustee’s advice in this case was wise.  Over the past 20+ years that I have been filing Chapter 13 cases, I have seen many instances where there was a payment history dispute between the mortgage lender and the debtor.  It is extremely frustrating when my client cannot produce copies of canceled checks, or receipts for payments.

When payment disputes end up before a judge, the lender will present a payment history that shows receipts, payment reversals and disbursements from escrow.  If the debtor cannot produce proof of payments, there is a good chance that the judge will accept the mortgage company’s analysis.   I have no doubt that Chapter 13 debtors regularly double pay post petition mortgage payments simply because they do not keep good records.  Don’t let this happen to you.

I am now telling my clients to create a “Chapter 13 file” that includes copies of mortgage payments, escrow payments, insurance payments, appraisals, informal valuations, pay stubs and tax returns.  These documents can be especially valuable in the future.  This file should also contain a copy of the Chapter 13 petition and every document generated by the clerk and mailed.

I encourage my clients to take an active role in their Chapter 13 cases – read what is sent to you and ask questions if something does not seem right.

Full post as published by Bankruptcy Law Network on September 06, 2010 (boomark / email).