Allows you to get caught up on past due home and car loan payments in an amount you can afford

Does filing for Bankruptcy allow me to get caught up on past due house payments and car payments?

Under Chapter 13 of the Bankruptcy Code, in addition to temporarily stopping a foreclosure on your home or a repossession of your car, you are allowed to propose a "Plan" that gets you caught up on any past due house or car payments.

With respect to your home, the basic concept is to demonstrate to the court that, notwithstanding the fact that you were several months behind on your house payment at the time you filed for Bankruptcy protection, moving forward, you do have the funds available to pay back the past due payments over time. The following hypothetical demonstrates how powerful this concept can be:

Assume your house payments are $1000 per month. Assume also that you are 6 months behind because you were laid off from your job or off during a union dispute or a strike. Now you are back to work and can easily make your regular monthly payment of $1000 moving forward. Trouble is, you're past due $6000 plus late charges of $522! You sit down with your calculator and figure out a monthly budget in which you make your full, regular monthly house payment, pay all your utilities, buy groceries for your family, pay your taxes, and pay your necessary living expenses. You discover that you have enough left over to pay $135 per month to the mortgage company to be put toward the $6522 in past due payments over the next 48 months (assuming no accruing interest or late charges and all payments apply toward principal). You pick up the phone and let the mortgage company know the good news! You can pay them back the past due payments in just 4 years! How about that! The mortgage company of course does not want its money over 4 years - it wants it now; or, if they're flexible even a little, want it over 3-6 months, but not 48!

Yet, this is exactly what a "save-the-home" Chapter 13 will do. We propose exactly that type of Plan; proposing to make 100% principal payments toward the mortgage arrearage, over time and in an amount your budget can afford, and, so long as the proposed Plan is feasible, your mortgage lender MUST accept those payments and cannot reject the Plan because it wants its money faster.

With respect to your car, the same approach can be proposed with an additional caveat. If your car loan is more than 910 days old (you entered into the agreement more than 2 years, six months ago), not only can we propose paying past due amounts over time and at an amount your budget can afford, we can also propose that your payoff value of the loan be reduced ("stripped down or crammed down") to the fair market value of the car as of the date your case is filed.