Conduit Payments in Bankruptcy

Arizona’s Preeminent Bankruptcy Attorneys On Direct Payments

Our Arizona chapter 13 bankruptcy attorneys discuss making Conduit Mortgage Payments within an Arizona Chapter 13 Bankruptcy.

If you are struggling to make your mortgage payment or are behind on your mortgage and have filed for Chapter 13 bankruptcy protection, your Ch. 13 repayment plan will have to include your mortgage payments within the re-payment plan. Therefore, debtors are not allowed to make payments directly to their mortgage company. Payments now must go through the trustee to ensure that all debtors are receiving payments and not being preferentially paid by the debtor. However, there is a 10% fee for each conduit mortgage payment made to the trustee within the Chapter 13 bankruptcy plan. In short, paying your mortgage through a repayment plan means that it will cost a person 10% more just to pay their mortgage.

Arizona Chapter 13 Bankruptcy?

Chapter 13 Bankruptcy reorganizes your debt into one consolidated monthly payment plan. Repossessions and foreclosures will be stopped by the Automatic Stay of Protection when the bankruptcy petition is filed, and the filer will pay off any overdue balances over the course of their payment plan. The payment plan will last 3-5 years, depending on the filer’s income level. Some debts will be discharged at the end of this payment plan, meaning the filer is no longer liable for them.

What Is A Conduit Payment?

A Conduit Payment is a part of Chapter 13 Bankruptcy used by filers who are behind on their mortgage payments. If this is the case, they will pay both their monthly mortgage along with their past-due balance in monthly installments to their trustee, who will then send it to the mortgage lender.

Is Arizona A Conduit Jurisdiction?

Arizona is a Conduit Jurisdiction per Rule 2084-4 of the District of Arizona local bankruptcy rules.

Can I Miss A Chapter 13 Payment?

If you miss your Chapter 13 payment, you can expect the trustee to file a motion to dismiss your case. If you aren’t able to catch up your plan payment, you may apply to modify your plan or convert it to a Chapter 7. You will only be able to modify your plan if you are paying more than the minimum required amount on your debts. Converting to a Chapter 7 could impact your conduit payments, so you should contact your attorney in Arizona as soon as possible if you believe you won’t be able to make your monthly payment. There are several options of how to modify your plan. You can change the payment date, reduce the installment, etc. The court will have to approve any modification you propose. To get approved, you will need to prove why you need a modification, e.g., loss of income.

How Much Does It Cost To File Chapter 13 In Arizona?

The filing fee in Arizona for a Chapter 13 Bankruptcy is $313. Your attorney may choose to offer you a low down payment for representation fees and work the rest of their fees into your payment plan. Attorney fees may vary, and can based on your attorney’s experience and reputation and the complexity of your case.

How Will I know If I Qualify For Chapter 13 Bankruptcy Protection In AZ?

Unlike Chapter 7, you don’t need to prove your income is low enough to file Chapter 13 through the median income level and the Means Test. However, you will need to be able to show that you will reasonably be able to make payments towards at least a minimal amount of your debts. This minimum will depend on the types and amounts of debt you have. You should consult with an attorney to get an estimation on what your plan payments will be.

More Things You Should Know About Conduit Payments In An Arizona Chapter 13 Bankruptcy

A major disadvantage of using conduit payments in your bankruptcy is that each conduit payment will have a 10% trustee fee. However, this fee goes towards the trustee’s careful and accurate keeping of your records. Conduit payments made through a trustee can help you at the end of your bankruptcy if there are any disputes over the status of your loan. Mortgage servicers are less likely to file a motion for relief from the automatic stay if they know a bankruptcy trustee will address the issue.

Arizona Bankruptcy Rule 2084-4 requires debtors filing Chapter 13 who are behind on their mortgage to use conduit payments. The debtor may only be excused from conduit payments if it is approved by the court. Under Rule 2084-4, debtors must complete a Mortgage Creditor Checklist and Authorization to Release Information in addition to the standard forms required in a Chapter 13 Bankruptcy.

If you miss a mortgage payment in your Chapter 13, you may be given a short period to catch up your payments, approximately 3-6 months. You may be able to add the past-due balance to your plan with the lender’s consent. If you don’t address it quickly, your mortgage lender may file a motion for relief from the automatic stay, which would allow them to proceed with a foreclosure sale.

Contact Our Arizona Chapter 13 Bankruptcy Attorneys

If you still have questions about Conduit Payments in a Chapter 13 Bankruptcy, our office can help. We offer free consultations, which is your opportunity to ask any further questions about conduit payments or any other concern you have. Call Chapter Bankruptcy Lawyers and get started today!