So you’ve been making your monthly Chapter 13 payment and it hasn’t been easy. There isn’t a lot of wiggle room to begin with but some months have been better than others. Plus, you know you’re on track to save a lot of money by completing the Chapter 13 bankruptcy. Then life happens. It’s the loss of a job, unexpected medical situation or a variety of other reasons why you may not be able to afford your monthly Chapter 13 payment anymore. So what do you do?
After filing Chapter 13 bankruptcy, you should confirm with your attorney whether the monthly mortgage payment is to be paid by you or the Chapter 13 bankruptcy Trustee. Often the mortgage payment is included in your monthly Chapter 13 payment and disbursed to the mortgage company by the Chapter 13 Trustee. Regardless of how the monthly payments are made to the mortgage company, you are eligible to deduct interest paid on your loan if you itemize your deductions on your tax return, and the mortgage interest meets the requirements established by the Internal Revenue Service. The same holds true if the property insurance and taxes are escrowed in your mortgage payment or whether you pay them directly to your insurance agent and city and county tax collector. They should be eligible for deduction on your taxes.
The mortgage company should continue to send you the Form 1098 Mortgage Interest Statement which will list the mortgage interest, insurance premiums and real estate taxes paid to them for the tax year. This will only include taxes and insurance if they were escrowed in your monthly payment. If you do not receive Form 1098 by early February following the tax year, you should contact the mortgage company and request they send the form to you. The information on Form 1098 is the same information the mortgage company provides to the Internal Revenue Service regarding your loan.