The Short Answer
What happens when you fall behind on your mortgage during bankruptcy depends on whether you're in Chapter 7 or Chapter 13 — and where you are in the case. In Chapter 7, falling behind before your discharge can trigger a Motion for Relief from Automatic Stay, giving the lender court permission to begin foreclosure. In Chapter 13, a missed mortgage payment outside your plan will need to be added back into your monthly trustee payment, increasing what you owe each month. In either chapter, catching up quickly is critical — the longer you wait, the fewer options you have.
We understand that sometimes after filing bankruptcy different situations come up that may cause you to fall behind on your mortgage payment. It’s important to realize there are a number of consequences that come from falling behind on your bankruptcy. We will look at them depending on which type of bankruptcy you file, a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.
Chapter 7 Bankruptcy:
In a Chapter 7 bankruptcy, one must be current on their mortgage payment at the time of filing and throughout the duration of the bankruptcy in order to keep the house. If you were to fall behind on your mortgage payments there would be two important time periods to consider. In other words, you need to know where you stand in the bankruptcy.
Before the Final Decree (End of Bankruptcy):
If you fall behind on your payment before the bank has received the final decree, the mortgage company could potentially take legal action. The mortgage company may choose to file a Motion for Relief from Automatic Stay. In other words, they would be asking the court for permission to begin foreclosure proceedings on the home. The Motion for Relief from Automatic Stay will likely be granted to the mortgage company unless you are able to bring the payments current by the hearing date.
After the Final Decree (End of Bankruptcy):
If you fall behind on your payment after the Final Decree, then it’s the same as if you haven’t filed bankruptcy. The mortgage company no longer has to ask for permission from the court to begin foreclosure since your bankruptcy is over once the Final Decree is entered. Therefore, the mortgage company would decide when they wanted to begin foreclosure proceedings on the home.
Prevention:
Be aware of when your mortgage payments are due each month and make a valuable effort to make sure they get to your mortgage company on time. It is common in Chapter 7 bankruptcy for the mortgage company to stop sending statements and/or to stop automatic drafts. You should keep an eye on your automatic drafts to be sure your payments are being made on time. Be sure you pay the mortgage payment on time every month, even if you do not receive a bill or a statement.
Chapter 13 Bankruptcy:
What’s important to consider in a Chapter 13 is at what point in the bankruptcy you have fallen behind on your payment.
Not Behind at the Time of Filing Bankruptcy
If you are not behind at the time your Chapter 13 bankruptcy is filed, the mortgage payment will not be included in your monthly payment to the Trustee. This is considered “paying outside of the plan” since it will continue to be paid as a separate payment. You will continue to make a separate payment to the mortgage company only if you are current at the time of filing and throughout the duration of the bankruptcy.
Behind at the Time of Filing Bankruptcy
One reason why people choose to file a Chapter 13 bankruptcy is because they are behind on their mortgage payments and need to get caught up. If you are behind on your mortgage payment at the time of filing, it will be included in your Chapter 13 monthly payment to the bankruptcy Trustee.
Not Behind at the Time of Filing But Later Fall Behind
If you are not behind on your mortgage payment at the time of filing but then fall behind during the bankruptcy, your Chapter 13 monthly payment will increase. The mortgage company is a secured debt and must receive a monthly payment. Therefore if you fall behind it then needs to be included in your Chapter 13 monthly payments. Your monthly payment to the Trustee will increase, because the mortgage company is one of the first creditors to receive payment. The Chapter 13 office will request that the mortgage company be added to your monthly payment, which will increase as a result.
Prevention:
If you are making your mortgage payments “outside of the plan,” or in other words, making separate payments to the mortgage company, be aware of when they are due and be sure the mortgage company receives your payments on time. As we discussed in the Chapter 7 section, it is common for billing statements and/or automatic drafts to be stopped during bankruptcy, so be sure you pay the mortgage payments on time, regardless of whether you receive statements.
Key Takeaways
- In Chapter 7, you must stay current on your mortgage from the day you file through the end of your case or risk the lender filing a Motion for Relief from Automatic Stay and starting foreclosure.
- Once your Chapter 7 discharge is entered, the automatic stay is lifted and your lender can pursue foreclosure without asking the court for permission.
- Mortgage companies sometimes stop sending statements or halting automatic drafts after you file — you are still responsible for paying on time even if you never receive a bill.
- In Chapter 13, if you are current at filing, your mortgage is paid directly to the lender outside your plan — falling behind later forces it into the plan and raises your monthly trustee payment.
- One key reason people choose Chapter 13 over Chapter 7 is the ability to catch up on past-due mortgage payments through the repayment plan over 36 to 60 months.
- If you realize you are falling behind during a Chapter 13, contact your attorney immediately — waiting makes the cure amount larger and plan modification harder to get approved.
Attorney Insight
The mistake I see most often is Chapter 7 clients assuming that because they filed bankruptcy, their mortgage is somehow on pause — it isn't. The automatic stay only prevents the lender from taking new collection action; your obligation to keep making payments starts the day your case is filed and never stops. I've had clients blindsided when a lender's Motion for Relief from Stay was granted at a hearing because they were two months behind and couldn't cure it in time. In Chapter 13 cases here in North Carolina, trustees like Anita Jo Kinlaw Troxler in Greensboro and Al Overcash in Charlotte move quickly to address mortgage arrears — if your payment structure needs to change, you do not want the trustee asking why before your attorney does.
