The Short Answer
Receiving a past-due mortgage statement while in Chapter 13 is almost always the result of one of two things: your mortgage company's internal record-keeping practices, or a timing delay between when you pay the trustee and when the trustee disburses funds to your lender. Neither situation means you are actually in default on your mortgage. As long as your Chapter 13 plan payments are current, your mortgage is being handled through the bankruptcy process as intended. Contact your bankruptcy attorney to verify your payments are on track before taking any other action.
If you’re in a Chapter 13 bankruptcy, you may be surprised to receive a mortgage statement indicating that you’re past due on your mortgage payment. This can be confusing and worrisome, but it’s important to understand what’s happening and what steps you need to take. In this guide, we’ll explain why you’re receiving the statement and what you can do about it.
Before we dive into why you’re receiving a mortgage statement saying you’re past due on your payments, let’s first review how Chapter 13 bankruptcy works.
Chapter 13 bankruptcy is a type of bankruptcy that allows individuals to reorganize their debts and repay a portion of them for three to five years. During this time, the individual makes monthly payments to a trustee, who then distributes the funds to the creditors in accordance with a Chapter 13 repayment plan. Once the repayment plan is completed, any remaining unsecured debts will be discharged.
If you’re in a Chapter 13 bankruptcy and are receiving a mortgage statement indicating that you’re past due on your mortgage payment, this is likely due to one of two issues.
1. Record-keeping practices by your mortgage company, or
2. A timing issue
In most cases, you will receive a statement showing you as past due on your mortgage payment because your mortgage company is keeping records of what amount you would be past due if you were not in a Chapter 13 bankruptcy. Confusing, right? Let’s explain this further.
When you are past due on your mortgage payments and file a Chapter 13 bankruptcy, you will pay that arrearage or past due amount back at 0% interest. This is much better than what you would be paying back outside a bankruptcy. Outside of bankruptcy, you would continue to accrue late fees, penalties, higher interest, etc. Due to this, the mortgage company keeps records to know what amount you would have to pay back if you were dismissed from bankruptcy. If your case is dismissed, you would be required to pay back the higher interest rate, late fees, and penalties that may have accrued while you are in the bankruptcy that you do NOT have to pay back if you complete your Chapter 13 bankruptcy. A mortgage company may keep those records so they have appropriate records and accounting of what you would owe if dismissed from a Chapter 13 bankruptcy.
A second issue is that in some circumstances, mortgage payments are due on the first of the month. However, your payment to the bankruptcy Trustee is not always immediately disbursed to your mortgage lender. There may be a delay of a few days or weeks between when you make the payment to the Trustee and when the Trustee distributes the funds to the mortgage lender.
As a result, the mortgage lender may report a late payment to the credit bureaus or send a past-due notice to you. However, this does not mean that you are actually in default on your mortgage.
If you’re in a Chapter 13 bankruptcy and are receiving a mortgage statement indicating that you’re past due on your mortgage payment, there are a few things you can do to address the issue.
The first step is to contact your bankruptcy attorney to ensure your payments to the Trustee are up to date. Then, your attorney can work with the Trustee to confirm that your payments are being disbursed to your mortgage lender on time.
You can also contact your mortgage lender to explain the situation and provide them with proof that you’re in a Chapter 13 bankruptcy. This can help them understand that the late payment reported on your account is due to a timing issue, not because you’re in default on your mortgage.
IMPORTANT: Also, it is essential to know that at the end of your Chapter 13 bankruptcy, the Chapter 13 Trustee will file a document called a Motion to Deem Mortgage Account Current. That is a motion that states the Chapter 13 Trustee has made all appropriate payments to your mortgage company. The mortgage company has 30 days to object to the Trustee’s motion if they believe the Trustee has not made all of the required payments. If they respond stating all necessary payments have been made or don’t respond at all, the Court will enter an Order finding all payments have been made and the Debtor is current on their mortgage payments. At that point, you would be current on the mortgage payments, and if the mortgage company tries to fight you on whether or not you are current, you can have your bankruptcy attorney send them that Order from the Court. If they still fight that Order, they could face sanctions from the Bankruptcy Court.
Finally, suppose the mortgage lender is still reporting the late payment to the credit bureaus. In that case, you can dispute the information with the credit bureaus and provide them with proof that you’re in a Chapter 13 bankruptcy.
Receiving a mortgage statement indicating that you’re past due on your mortgage payment while in a Chapter 13 bankruptcy can be confusing and stressful. However, it’s important to understand that this is likely due to accounting procedures by the mortgage company or a timing issue and not because you’re actually in default on your mortgage. Contacting your bankruptcy attorney and the mortgage lender can help you resolve the issue and ensure your payments are disbursed on time.
Key Takeaways
- Your mortgage company may track what you would owe outside of bankruptcy — including late fees and penalties — for their own accounting records, which is why statements can show a past-due balance even when your plan payments are current.
- There is often a lag of days or even weeks between when you pay the Chapter 13 trustee and when the trustee disburses those funds to your mortgage lender, which can trigger past-due notices.
- Receiving a past-due mortgage statement during an active Chapter 13 does not mean you are in default — but you should confirm with your attorney that your trustee payments are up to date.
- You can contact your mortgage lender directly to clarify that you are in an active Chapter 13 bankruptcy, which can help explain why the account appears behind in their system.
- At the conclusion of your Chapter 13 plan, the trustee will file a Motion to Deem Mortgage Account Current, giving your lender 30 days to object if they believe any payments were missed.
- If your lender files a Proof of Claim showing a different arrearage amount than what was proposed in your plan, your attorney needs to review it promptly to address any discrepancy.
Attorney Insight
The call I get most often mid-case is a panicked client who just opened a mortgage statement showing they're thousands of dollars behind — and they assume their bankruptcy isn't working. What they don't realize is that their lender is running two parallel sets of books: one for the bankruptcy world and one for what they'd collect if the case got dismissed. That "phantom" balance disappears if you complete your plan. The bigger issue I watch closely is the lender's Proof of Claim — if the arrearage they file doesn't match what we put in the plan, we have to object quickly or that inflated number becomes what the trustee pays out.
