Chapter 13 and the New “Conduit” Program in North Texas

Let’s Save Your Home

If you are reading this, you likely live in the Northern District of Texas – in the DFW Metroplex – and may be searching for a way to save your home from foreclosure.

My home, too, is by far, my most prized asset; and it isn’t just about value; it’s psychological: “There is no place like home.” If you are like me, your home means everything to you and your family. It’s where you’ve raised your children, where you find your most peaceful rest, where you work on your hobbies, and so much more. Falling behind on your mortgage payments – due to job loss, illness, divorce, etc. is nothing short of frightening.

Chapter 13 is a way to resolve this problem. Indeed, thousands of homeowners in the Northern District of Texas seek Chapter 13 protection each year. What’s more, thousands of homeowners here emerge from their Chapter 13 reorganizations back on track – with their mortgage arrears satisfied and their ongoing monthly mortgage payments paid in full. It’s a wonderful feeling. Foreclosure was prevented and the house is safe!

Let’s talk about how Chapter 13 works in this context. First, it prevents foreclosure. Second, it allows you to catch up on your mortgage over time by paying a monthly payment to the Chapter 13 Trustee, which can give you as much as five years to get caught up on that amount you fell behind on. Most importantly, this gives you the peace of mind you need to move forward. In moving forward in a Chapter 13, you can focus on paying your monthly mortgage on time as each monthly due date nears. So, for example, in a Chapter 13, you make a catch-up payment to the Trustee and your ongoing mortgage payments as they come due.

And as of October 1st, 2016, Bankruptcy Trustees in the Northern District of Texas are implementing the “Conduit” program for your monthly mortgage payments. This means that, if you are behind on your mortgage for more than two months when you file your Chapter 13, not only do you pay your catch-up payment to the Trustee, but also your regular monthly mortgage payments! The Trustee then pays your mortgage company each month. As legal counsel to hundreds of families in the Northern District of Texas who are attempting to maintain their mortgage payments while in a Chapter 13, I am very optimistic about this program! As far as I am concerned, it provides another layer of protection between you and your mortgage company and encourages a successful reorganization of your financial affairs.

So, why is there a new way of doing things? The rule is this: If you are in a Chapter 13 and fall behind on your mortgage after you filed your 13, and if you are getting close to the end of your plan, you will not obtain a discharge. To be successful in a Chapter 13, you have to make your mortgage payments on time. If you fail to do this, then your lender will seek to foreclose while you are in Chapter 13 because you fell behind again. All of the effort you have committed to your plan would then be wasted.

Additionally, the advantages of this new program cannot be overlooked. Perhaps part of the reason you “fell” behind is because your mortgage company misapplied your payments, lost your payment, or transferred your servicing to a new company. As legal counsel I see many instances of these circumstances while a debtor is in Chapter 13 – the lender says the debtor is late but the debtors says they are not. The proof is required. I am optimistic that our Chapter 13 Trustees will put a rest to these often needless controversies because of the accuracy of the Trustees’ records of payment.

If you are behind on your mortgage and fear losing your home to foreclosure, call Bailey & Galyen. Let us help you save your home, and obtain the peace of mind you need to move forward!

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