Written by Craig D. Robins, Esq.
A “conditional order” can give a Chapter 13 debtor additional time to cure post-petition mortgage payments
Most consumers file for Chapter 13 bankruptcy relief to stop foreclosure. They use the Chapter 13 plan to pay back the mortgage arrears. If a debtor misses some payments after the bankruptcy is filed, the mortgagee will bring a motion to vacate the stay.
When this happens, negotiating a conditional order with the mortgagee can often provide a reasonable resolution.
Chapter 13 debtors sometimes fall behind with mortgage payments or trustee payments even when they have the best of good faith intentions.
There are many reasons why a debtor can fall behind. Often unanticipated expenses — like a broken hot water boiler or covering the cost of a relative’s funeral — can mean the difference between being able to make mortgage payments or not. A debtor can also fall behind if his or her income is reduced as the result of sickness or loss of overtime.
One way I often try to resolve the problem of post-petition mortgage arrears in my Long Island bankruptcy practice is to work out an arrangement with the attorneys for the mortgagee called a conditional order.
A conditional order is basically an agreement that is “so-ordered” by the court, giving the debtor a certain period of time to do a particular act before the order can become effective.
The conditional order typically provides that the debtor will cure the post-petition mortgage arrears by making extra payments for a period of up to six months. If the debtor fails to do so, the conditional order will provide that the bankruptcy stay will be lifted.
Mortgage companies are not required to enter into conditional orders; however, most will do so.
Conditional orders are only practical if the reason why the debtor has fallen behind is only temporary.
If you are a Chapter 13 debtor who has fallen more than a month behind with your post-petition mortgage payments, you should immediately consult with your bankruptcy attorney to discuss resolving the problem — hopefully with a conditional order.