Conduit payment is the rule for chapter 13 cases in Cleveland. This is a super fancy name for the Chapter 13 Trustee making your mortgage payment if you are a chapter 13 debtor and plan to keep your home.
The mechanics are that your plan payment to the trustee will include your mortgage payment or payments if there is more than one mortgage or a home equity line of credit or HELOC. He cannot make the payment unless you pay it to him first.
Sounds a bit convoluted, doesn’t it? Why add the extra step to paying your mortgages? This process was actually requested by the area chapter 13 attorneys. The vast majority of debtors who file a 13 do so because they want to catch up their mortgage. The unfortunate truth is that if you are way behind on your mortgage your current monthly budget mindset does not include making mortgage payments. If something comes up the first place cut is the mortgage payment.
To succeed in a chapter 13 you MUST make all of your mortgage payment on time and in full. That is why most cases fail. You miss a mortgage payment then the bank files for relief from stay and then ramps up the foreclosure against you. All the time, effort and money you put into the chapter 13 case is wasted.
Enter Craig Shopneck, your Cleveland chapter 13 trustee. Under the conduit payment process he will make your mortgage payments starting the first of the month following the filing date of your case. For this reason, it is essential that you begin making plan payments when you receive your first paycheck following filing. You can’t wait until your employer begins deducting the payment from your paycheck. Often that takes more than a month to begin. If you fall $1,200 or more behind in your funding, you risk dismissal of your case.
In every chapter 13 case filed in Cleveland conduit payment of any mortgage or HELOC is required. Not everyone who files is doing so because they are behind on their mortgage. Sometimes it is because of tax problems, non-exempt assets they want to keep, or excess income. Rarely are these people behind on their mortgages. There is an option if you are not behind on any of your mortgages. You can opt out of the conduit payment requirement. This will require your bankruptcy attorney to file a motion with the court stating you loan is current at the time the case is filed. The court will then issue an order that you can continue making the mortgage payment or payments on you own.
If you are granted an order to opt out of the conduit mortgage payment there is little or no wiggle room. Fall behind and the lender will file for relief from stay. That can normally be resolved, but once you demonstrate to the court you can’t successfully make the payments on your own the conduit payment order will be reinstated.
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