The answer is no! A motion for relief from the automatic stay is filed when a debtor falls behind on the post-petition payments on a direct paid debt. A foreclosure can be stopped by the filing of a Chapter 13 bankruptcy. A Chapter 13 plan includes the past due payments, fees and other costs to be paid through the Chapter 13 with the debtor starting back the regular contractual payment with the payment due after the case is filed. Upon filing, the debtor is given the protection afforded by the automatic stay in bankruptcy.
Example of Motion for Relief
For example, Sally Debtor has a foreclosure set for Monday, November 30, 2015. As long as the Chapter 13 is filed BEFORE the foreclosure date, Sally can save her home and include the past due payments and costs of $5,000. Sally would then pay the regular contractual payment of $500 starting with December, 2015. If she fails to pay December, 2015 and January, 2016, the mortgage company creditor can file a motion for relief from the automatic stay. In other words, telling the court Sally has not complied with her plan by paying the direct payments December, 2015 forward. Many times when this motion is filed, the client debtor will want to cash in their 401K plan to bring the account current. However, most 401K plans only allow a hardship withdrawal if there is a foreclosure pending. The motion for relief is NOT a foreclosure action. It is simply the mortgage company creditor asking for permission to take any action to collect the money owed on the mortgage to include a possible foreclosure.
In the Middle and Southern Districts of Alabama, the mortgage company creditors usually will allow you to add in the past due post-petition payments one final time. However, in the event you default, the mortgage company creditor is given a “future relief” provision on mortgage payments. It is important to be timely or risk losing your home and keeping good records of all payments made is a must.
If you are behind on your mortgage payments or have a foreclosure pending, please contact one of our Bond & Botes attorneys today to see if a Chapter 13 plan will help you save your home.
Gail Hughes Donaldson is a Managing Partner of the Bond & Botes Law Offices in Montgomery and Opelika, Alabama. She holds a Bachelor of Science from Auburn University at Montgomery, and a Juris Doctorate from Thomas Goode Jones School of Law. She’s been helping families work through the bankruptcy process since she started with Bond & Botes back in 1993 as a paralegal. Read her full bio here.