Kevin L. served his country honorably for 22 years in the U.S. Army, including tours in Afghanistan and Iraq. After 22 years, Kevin retired at the rank of technical sergeant, and despite suffering combat-related injuries that left him fully disabled with PTSD, Kevin looked forward to his new life as a civilian.
Unfortunately, fate intervened. Kevin was involved in a significant auto accident after his honorable discharge. Kevin suffered a significant head injury that required brain surgery. Debts quickly piled up afterward. Even worse, Kevin’s partner left him after she added even more debt to his already heavy load.
Fortunately, Kevin came to the Sterbick firm for help this Spring. Kevin’s debts included his home and a truck, among others, and he had fallen behind in his payments. After the Sterbick team evaluated Kevin’s situation, we recommended filing a Chapter 13 repayment plan to get Kevin’s finances back under control. After answering Kevin’s questions, he agreed to the approach, and the Sterbick team prepared Kevin’s documentation and Chapter 13 filing.
The Sterbick team filed Kevin’s case in late May 2020. At the 341 hearing before the bankruptcy trustee and those creditors who wished to attend, only Kevin’s mortgage lender objected. John Sterbick represented Kevin at the hearing and overcame the lender’s objection to how the mortgage payments in arrears would be handled. After the Sterbick team amended Kevin’s Chapter 13 bankruptcy plan to include the amount of arrears, Kevin’s bankruptcy plan was approved.
Provisions for Bankruptcies Due to COVID-19
During the COVID-19 crisis, many people were furloughed or let go. A number of those now jobless people who had faithfully paid their mortgages before governments across the nation shut down large portions of the economy to try to mitigate the COVID-19 crisis could no longer remain current on their obligations. As a result, some people who had lost their income began to fall behind in their mortgage payments and other bills.
In a Chapter 13 bankruptcy filing caused by job and income loss due to the COVID-19 crisis, payments in arrears can be included in the bankruptcy plan and can be repaid over a period of up to five years at 0% interest.
The Sterbick firm recommends including mortgage payments in arrears into the Chapter 13 bankruptcy plan instead of taking the alternative option to forbear the missed payments. Here’s why:
Bankruptcy trustees have allowed mortgage forbearance during the current COVID-19 crisis for debtors who can prove job and income loss due to the crisis. Any debt in forbearance will be due and owing after the forbearance period ends, and plan payments will increase to include the missed payments. Chapter 13 currently allows the debtor to extend the debt repayment plan for up to seven years under those conditions. In forbearance, the arrears are not placed on the back end of the repayment plan unless the Trustee has agreed to extend the plan period to 7 years. As you can see, a debtor would accrue mortgage interest and default fees as well. In the end, the debtor will pay much more by accepting the mortgage lender and bankruptcy trustee’s offer to forbear the missed payments than if the debtor includes the missed payments in the Chapter 13 bankruptcy plan. Why add more debt to what is already a crushing burden?
Kevin Looks Forward to a Brighter Future
Now that his Chapter 13 bankruptcy filing and 341 Notice to Creditors hearing is behind him, Kevin is looking forward to a better life. Once the COVID-19 crisis is over, Kevin plans to renew and strengthen connections with his family, becoming a brother to his siblings and an uncle to their growing children.
Kevin left a five-star review for John’s firm on the firm’s Google listing: “Very impressed with John’s knowledge and ability to work quickly and effectively. Very impressed & I highly recommend. Thank you for all your help.”
Kevin went on to say, “I feel a great sense of relief now that the process is complete, and my finances are in order in a way that I can manage on my own again.”