If you’re behind on your house payment and a foreclosure sale is looming, Chapter 13 bankruptcy is the tool designed to fix it. Filing the petition halts the sale immediately, and the case gives you three to five years to pay off the missed payments, late fees, and escrow shortages through a court-supervised plan. Mortgage arrearage in a Chapter 13 bankruptcy is handled under a “cure and maintain” framework: a court-appointed trustee distributes the catch-up money to your lender while you resume the regular monthly payment going forward. Finish the plan, and the default is wiped out and the loan continues on its original terms.
Cure and Maintain: The Rule That Saves the House
Two provisions of the bankruptcy code do the heavy lifting. Section 1322(b)(2) protects your mortgage lender from having its loan modified in bankruptcy when the only collateral is your principal residence.1Office of the Law Revision Counsel. 11 USC 1322 – Contents of Plan You can’t cut the interest rate, extend the term, or reduce the principal. The loan stays exactly as written.
What Section 1322(b)(5) lets you do instead is cure the default over a reasonable time while keeping current on the payments that come due after filing. The “reasonable time” is the length of your plan. If your household income is below your state’s median for your family size, the plan runs three years; at or above the median, it runs five. No plan can exceed five years.1Office of the Law Revision Counsel. 11 USC 1322 – Contents of Plan
The moment you file, the automatic stay under 11 U.S.C. § 362 stops the foreclosure sale and freezes other collection activity.2Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay The stay isn’t permanent. A servicer can ask the court to lift it for “cause,” and the most common cause is that you’ve stopped making your post-filing mortgage payments or the property is losing value. If the motion succeeds, the lender can foreclose even while your case is technically still open.
What Goes Into the Arrearage Amount
The arrearage is more than the missed principal and interest. It typically also includes late fees, attorney fees the servicer racked up trying to collect, and any escrow shortages the servicer covered on your behalf for property taxes or homeowner insurance. Whether interest accrues on the cure amount itself depends on your loan contract and applicable nonbankruptcy law, because the mortgage isn’t being modified. Over several years of missed payments, that interest can be significant, so ask your attorney about it early.
The number that ultimately controls isn’t the one on your last statement. It’s the figure the servicer files with the court on Official Form 410A, the Mortgage Proof of Claim Attachment. That form requires an itemized breakdown of the arrearage as of the petition date, including principal and interest on missed installments, outstanding fees and costs, escrow deficiencies, and any projected escrow shortage.3United States Courts. Official Form 410A – Mortgage Proof of Claim Attachment Instructions It also requires a complete payment history from the first date of default through the filing date, showing every transaction, charge, and payment application.
This is where errors surface. Servicers sometimes include fees that were never properly disclosed or apply payments in unexpected ways. Compare Form 410A line by line against your own records. If the numbers don’t match, you can file a claim objection asking the court to disallow the inflated portion. Shaving even a few thousand dollars off the arrearage directly reduces your monthly plan payment, so the review is worth doing carefully.
How the Trustee Pays the Arrears
Once the court confirms your plan, you make a single monthly payment to a court-appointed Chapter 13 trustee, usually through a wage deduction order or automatic bank transfer. The trustee distributes those funds to your creditors in the priority the plan sets. Each month, a portion chips away at the pre-petition mortgage arrears until the balance reaches zero.
The trustee is compensated out of your payment. Federal law authorizes a percentage-based commission of up to 10% of all payments made under the plan,4Office of the Law Revision Counsel. 28 USC 586 – Duties; Supervision by Attorney General and most districts charge close to that ceiling. If your obligations to creditors add up to $1,000 per month, your actual payment to the trustee will run closer to $1,100. Factor this cost in before committing to a plan amount.
Staying Current on the Regular Payment
Curing the arrearage is only half the job. Section 1322(b)(5) requires you to keep making your regular monthly mortgage payment on time throughout the life of the plan.1Office of the Law Revision Counsel. 11 USC 1322 – Contents of Plan The trustee handles the past-due amounts; you handle the current ones. Miss a post-petition payment and the servicer will move for relief from the stay. If the court grants it, foreclosure proceeds as if you’d never filed.
Conduit Versus Direct Payment
How the ongoing payment reaches the lender depends on your local court’s rules. In conduit jurisdictions, you pay everything to the trustee, who forwards both the arrearage cure and the regular monthly payment to the servicer. In non-conduit jurisdictions, you pay the trustee for the arrears and pay the lender directly for the ongoing monthly amount. Conduit payment creates a clean paper trail and reduces the risk of misapplied funds, but it also means the trustee’s percentage fee applies to a larger total. Ask your attorney which system your court uses before filing.
Payment Changes and Post-Petition Fees
Your mortgage payment can change during a three-to-five-year plan. Escrow adjustments, insurance premium increases, and interest-rate changes on adjustable-rate loans happen on their own schedule. Federal Rule of Bankruptcy Procedure 3002.1 requires the servicer to notify you, your attorney, and the trustee of any payment change at least 21 days before the new amount is due.5Legal Information Institute. Rule 3002.1 – Chapter 13 Claim Secured by a Security Interest in the Debtors Principal Residence
The same rule governs post-petition fees. If the servicer incurs inspection fees, property-preservation costs, or attorney fees after your filing date, it must file a notice itemizing those charges within 180 days of incurring them.6Office of the Law Revision Counsel. Federal Rules of Bankruptcy Procedure Rule 3002.1 You or the trustee can challenge those fees by filing a motion within one year after receiving the notice. Servicers that skip the disclosure risk having the fees disallowed entirely, which is one of the few real points of leverage against post-petition nickel-and-diming.
When the Plan Ends Successfully
Completing all plan payments triggers a specific sequence. Within 45 days after your final payment to the trustee, the trustee files a notice stating the total amount disbursed to cure the mortgage default and whether the cure is complete. The servicer then has 28 days to respond, either confirming the cure or disputing it.5Legal Information Institute. Rule 3002.1 – Chapter 13 Claim Secured by a Security Interest in the Debtors Principal Residence If there’s a disagreement, you or the trustee can file a motion asking the court to decide whether the default has been fully cured.
The mortgage itself is not discharged. Section 1328(a) specifically excludes long-term debts maintained under § 1322(b)(5) from the Chapter 13 discharge.7Office of the Law Revision Counsel. 11 USC 1328 – Discharge The arrearage is gone and you’re current on the loan, but the mortgage continues on its original terms and the lender’s lien remains intact. You still owe whatever years of payments are left on the note. The discharge does wipe out most of your other debts provided for in the plan, including credit cards and medical bills.
When the Plan Fails
Not every plan makes it to the finish line. If you fall behind on plan payments, fail to file tax returns, or miss post-petition domestic support obligations, the court can dismiss the case or convert it to a Chapter 7 liquidation.8Office of the Law Revision Counsel. 11 USC 1307 – Conversion or Dismissal You also have the right to dismiss voluntarily or convert to Chapter 7 yourself.
Dismissal has immediate consequences. The automatic stay evaporates, and every creditor who was held at bay can resume collection where it left off, foreclosure included. Payments the trustee already sent to creditors stay put, but the trustee returns remaining undisbursed funds to you minus administrative costs.9United States Courts. Chapter 13 – Bankruptcy Basics The lender’s lien survives dismissal. If the plan only partially cured the arrears, you still owe whatever remains, and the partial payments buy no special protection.
Conversion to Chapter 7 is worse for the house. Chapter 7 is a liquidation, not a reorganization, and it has no mechanism to cure mortgage arrears. If you can’t afford the payments, the property goes to the lender. A failed Chapter 13 that converts to Chapter 7 typically means losing the home you were trying to save.
An Eligibility Note
Chapter 13 is available only to individuals with regular income, and it caps your total debt. As of the adjustment effective April 1, 2025, your unsecured debts must be under $526,700 and your secured debts under $1,580,125.10Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor If your mortgage balance plus other secured obligations exceeds the secured ceiling, Chapter 13 isn’t available and you’d need to look at individual Chapter 11 reorganization instead.