Can the Mortgage Bank refuse my Chapter 13 Bankruptcy?

No, a bank doesn't have discretion on whether or not a loan is involved in a chapter 13 bankruptcy.

The federal Bankruptcy Code provides that borrowers may cure a mortgage arrearage over up to 5 years in a chapter 13 bankruptcy plan. As long as the chapter 13 plan actually proposes to pay what is needed over those years to bring the mortgage current at the end of the case, the mortgage lender has no grounds to object to the plan. If they don't participate, the court can and will confirm a chapter 13 plan without input from a mortgage lender or servicer.

This is in contrast to mortgage modification programs, payment forbearance programs, or even cure-prior-to-foreclosure arrangements. Even when regulated by federal or state law, these programs and arrangements need some amount of participation by the lender. They get complex quickly if participation has to be forced.

This is not to say that chapter 13 bankruptcy can completely replace these other options. If the problem with a mortgage is an unaffordable interest rate, chapter 13 might not provide the long-term relief on the loan desired. Instead, chapter 13 might be one piece of a larger strategy for resolving problems with the home loan.

While bank cooperation isn't needed to effectuate a mortgage cure in chapter 13 bankruptcy, banks certainly have options to protect their interests in the chapter 13 process. For one, a bank can seek permission to start or continue foreclosure by means of a motion for relief from the automatic stay. Such a motion does require cause. If a chapter 13 plan proposes to pay the mortgage, and the plan payments are current, it would be unusual to see such a motion. A bank can also object to a chapter 13 plan, if it believes the plan isn't realistic or compliant with the bankruptcy code. Normally, we can forecast what sort of bank reaction (or non-reaction) would be anticipated in a chapter 13 bankruptcy prior to filing the case.

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