Blog
US Bankruptcy Court Western District of North Carolina - Brock & Scott, PLLC
Guidance on how Forbearance Notices will be treated in Chapter 13 cases
This is an update regarding an administrative order, attached here, that was recently entered in the Western District of North Carolina. It specifically relates to mortgage loans being paid through Chapter 13 plans as trustee or “conduit mortgage” claims when a creditor files a Notice of Forbearance related to COVID. In this district, all mortgage claims for primary residence must be paid through the plan as conduit claims.The purpose of the order is to give effect to Notices of Forbearance when they are filed and prompt the debtor's attorney to take further action to modify the plan, if necessary.
The Order says that upon receipt of a Notice of Forbearance, the Trustee will begin reserving on the conduit mortgage claim pending further order of the court. This order does NOT modify the plan payment amount or modify the creditor's claim. The plan payment amount will NOT CHANGE unless and until a motion to modify the plan is filed. The Trustee will still collect the plan payments and hold any funds designated for the claim until the court directs the trustee how to direct the funds. We expect debtor's attorneys will (or should) file a motion to modify the plan as appropriate as a result of any notice of forbearance.
Click here for the Adminstrative Order.