Because I am spending more time in seeing bankruptcy clients in Tucson, I decided to take a few minutes today to discuss a frequently encountered topic that applies only to those filing for chapter 13 bankruptcy in Pima County: Will I have to pay my mortgage payment through my chapter 13 monthly plan.

Take my advice. If you are filing for chapter 7 bankruptcy, stop reading now. If you are filing for bankruptcy outside of Pima county, stop reading now. If you are filing for chapter 13 bankruptcy in Pima county and are current on your mortgage payment, stop reading now. If you are filing for chapter 13 bankruptcy in Pima county and are behind on mortgage payment BUT you have hired an experienced bankruptcy lawyer and are comfortable handing over the reins, stop reading now.

For the two or three of you still standing, lets continue. If you filed for chapter 13 bankruptcy in Pima county while behind on your mortgage payment, your subsequent mortgage payments must be made through your chapter 13 bankruptcy plan. Let me repeat myself. Pima county residents that file for chapter 13 protection while behind on their monthly mortgage payments MUST include their mortgage payment in their monthly plan.

For all you lingo junkies out there, this is referred to as a conduit. A conduit mortgage payment allows your chapter 13 trustee to pay your mortgage payment directly, thereby ensure the adequate protection of the lender. A conduit mortgage payment also increases the amount you pay monthly to your chapter 13 bankruptcy trustee.

Huh? Yes, you heard me correctly. If your mortgage payment is included in your chapter 13 plan, the amount you pay monthly will increase to approximately 110% of your original payment. This is because your bankruptcy trustee is allowed a 10% administrative fee of payments processed.

I am pretty sure I can guess your next questions. If a conduit mortgage payment will cost me upwards of several hundred dollars a month, is there any way to avoid a conduit mortgage payment? There are a few options. First, you can simply become/stay current on your mortgage payment prior to filing for bankruptcy. However, that may be easier said than done.

Second, you can petition the court and ask to be excused from the standing order on conduit mortgage payments. Again, this is easier said than done. I have found that bankruptcy judges are reluctant to excuse a debtor from conduit mortgage payments without good cause.  (Hint: the additional cost to the debtor does not alone constitute good cause. 

In any event, filing for chapter 13 bankruptcy is a pretty complicated process. I recommend that you consult with an experienced Tucson bankruptcy lawyer prior to getting your feet wet. As always, I am available for free bankruptcy consultations in Phoenix, Tucson and Casa Grande.