Bankruptcy Mediation Program

Posted by kevin on April 10, 2015 under Foreclosure Blog | Comments are off for this article

The United States Bankruptcy Court for the District of New Jersey has a foreclosure mediation program. To date, I have not utilized this service. After a review of the rules, I doubt that I would ever use the program.

In short, the program is available to debtors in Chapters 11, 12 or 13. A Chapter 7 debtor can participate with the permission of the court. Debtors include only individual debtors so if title to the property is in the name of a corporation or LLC, you are SOL. The property must be the principal residence of the debtor. So, pure rental property is out.

The debtor is required to make adequate protection payments to the creditor during the mediation. Here is where the program breaks down. The adequate protection payments amount to 60% of the principal and interest payment plus 100% of escrows. Say your P&I are $3000 per month, you pay $12000 in real estate taxes and another $150 per month for insurance. Your monthly payments during the mediation amount to $2950 per month.

1800- 60% of 3000
1000- 1/12 of taxes
150- Insurance

2950- Total

That is 71% of the total payment prior to filing. Depending on what your arrearages are,

What I try to do is figure out what I would be paying in a modification on principal and interest and make that the adequate protection payment. I also explain to the creditor how I arrived at that figure. I agree to pay the insurance going forward to avoid the force placed insurance super surcharge which is usually more that double what the debtor is required to pay for insurance. Then, the ball is in the creditors court to demand more money as adequate protection. If they want more, they will ask for it or file a motion.