Under 11 USC § 1322(b)(5), a Chapter 13 plan may cure pre-petition mortgage arrears over a reasonable time while the debtor maintains the regular monthly mortgage payment. The cumulative effect is to bring the loan current by the end of the plan and let the debtor resume regular payments going forward. 'Cure and reinstate' is the standard tool for saving a home in foreclosure.
The Statutory Mechanism
11 U.S.C. § 1322(b)(5) permits a Chapter 13 plan to "provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any unsecured claim or secured claim on which the last payment is due after the date on which the final payment under the plan is due." For long-term debts like mortgages, this is the operative provision: the plan can cure arrears over the plan period while the debtor continues to make ongoing monthly mortgage payments.
The mechanism interacts with § 1322(b)(2)'s anti-modification rule for principal-residence mortgages. Section (b)(2) bars modification of mortgage rights, but § (b)(5) is an explicit exception — the plan can cure arrears even though the mortgage itself cannot otherwise be modified.
How a Cure-and-Maintain Plan Works
Mechanics:
- Pre-petition arrears (missed payments, late fees, foreclosure costs) are calculated as of the petition date and paid through the Chapter 13 plan over up to 60 months.
- Ongoing monthly payments resume on the petition date and continue at the contract amount, paid either directly to the lender (conduit-payment districts) or through the trustee (trustee-pays-mortgage districts).
- The plan term typically runs 36 to 60 months. Arrears must be cured within this period — the plan cannot stretch a mortgage cure beyond the maximum 60-month plan length.
- Plan completion + ongoing payments at the end of the plan, the debtor is current on the mortgage as if the default never happened, and the original mortgage continues per its contract terms.
The Pre-Petition Arrears Calculation
The lender files a proof of claim including a detailed itemization of arrears: missed monthly payments, late fees, attorney's fees, escrow advances, and inspection or property-preservation costs. FRBP 3001(c)(2)(A) and the Bankruptcy Form 410A require specific itemization for residential mortgage claims.
Debtors should review the arrearage claim carefully. Common errors: late fees in excess of contract or state law caps, attorney's fees not authorized by the loan documents, escrow advances with calculation errors, charges for property inspections that did not occur. Objections to claim under FRBP 3007 can reduce the cure amount materially.
Practical step. A 24-month arrearage at $2,000 per month is $48,000 the plan must spread over 60 months — about $800 per month additional payment beyond ongoing $2,000 mortgage. Run the math early to see if the cure is feasible at the household's income level.
Ongoing Payments: Direct vs. Conduit
Local practice varies between two payment models:
- Direct-pay districts. The debtor pays the ongoing monthly mortgage directly to the lender. The trustee handles only arrears. Simpler but exposes the debtor to potential payment errors that can trigger relief-from-stay motions.
- Conduit-pay districts. The trustee receives the monthly mortgage payment from the debtor's plan disbursement and forwards it to the lender along with arrears curing payments. Adds a trustee fee (typically 6–10%) but provides a documentation trail and reduces missed-payment risk.
Foreclosure Stopped on Filing
The automatic stay under § 362 halts foreclosure on the petition date. A pending foreclosure auction, even one scheduled the next day, is stopped if the petition is filed before the sale. Foreclosure cannot proceed during the plan unless the lender obtains relief from stay.
The lender can seek relief from stay under § 362(d)(1) "for cause" (e.g., the debtor fails to make ongoing mortgage payments) or under § 362(d)(2) "lack of equity and not necessary to an effective reorganization" (rare in cure-and-maintain cases because the residence is by definition necessary to the plan).
What "Reasonable Time" Means
Section 1322(b)(5)'s "reasonable time" for curing default is bounded by the maximum plan length (5 years for above-median debtors, typically 3–5 years for below-median debtors per § 1322(d)). Within that window, courts evaluate the cure schedule for feasibility. A cure that consumes a disproportionate share of disposable income may be challenged at confirmation.
Where arrears are very large relative to plan length and disposable income, the lender or trustee may argue the plan is not feasible under § 1325(a)(6). Debtors facing this issue sometimes negotiate a loan modification with the lender during the case to bring the cure into feasibility.
Loan Modifications During Chapter 13
Some lenders offer loan modifications to Chapter 13 debtors that can reduce the arrearage, lower the interest rate, or extend the loan term. The bankruptcy court has procedures (often called "loss mitigation" or "mortgage modification mediation" programs) to facilitate these negotiations. Successful modification can convert a difficult cure into a manageable one.
Modification approval typically requires court authorization since it modifies the underlying contract. Districts with formal mortgage-modification programs have specific procedures and timelines.
Default During the Plan
If the debtor falls behind on ongoing post-petition mortgage payments during the plan, the lender can move for relief from stay and demonstrate cause under § 362(d)(1). Courts often grant relief in this situation because failure to maintain post-petition payments defeats the cure-and-maintain structure.
Some debtors negotiate a "cure-of-cure" arrangement: the post-petition arrears are treated as an additional arrearage cured over the remaining plan term. This requires lender consent and court approval and is jurisdiction-dependent.
What Happens at Plan Completion
On successful plan completion, the debtor receives a discharge of remaining unsecured debt and the mortgage continues per contract terms. Pre-petition arrears are deemed cured. The debtor's payment history during the plan is a clean post-default record.
The lender cannot, after the plan ends, claim that arrears remain unpaid if they were properly cured through the plan. The doctrine of res judicata and the discharge order protect the debtor against post-discharge collection on cured arrears.
Further Reading
- 11 U.S.C. § 1322 — Contents of Plan
- 11 U.S.C. § 362 — Automatic Stay
- Facing Foreclosure
- Lien Stripping in Chapter 13
- Objections to Claim
This page provides educational information only. Cure-and-maintain plans involve feasibility analysis and procedural detail. Consult a licensed bankruptcy attorney about your specific situation.