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Why do Mortgage Companies File Claims with Deficiency Amounts Based on Escrow Shortage in Chapter 13 Cases
Mortgage companies file claims with deficiency amounts based on escrow shortage in Chapter 13 cases due to a variety of reasons. A primary reason is that these companies are trying to recoup any losses they may have experienced from the debtor. The deficiency amount is based on the difference between the mortgage balance and the property’s fair market value.
During a Chapter 13 bankruptcy, a debtor has the chance to reorganize their debt and pay it off over a three to five year period. This plan includes any arrears on the mortgage.
The escrow account is typically used to pay property taxes and homeowner’s insurance. If there is an escrow shortage due to increased property taxes or insurance premiums, the mortgage company can file a claim for the deficiency amount. This is because the debtor is still responsible for these amounts, despite the bankruptcy filing.
However, the bankruptcy court must approve these claims and will often scrutinize them to ensure they are fair and accurate. It’s always in the best interest of a debtor to have a knowledgeable bankruptcy attorney review any claims made by a mortgage company. At Liviakis Law Firm, we have experience in dealing with such cases and can provide the necessary guidance.