Bankruptcy Court Rolls Out New Mediation Program

For Chapter 13 Debtors 

By: Michele McKinnon 

The Eastern District of Wisconsin Bankruptcy Court has introduced a new Mortgage Modification Mediation program (the "MMM Program") to assist Chapter 13 bankruptcy debtors in their attempt to modify their home mortgages.  The MMM Program is modeled after a similar program offered by Marquette Law School, and is intended to assist those debtors who are not eligible for a modification under the Home Affordable Mortgage Program or other similar programs.  The MMM Program is, in theory, a voluntary program for both debtors and creditors; however, it is heavily endorsed and promoted by the very judges who will rule on disputes. As a result, creditors who extend home loans in Northeast Wisconsin should be well versed in how the MMM Program works. 

Overview of MMM Program:  The MMM Program is designed to provide a permanent modification for Chapter 13 debtors who cannot afford their current mortgage payment, but have steady income to pay a modified mortgage payment on a debtor's primary residence (investment properties do not qualify).  A debtor's mortgage balance must be less than $729,750, and a debtor must allege an inability to make the original payment due to a financial hardship.   

The Process:  It appears that only a debtor may file a motion to participate in the MMM Program.  A debtor must serve a copy of the motion on the creditor, who then has 21 days to respond to the motion.  The court will not schedule a mediation until a debtor provides certain information to the creditor (see "Requirements of Debtor," below).  The Court's goal is to complete mediation within 60 days of a debtor's motion through one of about 25 mediators spread across the State of Wisconsin.  The creditor must appear by a representative with settlement authority (preferably in person, or by telephone or video conference).  If the mediation is successful and the mortgage is modified,a debtor agrees not to voluntarily dismiss the Chapter 13 bankruptcy for at least 9 months.   

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