I’m Behind on My Mobile Home

For the purpose of this discussion we are strictly talking about homes that are considered a mobile home or manufactured home (still moveable) and are classified as personal property (the loan is only on the mobile home). We are not discussing a mobile home that has been converted into real property (attached to land permanently) with the loan containing land as collateral along with the home. If you have a mobile home or manufactured home that is permanently attached to the land and/or is wrapped up with the land in the loan, it would be treated like any other home mortgage that would need to be defended against foreclosure in bankruptcy as it would be subject to foreclosure (like any other home mortgage) not the process we will discuss here.

If you get behind or default on loan payments for a mobile home, the creditor can repossess the mobile home. There are two ways that this can be done.

Replevin Action. The creditor uses a judicial process called replevin. The creditor files a lawsuit in court and asks the court to grant an order for repossession.

Self-help repossession. The creditor takes possession without going through a judicial process by sending a repo agent out to take the mobile home away. This is much more practical for vehicles but not for mobile homes. It would be almost impossible to repo a mobile home without breaching the peace (which is not allowed to occur during self-help repossession) or without taking the borrower’s other possessions, like furniture and all the other personal property in the home.

Filing bankruptcy contains several options based on what you would like to do. If you want to save your mobile home, bankruptcy can certainly do that. If you want to get rid of the mobile home and all the debt associated with it, bankruptcy can also do that.

Filing bankruptcy immediately puts your property under the protection of the court which is referred to as the “automatic stay”. The automatic stay is a restraining order of sorts issued by the bankruptcy court to prevent creditors from gaining an order on any replevin they may have filed and stops all repossession activity immediately regardless of how far behind you are or how much you owe.

By filing a Chapter 13, you can stop all replevin, collection, and repossession efforts immediately. The Chapter 13 bankruptcy case puts the control over your loan back into your hands. The court looks at the value of your mobile home, the total amount you owe, and how long you have been paying on the note. The court uses this information to determine the amount you will need to pay through your Chapter 13 Plan.

Let’s use a mobile home that has a value of $10,000, a payoff of $25,000, an interest rate of 16%, and a monthly note of $535 as an example.

If the mobile home above has been paid on for more than 1 year, the court allows us to “cram down” the amount owed to equal the value ($10,000), which is less than the actual amount still owed ($25,000). This lowers the monthly note to approximately $166.67 from $535.00 and also saves thousands of dollars ($15,000) that would otherwise be owed.

If the mobile home above has not been paid on for more than 1 year, there is still help to be received. The court will require the full amount owed ($25,000) but by allowing it to be spread out over 60 months (5 yrs) will lower the note to $416.67 vs the current $535.00 a month rate.

The court also does one more wonderful thing. It limits the interest rate to no more than 5%. On the example above that’s a reduction of 11% in interest alone. That’s another huge overall savings.

You can go to www.nadaguides.com/manufactured-homes to look up the value of your mobile home, but I would highly recommend having an appraisal done by a professional if you qualify for a “cram down”. Your lender will have the payoff amount and be able to disclose how long you’ve been paying on your mobile home.

By filing a Chapter 7, you can also stop all replevin, collection, and repossession efforts immediately. The Chapter 7 case though handles things a little differently. Normally you would need to be current on your mobile home before filing, but there are some cases where a Chapter 7 is a better fit due to other debts and concerns that you are experiencing and the help it provides in other areas would allow you to catch up quickly on your mobile home. To save your mobile home in a Chapter 7, we would discuss either signing a Reaffirmation Agreement on the mobile home or take a look at possibly redeeming the mobile home. The Chapter 13 is almost always the better solution – but we can discuss all the options so you can decide what best fits your situation.

Then the Chapter 7 bankruptcy if a perfect fit. The Chapter 7 case will wipe out the debt and you can have the mobile home picked up when you’re ready during the process of your Chapter 7 case. Under normal circumstances, if you returned your mobile home to the lender, it would sell at auction and then the lender would sue you for any remaining balance. But filing a Chapter 7 wipes out your personal liability and the debt is gone.

If for some other reason(s) a Chapter 13 bankruptcy is better, you can still follow the same process to return the mobile home and eliminate all debt associated with that mobile home.

You have options. These laws were created to protect you and to protect your property when things in life happen that cause financial hardship. Call me or come in to see me and let’s talk.