Servicing Guide

Published September 18, 2018

E-2.2-03: Managing Chapter 12 Bankruptcies (11/12/2014)

Because there will not be many Chapter 12 filings for all Fannie Mae mortgage loans, each case must be handled according to its specific circumstances. The servicer and the law firm (if the case is referred) must decide the actions that need to be taken.

The timelines for completing a Chapter 12 bankruptcy are described in the following table.

If the mortgage loan… Then the time frame for completing a Chapter 12 bankruptcy is…

was current or less than 60 days delinquent when the borrower filed bankruptcy

five months and two weeks from the earlier of

  • the 60th day of delinquency, or

  • the date of referral to a law firm.

was greater than or equal to 60 days delinquent or in foreclosure when the borrower filed bankruptcy

five months and two weeks from the date of the bankruptcy filing.

becomes 60 days delinquent pursuant to the plan, post-confirmation

two months and two weeks from the 60th day of delinquency, and the servicer must

  • verify that all previous payments have been properly applied, and

  • send a new referral to the law firm no later than two weeks from the 60th day of delinquency to seek relief from the automatic stay or a dismissal of the case in accordance with local bankruptcy rules and practices.

Case completion for a Chapter 12 bankruptcy proceeding is defined as any of the following:

  • the termination of the automatic stay,

  • the case being dismissed or closed,

  • when the trustee abandons all interest in the secured property, or

  • when the Chapter 12 plan is confirmed.