Bankruptcy and Loan Modification's
The vast majority of bankruptcy clients are concerned about keeping their homes. Many of them have been victims of falling home prices, adjustable interest rates, and a bad economy that has caused high rates of unemployment. Because of these factors, most homeowners rely on savings, credit cards, and other debt to finance their lives while protecting their homes. The result is that most clients need bankruptcy to escape debt while simultaneously needing to modify their home loans in order to avoid foreclosure.
For those clients considering Chapter 7 bankruptcy, I am often asked the question if a client should pursue a loan modification prior to or after a bankruptcy. First, every bank is different and there is no definitive strategy when anticipating how the bank will react to bankruptcy. However, there are a few clear rules that can provide a framework for action.
Conversely, if a client is in default on a home for several months (greater than 6), filing bankruptcy before obtaining a home modification could be the wrong decision. Many of these clients find the lenders challenging the bankruptcies and seeking relief from the automatic stay to initiate foreclosure. Banks also seem quicker to file a notice of sale when the client has been in default for a long time and has emerged from bankruptcy. As a result, there is less time to work out a loan modification following bankruptcy and much effort has to be focused on pushing off sale dates rather than the modification.
While these are only a few of the considerations to be made when deciding what to do first, contact our office for a full evaluation. We can help you determine if Chapter 7 is right for you and if you are best starting with Chapter 7 bankruptcy or working first with our loan modification division.
Chapter 11 Permits Modification and Extension of Loans Without Consent of the Lender.
Chapter 13 Bankruptcy Loan Modification
The house recently approved a bill allowing bankruptcy judges to lower mortgage payments for struggling homeowners. With the new legislation, you can apply for Chapter 13 and get your loan modified, either with a lower interest rate or a reduction of the principal.