When we are attempting to manage our debt, it helps to consider it in pieces. Typically, the most substantial monthly payment for each of us is our home, or the mortgage on the home. With the significant changes in the real estate market and homeowners’ inability to pay current mortgages due to financial hardship, banks are increasingly willing to modify your mortgage. You may have even received letters about loan modification in the mail.

A bank is motivated to modify your mortgage to avoid foreclosure, bankruptcy or other adverse proceedings which negatively affect the bank’s interest. By working together with your bank and your bankruptcy attorney, you can achieve the best results for future financial stability.

Modification Prior To Filing Bankruptcy

You can modify your loan prior to filing bankruptcy. The modification will not negatively affect your bankruptcy filing. When you do file your bankruptcy petition with your Charlotte bankruptcy lawyer, you’ll need to provide the most up to date information about the mortgage to the bankruptcy trustee.

Modification During Bankruptcy

Chapter 7: If you are in an active Chapter 7 bankruptcy, loan modification is typically still available. You should speak with your bankruptcy attorney before entering into the modification agreement, as the attorney may need to get the court’s permission to allow the modification. If you have received a discharge in Chapter 7, you can proceed with your loan modification without permission from the court.

Chapter 13: If you are in an active Chapter 13 bankruptcy, your attorney will need to request permission from the court to allow the modification. This will be done by filing a Motion to Incur Debt. If you have received a discharge in a Chapter 13 or even a dismissal, you do not need the court’s permission to enter into a loan modification.

Working With Your Bank

Your bank will have a standardized process for approving a loan modification. They want to know your financial picture so they can show cause or need for granting the modification. They are also attempting to determine whether you’ll be able to make your new (lower) monthly payment after the modification.

Missing Mortgage Payments

Some banks will tell you that they will not consider a loan modification until you have missed a certain number of mortgage payments. While this may be the case, it’s important to remember that in order to file a Chapter 7 and keep your home in Chapter 7, you must be up to date on all mortage payments, including property taxes. Your attorney can help you strategize and balance the tension between the two options of loan modification and bankruptcy.

Get An Attorney’s Help

You are capable of pursuing a loan modification on your own. You may find that the bank is more responsive when they are contacted by your bankruptcy attorney. The reason is that the bank understands you are close to filing a bankruptcy, which may affect their rights adversely. While there are no promises, sometimes this makes the bank move more quickly on your file, which can make all the difference.

Information is free. Call me today to ask questions and get answers. I can be reached at 704.749.7747. Or, you can send me an email HERE and I’ll reply shortly. You’re on your way to recovery. It’s closer than you think. If you want to know whether you qualify for bankruptcy, consider completing this short bankruptcy evaluation. I’ll get back to you after I’ve reviewed it.