Homeowners may find it difficult to make their mortgage payments if there was a recent drop in income or if they are overwhelmed by debt. If you have trouble keeping up with your payments, you may seek a loan modification from your lender. Filing for bankruptcy can help you with this process and provide other ways to reduce your overall debt. At the Hollywood firm of Anidjar & Levine, our bankruptcy lawyers can help you seek a loan modification. We also will offer capable and personalized counseling to help you decide if bankruptcy is right for you.Loan Modification
If you are unable to keep up with your mortgage payments, you can request a loan modification from your mortgage lender. In 2009, the government created the Making Home Affordable Program to help homeowners avoid foreclosure. A number of options are available under the program to help homeowners lower their monthly loan payments, including the Home Affordable Modification Program (HAMP). You must meet certain eligibility requirements to qualify for the program. For example, to qualify for HAMP, you must have obtained your first mortgage on or before January 1, 2009. You also must owe no more than $729,750 on your primary residence and have enough income to support a modified payment.
Loan modifications are hard to get. Lenders have more leverage than borrowers, and they are in a position to deny your request. However, if you file for bankruptcy and qualify for HAMP, a lender must review your loan modification request. If you do not qualify for any of the programs, bankruptcy may still provide a meaningful way for you to make your monthly mortgage payments.Effect on Chapter 7
If you have an open Chapter 7 bankruptcy case, your lender must consider your HAMP application. In Chapter 7, your non-exempt property is liquidated to pay your creditors. You can reaffirm, or promise to pay, your mortgage and other secured debt. The automatic stay will prevent your creditors, including your mortgage lender, from foreclosing on your home while your Chapter 7 case is open. This gives you some time to seek a loan modification from your lender.
However, Chapter 7 poses some challenges. Unless you pass the means test , you may not be eligible for Chapter 7. Also, Chapter 7 cases are usually concluded within a few months. Although you have the benefit of completing the process quickly, you may not have enough time to get a loan modification.Effect on Chapter 13
By contrast, Chapter 13 allows you to reorganize your debt and make payments to your creditor through a debt repayment plan. You will have more time to work out a loan modification and to make payments to cover any arrears.
If you apply for a HAMP loan modification while your case is open, you must submit several documents with your application, including copies of your bankruptcy schedules, tax returns, and updated proof of income if your schedules are more than 90 days old. There is usually a three-month trial period for HAMP applicants, but you can potentially avoid the trial period if you are in Chapter 13 bankruptcy.
If you file for bankruptcy during your HAMP three-month trial period, the lender cannot deny your HAMP modification. It may extend your trial period for an additional two months while it obtains any bankruptcy-related court approvals and documents. You must still make your monthly trial payments, however. Once you are making your payments, the lender cannot object to confirmation of your Chapter 13 repayment plan or ask the court to remove the automatic stay.
Chapter 13 also provides other ways through which you can reduce your overall debt, even without a loan modification. For example, you can potentially strip the liens off any junior mortgages and convert them into unsecured debt that will ultimately be discharged if you successfully complete a Chapter 13 repayment plan.Providing Exceptional Bankruptcy Representation in Fort Lauderdale
The bankruptcy attorneys at Anidjar & Levine offer seasoned representation to Fort Lauderdale residents who are considering this process. We can discuss how a loan modification may offer you the financial relief you need if you are struggling with debt. If you decide to move forward with bankruptcy, we will provide individualized representation at every step of your path. Call our office at (800) 747-FREE or fill out our contact form for a free consultation.