There has been an evolution of the mortgage crisis. During the time of this crisis, many lenders were rejecting all loan modifications. Many clients were forced to file Chapter 13 bankruptcy in order to attempt to save their homes and pay toward delinquent mortgages. Many could not afford the bankruptcy and their regular mortgage payments and lost their homes and damaged their credit.
Lenders now seem to be easing these requirements. Filing a Chapter 13 bankruptcy means you will repay all or some of your debt over a 3-5 year time period. The bankruptcy court will assign a trustee to oversee your case. This is the only type of bankruptcy available to eliminate second mortgages.
Right now, you can take this opportunity to modify your first mortgage with a very low interest rate. This modification will usually lower your monthly payment which will also relieve your financial burden. Since you can repay some or all of your debt that is within a Chapter 13 bankruptcy, it won’t impact your credit for quite as long as filing a Chapter 7 bankruptcy. This modification will also help your monthly cash flow once it’s completed. You will need to satisfy the lenders loan modification conditions through the bankruptcy courts. You will have to file a motion and get a judge’s order approving the modification agreement. Then you may need to modify your Chapter 13 payment plan.
Many loan modifications lower your monthly payment, which will leave additional money in your budget on a monthly basis. You won’t be able to benefit from the extra money during this type of bankruptcy. The specific trustee assigned to your Chapter 13 bankruptcy case will want you to use the additional money to pay more to all the other creditors involved in this case, which will essentially benefit you and hopefully shorten the term of the bankruptcy. Your monthly mortgage payment can come down significantly after this loan modification approval. If the Chapter 13 plan payment happens to increase, you don’t want to pass up the long-term benefits of the loan modification such as future financial freedom and a low fixed interest rate.
If you have more to discuss regarding filing for bankruptcy or how it compares to other alternatives, please get in touch with the experienced southern California bankruptcy attorneys at Westgate Law.