Can I Get a Loan Modification While in Bankruptcy?

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Like many families residing in New York, you may find yourself struggling to keep up with your mortgage payments. So to prevent the foreclosure of your family home, you may consider filing for a loan modification, filing for bankruptcy, or both. Read on to discover whether you can get a loan modification while undergoing the bankruptcy process and how a seasoned Rockland County loan modification attorney at The Law Offices of Allen A. Kolber, Esq. can lead you down the best path.

How do I apply for a loan modification?

Firstly, as a debtor, you may apply for a loan modification so that you may adjust your present loan to better fit your current financial situation. You may be presented with this opportunity upon facing a foreclosure lawsuit. That is, the foreclosure settlement conference allows you to apply for such a modification; and in turn allows the bank to, in good faith, review your financial ability for a government or bank program.

For one, a government loan modification program may have your interest rate lowered to two percent, your loan term extended to 40 years, or your monthly payments lowered overall. On the other hand, a bank’s internal loan modification program may have your interest rate lowered, your adjustable rate fixed, your excess principal forgiven, or your defaulted payments placed at the end of your loan. Ultimately, the outcome is that the foreclosure action against you will be dismissed.

Is it possible to get a loan modification while undergoing the bankruptcy process?

The short answer is, yes, you may petition for a loan modification while you are actively undergoing Chapter 13 bankruptcy. This is because the innate function of Chapter 13 bankruptcy is to allow a debtor to catch up on their due payments. This is seen through an established repayment plan, in which the debtor makes monthly payments over three to five years. Therefore, you may apply to adjust the present loan on your family home and soon after incorporate your new mortgage payments into your approved repayment plan.

Of note, a loan modification in combination with a Chapter 13 bankruptcy petition is only made possible with permission granted by the New York bankruptcy court. Rest assured, a judge will likely approve your plan if your proposed terms are reasonable, given your current financial situation.

However, this opportunity afforded in a Chapter 13 bankruptcy is in contrast with a Chapter 7 bankruptcy. This is because, with Chapter 7 bankruptcy, you may be unable to keep property that you would otherwise lose after falling behind on a payment. This is all to say that, before you move further with your loan modification or Chapter 7 bankruptcy petition, you must consult a competent Rockland County bankruptcy attorney. So please reach out to The Law Offices of Allen A. Kolber, Esq. today.