San Francisco bay area bankruptcy attorney Cathy Moran brainstormed with her fellow bankruptcy practitioners today to discuss how judicial modification of home mortgages will work in chapter 13 bankruptcy if pending legislation becomes law. Moran compiled a list of questions:
What is the risk premium for interest rates?
Is the modification binding if the Chapter 13 is dismissed or converted?
How will debtors prove they have made an attempt with the lender to modify the loan?
Is a borrower whose payments are reasonable for his income eligible to modify a mortgage that exceeds the value of the property?
What if the loan is less than the value?
What is the loan interest rate isn’t adjustable?
Do we modify loans before, during or after chapter 13 plan confirmation?
How is the loan modification documented after plan completion?
Who must be served with notice of the plan, motion, and/or adversary that proposes to modify the mortgage loan?
What must be done when the loan payoff amount is in dispute?
Undoubtedly there are other issues. “My sense is there is a bucketful of issues raised by the bill as it now sits that will have to be answered by courts and lawyers if/when it is enacted,” Moran predicts.
Moran is a founder of the Bankruptcy Law Network. She has lead her own boutique bankruptcy law firm for nearly 30 years. She counts her website, Bankruptcy in Brief, her proudest accomplishment. It contains more than 170 pages of consumer friendly material she has written on bankruptcy law and procedure. She recently added a blog, On the Bankruptcy Soapbox, to publish her views on bankruptcy issues.
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