02 Sep Can Bankruptcy Help a Mortgage Modification Gone Bad?
Sigh. I hate loan modifications. I just got off the phone with a potential bankruptcy client. This call was from yet another borrower who has been working on a loan modification for months, but now is looking for a attorney to file an emergency Chapter 13 to try to saveher house.
In this case, the borrower was told she was approved for a loan modification but then thelender lost the paperwork. Since lenders usually proceed with filing for foreclosure at the same time they are supposedly working with the homeowner, they had gone ahead and sold her house at foreclosure!
Now this poor woman is trying to find a lawyer who can file an emergency Chapter 13 to stop the foreclosure and allow her to either catch up her payments or finish the modification that she had been promised. And she was trying to find a lawyer the day before a [holiday] weekend, making it that much harder to be able to get help in the few days she might have to save her home.
I assume that there may be some mortgage loans that are being modified, but in my law practice I don’t seem to see them. Over and over I see people who were told to stop paying their mortgage or to pay alower trial amount while they were in the modification process, then they find out that they are not going to get any help. The months add up so now they owe months and months of back mortgage payments to prevent the loss their home, and no help in sight.
Not long ago, another couple came to see me that Iwas able to help, but delaying seeing me cost them thousands of dollars. You see, they were seeking a modification because the husband had lost his job and they couldn’t pay their mortgage plus their credit cards too.
- So the mortgage company told them to make a reduced payment while they were seeking modification, and naturally the couple used the “saved” money to make payments on their credit cards. (Hint: this was a bad idea)
Aftermany months of working with the mortgage company their modification was denied, and they were told they had to make up the difference between what their regular payment amount and what they had been told to pay … over $15,000.00!
This couple has no way to come up with that much money so their best option appears to be filing a Chapter 13 and catching up the missed payments over time. They had spent money that should have gone to their mortgageonminimum payments on theircredit cards (so they barely touched the debt balances) and they are filing for bankruptcy anyway.
Had they come to see me in the beginning, I would have shown them how they could afford to pay the mortgage because they wereeligible to reorganize the credit cards in bankruptcy, and they would have been 9 months into catching up their mortgage, rather than being $15,000.00 further in the hole.
- Tip: if you are talking to your mortgage company to try to modify your mortgage and are paying reduced payments, you should save up as much money as you can in case it doesn’t work out, or at least speak to a good lawyer before spending the money paying off unsecured debts that you might be able to discharge in a bankruptcy case.
Not to mention saving them many sleepless nights worried about the unanswered modification.
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Can Bankruptcy Help Save Your Home From Foreclosure? by Susanne Robicsek, North Carolina Bankruptcy Attorney
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