Individuals who have defaulted on their mortgages may apply for loan modification programs that are sponsored by the federal government or supported by the lender themselves. If a loan modification application is denied, then borrowers should consider filing a Chapter 13 Bankruptcy to save their home.
Generally an individual applying for a loan modification must supply to the lender proof of income for the last 60-90 days, bank accounts statements, tax returns from the previous two years, hardship letter explaining the individuals financial circumstances, utility bills, invoices for real estate taxes, and proof of home insurance.
Benefits of a Loan Modification
Loan modifications programs are designed to help individuals with a reduced income stay in their homes and avoid foreclosure. Several of the techniques these
programs use to modify your mortgage are by lowering your current interest rate,
extend the term of your loan, or add your payment arrears on to the end of your loan.
Chapter 13 as an Alternative to Loan Modifications
Depending upon your situation, it may make more sense to file a Chapter 13 Bankruptcy as opposed to applying for a loan modification. Also, your lender may have denied your loan modification application leaving you in the position to lose your home in a Sheriff's sale. In addition, you can still pursue a loan modification while in a Chapter 13 Bankruptcy. If the loan modification is approved, then you may be able to withdraw from the Chapter 13 Bankruptcy.
A Chapter 13 Bankruptcy will stay a foreclosure and allow you to pay your mortgage arrears over a 60 month repayment plan period. Once the payment plan period is successfully completed then your defaulted mortgage will be reinstated.
For more information about loan modifications or if your lender is giving you the run around and you require assistance or your would like to learn more about a Chapter 13 Bankruptcy payment plan, please contact our firm at (610) 935-5555 for a confidential consultation.
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