Can I Apply for a Loan Modification During My Bankruptcy Case?
The vast majority of bankruptcies are caused by unexpected life-changing events (e.g., job loss, illness, divorce, etc.) that generally impact all aspects of life. As a result, in addition to past due mortgage payments, bankruptcy filers sometimes have other types of nondischargeable debts that must be repaid. Because a modification will automatically bring a loan current, it may be the best (or only) option to prevent foreclosure for bankruptcy filers in this scenario.
For example, assume that a homeowner is facing both (1) threats of garnishment from the IRS due to unpaid taxes and (2) foreclosure due to unpaid mortgage payments. If the homeowner can afford to pay their taxes through a Chapter 13 plan, but not the past due mortgage payments, then their best option to resolve both issues may be to apply for a loan modification during their bankruptcy case. This is accomplished by proposing a plan to repay the IRS through the bankruptcy, and to become current on their mortgage through a loan modification.
HAMP guidelines are specifically written in order to assist homeowners in this scenario. These guidelines provide that, so long as you apply for a loan modification soon after filing bankruptcy, then your bankruptcy petition can used as a substitute for some financial documents. This should make the application process much easier and prevent problems with repetitive requests for the same documents. And if problems do persist, then the bankruptcy judge may be able to provide some relief.
This two-pronged case strategy, though, can be very complicated. In some cases there may be a very limited amount of time in which a homeowner can apply for a modification, and court approval will be needed.
If you feel this fits your situation, contact us a call for a free consultation.
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