August 22, 2009
/24-7PressRelease/ --
Seeking a Mortgage Modification? A Bankruptcy Filing Could Help
Article provided by George R. Belche, Attorney at Law, LLC
Visit us at
www.bankruptcygwinnett.com
In today's turbulent economy, consumers have to be proactive in taking care of their own finances. If your financial situation has dramatically changed since the purchase of your home (including job loss, unexpected expenses, extended illness, death of a breadwinning loved one or ballooning mortgage payments), you may be in danger of losing your home.
The fear of foreclosure can be a great motivator, prompting you to take charge of your finances and make changes that will get you back on track. Seeking a mortgage modification directly from your lender can be difficult, but it can also keep you in your home. Filing for bankruptcy could make the modification process easier.
Too Little, Too Late?
While an attempt to pass a federal law that would allow bankruptcy judges to modify mortgages never made it through the Senate, the federal government has made an effort to make loan modifications easier and dispel myths about the process. The Making Home Affordable program, passed in early 2009, is an attempt to quell the tide of foreclosures battering the housing market. It offers options to help consumers seek refinancing or loan modification.
For homeowners in danger of losing their homes, however, it may be a case of too little, too late. Generally speaking, in order to be eligible you must be able to show that your income is sufficient to consistently make a reduced mortgage payment and that a modification of your loan is the best course of action given the nature of your preexisting mortgage and the current value of your home. Unfortunately, the eligibility guidelines set forth in the program are just that -- guidelines. Banks are not required to participate, and only your lender can determine if you qualify for a modification.
Tragically, where there are people desperate to stay in their homes, there are companies seeking to take advantage of them. Countless homeowners have been scammed by fly-by-night consumer debt relief agencies that take their money and run, tricking them into signing over the deeds to their homes and bilking them out of thousands of dollars. The Making Home Affordable program does offer some advice on how to avoid mortgage modification scams, but even reliable companies may still charge a substantial fee for their services. For someone already buried under debt, these fees can present an insurmountable hurdle.
Filing for Bankruptcy Can Help
Despite the social stigma once attached to bankruptcy, more people are filing for bankruptcy protection than ever before. Subprime mortgages, a record-high unemployment rate, skyrocketing health care costs and predatory lending practices have all contributed to the rapid rise in bankruptcy filings. For homeowners in danger of foreclosure, filing bankruptcy may be their last chance to keep their homes. Bankruptcy not only offers relief from obligations like medical bills and credit card debt, it may also provide the leverage needed to engage in serious negotiations for a mortgage modification with your lender.
The bankruptcy laws were significantly revised in 2005, making it more difficult for some people to file, but debt relief options still exist. Chapter 13 bankruptcy, for example, can protect your home and the majority of your assets, allowing you to consolidate your debt and make regular payments for a set time. At the end, remaining qualified debt is discharged.
While your current and future mortgage payments are not included in that consolidation plan, any arrearages you owe are included. At the same time you restructure your debt, you can negotiate with your mortgage lender for a loan modification. Many lenders are willing to discuss modifications in these circumstances for the simple fact that some profit on the mortgage is better than none; since most banks have also been struck by the economy's downturn, they may be more likely to accept a reduced payment or lowered interest rate just to keep money coming in.
Chapter 7 bankruptcy offers similar protections, and it may allow homeowners to keep their homes, depending on circumstances including the ability to show the mortgage lender that they are able to make on-time payments for a mutually agreed-upon period.
While you are considering options for mortgage refinancing or modification, it can be helpful to seek the advice of an attorney experienced in these matters. Hiring a bankruptcy and debt relief lawyer gives you access to a world of legal knowledge and allows you to understand possible courses of action, along with the potential results of each.
Article provided by George R. Belche, Attorney at Law, LLC
Visit us at
www.bankruptcygwinnett.com---
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