Bankruptcy & Loan Mod
WHAT IS
Bankruptcy & Loan Mod
More and more, lenders are willing to negotiate with homeowners in order to minimize their losses. When your loan modification is protected by Chapter 13 bankruptcy, temporary payment terms can become sustainable debt relief.
Cemtica Services bankruptcy attorneys specialize in bankruptcies that protect homeowners. When Chapter 13 is a viable option, we may be able to lock in a lower monthly payment while working to strip other portions off your mortgage debt. Our firm has years of experience helping clients struggling with debt, and we have been listed in hg.org among other places for our dedication to the best outcomes for our clients.
Loan modification is voluntary on the part of the lender. During the negotiation, you may encounter two types:
- Trial modification A trial run for a new payment schedule. Generally lasting two or three months, the trial period commonly features terms beneficial to the homeowner.
- Permanent modification The payment schedule has been restructured until the debt is paid or other circumstances interrupt monthly payments.
Chapter 13 bankruptcy can often be paired with your loan modification. After the trial modification terms have been agreed upon, we can help you file. If the loan modification is built into your bankruptcy filing, the lender may be forced to accept the new mortgage payments as part of your three to five year payment plan. But its essential to take the initiative; foreclosure eliminates the opportunity to negotiate for any loan modification.
Who qualifies for loan modification
- Your mortgage must be at least 1 year old.
- You must have a first-lien mortgage, which means your mortgage company will be repaid
first if you default on your loan and the home is sold. - If your loan is current or you have fewer than 60 days of missed payments, the mortgage
must be for your primary residence. You must be 60 days or more past due on a loan for
a second home or investment property. The property may be vacant or condemned. - Your mortgage loan is current or less than 60 days past due, but your lender has
determined the loan is in “imminent default.” That means the lender believes you are no longer able to afford your monthly payment.
What are the benefits of loan modification
- Reduce your monthly payment by as much as 20 percent
- Add past-due amounts, including interest, to your principal balance, so it’s not all due up front
- Extend your repayment term
- Lower your interest rate
Place a forbearance on a portion of your principal, which won’t accrue interest and will be due when the loan matures or you pay it off early
The Flex Loan Modification can be an excellent option for someone who is behind on their mortgage payments due to financial hardship and doesn’t anticipate a change in their situation. This long-term solution can help you avoid foreclosure, which can damage your credit and uproot your life, forcing you to find another place to live.
What constitutes a Hardship
- Unemployment
- Reduction of income due to circumstances outside of your control
- Increase in housing expenses due to circumstances outside of your control
- Natural or man-made disasters that impacted your property or place of employment
- Long-term or permanent disability
- Serious illness of the borrower, co-borrower, or a dependent family member
- Divorce or legal separation
- Separation of borrowers unrelated to marriage, civil union, or similar domestic partnership
- Death of a borrower or the primary or secondary wage earner
- Employment relocation of more than 50 miles
- Other hardships as described by the borrower
Beware of loan modification scams
Be aware of the following:
- Were you told you had to pay a fee to obtain counseling services?
- Were you guaranteed a loan modification
- Sign over title to your property
- Redirect mortgage payments
Counseling about your mortgage options should never come with any cost to you; for this is what determines whether you are even eligible for the program.
Not everyone is eligible for Flex Modification, so you should be leery of anyone guaranteeing acceptance into the program without taking the proper steps first.
Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
Do not sign papers in exchange for a promise that someone else will pay off your mortgage.
Never submit your mortgage payments to anyone other than your mortgage company without your mortgage company’s approval.
Scammers might ask you to make your payments to them; however, they pocket your payments instead of sending them to the mortgage company.
Retaining a private company to assist you with these programs on a fee basis is perfectly fine should that be the option you choose. Just be sure and perform your due diligence researching the company and be sure that the said company is always being upfront and fully transparent about their fees and what services they are providing for you.