Mortgage Modification Can Occur Prior to or as Part of a Bankruptcy Filing Mortgage modification is often a key component of dealing with a foreclosure whether the modification occurs prior to a bankruptcy or during the bankruptcy process. A mortgage modification offers certain changes to the terms of the mortgage that can make it easier for the homeowner to catch-up and repay the amounts in arrears. Potential items that may be open for negotiation if the lender is amenable to a mortgage modification:
Extending the repayment term
Reducing the interest rate
Rolling arrears, penalties, and other costs into the principle of the mortgage
Altering the payment schedule in some other way to make it more likely the mortgage is paid each month A mortgage modification provides for a flexible framework to address troublesome mortgage provisions. Working with an experienced Sacramento bankruptcy attorney can help you negotiate a modification that addresses your situation and concerns.
A Pre-Foreclosure Forbearance Plan Can Address a Foreclosure
A mortgage foreclosure defense attorney may also consider whether the lender would be open to a pre-foreclosure forbearance arrangement. In an arrangement of this type, the lender will typically agree to postpone the sale of property. In exchange, the borrower will promise to make substantial repayments over a limited window of time. A lender will generally provide up to an additional six months for the borrower to catch-up on arrears,as long as there is a reasonable likelihood that these repayments are achievable.
Chapter 13 Bankruptcy Can Save Home from Foreclosure In some instances where the homeowner has limited equity, both Chapter 7 bankruptcy and Chapter 13 bankruptcy may be able to save a home from foreclosure. However, in situations where the homeowner has more equity that is not fully protected by California’s bankruptcy exemptions, a Chapter 13 filing is more likely to achieve one’s legal goals. A Chapter 13 bankruptcy is not liquidation. Rather, the property you wish to keep is protected under a Chapter 13 repayment plan. Under a Chapter 13 repayment plan, you will make a single consolidated payment to the court. The court will then ensure that the correct payments are remitted to creditors. Aside from simplifying your debt payments, engaging in a Chapter 13 plan has a number of additional key benefits:
The three to five year repayment window can provide a homeowner additional time to catch-up on payments.
Chapter 13 bankruptcy allows a homeowner to satisfy mortgage payments that are in arrears.
Chapter 13 bankruptcy can provide a significant savings on payments to satisfy unsecured debts. This can free up additional resources to pay the mortgage. For many, a Chapter 13 bankruptcy filing can protect and save their home from foreclosure. However, one must fully discuss their situation with an experienced attorney before taking any action to address a foreclosure.