Foreclosures throughout the country are on the rise as the federal government apparently scrambles for solutions to the foreclosure crisis. With unemployment numbers at an all time high and so many people under employed it's no wonder bankruptcy filings have steadily increased as well. If your financial situation has changed since the purchase or refinance of your home you might want to consider filing bankruptcy to help you qualify for a home loan modification.
Trying to avoid foreclosure can be a great motivator for homeowners to file bankruptcy, and stop the foreclosure process. But why wait until you're in foreclosure to file bankruptcy? Why not eliminate your unsecured debt and seek a loan modification to help get your finances in order? Seeking a home loan modification directly from your lender can be daunting task if you're not accustomed to dealing with mortgage servicers. Hiring an attorney to file bankruptcy and/or negotiate a loan modification may be the solution to help homeowners avoid foreclosure. Lender's are willing to work with bankruptcy attorneys outside of bankruptcy to modify mortgages that are upside down.
So What Now?
While an attempt to pass a federal law that would allow bankruptcy judges to modify home mortgages never made it through the Senate, the federal government has made an effort to make loan modifications easier, or have they? The Making Home Affordable program (MHA), passed in 2009, is an effort to curtail foreclosures flooding the housing market. It offered opportunities to help consumers refinance and modify home loans but admittedly has fallen short of the governments expectations.
Homeowners in danger of losing their homes have been encouraged to work directly with their lenders for solutions, as the lenders are encouraged to participate as well. In order to be eligible for Home Affordability Mortgage Program (HAMP) home owners must be able to show that their income is sufficient to consistently make a reduced mortgage payment and that a loan modification is more profitable for the investor than foreclosure. Unfortunately, the guidelines set forth for program eligibility are just that, guidelines! Mortgage lenders are not required to participate, and only your lender can determine if you qualify for a (HAMP) or in-house loan modification.
Unfortunately, where there are home owners desperately trying to avoid foreclosure, there are scammers trying to take advantage of them. Countless homeowners have been scammed by fly-by-night loan modification and debt relief/ debt settlement companies that take their money and run, tricking them into signing over the deeds to their homes and entering costly debt settlement programs. The government's (HAMP) or (HAFA) programs don't advise home owners on how to avoid loan modification or debt settlement scams. Even reputable loan modification attorneys or debt settlement companies can charge fees that are unaffordable for people already struggling financially. We see so many consumers come to us after paying an attorney to modify their loan and/or a debt settlement company to settle their credit card debt. Only to end up filing Chapter 13 bankruptcy to bail them out with a repayment plan.
Filing for Bankruptcy Can Help
Despite the negative stigma tied to bankruptcy, more people are filing for bankruptcy protection these days as an offensive strategy. Unemployment, under employment, toxic mortgages, cost of living, increased health care costs, predatory lending practices and mortgage fraud have all contributed to the significant increase in bankruptcy filings. For homeowners avoiding foreclosure, filing bankruptcy Chapter 13 may be their last chance to keep their homes, if they can afford the payments. Bankruptcy not only offers relief from unsecured debt like credit cards and personal loans, it may also provide the ammunition needed to enter into serious negotiations for a home loan modification with your lenders mortgage servicer.
The bankruptcy laws were significantly revised in 2005 employing the "means test", making it more difficult for some to file bankruptcy Chapter 7. However, filing Chapter 13 bankruptcy, for example, can save your home and help you consolidate your debt and make one affordable payment for 3 to 5 years. At the end, the remaining qualified debt is discharged as well as any upside down junior liens. Another words, if you have a 2nd or 3rd mortgage yo can eliminate it with Chapter 13 bankruptcy.
When filing Chapter 13 bankruptcy current and future mortgage payments are not included in the Chapter 13 plan, only the arrearages. At the same time you restructure your debt, you can negotiate a loan modification with your mortgage holder. Many lenders are willing to consider loan modifications in these circumstances for the simply because some profit is better than none at all; lenders may be more likely to accept a reduced payment or lowered interest rate to keep the loan performing.
Chapter 7 bankruptcy can also offer similar protection, depending on circumstances and the ability to show the lender that they are able to make on-time payments by eliminating their unsecured debt.
By consulting and hiring a bankruptcy attorney early in your financial struggle offers you a a powerful tool and gives you access to all your options. You should understand the benefits of bankruptcy with a loan modification if you are trying to avoid foreclosure or have decided to short sale your home. The California bankruptcy attorneys at the Law Offices of Zhou & Chini offer FREE consultations to help you explore all your options. Call our office TOLL FREE at (800) 972-9600 to see how we can help.
