Bankruptcy and Mortgage Loan Modifications
With recent financial stress and an uncertain economy, homeowners that are still paying for their homes are exploring options that may help them protect the largest investment that most people have. Offers of loan modifications and/or refinancing may be suggested as choices when you are struggling to pay for your home. These offers may also affect or be impacted by decisions to seek bankruptcy or to stay in bankruptcy for someone that has already filed bankruptcy. Exploring these alternatives and taking positive steps to helping you protect your home are issues that your Montgomery, Selma, and Central Alabama bankruptcy attorneys at The Sellers Law Firm can guide you through. How can bankruptcy help you when you are struggling to make mortgage payments on your home or even if you have fallen behind on payments? You can use this Contact Form to learn more about how we can help or keep reading for more information!
First and foremost, as soon as you file for bankruptcy one of the strongest consumer protections under law is applied to you and your property including your income. This protection is called the automatic stay and it keeps anyone to whom you owe money from doing anything to collect a debt. A creditor, or someone you owe money to, can’t call, send letters, start or continue a lawsuit, garnish paychecks, repossess a vehicle or foreclose on a home once the automatic stay protects you under a bankruptcy. If you are already in bankruptcy, then considering a mortgage loan modification can change how your bankruptcy is operating. Generally, bankruptcy is meant to put you back in control of your finances and ideally should be organized to lower your outgoing expenses. For instance, if your outgoing expenses for your home mortgage and car loan are $750.00 per month, and you are having difficulty making those payment then a planned bankruptcy should reduce those payments. If the planned bankruptcy moves your payment to $1000.00 then the bankruptcy is likely not going to help you. You need to take the same care when considering a mortgage loan modification.
A loan modification will typically change one or more parts of the agreement with the mortgage company including changing your interest rate, making bi-weekly payments rather than monthly or even putting missed payments back in the amount owed. Adjusting the amount owed is one of the more often considered elements. If you are considering bankruptcy and your mortgage company offers to add the missed payments to the amount owed, then there are a few things you need to know. Under a Chapter 13 bankruptcy the missed house payments are usually paid through the Chapter 13 payment to the trustee at no interest. If the mortgage company puts the missed payments back into the amounts owed, then interest continues to add up on those amounts. Changing from monthly to bi-weekly payments may also have issues. If your mortgage payment is $800 a month and the mortgage company proposes bi-weekly payments of $375 then it appears to be a $50 a month savings. However, since there would be 26 payments a year, and not 24, the monthly payments would actually go up to $812.50 a month. These concerns are issues that your Montgomery, Selma, and Central Alabama bankruptcy attorneys at The Sellers Law Firm can advise and assist you on.
If you are already in a Chapter 13 or Chapter 7 bankruptcy and are approached about a mortgage loan modification you need to be aware that you can not just agree to the modification. Since you are under bankruptcy protection you must get permission from the Court to make any debt changes in your life. While you are in bankruptcy you can manage your finances that are in the ordinary course of your daily affairs and business. Since a proposed loan modification is not an ordinary event, the modification needs to be reviewed by your attorney, filed with the court, and approved by the Court. If the modification plans to put missed payments back into the amount owed, then any Chapter 13 that was going to pay the missed amounts will need to modified and approved by the court as well. If the main reason you were in bankruptcy was to protect your home and the mortgage company removes this issue through a loan modification, then you may consider a dismissal or conversion to Chapter 7. As you can see there are lots of moving parts when considering a mortgage loan modification while you are in bankruptcy or if you are considering bankruptcy. Ultimately, the decision needs to be made as to any proposed mortgage loan modification being in your favor. The lawyers and staff at The Sellers Law Firm are more than able and willing to assist you with these decisions.
At the Sellers Law firm, we have offices in Montgomery, Selma, Greenville, and Troy which allows us to be closer to you for your convenience. We can usually meet with you within 24 hours, and all consultations are always free! Our goal is to help you prosper so call or text us at 334-LAWYERS (529-9377). Our phones are answered 24 hours a day! You may even use the Contact Form on this website to reach us or you may email us at firstname.lastname@example.org. Remember that doing nothing changes nothing so act today!
The Sellers Law Firm is designated a debt relief agency by an Act of Congress and the President of the United States. We have proudly assisted people seeking relief under the U.S. Bankruptcy Code for four decades.