Can I Get a Loan Modification After Filing for Bankruptcy?

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If you are contemplating filing for bankruptcy but would very much like to remain in your home and to additionally keep possession of it – that is very much a possibility. If you were previously considering your options other than bankruptcy and had considered applying for a loan modification, filing for bankruptcy does not immediately disqualify you for a reorganization of your mortgage.

In order to be approved for a loan modification during the course of your bankruptcy proceedings, it will be necessary that you follow all proceedings to the letter. If your lender/mortgage company does come to an agreement with you about modifications to be made, these modifications must be first approved by the bankruptcy court handling your case. In most circumstances, the bankruptcy court will not hold you back from getting a loan modification during your New Jersey bankruptcy case.

With that being said, you will need to be aware that more paperwork is headed your way if you are filing for a Chapter 13 bankruptcy, because your bankruptcy trustee will need you to amend your income/expense schedule appropriately so that your bankruptcy plan is accurate.

What normally happens after filing for bankruptcy in New Jersey, is that your mortgage company files proof of claim which will state how much you owe in total and how much, if any, you are in arrears (back or late payments.) The natural procession of bankruptcy cases requires that you, as the debtor, must pay back the total amount of your late payments/arrears that became due before you filed for bankruptcy. This can be a scary concept because many debtors are quite unable to pay back that money, but typically, they will be folded into the bankruptcy plan and you will be able to pay them back gradually.

If you are able to get approved for a loan modification during the course of your bankruptcy matter, your late arrears may very well be erased or spread out over the entire length of the loan. In some cases this will involve a balloon payment when the loan ends, but you can actively negotiate for no end balloon payment with an experienced NJ bankruptcy attorney working for you.

Once again, remember that if your bankruptcy court approves you for a loan modification while your bankruptcy case is active, you will need to make changes to your plan so that your loan modification details are included. This means that your income and expense schedules will have to be modified to show the amounts of your new payments and your increased amount of disposable income.

For more details about filing for a Chapter 13 bankruptcy in New Jersey, George Veitengruber can be reached at (732) 695-3303. If you would like to engage in a free consultation with Mr. Veitengruber, ‘like’ our Facebook page and simply mention that you have done so when you contact our office. If you feel more comfortable contacting Mr. Veitengruber in writing, simply fill out our ‘Contact Us’ form and we will contact you accordingly.

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