Can I File for Bankruptcy During a Trial Loan Modification?


You’re struggling financially. You’re really just making it month to month by the skin of your teeth. All of the options – NJ bankruptcy, foreclosure, loan modification – they’re all swimming around in your mind making your head spin. Figuring out which option(s) are best for your particular situation isn’t a simple process. If you’re in danger of losing your home, you should consult with a professional ASAP.

Obtaining a loan modification is a great way to keep your home if you’re struggling to pay a too-high mortgage payment every month. By working with an attorney who is well-versed in credit repair and loan modification, you’ll  be able to get ideas that really can get you back on solid footing. A NJ attorney with experience in loan modification negotiations can consult with your mortgage lender to work out a trial loan modification.

Oftentimes, lenders will offer distressed homeowners a trial loan modification to see if the homeowner is actually able to make good on the payments. Typically, a trial loan modification in New Jersey lasts 3-6 months. After the trial period ends, the lender decides whether or not to make the trial loan modification into permanent changes to your mortgage. The trial loan modification is a temporary “test” to see if the borrower is able to make the new payments in full and on time. After the trial period ends, the lender will also look at the rest of your financial information in order to make a final decision.

Because of this, it is strongly advised to avoid filing for bankruptcy during a trial loan modification period. A bankruptcy signals to your lender that you are unable to maintain regular payments to them and to other lenders. Your home loan would be transferred to the bankruptcy division and, in essence, your loan modification would be killed.

If you are sincerely interested in keeping your home, try to avoid filing for bankruptcy until after you receive a permanent loan modification from the bank. Once you have your official new loan terms in writing, you can file for bankruptcy and reaffirm your mortgage debt, which will allow you to keep your home.

In the meantime, there are things you can do to ensure that you will be able to make good on all of the trial loan modification payments. If the interest rate and monthly payment are reasonable and something you would be able to maintain if you could erase the rest of your debts, slow pay or stop paying your credit card bills during your loan modification period.

You can stop making car payments as well, but only if you can live without the car, because it will be repossessed if you default on payment.

This is definitely a difficult situation, and you will achieve best success by working directly with a qualified bankruptcy attorney with a lot of experience with loan modifications in New Jersey. For a free consultation in our Wall, NJ office, simple call (732) 852-7295. We can help guide you to making the right choices so that you don’t lose your home.

Image: Lending Memo (flickr)

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: