Filing for a Mortgage Modification and Bankruptcy at the Same Time


If you’ve been fighting off an impending foreclosure for a significant amount of time and you don’t seem to be making much headway, you might need to get more aggressive with your debt resolution strategies.

Recently, a question was raised regarding filing for bankruptcy and modifying a mortgage simultaneously. Many people don’t think of bankruptcy properly, so putting bankruptcy together with a mortgage modification may seem strange at first. However, when you realize that bankruptcy laws were created to help distressed debtors afford their monthly living expenses again, making some changes to an existing mortgage is a very sensible thing to do, especially if you’re filing for bankruptcy.

Luckily, the New Jersey bankruptcy court actually provides debtors with a program to assist them with modifying their current mortgage, if they wish to keep their home even after their bankruptcy discharge. Even so, if you feel like filing for bankruptcy and applying for a loan modification is right for your situation, you simply must seek the help of a NJ attorney who is not only experienced in bankruptcy but also in foreclosure and loan modifications.

Navigating the bankruptcy code and rules can be extremely confusing and should not be attempted without the assistance of not just a professional, but an expert in the above-mentioned legal areas. Taking on such a complex combination of laws can easily lead you down the rabbit hole into mass confusion which may very well cause you to either mis-file something important, or to forget a piece of information altogether. Even with the best intentions, you could end up committing bankruptcy fraud unknowingly, which as we all know by now can only end very, very badly for you.

Whether or not you will be approved for a mortgage modification while you’re in the midst of a bankruptcy filing will depend on your debt-to-income ratio – specifically what it will look like after your bankruptcy case is completed.

You can discuss what chapter bankruptcy to file for with your attorney. Chapter 7 bankruptcy entails a liquidation (sale) of a lot of your assets in order to repay at least some of your debts. If you are granted a chapter 7 discharge, the debts remaining at the end of your case will be erased, unless you choose to reaffirm any of your debts in order to keep the asset in question, namely: your home.

Chapter 13 bankruptcy is essentially a reorganization of your debts. Some of your debts may be reduced, and most of them will be restructured and/or refinanced so you can afford the payment schedule with your current income.

During a loan modification, your attorney will negotiate with your mortgage lender to alter some of the terms of your loan in order to make it more affordable for you. These alterations may include changing the length of the loan, wiping out past due amounts, eradicating late fees, etc. The goal of applying for a mortgage modification is to have small but significant changes made to your loan.

To learn more about filing for bankruptcy while also initiating an application for a mortgage modification, contact Veitengruber Law today.


Image credit: Cafe Credit

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