Don’t Modify Your Home Loan Until You Consider Chapter 13 Bankruptcy
You May Find Yourself In A Worse Position Than When You Started
by Richard Fonfrias,
J.D. Chicago’s Financial Rescue &
Fonfrias Law Group, LLC
If you’re thinking about modifying your home loan, wait. Loan modifications often create more problems than they solve. In fact…
You could become homeless during a loan modification because you sign over your home to someone else!
If you need help with your mortgage, you may have a better option: Chapter 13 Bankruptcy.
If you have an ongoing source of income, Chapter 13 bankruptcy — often called “the wage earners’ bankruptcy” — is a way for you to reorganize your debt into an affordable monthly payment. It allows you to pay your creditors over a three- to five-year period, with the remaining debt erased at the end of the repayment term.
And if you are facing foreclosure, Chapter 13 bankruptcy could be a big help because it immediately stops the foreclosure process. Chapter 13 bankruptcy allows you to include your past-due mortgage payments with other past-due bills. This gives you the opportunity to get current on your mortgage payments.
CAUTION! If you are in Chapter 13 bankruptcy, and you modify your home loan, you may notice that your mortgage payment goes down. However, don’t be misled. The extra money that you save on your mortgage payment goes toward your Chapter 13 payments. The bankruptcy court may see the loan-modification savings as disposable income. As a result, the court could increase the amount of money you pay to unsecured creditors.
NOTE! Once you sign the loan modification paperwork, the new loan is in place. You cannot undo it. So make sure modifying your loan is the right decision before you move forward.
How a Loan Modification During Chapter 13 Bankruptcy May Affect You
You may face unexpected consequences from modifying your loan while you’re in Chapter 13 bankruptcy. These consequences may include the following:
1. Your monthly payment plan may increase to avoid creating disposable income.
2. The past-due mortgage payments made through your Chapter 13 repayment plan may be placed at the end of your mortgage, increasing both your mortgage balance and the amount of interest you pay.
3. The part of your monthly bankruptcy payment that was used to pay your past-due mortgage payments may now go to repay unsecured creditors, which may increase the percentage they receive.
So… if you’re thinking about modifying your home loan, please call me and let’s discuss your situation. You don’t want to start the long, stressful loan modification process and then learn you had a much better, low-stress option.
I will gladly help you make an intelligent, informed decision so you know that the path you choose is truly in your best interests.