The Bankruptcy Law Clinic Blog

Wednesday, May 22, 2013

Loan modifications inside bankruptcies- A new powerful tool to save people’s South Florida homes since March 2013


For the past two years in Orlando, there has been a new wrinkle in bankruptcies.  You can now include loan modifications inside your chapter 13 bankruptcy. Over 70% of these bankruptcy cases resulted in new lower mortgage payment. Now, we are doing the same program in Dade and Broward counties.  In the past, our law firm has shied away from loan modifications.  We focus on bankruptcies (hence the name and website). We want our clients to continue to love us and we’ve rarely met people who were happy with their banks or their monthly payment after their loan mod.  In many cases , while they were in the middle of negotiating with their banks, they were served foreclosure papers, forcing them to fight their battle on two or even three fronts  (loan mod, foreclosure defense AND bankruptcy).  It’s not surprising they weren’t happy.  After all 95% of loan modifications are private negotiations between you and the bank, and guess who has all the power?

Doing the loan modification inside your bankruptcy has numerous advantages...

1.       No more endless rounds of duplicate or “lost” paperwork.  The loan modification is included inside of a chapter 13 bankruptcy which has its own very extensive paperwork requirements. You can be sure, with the power of the US Federal Bankruptcy Court involved; banks will keep better track of the paperwork provided or risk receiving sanctions (Fines) from the bankruptcy court.

2.       Balance of power has shifted.  In a normal loan modification, you send your paperwork away and the bank eventually gets back to you with a proposed modified interest rate, term, monthly payment, etc. and you can basically take it or leave it.  When you do it in a chapter 13 bankruptcy, WE CREATE the proposed loan modification with the terms we’ve created and the banks must react to what we have created.

3.       Prompt response- We’ve all heard the horror stories of people being in loan modification programs for years, with the bank rejecting their loan mod for numerous dubious reasons, sometimes even after the client has successfully made their trial payments.  With the US Bankruptcy court taking an active interest, you can be sure that your bankruptcy and loan modification will move swiftly.  The new lower mortgage is reflected in the first payment in a chapter 13 bankruptcy, which is typically sent only 30 days after your bankruptcy is filed.  One month vs. two years?  I know which one our clients prefer!

4.       No additional upfront fees- Depending on the law firm and the complexity of your case, some law firms charge from 1,500 to 3,600 for a loan modification.  When you do your loan modification inside of a chapter 13 bankruptcy, no additional upfront legal fees are required beyond what you already are paying for your bankruptcy. 

5.All the normal benefits of a bankruptcy- When you do a bankruptcy, you eliminate all your unsecured debts, which means in addition to a lower first mortgage, we may be able to strip and eliminate your second mortgage and your Home Equity Line of Credit.  We will also eliminate all the credit cards, car repos, medical bills, paydays loans and other bills that prevent you from getting the fresh start you deserve.

To be sure, this is not an easy process.  But it is one that we do for our clients, allowing them to stay in their homes, eliminating their debts and giving them the fresh starts they deserve.

To find out more, call us at 305-663-3281. The call and initial consultation are free.  Even if you've been trying for a loan modification for 2 or more years, we can still help.


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