If you are one of the many Americans whose financial situation has drastically changed since you purchased your home, you are most likely in danger of having your home foreclosed. In today’s economy, many who have experienced job loss, unexpected illness, death of a bread-winning loved one or ballooning mortgage payments.
Obama’s administration has offered help for families to save their home from foreclosure through the loan modification program. Unfortunately, getting a mortgage modification from your lender can be difficult and can take a lot of time. I learned today that filing for bankruptcy could make the application process for a mortgage modification much easier.
Although Obama’s Making Home Affordable program is an attempt to slow down the tide of foreclosures in the US by helping consumers seek refinancing or loan modification, for families who are already in danger of losing their home to foreclosure, Obama’s help is too little, too late. The problem is that the guidelines of determining eligibility of the program are just guidelines. Apparently banks are not required to participate and the only party that determines whether you qualify for a loan modification or not is only your lender. Moreover, even if a homeowner qualifies for a modification, some reliable and legitimate companies may charge a huge fee for their services which could present even a more financial hurdle for homeowners who are already buried deep in debt.
It is not surprising to learn that more and more people nowadays are filing for bankruptcy despite the social stigma attached to it. Obviously, for homeowners who are in danger of foreclosure, filing for bankruptcy seems to be their last chance to get keep their homes. By filing for bankruptcy, people will have the leverage that is needed to have serious negotiations for a mortgage modification with your lender.
In chapter 13 of the revised bankruptcy laws in 2005, your home and the majority of your assets can be protected, which will allow you to consolidate your debt and make regular payments for a set time. And at the end, your remaining qualified debt is discharged. Your current and future mortgage payments of course are not included in the debt consolidation plan. While you are restructuring your debt into the consolidation plan, you can contact your lender to negotiate with them to get a loan modification. When you contact them, politely explain that you are currently in the process of filing for bankruptcy as opposed to threatening them to give them a loan modification.
Most lenders will be more than happy to negotiate a loan modification with you as for them, some profit on the mortgage is better than none. Remember that most banks have also been hit by the crisis and they will be more likely to accept a reduced payment or lowered interest rate, for the sake of whatever money coming in.
Personally, filing for bankruptcy would not be something that I would recommend, but in this circumstances, it can be very helpful to consider this option and seek the advice of a bankruptcy and debt relief lawyer. As it is very difficult to get a loan modification, this option might be helpful.
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