Okay, face it times are truly tough and you might look for every single opportunity to save money. Regardless of whether you’re behind on your loan payments, you can still go for a loan modification. A loan modification is nothing but a short contract adjusting the terms of your existing loan. In simple words, loan modification is a fresh contract between you and your lender that reinstates the previous interest and payment agreement. The cause behind doing this is simple loads of cash in interest savings and possibly a noticeably abridged monthly payment.
Since the year 2009, there have been modifications in the bankruptcy laws to not merely allow loan adaptation during bankruptcy procedure, but to support it. Before 2009, a majority of the loans were adjustable either during a Chapter 7 or Chapter 13 bankruptcy; however, the former rules exempted mortgages under Chapter 13 proceedings. That’s no longer the case. For home proprietors who face problems making their monthly mortgage payment, a mortgage loan modification may prove to be quite beneficial.
See that you’re eligible for a loan modification under existing bankruptcy laws. In a majority of the instances, the collateral used to secure your loan must be less valuable than the amount you owe; you must have made earlier negotiations with your lender for restructuring the loan. In case you’re not sure if you meet the eligibility criteria, consult an attorney or talk to your trustee.
Tell your bankruptcy trustee about your wish to modify the loan. This trustee will either inform your lender about your modification plans or provide you with the proper documents to complete the loan modification application process.
Inform your trustee if your loan provider makes modified term offers that you wish to accept. However, the bankruptcy court needs to approve your fresh loan as an integral element of your bankruptcy plan.
Let your trustee know if your lender refuses your proposal to revise your loan terms. If you’re already undergoing a Chapter 13 bankruptcy process and attempting to change your mortgage loan terms, the bankruptcy judge can revise your loan to regulate your mortgage disbursement to a 31 percent debt-to-income ratio. Even though your lender can’t be compelled to participate in the revised federal program that enables judges to perform this, the government makes attractive incentive offers to lenders who coordinate.