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Bankruptcy Lanigan & Lanigan, P.L.
831 W. Morse Blvd., Winter Park, Florida 32789


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Loan Modification During or After Bankruptcy

If you’re filing Chapter 7 bankruptcy it’s important to know whether you should complete a loan modification prior to filing for bankruptcy or after.

The answer depends on your particular economic situation and if completing a loan modification prior to filing for Chapter 7 bankruptcy, will affect your ability to file.

Consider talking with Florida bankruptcy attorneys Eric Lanigan and Roddy Lanigan to clarify bankruptcy and modification issues. You should be aware of many options and alternatives and a plan that will work for your scenario.

If you have started a loan modification process, but the loan modification has not been completed, then you might want to complete your home loan modification prior to filing for bankruptcy. If you file in the middle of home loan modification–like during the trial payment period–a lender may require you to restart the loan modification process.

This means the lender will require that you submit your loan modification package over again to be reconsidered for a loan modification. If you have worked for a long period of time to complete your home loan modification, then filing for Chapter 7 bankruptcy, may affect your ability to finalize the process.  

Lenders will not negotiate to modify the terms of your loan when there is a pending Chapter 7 bankruptcy. The automatic stay results in mortgage lenders stopping the negotiating process, until they receive an authorization letter from your attorney.

Some lenders won’t require that the process be restarted and will continue to work with your during your Chapter 7 bankruptcy, after receiving your attorney’s authorization. 

If you have not started the home loan modification process, then you have an option to file for Chapter 7 bankruptcy and then start the process of loan modification while you are in Chapter 7 bankruptcy.

The mortgage company will require that your attorney sign an authorization letter allowing them to contact you about loss mitigation options including loan modification. Once they receive this authorization letter and the documents to begin the loan modification process, they can begin to process your paperwork.

If the home loan modification is approved while you are in Chapter 7 bankruptcy, then the mortgage company may require that you obtain a court order approving the modification prior to the finalization of the loan modification.

You’ll need to find out if the bankruptcy code supports the idea that a court order of approval is required in order to finalize the loan modification. Many mortgage companies are under the impression that this is required and therefore will require that you obtain a court order if you are in bankruptcy.

The mortgage company may want to wait until your Chapter 7 bankruptcy discharges to finalize any loan modification. If your Chapter 7 bankruptcy case is discharged and closed, then the mortgage company won’t require court approval for finalizing the loan modification.

It’s important to consult with Winter Park Florida bankruptcy attorneys Eric and Roddy Lanigan to find out if modifying your loan prior to finalizing for bankruptcy is in your best interest.

There may be facts in your case that would support filing before or after your Chapter 7 bankruptcy. If you are many months behind in your mortgage payments then filing for Chapter 7 bankruptcy before completing the loan modification process may not be beneficial.

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