If you are going through the bankruptcy process, you may be wondering if there are any other ways that you can reduce your financial obligations and get closer to that fresh financial start. Some of our clients ask us if a loan modification is possible and if that modification could ease their financial burden. A Rockland County Chapter 13 bankruptcy lawyer from our firm can advise you on that.
Do Different Types of Bankruptcy Have Different Loan Modification Rules?
The type of bankruptcy you choose to go through can actually affect your options here. You are generally not going to be able to ask for a loan modification while you are in Chapter 7 bankruptcy. That’s because all of your assets go into a bankruptcy estate while this process plays out. Modifying, let’s say, a mortgage loan is just not going to be an available option to you.
However, if you choose to go through Chapter 13 bankruptcy you may be able to modify some of your loans. Again, a mortgage modification is one that our clients often ask about. This loan modification along with the establishment of a payment plan that satisfies other creditors can help you get a fresh financial start.
What Kind of Loan Modification Can I Apply For?
We have mentioned mortgages, but there are also other types of loan modifications that might help someone going through bankruptcy. Many government-backed loans, including federal student loans and USDA loans, offer their own refinancing or modification options. If you have another type of debt with a private lender, like a bank or car lessor, then you may be able to speak to them about a loan modification.
Many of these modifications are not guaranteed though. You are still going to have to play nice with lenders and hope that they agree to modify your terms.
Will I Still Need to Go Through Bankruptcy After a Loan Modification?
In some cases, starting the bankruptcy process and securing a loan modification could be enough to give someone financial breathing room. When you file for Chapter 13 bankruptcy, you can put a stop to any foreclosure action against you. If you modify your home loan and figure out that you do not need to go through the entire bankruptcy process, you can put a stop to it.
You just need to be sure that your new loan modification will make the difference and allow you to pay off your debts over time without making a bankruptcy plan with the rest of your creditors. Someone who modifies their student loans or any other significant loan should do the same calculations.
Contact Our Bankruptcy Attorneys
If you want to learn more about the bankruptcy process and how it could help you reclaim your financial life, contact the Lauterbach Law Firm. We can schedule a consultation and tell you more about what we can do to assist you.