When you start to experience significant financial difficulties, chances are that your mortgage payment is one of the first financial commitments you become concerned about. After all, it is literally the payment that keeps a roof over the heads of you and your family but will also be one of your biggest monthly outgoings. Did you know that, when you are considering bankruptcy, and even after you have filed for bankruptcy, you could be able to modify your mortgage? A mortgage modification involves changing the terms of your loan, but remaining with the same loan and lender. It can be available to those with poor credit while refinancing your mortgage tends to require good credit. In fact, mortgage modification has been designed specifically for those in financial difficulty.
Do I Qualify for Mortgage Modification in Chapter 7 or Chapter 13 Bankruptcy?
The short answer to that question is yet. In both Chapter 7 and Chapter 13 bankruptcy, your Salt Lake City attorney could help you to secure mortgage modification. The specific requirements will depend on your mortgage lender but, in general, you could be eligible if you can satisfy the following criteria:
- Your total housing costs account for at least 31% of your monthly income
- Your financial difficulties mean you are at risk of defaulting on your mortgage payments, or you are already delinquent
- Your mortgage is underwater, meaning you owe more than the house is worth
- Your financial circumstances render you ineligible for refinancing
If your mortgage modification is approved, both your interest rates and your repayments will reduce. Your Salt Lake City bankruptcy attorney will provide advice specific to your circumstances when you discuss your modification with them but, generally, if you request mortgage modification before filing for Chapter 7 bankruptcy, you can keep your home as long as you keep your mortgage repayments up to date. If you request modification after filing for Chapter 7 bankruptcy but before discharge, your lender is obliged to consider your request.
On the other hand, when you are facing Chapter 13 bankruptcy, your bankruptcy filing must notify the court of this request, even when it has not gone through. Your lender must consider your application, whatever stage of Chapter 13 bankruptcy you have reached. However, after filing for Chapter 13 bankruptcy, if your mortgage modification is approved, you must declare the reduced outgoings, which will normally result in increased repayments to your creditors.
Has Your Mortgage Modification Been Denied? This May Be Why
While your mortgage lender is obliged to consider your modification application in certain circumstances, they do not have any obligation to approve it. As experienced Salt Lake City Chapter 7 attorney and Chapter 13 bankruptcy attorneys, we have assisted countless clients with applications for mortgage modifications and, when your application is denied, it may well be for one of the following reasons:
- Your mortgage lender does not believe that you can afford the mortgage, perhaps due to losing your job or receiving a reduced income
- You are unable to provide the required documentation
- You have already received a mortgage modification in the recent past
- The lender believes that your current terms are affordable
If you are facing Chapter 7 or Chapter 13 bankruptcy and want to apply for a mortgage modification, a Salt Lake City attorney could help you. To schedule your initial consultation, call us today on 1-801-505-9679.