Arizona residents who are looking to modify their mortgage may have experienced difficulty getting a loan modification even after filing for Chapter 7 bankruptcy, which recognizes that people have unsecured debts and discharges them of those debts. However, people may still file Chapter 13 after they have already filed Chapter 7.
Chapter 13 bankruptcy has provisions that allow people to work on paying their unpaid mortgage payments over the course of three to five years. If they have already filed Chapter 7, then the section of Chapter 13 that discharges them of their debts won’t apply to them since it will already be taken care of in the Chapter 7 bankruptcy.
Yet, even though Chapter 13 bankruptcy allows for people to catch up on their delinquent mortgage payments, they will still be expected to make their current mortgage payments. This may prove difficult for them since the whole purpose of them filing bankruptcy to begin with was because they were struggling with debt.
However, lenders might be inclined to modify people’s mortgages when they are working on paying back their delinquent mortgages within Chapter 13 bankruptcy. Many lenders generally do not want their clients in active bankruptcy cases, so they might be more willing to consider modifying mortgages in an attempt to help them get out of bankruptcy.
Bankruptcy lawyers might be able to advise people as to what type of bankruptcy best suits their needs. They might also be able to help them gather and prepare the paperwork necessary to file their bankruptcy, as well as help them come to negotiation terms with any lenders so that they may potentially keep their property.
Source: Fox Business, “Will Bankruptcy Help Mortgage Modification?“, Justin Harelik, June 11, 2013