Should I Delay Filing Bankruptcy While Waiting For A Mortgage Modification?

Filing Bankruptcy While Waiting For Loan Modification

Many debtors whether they are working full-time, part-time or are unemployed, feel reluctant to file Chapter 13 bankruptcy or Chapter 7 bankruptcy because they believe that they are only a few days or weeks away from winning a mortgage loan modification. But when it comes to saving your home from foreclosure, you don’t necessarily need to wait on your mortgage servicer before you make a move to save your home. Let’s first clear up a common misconception, you don’t need to put off filing bankruptcy as your lender processes your mortgage modification request.

A matter of fact, in some cases it may be a huge mistake to delay your bankruptcy filing in hopes of winning a mortgage modification, here’s why:

  1. Mortgage modification delays are long and often result in the homeowner resubmitting their application repeatedly. The mortgage modification departments of lenders are understaffed, overwhelmed and ill-equipped to handle the slew of applications pouring into their offices from homeowners facing foreclosure. There are horror stories about homeowners succumbing to foreclosure as they wait for a mortgage modification approval.
  2. Many mortgage modifications are denied after months of waiting. The unsettling truth for many homeowners facing foreclosure is that most mortgage modification requests that are rejected are often followed by a quick foreclosure process. And to make it worse, some lenders offer the homeowner false hope that maybe they can get approval for another program or scheme, while their foreclosure attorneys swoop in on their home. Debtors in this situation should not delay their bankruptcy filing. They can always negotiate a mortgage modification AFTER they file bankruptcy.
  3. A pending foreclosure is probably not your only financial problem.  Most debtors facing foreclosure are facing other debt troubles. If the debtor delays filing bankruptcy in hopes that they can get a permanent mortgage modification, often other creditors will hit them with lawsuits, wage garnishments and asset seizures compounding their financial predicament. By moving quickly to file bankruptcy, the debtor can handle all of their debt troubles and save their home.

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