Can I Get a Loan Modification While in Bankruptcy?

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There are a lot of rules around the bankruptcy process, so we’re never surprised when our clients have questions about what they are and are not allowed to do once the paperwork is all filed. Some of our clients are looking into ways to get a loan modification, a better deal on a loan that they have already taken out. If you are behind on payments, sometimes a modification can give you the time to get back on track. A Bergen County bankruptcy lawyer can tell you if that’s an option for you.

What Type of Loan Modification Do Most People Apply for in Bankruptcy?

There are a few types of loan modifications that can help someone change their financial situation for the better. You can ask a lender about modifying the terms of loans like:

  • Mortgages
  • Car financing plans
  • Student loans
  • USDA loans
  • Veterans Affairs loans

Sometimes you cannot make a modification to a loan while you are in bankruptcy though, even if you think that it will be helpful as you try to navigate toward a fresh financial future.

Can I Get a Loan Modification in Chapter 7 Bankruptcy?

In Chapter 7 bankruptcy your assets are liquidated and sold off to pay off your debts, but exemptions are made to allow you to keep some property. That often includes a house, so some people ask if they can ask for a loan modification on their mortgage. You cannot do this while the process is going on though because everything is in a bankruptcy estate. You also cannot modify your loan if you’re behind on payments.

Can I Get a Loan Modification in Chapter 13 Bankruptcy?

Chapter 13 bankruptcy actually would allow you to ask for a loan modification on your mortgage. It would simply have to be approved by the bankruptcy court along with your creditor repayment plan. You may be able to ask for other types of loan modifications as well, like changes to your student loan repayment plan.

Can the Bankruptcy Process Stop After I Modify a Loan?

Going into bankruptcy and then asking for a loan modification can be beneficial because starting this process stops actions like foreclosures and prevents creditors from pursuing you. Sometimes someone files for bankruptcy and gets the loan modification that they need. Then they realize that their finances are manageable and that completing the bankruptcy process is not necessary. This is fine and you can end the process before deciding on a Chapter 13 creditor repayment plan.

Do I Need a Bankruptcy Lawyer?

Filing for bankruptcy on your own can be tough. There’s a lot of paperwork to worry about and everything needs to be correct. Leave out crucial info or make a mistake, and you could end up facing delays and legal headaches. Let our experienced lawyers take care of things and focus on your financial future instead.

Schedule Your Consultation

If you are thinking about filing for bankruptcy yourself, know that you do not have to do it on your own. Contact the Law Office of Boyd & Squitieri to schedule a consultation with our team. We can tell you more about your options and guide you through this process.