topic Re: Can you apply for a loan modification before or after a CH7? in Bankruptcy

Can you apply for a loan modification before or after a CH7?

Anonymous — Fri, 23 Jul 2021 00:35:11 GMT

We are likely going to a file a CH7. My wife lost her job due to COVID, but is employed now. Anyway, during that period, our situation started to slide downward, and at one point I asked our mortgage lender if we could apply for a loan modification. They automatically granted us a loan forbearance, so we didn't have to pay our mortgage for 1 year...they basically tacked that year onto the end of our original 30 year loan. The forbearance period just eneded, and now we are pursuing the BK.

So, I'm wondering a few things: 1) is it advisable to pursue the BK first, then after DC apply for a loan modification?
2) Or, as part of the loan affirmation process (which I'm just now learning about), does that remove the option of a loan mod altogether?

3) If anyone has received a loan modification, did they lower the interest rate, or just lengthen the loan?

Thank you.

Re: Can you apply for a loan modification before or after a CH7?

kr43002 — Fri, 23 Jul 2021 02:46:59 GMT

I am not an expert, but I believe a reaffirmation agreement in a sense is a loan modification. however i believe the general consensus is do not start a bk until you can support yourself without credit. A lender is under no obligation to reaffirm or modify a debt agreement. If you do go and get a bk and cant support yourself afterwards you cant file again for 8 years i believe. You may want to get a loan modification now to be on the safe side

Re: Can you apply for a loan modification before or after a CH7?

FLLGuy — Wed, 28 Jul 2021 14:37:20 GMT

@Anonymous I can't answer on Chapter 7 maybe another community member can share some insight. However, I was successful and granted a loan modification during my 3rd year into Chapter 13 with my attorney's guidance and trustee approval it was possible took us 4-6 months to get it completed. I did not qualify for a reduced payment but interest rate was lowered.

My mortgage company was Ditech @4.25% / 30yr then transferred to NewRez/Shellpoint during the probational payment plan finalized within 4-6months w/lower interest rate @4.00%. I did not include mortgage into my CH13 and paid outside of plan and did not reaffirm.

Re: Can you apply for a loan modification before or after a CH7?

jmw1 — Thu, 29 Jul 2021 00:39:52 GMT

I would get the loan mod done first and then do the BK. I would not give up the automatic stay just in case you need it due to a loan mod process that is dragging out so much that foreclosure is a possibility. Loan mod should be easy and quick with no documentation as long as you can pay a mortgage payment that is the same or slightly higher.

There is no good reason to reaffirm the mortgage in a C7.