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Roger
Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 31590
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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Hello...a dear family friend filed recently Chap 7 and was

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Hello...a dear family friend filed recently Chap 7 and was finalizing the very end of a home loan modification for his mortgage to keep the house. He was at the last step of the final submitting of papers. Then the loan company notified him declining his modification due to recently claiming bankruptcy. Will these same rules apply to all home modification programs that are created to help people keep their homes? Fyi...the loan modification was applied for first before the bankruptcy. Thank you

Kirk Adams :

Hi - my name is XXXXX XXXXX I'm a Bankruptcy litigation attorney. Thanks for your question. I'll be glad to help you today!

Customer:

Hi Kirk Thanks

Kirk Adams :

If a bankruptcy is filed during the application process, the lender is USUALLY going to deny the modification because of the collateral affects this has to the applicant's credit and possibly his/her ability to repay the loan even with the modification.

Kirk Adams :

BUT

Kirk Adams :

The reason that lenders stop the process is because (1) it's a violation of the automatic stay to continue after bankruptcy is filed, and (2) there could be claims of preferential treatment of the mortgage lender, which could cause trouble for the trustee and from other creditors.

Kirk Adams :

However, it is possible to RESUME the loan modification after filing via what is called a reaffirmation agreement.

Customer:

How long does it take to get to the step of reaffirmation agreement?

Kirk Adams :

The reaffirmation agreement is when the lender and mortgage company agree that the borrower/debtor will continue to pay the mortgage loan, and in exchange, the borrower/debtor will be allowed to keep the property.

Kirk Adams :

Your friend can attempt to resume discussions and try to reach a reaffirmation agreement any time after filing.

Customer:

He has gone to court so does that mean ho is done with that part?

Kirk Adams :

But, the lender is not under an obligation to agree to the reaffirmation, BUT if they were close on a loan modification, it may be that your friend and the lender can reach an accord and work this out through a reaffirmation.

Customer:

By saying court I am referring to bankruptcy court

Kirk Adams :

If they reach an agreement on the reaffirmation, he would have to go back to court for the judge to approve it.

Customer:

okay...i will pass it on. Thank you so very much. It is hard to watch this happen to a family we have known for 20 years. It must be heart wrenching at times doing what you do for an occupation. I appreciate your help with this.

Kirk Adams : No problem. Glad to help.
Kirk Adams : It is very hard to watch people go through tough times for sure. I've had friends and family go through this as well.
Kirk Adams : Hopefully, they can reach a deal to keep their home and save it from being taken.
Customer:

Yes it makes me wish I was a billionaire to help with this but I have daughters and a home and horses on my plate and that's all i can do.

Customer:

Enjoy the rest of your day and I will finish by rating our chat. Thanks again

Kirk Adams : Thank YOU for allowing me to help. I wish you and your friends all the best. I hope things turn out as good as it can under the circumstances.
Customer:

Thank you.

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