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Loan Modification Laws Related Questions

When an individual tries to make changes to or modify the terms and regulations of their current loan with his/her lender, it is often called a loan modification. In most situations, the lender may accept the loan modification request by the individual. However, in other situations, if the lender does not accept the loan modification request, then the individual may have to consider other options like refinancing with another lender. This can lead to uncertainty and questions about loan modification laws, especially while filing for bankruptcy. Below are some of the most commonly asked questions about loan modification laws.

Would Chapter 13 Bankruptcy Affect an Individual’s Payments if he/she Applied for Loan Modification?

If the Chapter 13 Bankruptcy petition is already approved, in most situations it would not affect the individual’s payments if he/she applied for loan modification.

What Can an Individual do if his/her Loan Modification Request to Lower his/her House Payments gets Denied?

If an individual gets a letter denying his/her loan modification request, the letter would also mention the reason for the denial. The individual, in such a situation, may call the lender and request to apply for a Home Affordable Modification Program (HAMP) modification. If the lender is a participant in this program, he/she may have to stop the foreclosure and process the HAMP modification. This would also mean that the lender may have to come up with a new payment plan. If the HAMP request also gets denied, the individual may send a letter disputing the foreclosure to the lender and to the foreclosing attorney. This letter would be considered a qualified written request and the lender may be forced to stop the foreclosure till the dispute is solved.

Can an Individual do a Loan Modification when in a Chapter 7 Bankruptcy?

As per loan modification rules, an individual may not be able to apply for a loan modification after filing for Chapter 7 Bankruptcy. The lender may not agree to the loan modification request because working towards the loan modification with the individual would be looked at as an action on the lenders behalf to collect the debt. As per the bankruptcy court, the lender may not attempt to collect the debt without the approval of the bankruptcy court when the bankruptcy case is pending. The individual may renegotiate the loan modification request with the lender after the bankruptcy is discharged.

Can an Individual Refuse to Accept a Loan Modification when he/she files for a Chapter 13 Bankruptcy?

According to loan modification laws, an individual may reject a loan modification in a chapter 13 bankruptcy and continue to repay the loan according to the original bankruptcy plan. However, if the individual is not able to repay the loan in the given time, the lender may take foreclosure action once the bankruptcy is discharged.

Requesting for a loan modification may not always be an easy process. Not having answers to the various questions regarding the loan modification laws and how they apply in the event of a bankruptcy can make it even more difficult for the individual. Understanding the different loan modification rules and the affects of bankruptcy on loan modification can help individuals who are planning to apply for a loan modification. It can also help individuals who already have received approval for a loan modification and are planning to file for bankruptcy. If you are not fully aware of the laws or how they apply in your situation, asking an Expert could get you the clarity needed to make informed decisions.
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