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Mortgage Modification in Chapter 13 Bankruptcy

Posted By admin || 29-Aug-2009

In the Chapter 13 bankruptcy case of (Smith, David B. and Susan L.; In re) the bankruptcy court denied a motion to approve/disapprove an agreement to modify a residential mortgage. The bankruptcy case details:
"The Chapter 13 debtors asked the bank­ruptcy court to approve a modification of their home mortgage. The lender agreed to reduce the mortgage payments for three years and to add the arrearages to the principal amount of the loan. The lender joined the debtors in seeking court approval in order to be sure that the modification is acceptable under the law and with the court. The bankruptcy court denied the motion because it was not required under the Bankruptcy Code or Rules."
Basically the bankruptcy court ruled that they did not need to approve an agreement to modify a mortgage unless it had arisen due to a dispute.  However, if the mortgage modification was presented as a settlement for a dispute the bankruptcy court would have approved/disapproved it.  It's important to note that the bankruptcy court's refusal to approve it does not mean that it was a "disapproval" they are simply stating that they do not need to be involved in approving/disapproving the mortgage modification because it did not arise out of a dispute.

Source: Consumer Bankruptcy News, Volume 19, Issue 18, pages 8-9

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