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Mortgage Modification Mistakes That Will Land You In Bankruptcy

Posted By admin || 24-Jan-2011

Sale by owner previous to foreclosure.

Homeowners facing rising housing costs, unemployment, underemployment and other financial issues are turning to mortgage modification to avoid foreclosure . But as many are discovering, modifying a mortgage can not only fail to stop foreclosure, it can often lead to bankruptcy.

Let's take look at a few of the facts:

  1. One of the first things that homeowners are told when they seek a mortgage modification is to stop making full payments on their mortgage while they are being approved. The problem with this approach is that when the homeowner is not approved for the mortgage modification foreclosure is often imminent. The homeowner must either pay the delinquent payments or face foreclosure. For many homeowners, it is only a Chapter 13 bankruptcy that can stop their foreclosure at this point.
  2. During the trial phase of the mortgage modification, many homeowners use the money they have "saved" to pay for other debts such as credit cards and medical bills . But once again, once the mortgage modification is denied they are required to pay back the delinquent payments, which of course they can't. If the homeowner fails to catch up on payments, they face foreclosure. And since most don't have the cash, they need to file Chapter 13 bankruptcy so that they can have the opportunity to catch up on their payments over time.
  3. Finally, most debtors don't investigate their bankruptcy options while they are seeking a mortgage modification approval. They simply hope for approval while they make reduced payments. But what happens is that once they are denied a mortgage modification, they will need to rush to find a bankruptcy attorney willing to file an emergency Chapter 13 bankruptcy filing so that they can stop the foreclosure which can happen very fast after a modification is denied.


Categories: Loans / Mortgages
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