Loan Modification

Many people who are in deep debt and can’t afford to make their payments apply for loan modification. A loan modification is an adjustment to one or more terms of the debtor’s loan that results in lower monthly payments that the debtor can realistically afford. Loan modification is primarily used for mortgage payments, but can also be used for other types of secured debts. A loan modification can be accomplished by a reduction of the interest rate on a loan, or a reduction of the principal sum of the loan. A loan modification can also be accomplished by lengthening the term of a loan, or capping the monthly payment to a percentage of the income. The exact terms of a loan modification depend on how current the debtor is with his payments.

Loan Modification In Bankruptcy

For debtors who are trying to get debt relief and who own a home, loan modification is a good option. However, if you’re unable to make your monthly mortgage payments due to a high debt-income ratio, a lender will be reluctant to agree to a loan modification. If you have a lot of other debts, for example credit card debts, a lender has reason to question your ability to make the monthly payments even after the loan is modified. If you’ve already missed a number of payments, foreclosure could be pending.

Many debtors in this situation consider bankruptcy, loan modification not always being a possibility unless it is supervised as part of a chapter 13 bankruptcy filing. To explain, a loan modification in bankruptcy is always part of the controlled payment plan as overseen by the court-appointed Trustee. It’s important to realize that if you are facing bankruptcy, loan modification as a voluntary decision is a more attractive option for the lender than loan modification in bankruptcy because without interference from the bankruptcy court, the lender can still influence the amount of the modified loan. Foreclosure poses the same probability of financial loss to the lender, so for banks, it is often a last resort.

If a lender suspects you might file for bankruptcy, loan modification could offer him the guarantee of eventual repayment of the monies owed, even if it takes longer for you to pay the debt off. When you file for bankruptcy, all collection actions instigated by a creditor must be stopped by law and the property must be treated as part of the estate that will be liquidated or reorganized in the bankruptcy procedure. Loan modification in bankruptcy proceedings is carefully evaluated before the court approves it. For people who file a chapter 13 bankruptcy, loan modification is something an experienced bankruptcy attorney can advise you on.

For more information about Bankruptcy and Loan Modification please visit:

http://www.cdloanmod.com/chapter-13-bankruptcy-loan-modification/