Dos and Don’ts of Home Loan Modifications

Home Loan Modifications

If you are struggling to make your monthly mortgage payment, you may be considering pursuing a home loan modification. Here are some things you want to be certain to do, as well as some pitfalls to avoid.

Dos

The most important thing to do when investigating the possibility of a home loan modification is to be realistic. Your lender has no legal obligation to change the terms of your loan. They will only give serious thought to doing so if it’s in their best interests, so you’ll have to put yourself in their shoes and try to determine why you should be allowed to modify the loan.

You’ll also want to put together an honest budget before you take any further steps. Look at how much income you have, as well as your other expenses, and be realistic about what you can afford per month. Don’t try to negotiate a modification if you won’t be able to stay current.

Do consider filing a Chapter 13 bankruptcy petition. It may be the best form of home loan modification available. You’ll have the added bonus of the automatic stay in bankruptcy, so that creditors can’t bombard you with calls and letters.

Don’ts

Don’t assume that your modification is permanent—verify it. If your lender agrees to a modification, be careful to clarify that it’s not just a trial modification. A lender will often allow you to amend the terms on an informal basis, but retains the legal right to reinstate the original terms. Keep thorough records of every correspondence between you and the lender, so that you have evidence that the modification is permanent.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

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Debt Collectors Prone to Violation of Bankruptcy Discharge

A bankruptcy discharge releases the debtor from personal liability for most but not all debts. In essence, the debtor is no longer legally required to pay any debts that are discharged. This discharge is permanent. The bankruptcy discharge is a court order that prohibits the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters and personal contacts.

Upon execution of the discharge order, creditors receive a copy of the order of discharge, and are put on notice that they violate the injunction provisions at their own risk. Such violations of the order of discharge are considered contempt of court. The bankruptcy court has the inherent power to punish for such contemptuous conduct [Code sec. 105 (a) and Rule 9020 (b)]. There are many cases that are used as examples that such violations are not to be taken lightly and will not be tolerated

The discharge is the most important right that bankruptcy affords. It has its limitations, as we have discussed in recent blog articles and discuss below. However, we see with some regularity that some creditors whose debts have been discharged still try to collect anyway. One way they do this is to include fine print stipulations written on the backsides of the notices that are sent, or outright collection efforts.

Some debts are “automatically ” exempt from discharge. These debts include most income taxes, all payroll and sales taxes, alimony, child support and other “domestic support obligations”, and most student loans. If you sign an agreement to reaffirm a car loan or other debt during the bankruptcy and the agreement is approved by the court before your discharge, you have given up the protection of a discharge in the only way allowed for such debts. A discharge also does not protect you from most debts that arise after a bankruptcy filing, including condominium, co-op or association fees. Creditors with collateral, such as mortgage holders have the right to pursue foreclosure, repossession or sale of their collateral if the loan is not current. This right does not extend to trying to collect on the personal obligation. See our recent blog articles on this topic.

If you are facing this type of activity, we recommend you document all the contacts and keep all the notices. Recording telephone calls is a good idea, but only if you advise the caller during the recording that you are recording the call. If you think your rights are being violated, the first step is to send a clear notice in writing to stop, and keep a copy. If the collection efforts persist, it is time to call in experienced legal help.

Neuner & Ventura are experienced attorneys who are federally recognized as a debt relief agency. Our attorneys can help protect you against creditor abuse both before and after a bankruptcy. Please contact Nuener & Ventura at (856) 596-2828 for a consultation.

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