Balking after bite of economic bust understandable reaction

On Behalf of | Aug 12, 2013 | Chapter 13 Bankruptcy |

Over the past five or six years, a lot of people have felt the weight of the economic collapse in their lives. Many in Texas found relief through various channels, including the very legitimate and helpful processes of Chapter 7 or Chapter 13 bankruptcy.

Launching into bankruptcy can be a challenge. The harsh financial realities that lead a person to consider the process can be daunting. The effects are often made worse if the filer succumbs to feelings of unnecessary guilt about their situation. Consulting an experienced attorney is how to avoid such a hurdle.

There is one other thing that has been frustratingly all too common recently; lenders refusing to consider legitimate requests for loan modifications. But some experts say that seems to be changing now. They report that more lenders are starting to offer generous modifications. Indeed, some of the offers sound so good that suffering homeowners question if they aren’t too good to be true.

The Bankruptcy Adviser blog on Fox Business offers up an example. A woman wrote in to say that she is in the final year of a Chapter 13 bankruptcy, a process that she hopes will erase a second mortgage that continues to hold her underwater home down.

With the end of bankruptcy process on the horizon, her lender is now offering to modify her first mortgage to a rate of 2 percent for seven years and a ceiling rate after that of just 4 percent. She wonders if she should take it, and if she does, whether it will harm her bankruptcy case.

Now, every case is different, but taking certain assumptions into account, the advice offered to the reader is to take the modification offer. It seems to make sense. One assumption is that the new rate will mean a lower monthly payment on the main mortgage over the life of the loan.

The important observation is made that the homeowner may have to put any savings realized for now toward the debts under the bankruptcy filing. That’s something that likely should be worked out with the bankruptcy court. But once the time frame of the bankruptcy is over, the lower mortgage rate should be in place for the duration.

Source:, “Should I Take Loan Modification While in Chapter 13?,” Justin Harelik, July 24, 2013