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Chapter 13 vs Loan Modification

How to Succeed at Saving Your Home

When you get behind in your mortgage, you have options. You first want to know the basics of Chapter 13 vs Loan Modification. If the bank will not work with you at all, then Chapter 13 will be your only route, generally. And, in Southern Ohio, as of October 1, 2020, Chapter 13 vs loan modification just got a new option!

But a loan modification can be better than Chapter 13. And, sometimes we will first do a loan modification, and THEN file Chapter 13, to get the best possible outcome for our clients. Non-bankruptcy options can be combined with Chapter 13 creatively to get your loan modification and protect your home.

Chapter 13 vs loan modification analysis can be tricky. Timing issues make a big difference in your chances for success. If you are actively pursuing a loan modification it’s best to not file any kind of a bankruptcy. The reason for this is that the bank will, upon being notified of your bankruptcy filing, generally stop processing your loan modification, and transfer your loan. The loan might be transferred to a different department, or possibly they will actually sell your loan.

Either way, your loan modification will either fail, or have to be started over. At the very least, it creates significant delay. If you happen to be in a foreclosure at the same time, the delay can be fatal to your effort to keep the house. But, there are still other options. When homeowners come to me with this situations, I have been able to stop the foreclosure with a bankruptcy, and then help my client later obtain a loan modification.

Foreclosure, Chapter 13 and Loan Modification

Many homeowners are confused by their banks filing foreclosure and also sending them invitations to apply for a loan modification. These consumer often believe that if they are pursuing a loan modification that the foreclosure will be put on hold. This makes “common sense” but in the Chapter 13 vs loan modification world, this is not what really happens.

Banks will frequently process foreclosure cases, and also appear to be processing a loan modification application. I say “appear to be” because I’ve seen too many cases where it seems that the bank is attempting to keep the homeowner distracted while the foreclosure proceeds, day by day, towards the inevitable sheriff sale date.

Homeowners have told me, too late, that they were “assured” by the bank that the sale would not be conducted while the loan modification was pending, no need to file Chapter 13. But that turned out not to be true. And, you cannot, in Ohio, “undo” a sale with a chapter 13. To stop the sale, you have to file your Chapter 13 before the sale. This is why doing the Chapter 13 vs Loan Modification analysis is so important.

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How to do Chapter 13 and Loan Modification

The way to succeed when pursuing Chapter 13 and loan modification is to try to get the loan modification done before any sheriff sale is conducted. If you are fortunate, and have enough time, you will complete the loan and the bank actually will cancel the foreclosure sale. You have to be very cautious, your home is on the line. You have an absolute right to stop the sale at any time by filing Chapter 13, but it will halt your loan modification.

Loan Modification in Chapter 13 with a Facilitator

There is a new issue in Chapter 13 vs loan modification. Beginning October 1, 2020, the Southern District of Ohio launched a new program for loan modifications that may tip the scales in favor of homeowners. This new program allows you to request a facilitator, called a mediator in other jurisdictions, to assist in the loan modification process. This may get your loan modification approved where you might be denied if you do it on your own. So Chapter 13 vs loan modification analysis needs to evaluate this new option.

You should realize that the bank has no obligation to offer or approve a loan modification, but you have an absolute right to file Chapter 13, if you qualify. Frequently, I will monitor these loan modifications for my clients, waiting in the wings, with a Chapter 13 ready to file. If we get too close to the sale date, and I see the the foreclosure suit is not withdrawn, I will jump in at the last minute and file the Chapter 13. You can monitor sheriff sales online.

When we do this, we save the house. Then, I’ll get the Chapter 13 approved by the court. After that, we approach the bank, and start the loan modification process all over again. The house is saved from foreclosure, and we still get to attempt to complete a loan modification. This process has been proven to work in many cases.

If you are in danger of foreclosure and thinking of a loan modification, I can walk you through the entire Chapter 13 vs loan modification analysis and advise what you need to watch out for.

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