Bankruptcy can stop foreclosure

Loan Modification article written by Columbia, SC attorney Daniel Stone

Many of my clients are hesitant to file for bankruptcy to save their home from foreclosure because they have a pending loan modification that has not been approved. The good news is that with most mortgage lenders, you can file for Chapter 13 bankruptcy and continue working on a loan modification. Why does this matter in the first place? I can’t tell you how many of my clients  have been surprised to learn at the last second that even though they have a loan modification in process, the mortgage lender usually does not stop the foreclosure sales. Some unsuspecting potential clients have seen their homes sold at a foreclosure sale even though they had an active loan modification.

How does the bankruptcy/loan modification work?  Usually, I tell my clients to wait one to two weeks after the bankruptcy filing to contact the mortgage lender. This gives the mortgage company enough time to get the new bankruptcy information in their system. When you call, request to speak to the loan modification department. Most likely they will say they cannot speak to the client due to the bankruptcy filing. Ask for the loan modification department’s fax number so that your attorney can fax them a letter requesting them to contact you directly in regards to the loan modification only. The mortgage lender will not be able to call you for any other reason.

Once the loan modification is tentatively approved, they will need court approval from the United States Bankruptcy Court. I will file a motion with the Court. Hopefully from there you are well on your way to a loan modification! Once it is approved, come see me because we may be able to, in some circumstances, lower your plan payment.

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