By: Daniel Stone
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Stopping foreclosure through bankruptcy, loan modifications, or both
Foreclosure article written by South Carolina lawyer Daniel Stone
One of the common questions I receive from clients is whether or not they should continue their loan modification packet or just file Chapter 13 bankruptcy to stop the pending foreclosure? This is a tricky answer for most of my clients. Why? It depends on where they are in the loan modification process and how serious their mortgage lender is about trying to process the modification. Please note that just because you are working on a loan modification with your mortgage lender does not mean that the foreclosure process is in limbo. Most of the time, the foreclosure attorneys are still actively pursuing foreclosure on the home even though you are working on the loan modification with your mortgage lender. I cannot tell you how many potential clients have come to me with a shocked look on their face because they assumed the foreclosure process would stop once they mailed in their loan modification.
What is an alternative plan? Ask the mortgage lender if they can put a moratorium or halt on the foreclosure process while you work on your loan modification. If they say yes, note their name and number and stay in contact with your County Equity Judge to make sure there is no sale date pending on your property. The other alternative is to file Chapter 13 bankruptcy, and then file for a loan modification. This will give you additional time to organize both a successful Chapter 13 plan to deal with your other creditors and to finish your loan modification packet. For some strange reason, I have had clients that were denied loan modifications prior to filing bankruptcy and were later approved after the bankruptcy filing. While I cannot promise similar results for you, it does appear that many of the mortgage lenders are trying hard to get bankruptcy filers to submit loan modification packets. Procedurally, your attorney will most likely have to fax a letter to your mortgage lender after your bankruptcy has been filed giving them permission to deal with you directly in order to complete your loan modification.
Finally, I want to stress that many of the successful loan modification packets that I have seen are from families that are politely calling every other day to check on the status of their loan modification. Many of the unsuccessful packets are from those that send in the loan modification and never make any calls to check on the status. Please note that the mortgage lenders are notorious for losing documents. The clients that are constantly checking on the status of their packets are being rewarded.