Pittsfield, MA -- (SBWIRE) -- 11/29/2012 -- Many homeowners that are trying to get loan modification to avoid bankruptcy are being told by their lenders that they do not qualify for a voluntary modification due to the fact that their debt-to-income ratio is too high. This means that one owes too much in other debts aside from the mortgage, such as personal loans or credit cards, to be able to afford the new, lowered payment. Basically, the lenders are blaming one’s current debt load for refusing to allow one to keep his home and going forth with the foreclosure process. However, if one does file personal bankruptcy, it may not actually harm his chances of getting the loan modification he needs.
It is possible for people to obtain loan modification while in bankruptcy, as long as it is a Chapter 13 bankruptcy. Chapter 13 is known as the reorganization bankruptcy because it allows an individual to develop a financial plan that makes it less difficult for him to repay what he owes while staying current with his other responsibilities. This plan can span up to a 5-year time span, during which period he can apply for a mortgage loan modification. During a Chapter 13 bankruptcy, the court appoints a trustee to whom a person makes payments each month. The trustee then distributes the money to his creditors. While making these court-ordered payments, if he keeps up on his regular mortgage payments, he may qualify for a loan modification.
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At this point, it would be wise of the person to look into government-sponsored loan plans, such as HAMP (home affordable modification program), a plan developed by the Obama administration to help folks who are at risk of defaulting or already in default on their mortgages. An individual can obtain a loan modification after a bankruptcy through this program. The bankruptcy trustee, with the debtor’s consent, applies for loan modification on the debtor’s behalf. Once the modification is approved, there are three-month check-ins with the court and if the debtor is holding up his end of the Chapter 13 bankruptcy and the loan modification, his overall situation improves. Please remember that the HAMP plan and other loan modification scenarios are only able to work for those in Chapter 13 bankruptcy, not those in Chapter 7.
http://www.Credit-yogi.com, an online marketing company located in Pittsfield, Massachusetts, had more information about loan modification and bankruptcy, and someone is always available to share it with folks who need it.