Failed loan modifications can be fixed in a chapter 13 bankruptcy

free_253899.jpgAs a riverside bankruptcy attorney I have been getting more frequent calls from people who have been trying to work with their lender in getting a loan modification. In order to qualify for a loan modification lenders often tell home owners that they cannot be caught up with their payments. Many homeowners have fallen behind on payments in hopes of getting a loan modification which often don’t ever come to realization. Banks are notorious for stalling on these loan modifications, losing paperwork, having you constantly send in new pay stubs and other qualifiers when it seams like there only motive is to drag this housing crisis out. Inevitably the day comes where the lender lets the client know that there is a notice of foreclosure pending and potentially a trustee sale. Fortunately there is a solution.

Chapter 13 Bankruptcy allows people to put their late payments(arrearages) into a chapter 13 plan and pay off their late payments over a 3 to 5 year period. The filing of a chapter 13 bankruptcy will stop the foreclosure process immediately and give you time to take the full amount that you are behind on your mortgage and pay it back over either 36 or 60 payments depending if you are above or below the median income for your household size. You can also pay pennies on the dollar to your unsecured creditors and discharging all those debts once your plan is complete. In order to qualify for a chapter 13 bankruptcy you will have to have enough disposable income to pay off your arrearages over the payment plan period. This usually means having a current income that pays your average expenses and leaves you with enough money to fund the plan. Don’t let a failed loan modification lead you to believe that you can’t keep your house. Often times bankruptcy is a much better option and you can realize a greater benefit. You can even get rid of a second or third mortgage in bankruptcy if your house is worth less than you owe on the first. Talk to an experience riverside county bankruptcy attorney and know your options before you allow the bank to take your home.

Frequently Asked Questions: Debt Consolidation in California
How does debt consolidation affect credit scores?

Initially, it might cause a slight dip due to credit inquiries. However, consistent payments can improve your credit score over time.

What is the difference between debt consolidation and debt settlement?

Debt consolidation involves taking a new loan to pay off debts, while debt settlement is negotiating to pay less than you owe. Settlement can negatively impact your credit score.

What are secured vs. unsecured debt consolidation loans?

Secured loans require collateral (like a house or car), usually with lower interest rates. Unsecured loans don't require collateral but typically have higher rates.

Is debt consolidation right for me?

It depends on your total debt, interest rates, credit score, and payment capability. It's suitable if you can pay off your debt within five years and secure a lower interest rate than your current debts.

Should I consider long-term financial planning?

Yes, debt consolidation should be part of a broader financial strategy including budgeting, cutting expenses, and building an emergency fund.

How do Chapter 7 and Chapter 13 bankruptcies in California differ?

Chapter 7 involves liquidating assets to pay off debts, while Chapter 13 allows debt restructuring over a set period, usually three to five years.

Can my spouse's bank account be garnished for my debt?

Bankruptcy laws offer protections against such actions, but specifics depend on individual cases and state laws.

How can I learn more about my options?

Consulting a California bankruptcy attorney can provide clarity. Firms like The Law Offices of Christopher Hewitt offer free consultations to explore debt relief paths.

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