If I file bankruptcy, can I still get a mortgage modification?
Important new regulations issued by the Obama administration say two very important things for people struggling with their debts and trying to save their homes.
First, filing bankruptcy does not affect your eligibility to apply for a mortgage loan mod.
Second, if you are in a trial modification, bankruptcy does not push you out of the trial and back to the end of the line.
Both of those are very good news.
Since the beginning of the crisis, I’ve told people to try to get their mortgage loan modification before we filed the bankruptcy. For some people, that’s been a really long time. (Last week we celebrated that a lady I’ve be working with since the middle of 2008 finally got a mod approved.)
Stalling the other creditors until the modification has been approved hasn’t always been easy. Sometimes it hasn’t been possible. So I’m glad we don’t have to do it any more.
I can also tell you that people who filed bankruptcy to fix their credit card problems back in 2008 are now telling me they are getting approved for modifications. And I have a couple people who filed bankruptcy and moved out at the end of 2009 ask me why Bank of America sending them modification applications at their new address. (They’d rather get some payment then foreclose.)
So how does it add up? If you need a loan modification to save your house, but also need protection from your credit cards or medical bills, it’s safe to file bankruptcy and still apply for the modification.