As top bankruptcy defense attorneys in New York, we know how easy it is to get behind on payments in this economic climate. Regardless of how you ended up in this situation, you deserve financial solutions. Contact us online to schedule a free consultation today.
Despite what some critics say, almost no one agrees to loan terms they know they’ll be unable to afford in the future. Most people expect their income to stay the same, if not increase, with time. Unfortunately, that’s not always the case-especially in a post-Covid economy.
When prospective homeowners meet with their lender to discuss the terms of their loan, they’ll negotiate a recurring monthly payment. For as long as they can afford to maintain their payment schedule, everything is great: They can enjoy the perks of homeownership while building credit over time.
However, when borrowers lose their jobs or encounter unexpected expenses, their financial situation can take a drastic turn for the worse. Their once friendly and helpful lenders are suddenly unsympathetic and cold, eager to remind borrowers that they are more than capable of demanding repayment in full.
If you’ve fallen on hard times and can no longer afford to pay your current loan, you may be feeling scared, hopeless and unsure of your future. Don’t give up on keeping your home before you explore your options with a trusted bankruptcy attorney.
At Jacoby & Jacoby, we specialize in helping hard-working individuals avoid foreclosure through numerous strategies, including loan modification. Keep reading to learn everything you need to know about the loan modification process, its pros and cons and how our law firm may be able to help you keep your home.
What Is Loan Modification?
In simplest terms, a loan modification is an agreement you can make with your lender to change the terms of your current loan to help avoid foreclosure. If you are issued pre-approval for a loan modification your lender will prepare a new payment schedule for you. Examples of ways that a lender can prepare a new payment schedule for you include delaying your adjustable interest rate to a fixed interest rate or the forgiveness of part of the loan balance. However, before you can get locked into your new payment schedule you first need to assure that you even qualify for a loan modification.
Requirements for Eligibility
It’s important to realize that not everyone qualifies for loan modification. To determine whether or not you qualify, you have the option to reach out to your servicer directly. However, you may want to speak with an attorney first to analyze your income and terms of your current loan.
Either way, you will most likely need to meet the following criteria to qualify for loan modification:
- The loan modification must be for your primary residence.
- As a result of financial hardship, you are unable to afford your current payment.
- You generate sufficient income to afford a reasonable mortgage payment.
As you can imagine, your lender isn’t going to take your word for it. You’ll need to demonstrate your financial situation with pieces of evidence like tax returns, bank statements, pay stubs or other types of documentation. You will also need to write a financial hardship statement that explains your circumstances.
Your Rights During Loan Modification
After you submit the pertinent information, your lender or servicer has 30 days to respond to your request for loan modification. Your 30-day period begins as soon as you’ve submitted all of the necessary documentation to your bank.
During the loan modification process, borrowers are entitled to a number of rights, including the following:
- A person assigned by your lender to handle your case
- The contact information, including phone number, of the person assigned to your case
- Access to information pertaining to your mortgage account, including a complete payment history and itemized statement of what you owe
- The knowledge of which mortgage company or bank owns your mortgage
As you can imagine, partnering with someone who can help you navigate this process can be extremely beneficial. However, it is important to note that New York law forbids a company, other than an
attorney, from collecting an upfront payment for their assistance; they can only legally collect a fee after they’ve assisted you in your case.
Is Filing for Bankruptcy a Better Option?
Although loan modification offers a viable option for avoiding foreclosure, it isn’t your only option. If you’re unable to maintain your current repayment schedule, you may also benefit from working with an experienced bankruptcy attorney in New York.
Chapter 13 Bankruptcy vs. Loan Modification
Despite offering numerous potential benefits, loan modification isn’t for everyone-and not everyone qualifies. Luckily, borrowers who are behind in their mortgage payments have another option in the form of Chapter 13 bankruptcy.
If you have a steady source of income, financial problems that are only temporary and are willing to repay some debt in order to keep your home, Chapter 13 bankruptcy may be your best bet. It may allow you to consolidate your payments, avoid fees and penalties and establish a court-approved repayment plan.
Benefits of filing for Chapter 13 bankruptcy include the following:
- The ability to file without being behind on mortgage payments
- A chance to catch up on missed payments, thus avoiding foreclosure
- The ability to use future income to repay creditors and keep your home
- The chance to discharge other types of unsecured debt
Unsure how to proceed? Here’s the good news: Loan modification and Chapter 13 bankruptcy are not mutually exclusive strategies. An experienced Long Island bankruptcy attorney can help you explore the pursuit of both.
Jacoby & Jacoby: Your Advocates in Financially Trying Times
When you’re facing foreclosure, your options can seem limited. You may feel as though everyone is against you or that there’s no way out of your current situation. Luckily, that’s not the case. With help from an experienced bankruptcy attorney in Long Island, you can emerge on the other side of this situation without losing your home.
At Jacoby & Jacoby, we understand that there’s no easy solution to financial troubles. However, there are effective strategies for minimizing your losses and retaining your assets, and we know them. When you’re ready to protect your future, getting started is as simple as contacting us online to schedule a free consultation, or calling our law office at (631) 289-4600.
