The judges in the bankruptcy court in the Eastern District of New York recently adopted a loss mitigation program for real property that individual debtors use as their personal residence. The judges in the bankruptcy court in the Southern District of New York set up a similar program one year earlier.

Loss mitigation can take several forms including: loan modifications, loan refinance, forbearance, short sale, deed in lieu of foreclosure or surrender of the real property in full satisfaction of the debt. The bankruptcy judges believed that the program may avoid the need for bankruptcy litigation and may reduce costs to debtors and secured creditors.

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Loss mitigation can be initiated by the debtor, creditor, or by the bankruptcy court. The bankruptcy court developed a model form in which the debtor or creditor can file with the court. Once the request is made, the debtor or creditor may oppose the request within 14 days. If there is no objection, the court may enter a loss mitigation order. A Chapter 13 debtor may also include a request for loss mitigation within their proposed Chapter 13 plan. If a creditor opposes the loss mitigation, they must file an objection within 21 days or the court may issue a loss mitigation order. If a timely objection is filed, the court will schedule a hearing on the request.

A loss mitigation order will contain the following:

  • The date by which the parties will provide contact information.
  • The date by which each creditor shall initially contact the debtor.
  • The date by which each creditor shall transmit any information requested by the debtor.
  • The date by which the debtor shall transmit any information requested by the creditor.
  • The date by which a written status shall be filed with the court, or the date and time for a status conference with the court. In a Chapter 13 case, the status conference will likely be held at the confirmation hearing. In a Chapter 7 case, the date will likely be seven days after the initial loss mitigation session.
  • The date the loss mitigation process ends

During the loss mitigation period, a creditor may contact the debtor directly and it is presumed that the contact does not violate the automatic stay. In addition, a creditor should not file a motion for relief from stay during this period. A debtor may file a request for loss mitigation after a creditor files a motion for relief from stay. In such case, the creditor may file an objection to the request for loss mitigation. The motion for relief from stay will not be ruled upon until the request for loss mitigation is ruled upon. If the request is granted, the motion for relief from stay will not be heard until the completion of the loss mitigation. If the request is denied, the court will proceed to rule on the motion for relief from stay.

All parties in the loss mitigation process must negotiate in good faith. If a party does not participate in good faith, the court may issue sanctions against the offending party. Loss mitigation sessions may be conducted in person, by telephone, or by video conference. At the end of each session, the parties shall discuss whether to hold further sessions and whether any additional information or documents should be exchanged. Each session must be attended by a person with full settlement authority for each party. If a settlement is reached, the bankruptcy court shall consider the agreement. A debtor is not required to request a dismissal as part of the settlement agreement. The loss mitigation program is not a requirement for a creditor to settle. The program is an avenue for the debtor and creditor to discuss various options. If a creditor is not amenable to a settlement, it can either object to the loss mitigation request or it may listen to the debtor’s offer of settlement, with no requirement to accept any proposal.

The Eastern District of New York bankruptcy court set up the program in order to allow the parties to communicate.


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When you work with a New York bankruptcy lawyer at Jacoby & Jacoby, you have the benefit of our years of experience and our extensive resources, all at your disposal as you face these trying times. The stress and emotions associated with mounting debt may leave you feeling hopeless and lost. Thankfully, with the help of a lawyer at our firm, you can begin to take control of your finances and experience much needed relief.

By discussing your situation with an attorney at our firm, you can decide whether bankruptcy is right for you. You can learn what your options are. When you work with an experienced attorney at Jacoby & Jacoby, you will have the support and legal counsel of a professional who will know what to do to help. Finally, you can experience relief from creditors. You can stop worrying about losing your possessions or your home.

Contact our firm today, and learn more about the many ways that we can come to your aid. Call Jacoby & Jacoby at (888)452-2629.

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