Finalize Your Modification before Bankruptcy

Foresight is an important skill that every borrower should learn. No matter what kind of loan you enter into, the chance of defaulting is always real, and the ability to foresee whether the possibility that that might happen is high can help you plan ahead and take concrete steps to mitigate your loses.

This is especially true when it comes to mortgages, loan modifications, and filing for bankruptcy. A borrower who is able to project that he might face bankruptcy in the future will be able to request a loan modification and finalize it before filing for bankruptcy.

There are several benefits to this:

1. The terms of a modified mortgage will survive the bankruptcy filing and discharge. This will allow the borrower to survive the Chapter 13 process on a less painful set of mortgage terms or make life after Chapter 7 bankruptcy much easier.
2. The borrower is able to avoid being forced into reaffirming the mortgage—which some lenders demand before agreeing to modify your loan after filing for bankruptcy. This also allows the borrower to avoid any potential deficiency judgments if the situation ends in foreclosure.

Before seeking out a loan modification option from your lender, however, it is always best to consult a foreclosure lawyer who has dealt with modifications in the past. The lawyer should be able to help you understand better the implications of requesting a loan modification before filing for bankruptcy, and to assist you in coming to an informed decision.