Loan Modification In A Chapter 13 Bankruptcy

A loan modification in our bankruptcy court’s chapter 13 program can prevent foreclosure of your home if you unable to pay your mortgage.  A loan modification may be your only chance to save your home.  However, because of rising home values here in the Bay Area, getting a loan modification is more difficult than it used to be.

The first thing that a lender does after receiving a complete loan modification packet application is a “net present value” test.  While this test is complicated and has about 45 inputs, it basically attempts to predict whether the lender would be better off giving you a loan modification or foreclosing.  If you have a lot of equity in your home — in other words, if you would get a lot of money after paying off the mortgage and other liens (if any) after a sale — you will almost certainly fail this test and will not even be analyzed for any of the lender’s loan modification programs.  Lenders each have different standards, but this is the norm in the industry.

It is still possible to get loan modifications and we have gotten them recently.  But most people who come to us for mortgage help now have equity in their property and have a very low chance of getting a loan modification.

If you cannot afford your mortgage but want to save your home, contact a bankruptcy attorney today to ask about whether our court’s loan modification program might still work for you.