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You may be wondering if you apply for a mortgage modification if you have filed for bankruptcy. A mortgage modification house is still available when you file for bankruptcy. You can be considered for modifications under the Making Home Affordable Programs such as The Home Affordable Mortgage Program (HAMP) before, during, or after you file for bankruptcy. If you apply for a modification through these programs while you are in bankruptcy, your servicer may allow you to submit your bankruptcy schedules in place of the lengthy application that is generally required. The bankruptcy court in South Florida has recently implemented its own mortgage mediation program to encourage foreclosure resolution in bankruptcy. Whether you take advantage of the mediation program or pursue your modification outside of the bankruptcy court, your application must still be considered.

How Bankruptcy Can Affect a Modification Application

Bankruptcy may make a modification more affordable if your attempts to modify your mortgage have been hampered by

  • excessive unsecured debt, such as credit card or medical bills,
  • second mortgages or junior liens, or
  • mortgages on rental or investment property that exceed the value of the property.

If you receive a Chapter 7 discharge prior to obtaining your mortgage modification and did not reaffirm your mortgage debt, your mortgage holder is required to consider you for a modification without requiring you to reinstate your personal obligation on the loan. This makes modification less risky because if you ever default, the mortgage holder can take back the property but cannot obtain a deficiency judgment against you for the difference between the amount recovered from the sale of the house and the amount you owe at the time of the foreclosure.

Under the Making Home Affordable Program, you must be considered for a HAMP modification if you or your attorney submits a request while you have an open Chapter 7 or Chapter 13 bankruptcy. Under the program guidelines, your servicer may even accept recently filed bankruptcy schedules in place of a portion of the lengthy application usually required.

If you are already in a trial modification when you file for bankruptcy, your mortgage servicer is required to work with you and your attorney to obtain any trustee or court approvals necessary to complete the modification process. This includes extending the trial period for up to two months to give you time to obtain court approvals. If you are approved for modification during your Chapter 13, under certain circumstances, your servicer may be able to waive the trial period and enter directly into a permanent modification.

If You Have Already Modified Your Mortgage

If you entered into a modification on your homestead property prior to your bankruptcy filing, in most cases, you can continue to make the modification payments and retain your home when you file for bankruptcy.

Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida. For more information, go to our web site or call 727-335-7151.