Loan Modification or Chapter 13 Bankruptcy?

by admin on March 7, 2009

Let’s assume for example that you live in a house that is worth $375,000. You have a primary mortgage of $450,000 and a secondary mortgage of $100,000. Should you try to get a loan modification done with your lender or should you file bankruptcy?

The decision to do a loan modification is something you can accomplish yourself or you can seek professional assistance. If your home is really that far underwater, a loan modification might not be enough to help you. One of the key questions you have to answer is your income level. Are you able to make enough money to satisfy your primary and secondary mortgage payments each month, plus have enough money to live on? If you feel comfortable that you can keep making the mortgage payment, then going for a loan modification might be your best option.

If you are in the above scenario and recently lost your job or you aren’t making enough to make your monthly mortgage payments, then a loan modification might not be enough to help you out. You may want to consider filing for bankruptcy – and possibly Chapter 13. If you are considering bankruptcy, many attorneys offer free consultations, so my advice to you would be to seek help and get the facts before you make any major life altering decisions.

If you do end up filing for bankruptcy, depending on the state you live in, you may still have the opportunity to keep your house. Also under the terms of the new Bankruptcy House Bill that just passed, you may be eligible to have a bankruptcy judge modify the principal balance on your primary mortgage, this is a completely new option that will affect many people.

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