Loan Mod First or BK Chapter 13

[LenderNoHelp]

Hi all,

My ultimate goal is to do Lien Stripping on the 2nd. At the same time I would like to do a loan mod on the First mortgage to bring down monthly payment. I have met with an Attorney and he calculated my monthly repayment plan to be $450 or so. My question is if I do a loan mod on only the first, it would increase the monthly repayment plan right? In reality there is no sense in doing a loan mod?? I'm confused.

[ShouldWeFile]

If you are (significantly) in arrears on the first, your ch13 repayment could possibly go down if you are able to do a loan mod. The amount that you are currently in arrears on the 1st mortgage is paid back over the ch13 (typically secured creditors are paid first). If you do not need to include this in your ch13 payment plan, it could put a different spin on your situation. The key is patience. Modifications typically take 60-120 days based on what others are reporting.

ie, if you are able to modify the first to where you are brought current on your first mortgage without any financial participation from you (this could be through re-aging the account, or issuing an entirely new note), then there will be no need to include the first in the BK (ch13 or ch7) - basically the first will be current and kept out of the BK.

All the above is mostly irrelevant if you are current (or close to it) on your first mortgage.

To confuse matters more, if I understand correctly, this may not have a significant impact on the monthly amount of your ch13 payments as they will take a similar amount of your disposable income no matter what amount you need to repay - it may simply be at a higher or lower percentage paid back to the unsecured creditors, but the same overall amount and monthly payment (for unsecured creditors only - secured are always paid at 100%, except car loans that are crammed down, which pay 100% of the reduced loan amount).

For me, I am attempting to get my first modified so that I am current and the monthly payment is reduced. At that point I will attempt to file a 7, as I qualify, but was exploring a ch13 simply to get the (19k in arrears) 1st mortgage caught up.

[LenderNoHelp]

How long should I wait to file BK CH.13, I'm 4 months in arrears in CA? I have not received Notice of Default but received Intent to Accelerate. If I understand correctly, once BK is filed automatic stay is in place which freezes any type of modification. Is it worth it to try to do the loan mod first before filing BK? What happens if I wait to file BK?

[ShouldWeFile]

Once the automatic stay is in place it simply freezes any creditor from attempting to collect from you. When you file, you have in theory given up any financial responsibility and ability to make your own financial decisions in exchange for protection from creditors actions.

It's rare, but some have reported modifications during or immediately after BK discharge. It's up to the lender really - but typically once you file (especially a ch13), they loose the motivation to work on the mod, since the court (the trustee technically) will make sure they get paid all of the arrearage, as long as you continue to make the ch13 payments. You must also resume regular mortgage payments, and remain current on your mortgage payments in addition to your ch13 payments during ch13.

I do not know your entire situation, but I would think it would make the most sense to attempt to workout a loan mod with the lender, and once that is in place, and your first payment (or two) on the modified loan have been made, then pursue a BK (likely a 7, if you qualify).

Lastly, if you wait to file BK, your debts simply age more, and some creditors may decide to file suit to try and collect their defaulted balances from you via obtaining a judgment.

I am not sure how Forclosues work in CA, but in my home state (IL), you have 7 months after being served foreclosure papers to redeem the mortgage (redemption can be done via a workout modification also). You need to know the time line in CA for Foreclosure. Perhaps some one can chime in on that.