Lender approves loan modification but Chapter 13 to be dismissed soon

[regurrola]

I am currently in a chapter 13, and an motion from the trustee to dismiss will be made on 8/10. The plan has not yet been confirmed. My lender has been authorized by my attorney for loss mitigation to dicuss and process a loan modification. I recieved approval from the investors (fannie mae) for a lower interest rate, and to roll all arrearages into a new loan. However, because I am in a bankruptcy, my lender has to get approval from the trustee. My lender informed me that if my chapter 13 gets dismissed loss mitigation is not an option. Meaning , they cannot go forward with the modificatinon. My ch13 plan payment did not include the mortgage payment, it is being paid apart from the plan payment. Does this make sense. The guy doing the modification sounds like he is just learning his job. He even said that he didn't think it would be a problem to get the modification to the trustee and approved before the 8/10 order of dismissal. My lawyer informed me that it can take weeks for the trustee to even see the request to approve the loan mod, and even longer to approve. Has anyone experienced this and can you please help/direct me?

[SMinGA]

Your attorney is more likely to know how long it will take the trustee to review/approve an order. The loss mitigation person would have no idea.

Why is the ch. 13 being dismissed?

[regurrola]

Back income taxes to be filed, late plan payments, etc. We have already extended twice, so my lawyer will not request another extension. The only reason we are in the bankruptcy was to avoid foreclosure. We have no other debt. We were happy when we found out the we were approved for a loan modification, be it sound like the lender is forcing us to stay in bankruptcy.....this is the part that I'm confused about. What I've been reading in this forum is that most lenders won't even negotiate a modification while in bankruptcy and actually need the automatic stay lifted by either dismissal or temporary dismissal to proceed with the modification. According to the LM representitive, they are requiring the opposite. They are requiring that we stay in the BK to proceed?? I don't know what to do next. The only reason we are in this postion is because I lost my job and was out of work for 3 month. We can now make the payments without a problem, but we do not want to be in the BK...there is no need if the loan is modified.

[SMinGA]

I can only guess - but perhaps the mortgage co is afraid you won't stick to your budget if you're not in the 13? Or it could be this particular LM department is only for BK cases, and if so you could possibly start over again once you dismiss.

Your best course of action perhaps is to stop stalling, do what is needed to stay in the ch. 13 for now at least. Otherwise you may end up losing the house. If you've been given multiple extensions and have not done what is required - its probably obvious to the trustee you are using the bankruptcy to stall and nothing more. Perhaps that is why your atty does not want to keep playing the game. If you actually file the back tax returns - would your atty file for one last extension? Can you catch up on the plan payments?

The modification process will take time, even after the trustee signs off on it. At best 2-3 months. The paperwork has to be signed by you, go back to the lender to be signed and eventually get filed. At that point, you could possibly dismiss voluntarily.

[SMinGA]

For what its worth, here is a summary of my story:

Filed ch. 13 Dec. 09. Arrears on mortgage, pay off 2 financed vehicles, a little to unsecured. 3 weeks later one of the cars dies and the transmission goes out on the other. Transmission was fixable and that car was worth fixing. Other car was not. Used tax refund to fix transmission and a Christmas bonus to get into a quick cash temporary car. Mar. 09 dismissed voluntarily, we were not yet confirmed, due in part due the fact I eventually decided our atty was incompetent for ch. 13 and trustee wanted our refund which we put into transportation.

Decided to try to work out arrears w/ BofA (formerly Countrywide) and get into a more reliable vehicle. Could not get an auto loan due to recently dismissed BK and not enough down $. Started saving aggressively, and BofA started inhouse mod process in April. Got the mod, started making new payment in June. No more arrears, mortgage payment decreased due to lower interest. Mod is now 99% complete, just waiting on our copies of paperwork to return w/ BofA's official approval. Mortgage updated on credit report to no longer showing past due a couple of weeks ago.

Still driving the cash car - doubt it will last too long as I drive 700-750 miles a week. Going to try in a few weeks to buy a used car (2007-2008 Prius, 40-45k miles max, finance under $12k after downpayment). Dealing with occasional collection calls, though not as aggressive as this time a year ago, and will ultimately refile to handle all other debt.

[mrslick]

I think you should stay in the plan until your loan mod is final. My situation is somewhat similar to yours. i'm in ch. 13 right now and i'm 2.5month behind on my mortgage payment. my wife and i had our first child in June which skyrocked our expenses. my wife will not be going back to work full time after her maternity leave is up. right now we're only getting 60% of her monthly pay for the 3 months which reduce our income by $850 monthly. we asked the trustee if we can convert to ch. 7 and she said we need to do a loan mod first. i started the loan mod in June with BofA and i got a letter this week saying that they looking into getting me a HAMP. the letter also said that i have to wait 45 days before i'll received anything else from them. I don't have any money to pay into the plan, last month i had to use money that people gave to my daughter as gift to pay the stupid plan. so i think i'm going to have to request a dismiss the ch.13 then re-apply for ch. 7 right away. i'm afraid BofA will cancel my request once i dismiss my case. Any ideas on what i should do?

Trustees should not be a pay a % of the plan, because they are not doing anything to help the debtors.

[SMinGA]

mrlick-

Once you dismiss, BofA might not speak to you about a mod until they get the account updated regarding status. If you believe your only options are mod OR give up the house-ask specifically about an inhouse mod. The HAMP may be good for some, but from all I've heard: much red tape, trial payments that may go nowhere, etc.

My inhouse process was pretty simple. I faxed all requested paperwork, writing my loan # on each and every page. (Cramp) I had docs to send back to them about 6 weeks later, putting missed interest payments into the principal & reducing my rate. Was 6.95% fixed, now 3.875% for 2 years then 4.375% for 2 years and finally it rests at 4.75%.

Things to be aware of:

1. if/when they send an offer, expect to return it w/ certified funds = 1 month new payment within 7-10 days. They include a FedEx label & envelope. Have $ on hand for the payment... I had to send it back by June 1 w/ a payment, and make my next payment July 1st and regularly after that.

2. they may not fix the escrow account w/ the mod. For mine, they did not. They got around to that last month, I had the option of paying extra escrow for a while or paying a lump sum to balance the account. (Otherwise it would have taken ages for it to balance as I only made 3 payments since my last round of property taxes & insurance were paid.)

While they were processing the inhouse mod, there were no collection activities. I did receive letters that I could make payments, as it would lessen the amount to be added to the principal. I did not - though only one payment came 'due' between requesting the mod and sending in final docs.

If you can get a similar arrangement (temp delay to proceedings) then it would be best to wait til it is all finalized before re-filing BK. Filing before its finalized would stop the process due to the automatic stay...

[mrslick]

Thanks, SMinGA.
My problem is my wife does want to work part time she wants full time. If she goes back full time we will be over the median income by alot. So i need to get everything done by year end. So if i dimiss now i may still be able to do in-house mode with bofa then defile for ch. 7 by november or december.