Many of my clients are hesitant to file for bankruptcy to save their home from foreclosure because they have a pending loan modification that has not been approved. The good news is that with most mortgage lenders, you can file for Chapter 13 bankruptcy and continue working on a loan modification. Why does this matter in the first place? I can't tell you how many of my clients  have been surprised to learn at the last second that even though they have a loan modification in process, the mortgage lender usually does not stop the foreclosure sales. Some unsuspecting potential clients have seen their homes sold at a foreclosure sale even though they had an active loan modification.

So how can you prevent the sale of your home if you have a pending foreclosure sale? One option is to file a Chapter 13 bankruptcy. A Chapter 13 bankruptcy will stop the foreclosure sale and allow you to put together a plan to pay back the mortgage arrearages over a 36-60 month period. In addition, after the bankruptcy is filed, you can resume your loan modification packet.

How does the bankruptcy/loan modification work?  Usually, I tell my clients to wait one to two weeks after the bankruptcy filing to contact the mortgage lender. This gives the mortgage company enough time to get the new bankruptcy information in their system. When you call, request to speak to the loan modification department. Most likely they will say they cannot speak to the client due to the bankruptcy filing. Ask for the loan modification department's fax number so that your attorney can fax them a letter requesting them to contact you directly in regards to the loan modification only. The mortgage lender will not be able to call you for any other reason.

When the mortgage lender gets in contact with you, immediatley begin the loan modification packet. After you send in the packet to the mortgage lender, stay in weekly contact with the mortgage lender to see if there are any missing documents that are needed. I often see loan modifications denied because the homeowners fail to stay in contact with the mortgage lender.

Once the loan modification is tentatively approved, they will need court approval from the United States Bankruptcy Court. I will file a motion with the Court. Please note this can take some tieme to get approved depending on how your mortgage lender assits in the process. Hopefully from there you are well on your way to a loan modification! Once it is approved, come see me because we may be able to, in some circumstances, lower your plan payment.

Article written by Columbia lawyer Daniel Stone   danielstonelaw.com