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Seek mortgage modification before filing Chapter 13 bankruptcy petition

by Dorota Trzeciecka on January 11th, 2010

Last week, I attended a brown bag lunch sponsored by the Bankruptcy Bar for the Southern District of Florida.  The panelists included, among others, three bankruptcy Judges and Chapter 13 Trustee.  The consensus among the Judges and the Trustee was that the request for mortgage modification on the debtor’s primary residence should be done before filing of Chapter 13 bankruptcy petition.  The plan terms should state that the debtor is seeking to modify the mortgage.  If the lender does not object to the request for  modification, the court will confirm Chapter 13 Plan subject to modification of the mortgage and status hearing set at a future date.  Meanwhile, the Trustee will be collecting the estimated modified mortgage payments and forward them to the mortgage lender.   The lender’s acceptance of the payments from the Trustee does not bind the mortgage lender to the terms of the plan. 

If the mortgage lender denies the request for modification, it has to give a reason for the denial to the borrower, in writing, pursuant to the Department of Treasury directive SD09-08.  The borrower can then challenge the lender’s calculations.  If you are seeking modification of your first  mortgage on the primary residence, there is probably no better place to be right now than federal bankruptcy court.  You have understanding judges who were ready to go to bat and modify mortgages on primary residences, but whose hands are tied because of Congress’ failure to pass the modification measure.

For more information about mortgage modifications and Chapter 13, please call my office at (305) 439-0464, or e-mail me ar dorota@debtor-creditorlaw.com.