Dear Bankruptcy Adviser,
I have been in Chapter 13 bankruptcy since 2010. I have been paying $330 each month for a car, taxes and a lawyer. I have not paid any payments on our house since March 2010. I have applied for a mortgage loan modification four times. I hired an attorney to help with the last modification, but that didn't help. Can I go through my bankruptcy court to get a loan reduction or modification? My lender will not respond to other efforts at keeping my home. My husband became disabled in 2010. I do not want to lose this home. Any information or encouragement would be appreciated.
I can try to give a bit of encouragement, but I don't have much great news other than you can continue to apply for loan modifications. At the time of this publication, you have not made a mortgage payment in nearly three years. That is not uncommon these days, but still quite remarkable that the lender has not taken your house out of bankruptcy protection and continued with the foreclosure. That alone is very encouraging.
About three years ago, at the height of the mortgage crisis, there was a push to give judges power to force lenders into loan modifications or loan principal reductions. Attorneys and judges made a plea to state and federal legislatures to give bankruptcy judges power to force the lender to modify loans and/or reduce mortgage balances to the current fair market value.
Nothing changed. Bankruptcy judges were not given the power to require the lender to modify a loan or reduce loan principal.
In some states, attorneys are filing lawsuits against lenders claiming that the loan paperwork is faulty or the homeowner is the victim of a predatory loan. I know that many homeowners have been given loan modifications as a result of this litigation, but I don't know whether a modification is a common result of this course of action or if this is just another way for the homeowner to delay a foreclosure or eviction from the property.
At this point, it appears that you can apply for another loan modification. You tried working with the lender on your own three times, and each time you were denied. Then, you hired an independent attorney or law firm and received the same result.
I don't know of any statistics that show whether you have a higher likelihood of success working with an attorney or handling it yourself. But I do know that the process is just about accumulating documents and submitting to the lender a complete and thorough loan modification application. You are being lied to if someone tells you he or she has a "special relationship" or an "inside contact" with the bank.
There is no magic to the loan modification process. It is purely a paper campaign -- one in which you are given specific instructions and the bank follows specific guidelines. Failure to submit all the paperwork can easily result in the loan modification denial.
Here is what you need to say every day: "Patience is a virtue, but persistence to the point of success is a blessing."
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