Lose Benefits of Chapter 13 Bankruptcy With Loan Mods

Lose Benefits of Chapter 13 Bankruptcy With Loan Mods "No one could have predicted what would transpire in late 2007 and 2008, however. A short time later, Congress modified the bankruptcy code to reduce the number of individuals filing for bankruptcy by eliminating those they believed were exploiting the system. Changes to the bankruptcy code included a means test to determine bankruptcy eligibility, as well as a pre-bankruptcy credit counseling course and a post-bankruptcy financial management course. Initially, it appeared to be effective, as the number of individuals filing for bankruptcy decreased. And while all of this was occurring, the credit markets were inundated with mountains of subprime debt. After the real estate bubble fell, the American economy declined. Millions of Americans were underwater on their mortgages, buried in credit card debt, and earned too much to apply for bankruptcy. That's when bankruptcy attorneys began to utilize the true benefits of Chapter 13 bankruptcy in inventive ways.After the financial crisis, the government devised loan modification programs to assist Americans saddled with subprime mortgages. Unfortunately, this did not work, and only about 5% of those who applied for a loan modification received one. Many of these individuals ultimately lost their homes to foreclosure because they fell so far behind in complying with the new loan modification rules. People were now underwater on their mortgage or had lost their home to foreclosure, and they were mired under a mountain of credit card debt. After attempting to do it their way, they were left with no choice but to file for bankruptcy. The bankruptcy attorney was then contacted as a last resort. Those who did not qualify for Chapter 7 bankruptcy would be offered Chapter 13 as an alternative by the bankruptcy attorney.The majority of people were unaware that Chapter 13 bankruptcy was almost tailor-made for this circumstance. Many bankruptcy attorneys realized that the second and third trust deeds were technically no longer secured by anything and should be dischargeable at the conclusion of a Chapter 13 bankruptcy. In Chapter 13 bankruptcy, the debtor and their bankruptcy attorney are required to present the bankruptcy court with a feasible repayment plan that will last between three and five years. In this plan, secured obligations are paid first, followed by unsecured debts, which receive any remaining funds. The bankruptcy attorney would file a motion with the court to reclassify as unsecured the debt that was no longer secured by the property due to depreciation. Since it is unsecured, it would receive whatever remnants remain at the conclusion of the Chapter 13 repayment plan, and the remainder would be discharged. There was an error for the few individuals who received a loan modification. If the first trust deed was reduced below the property's value, the second could not be discharged and would have to be paid in full. Even if the property had no value whatsoever, the loan would still be secured by it. All of this can be perplexing, so anyone in this situation should seek the counsel of a bankruptcy attorney to determine their best course of action.
" - https://www.affordablecebu.com/