Companies that lend money like to make as much as possible off of each loan or transaction. It is common for credit card companies to base their operations out of specific states so they can charge the highest interest rates possible, for example.
Lenders often impose fees and charges on their clients that can increase monthly payments and hurt someone already struggling to balance their budget every month. When you can no longer afford your mortgage, you may want to go back to your lender to ask for help. Loan modifications can help people avoid foreclosure, but lenders may not cooperate in early modification efforts.
Filing for Chapter 13 bankruptcy can help those who want to modify their existing mortgage.
Why bankruptcy helps
A lender always has a little bit at risk when negotiating with a borrower, but their trump card is the ability to foreclose on the property. They can reclaim the property and deprive you of years worth of investments in it if you fall behind on the loan.
When you file for bankruptcy, the lender is under more legal pressure to work with you to help keep you at the property. In fact, Florida even facilitates mortgage modification mediation for those who want to keep their home but cannot yet reach an agreement with their lender.
The scrutiny of the courts and the pressure to work with those trying to manage their finances more responsibly can combine to push your lender to work with you. They might agree to reduce your interest rate, lower your monthly payments or increase how long you have to repay the loan.
Modification alone often isn’t enough
If you find yourself struggling to pay your mortgage every month, the chances are good that your home isn’t the issue, but rather other financial obligations. Even if your lender is already amenable to a modification, bankruptcy can still help you keep your home.
When you stop collection activity and discharge the medical debt or credit card bills making it hard for you to pay your mortgage every month, you will have more money at your disposal from each paycheck to spend on what matters the most.
Evaluating all of your options for dealing with your debt, including bankruptcy and loan modification, can help you protect your biggest assets even when your finances aren’t the best.