Many of the bankruptcy lawyers in Riverside County work with loan modification companies or will provide modification advocacy services because there is a client demand for modification assistance.
I tend to sit the fence on the issue. I’ve said previously that I don’t believe in pressuring clients to do anything they don’t want to do, but I’m not entirely certain that the modification process is always a good thing. For one, you are still getting your credit hit for late payments since it is not a “full” payment—at least during the trial period. It also does nothing for the other bills you must pay. My personal opinion is that Chapter 13 has the potential to do a lot more for you than a simple modification could. Here’s why:
• It forces all of the creditors to the table for a third party arbitration that they must accept
• It provides a fair payment plan that includes your right to eat food, buy gas, and pay for your electric bill
• It gets you out of debt entirely in 3-5 years
It does not behoove your bank or creditors to give you affordable payments. They don’t care that you have a family. They don’t care that the cost of living has increased, or that you have no way of paying them back. They care that you didn’t pay them. Any “plan” or settlement that they could come up with will be in their best interests, not yours. That is, if they even allow you to come up with a payment plan. As a Riverside bankruptcy lawyer I see people who are in home loan modification programs come to me because the modification did nothing to help their situation and want to file for Chapter 13 because
A judge will look at your bills, what you earn, and the cost of living in your area and decide upon the payment schedule and amount. Anything that cannot be paid off in 3-5 years will be discharged. At the same time, your house does not go into foreclosure, your vehicles aren’t repossessed, and your life gets back to a state of relative sanity. My opinion as a Riverside bankruptcy attorney who’s been at this for a while is that Chapter 13 can do everything that a loan modification can do and more. With Chapter 13 you have a judge set the amount that you pay each month and this does not change. With loan modifications you may see your payments increase exponentially. With Chapter 13 you will have all of your debts reorganized. If you just do a home loan modification you aren’t going to get that—and that’s something most people desperately need. As for the credit report and score—either way you are taking a hit, but at least with Chapter 13 you can have everything tied up in 3 years.
If someone asked me which I would recommend to clients (should they ask) I would suggest Chapter 13 over a loan modification for all of these reasons. And that’s the opinion of this humble Riverside bankruptcy attorney.
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