Many debtors apply for a loan modification as an alternative to applying for bankruptcy. This is because they may adjust the present loan for their mortgage in a way that better fits their financial situation, without having to go through the extensive and publicly-recorded process of bankruptcy. However, there are other cases in which debtors apply for a loan modification in tandem with a bankruptcy petition. Follow along to find out how to apply for both a loan modification and a Chapter 13 bankruptcy and how a proficient Louisville, Kentucky loan modification lawyer at Schwartz Bankruptcy Law Center can help weigh your options.

Can I apply for both a loan modification and a Chapter 13 bankruptcy?

First off, you may apply for a government or bank loan modification program so that you can receive a lower interest rate, a lower monthly payment agreement, and/or an extended loan term. Ultimately, the purpose of such a modification is so you can work with a payment plan that better aligns with your current financial status. All the while, you may shield your house from a foreclosure lawsuit.

Once you get approved for a loan modification, you may start to consider filing for a Chapter 13 bankruptcy. It may be argued that it is reasonable to apply for both, as it is almost always the case that a mortgage loan is not the only loan repayment that a debtor is behind on. That is, it may be your case that you are also behind on your taxes, child support payments, spousal support payments, or even attorney fees. Well, these types of debts may be incorporated into a Chapter 13 bankruptcy repayment plan, in which you make a three to five-year schedule for paying them off. In other words, this repayment plan can protect your house by helping you bring your past-due mortgage payments current.

Is bankruptcy necessary after this modification?

After you go through the loan modification process, you may wonder if it is necessary to also go through the Chapter 13 bankruptcy process. While applying for both may be beneficial, your ultimate decision should be based on what is reasonable given your unique financial situation. Without further ado, during your initial consultation with your lawyer, you may want to bring up the following questions:

  • Do I qualify for a Chapter 13 bankruptcy to begin with?
  • Do I have a significant amount of dischargeable debt that can be taken away in a Chapter 13 bankruptcy?
  • Do I have other forms of non-dischargeable debt that can be addressed in a Chapter 13 bankruptcy repayment plan?

This is all to say that, before you move further with your loan modification or bankruptcy petition, you must consult a talented Louisville, Kentucky Chapter 13 bankruptcy lawyer. So please reach out to Schwartz Bankruptcy Law Center today.