man holding small house with calculator

When you are in bankruptcy, there are certain limitations on what you can and cannot do. As such, if you want to obtain a loan modification on your mortgage, you may think you need to wait until your bankruptcy has finished. However, this is not the case. If you’re in active bankruptcy or considering filing, understanding loan modifications is critical, so you’ll want to keep reading. You’ll discover how an experienced Memphis, TN chapter 13 bankruptcy lawyer can help you through these confusing legal processes.

What Is a Loan Modification?

When you take out a loan like a mortgage, you may need to alter the terms of your agreement to lower your monthly payments if you are unable to repay the loan under the original agreement. Generally, this is done to avoid foreclosure, as it can help you stay on top of payments. However, you may have to extend how many years you are responsible for paying the loan.

Though all loans are eligible for modifications, this is most commonly seen with mortgages. Additionally, this is different from forbearance, which is a short-term solution, or refinancing, which replaces your current mortgage with a new one.

Is It Possible to Secure One During Bankruptcy?

If you are going through Chapter 13 bankruptcy, you may worry that you will be unable to modify the terms of your loan agreement because of this process. However, with permission, you can secure a modification. This is because you cannot obtain a new debt without court approval. Though this is not technically a new debt, it does alter the terms of your loan agreement, meaning the courts must grant permission for this process.

When looking at your modification request, the judge must determine if the new terms of your loan are realistic based on income. If it is, and your request is granted, the court will create a new repayment plan. If your mortgage was the only debt you were repaying during your bankruptcy process, working with an attorney can determine whether or not it’s necessary to continue with your Chapter 13 bankruptcy. However, if you have other debts you’re repaying, it’s likely in your best interest to continue with your bankruptcy process.

What Should I Do if I Need Assistance?

As you can see, there are many considerations you must make regarding this process if you are interested in modifying a loan. Because this process can be overwhelming and challenging to navigate, it’s in your best interest to connect with an experienced attorney to help.

At the Arnold Law Firm, we understand how anxiety-inducing it can be to drown in debt. That’s why our team is ready to assist you through these challenging times. Contact us today to learn how we can help you through bankruptcy and assist with any loan modification issues you may experience.