New York City Bankruptcy Lawyer discusses Loan Modifications

Actually, New York City Bankruptcy Attorney Daniel Gershburg does not discuss loan modifications…but the Wall Street Journal does.  It’s not often you find this kind of content surrounding Loan Modifications in New York City.  The article, which you can find here discusses loan modifications and if they’re a good idea for you.  They go into detail about whether Loan modifications hurt your credit score and even give some advice as to whether or not you should enter into a loan modification or simply walk away and let the house in New York City be foreclosed.  Check out the article.  It will give you a nice break from me ranting about Chapter 7 Bankruptcy in New York City for a few days!

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  • http://chapter13cincinnati.com/about-us/client-testimonials/ Fitzgerald Q. McAuliffe

    There are many different variations of “loan modifications” being used in the market today. The most traditional loan modification is one where the lender changes the terms of the loan to accommodate the borrower. This usually occurs when the borrower is in a financial bind and has defaulted on their loan. The borrower does not have the funds to fix the situation by paying their arrears or they cannot make their current payments due to a financial hardship. The lender then modifies the loan (which is different from a refinance) to accommodate the borrower. A loan modification is discretionary and need not be approved by the banks. The modifications can include a reduction of interest rate, decrease in principal of the loan, or adding any arrears to the principal and extending the loan.

    Generally speaking loan modifications and bankruptcy are like oil and water. The two concepts do not work well together. If a debtor is in the middle of loan modification then any subsequent bankruptcy filing will put a stop to the process until the bankruptcy is finished. Also, if a debtor is in bankruptcy, the bankruptcy court must approve any loan modifications.

    A loan modification and a bankruptcy can co-exist but it requires a lot of extra paperwork and many more hoops to jump through. It is better for a debtor to actually finish one before starting another. Technically speaking, if a debtor does a loan modification and then immediately files for bankruptcy, then the debtor’s transaction may fall into the presumption of abuse. The presumption of abuse is important because if the debtor pulled out money or paid down some balance then the debtor may have to return the money or reverse the transaction. However, most lenders will not cry foul unless the debtor intends to renege on the new deal.

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