Loan Mod–Even At the Last Minute, Bankruptcy Worked

This time bankruptcy worked better than I hoped

John and Val filed a Chapter 7 bankruptcy with me in 2004.  A lot of their problem then was medical bills.

John’s health continued to decline.   When they came to see me in 2012, he was disabled.  He was confined to a wheel chair.  And they were back in debt.  No surprise.

But John wanted to “protect his credit” so they decided to do nothing.

After their 2004 bankruptcy, John’s health kept getting worse. No surprise they were in financial trouble again.

They came rushing back this month, December 2014.  They had gotten a trial loan mod–getting them a house payment they could afford

But, they hadn’t been able to make the loan mod trial payments!  Two reasons.  First, they had been taking pay day loans–and a car title loan!  And now were paying those instead of the mortgage!  (Why; well payday loans will call and threaten you, if you don’t pay them.) Second, Val had gotten garnished for back Home Owner Association dues.

So, they were back to the mortgage they couldn’t afford.  They now had a car payment they couldn’t pay.  And Vicky would have a new paycheck garnishment starting in two weeks.

This was a case for Chapter 13

I always look first at Chapter 7, but this was a case for Chapter 13.  I could use Chapter 13 to take the interest on the title loan from 240% down to 5%.  Saving nearly $325 a month. With John on social security disability, that $325 was lot of money.

Second, I thought there was a chance that the bankruptcy judge could undue their “default” on the trial mod payments.  (Force the mortgage company to accept the loan mod trial payments late, and then lock in the modification.)

The husband threatened to leave my office unless I could promise him this would work.  No promise: loan mods are voluntary.  I’ve never tried to force a bank to accept one.  His wife told him, what choice do we have?

Loan Mod Offer Comes in the Mail

Worked better than I hoped.  In less than two weeks, the mortgage company offered them the loan mod again.  Make three trial payments, and we’ll make it permanent. (I didn’t have to try to argue the judge had the power to bring back the defaulted mod.)

Now that Val is not being garnished, and they are not being bled by payday loans, they can make that payment. (And I didn’t have to try my long-shot argument in front of the judge..)

House saved; family saved.

Wew.  No guarantee this would work again.

Even at the last minute, for most people bankruptcy works

These folks would have saved enormous stress–and probably helped John’s health–if they had gone ahead with bankruptcy in 2012.  (They chose “protecting their credit”  instead of protecting their family.) But even at the last minute, for most people, bankruptcy works.