Last June, new guidelines took effect that afforded homeowners greater protection in keeping their homes. The Home Affordable Modification Program (HAMP) now allows homeowners to seek a modification even though they have filed for bankruptcy protection. Prior to this change, the mortgage company could deny the modification if the Chapter 7 debtor did not reaffirm the mortgage debt. This was a common fate for people who had lost their jobs and were unable to make their previous payments. HAMP now gives those seeking bankruptcy a way to stay in their home while making amends. This article will address some common questions about your rights under HAMP while filing bankruptcy.
Can I seek a loan modification if I am filing bankruptcy?
Under HAMP, you may ask your lender for a loan modification even if you have filed bankruptcy. It does not matter if you have an open Chapter 7 or Chapter 13 case. Servicers are required to consider you for a modification, and may request that your attorney or the bankruptcy trustee submit a request.
To apply for a modification, you must submit an "initial package," which normally includes a Request for Modification and Affidavit (RMA), a Tax Authorization Form (form 4506-EZ) and proof of income. If you have already filed bankruptcy, copies of your petition and schedules can be used in lieu of financial documents.
If I have already filed bankruptcy, do I have to go through a trial period?
Normally, people seeking a modification are subject to a trial period before their modification becomes permanent. This may not apply to borrowers seeking bankruptcy protection. For those with open Chapter 13 cases, an attorney or the bankruptcy trustee may request a waiver of the trial period. This is especially important if the trustee has already approved your repayment plan.
May a lender take action against me for filing bankruptcy?
If you are in a trial period, you may not be denied a modification simply because you filed bankruptcy. If you have made trial period payments after filing bankruptcy, a mortgage servicer may not object to your Chapter 13 plan, move for dismissal of your petition because you have made payments, or seek to remove the automatic stay.
If you are considering bankruptcy and are in danger of losing your home, contact an experienced attorney to advise you of your rights and options under HAMP.