Chapter 13 Bankruptcy
Loan Modification has changed in the last year, and not for the better. A year or two ago, I may have recommended a loan modification for those who are in a temporary situation like a job change or small medical emergency that had adjusted their budget in the short term. But with the latest housing crisis and dismal performance of the loan modification, I’m not sure I would recommend it at all, for any situation. Even the biggest lender in America has only approved 4% of requests – leaving the other 96% to fend for themselves. Typically, you must first fall behind on your mortgage payment to even be eligible for the program. This has led to people purposefully falling behind on their mortgage in order to qualify. Since the waiting line for modification requests is so long, they are often so far behind by the time people are told that they can’t get the mortgage modified that it is impossible to catch up.
On the other hand, Chapter 13 bankruptcy gives homeowners a permanent solution to debt. Despite what it may seem like, many life events are not temporary and are actually the quickest way to find yourself in overwhelming amounts of debt. Even what seems like a small change in your budget could lead you down into the bottomless hole of debt. You may only be able to get out of debt by finding a solution that permanently handles your debt.
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