Bankruptcy and Loan Modification

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Posted by Manager in Latest Developments on 05/24/2009

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Homeowners in the US have never had it so bad, as currently. The global and domestic economic crisis has indeed hit so many millions of people like a ton of bricks. On one hand, they had taken loans, some of them quite substantial and on the other hand, layoffs had adversely affected their ability to replay loans. This has increased the requirement for bankruptcy and loan modification as so many people are under threat of going down under a mountain of loan woes.

When people are faced with mounting bills to pay and the prospect of reduced earnings, they become faced with the possibility of insolvency and begin to renege on their payment commitments to the bank or the lending institution. This is when the process of bankruptcy and loan modification kicks in, especially when borrowers do not have direct recourse to renegotiation of loans or mortgages. The first resort of people is to approach an attorney to make a pitch for loan modification through a formal loan modification. Loan medication makes an appeal to the lender to either reduce the balance payment in line with the true lower value of the property, increase the tenure or lower the interest rates, so that the borrower can try to make good the payment on the revised terms. This involves presentation of the incomes and expenses statement with documentary proof to the lender, to make a request for revised terms of the loan.

In case the lending institution turns down the appeal for loan modification, the homeowner can go in for filing for bankruptcy under the provisions of US Bankruptcy law. There are provisions under Chapter 7 and Chapter 13 of the bankruptcy law, whereby a borrower can either liquidate assets to pay off debts and e clear within 4 months or else accept a 3- 5 year tenure of financial discipline so as to retain the assets while paying off the debt. In any case, bankruptcy and loan modification are options that one has to consider given the unique conditions and merits of each individual case.

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