How Can Bankruptcy Help?
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Typically when a homeowner files for bankruptcy a lender is temporarily stopped from attempting to collect on missed payments or moving forward with the foreclosure process. A Bankruptcy stops any pending foreclosure or collection actions against the homeowner or Debtor. A bankruptcy filing may even stop the loss of a home up to the day of the sale of the home by the lender. The automatic stay in Bankruptcy is one of the major benefits of filing for protection under bankruptcy as it gives homeowners time to reorganize their debts and explore their loss mitigation options with the lender.
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Bankruptcy helps homeowners address their outstanding debts and gives homeowners a framework to pay back missed payments, modify secure debt on their property, and take other action to reorganize their finances. One of the biggest benefits of applying for a mortgage loan modification while in bankruptcy is that a homeowner can “clean up” their other debt issues; consequently, making their financial situation more appealing to the lender reviewing the application for a loan modification.
Another benefit of applying for a mortgage loan modification in Bankruptcy Court is oversight. While you cannot force a lender to grant you a loan modification; you can make sure that the lender properly reviews the application to make sure they explore all government and internal programs available to see if the homeowner qualifies for a loan modification through any governmental or internal program. The process of trying to obtain a modification through the Bankruptcy Court is called loss mitigation.
Loss mitigation is usually ordered by the Court in an actual Federal Court Order. The Loss Mitigation Order must be followed by the homeowner and the lender. The Order also sets forth dates and deadlines by which certain actions must be fulfilled and taken by both the lender and Debtor. This structure is a great benefit to all parties and it ensures that the parties engage in the process in a timely manner and in good faith.
The homeowner must move before the Bankruptcy Court for authorization to enter into a modification with the lender if and when a lender offers a modification to the Debtor. The Loss Mitigation process grants transparency to all parties involved in the process and further ensures that the homeowner remains in control of his/her home.
What are the differences between the loss mitigation programs in the District of New Jersey and Eastern District of Pennsylvania?
The Law Offices of Mitchell Lee Chambers handles bankruptcies and loan modifications in the District of New Jersey and in the Eastern District of Pennsylvania. However, while the Bankruptcy Code may be uniform; loss mitigation is something fairly new and handled very differently in both jurisdictions.
The District of New Jersey has implemented the use of a Bankruptcy Loss Mitigation Program which will be discussed in significant detail below. The Bankruptcy Court in New Jersey elected to take a very active role in the supervision of the loss mitigation program and implanted a program and process to help debtors and lenders mitigate the foreclosure process and help homeowners avoid the loss of their home.
In contrast, the Bankruptcy Court in the Eastern District of Pennsylvania has not implemented a similar program. The Bankruptcy Court in the Eastern District of Pennsylvania grants the Debtor a reasonable amount of time to mitigate the loss mitigation process; however, the process is mainly handled outside the scope of the Bankruptcy. Consequently, there is little to no supervision of the loss mitigation process itself in the Eastern District of Pennsylvania.
Consequently, it is even more important to hire an attorney that specializes in handling bankruptcies and loan modifications in the Eastern District of Pennsylvania as time is of essence to ensure that the proper documents and forms are submitted to the lender in a timely manner to have any chance of obtaining a loan modification with the lender. While the Bankruptcy Court itself in the Eastern District of Pennsylvania may not oversee the loss mitigation process; other government entities may be overseeing the loss mitigation process outside the Bankruptcy.
This is why homeowners should schedule a free consultation with an experienced bankruptcy attorney in Blackwood New Jersey or Philadelphia to consider their legal options in Bankruptcy in conjunction with an application for a mortgage loan modification.
What is the NJ Loss Mitigation Program?
In recognition of the mounting number of foreclosures on residential and commercial properties in the current unstable economy, the United States Bankruptcy Court for the District of New Jersey adopted a Loss Mitigation Program which became effective in 2011.
The Loss Mitigation Program is designed to function as a forum for debtors and lenders to reach a consensual resolution when a debtor’s residential property is at risk of foreclosure. The program aims to facilitate such a resolution by opening and maintaining the lines of communication between the debtors and lenders.
The Loss Mitigation Program encourages the parties to finalize a feasible and beneficial agreement with the assistance and supervision of the Bankruptcy Court.
Loss mitigation is intended to provide the Debtor or Homeowner with the full list of solutions that may be available to the Debtor. The ultimate goals of the program is to avert the loss of a debtor’s property to foreclosure, increased costs to the lender, or both, and may include loan modification, loan refinance, forbearance, short sale, surrender of the property in full satisfaction, or some combination of these agreements.
Contact the Law Offices of Mitchell Lee Chambers
The filing for “Loss Mitigation” is extremely time-sensitive since a debtor seeking to commence the Loss Mitigation Program must file papers with the Court and the Lender fairly quickly once a Bankruptcy Case is initiated.
The Bankruptcy Court will enter an Order establishing a schedule for Loss Mitigation once the Court reviews the application and grants the lender a reasonable amount of time to object to the application. Therefore, it is extremely important to hire an attorney with the full knowledge and experience necessary to obtain the most favorable result for you.
Contact me for a free consultation to discuss your individual legal situation and what options may be available to you. I can be reached at 856-302-1778 or 1-800-763-9101 to schedule a free consultation.
Consultations are available in person in both my New Jersey and Philadelphia locations. I also offer full consultations over the video conferencing program, ZOOM.