Lenders today will often initiate the foreclosure process on a house after a borrower misses just one or two house payments. When a lender begins this process, the homeowner must work hard and fast if he or she wants to prevent losing the home to the bank, and there are two main ways to do this, (other than paying off all the arrearage in full). One option is through bankruptcy, and the other option is through a loan modification. Here are several differences between these two methods of stopping a house from foreclosure.
A loan modification offers permanent changes to loan terms
One big difference with a loan modification and bankruptcy is the way each option changes the terms of the mortgage loan you have. Both can stop a person from losing a home to foreclosure, but a bankruptcy offers only a temporary change of terms for a loan. In a Chapter 13 case, you must repay the loan payments through a repayment plan, and you will likely pay more each month for your house payment simply because you have arrearage to catch up on.
With a loan modification, you will get a brand-new set of terms for your loan, and these terms will be permanent. The terms that can change include the principal balance you owe, the interest rate, and the length of the loan. When it is approved, you will have a new house payment amount and most likely a lower balance owed for the house, plus you will get to keep your home as long as you follow the new terms.
Bankruptcy affects your entire life
The other difference is that bankruptcy affects your entire life. It will affect every payment you make as well as your credit. A loan modification, on the other hand, is something that will only affect your mortgage, and the good news is that it will make your mortgage more affordable for you to repay. This is a huge advantage for a person who is not struggling financially in other ways but needs help saving his or her home.
Both options require the help of an attorney
While some people are able to successfully file and use a loan modification without a lawyer or file for bankruptcy without one, both options are much better and easier if you do use a lawyer. If you are interested in learning more about getting a loan modification, you should contact a law firm that offers these services. Contact a company like Ellen K Lawson Attorney at Law PLC in order to learn more.Share