Effective June 1, 2010, new HAMP rule changes will now allow you to apply for a mortgage modification while in an active bankruptcy case. Under existing US Treasury rules, mortgage lenders are not required to consider modifications under the federal government’s Making Home Affordable Program (HAMP) while the homeowner is in an active bankruptcy case; however, these rules are about to change and will prevent lenders from saying no to mortgage modification during bankruptcy cases.

This will make it much easier for homeowners to seek mortgage modification and save their home while adjusting and discharging other debts in one go. The rules also allow the use of schedules filed in the bankruptcy case as a request for modification and other streamlined procedures that will make it easier to communicate with lenders. It also gives the homeowner the added protection of a court order approving loan modifications to prevent future mortgage problems caused by the mortgage company.

In the Orlando Division of the Middle District of Florida, the U.S. Bankruptcy Court has also launched a Mortgage Mediation Program to bring mortgage lenders to the negotiating table and offers penalties against mortgage lenders who refuse to participate. . In most cases, the trial period can be waived by making mortgage payments through a Chapter 13 Trustee.

These new rules make Chapter 13 bankruptcy a much better option for filing for mortgage modification and keeping other creditors at the same time. It can also allow for the “elimination” of second mortgages, reduced car loan payments, and a minimum payment, if any, on unsecured credit card debt. A homeowner who files for Chapter 13 bankruptcy to reorganize can get out of the case with a modified first mortgage, a second mortgage that is gone forever, and otherwise be debt-free upon completion and cancellation of the plan.

Finally, a rule changes to help the American homeowner save his home. Most of the homeowners I meet here in Central Florida need mortgage modification and bankruptcy relief and now the rules will make it easier to get both kinds of relief at the same time. I think this will actually give homeowners a better chance of saving their homes and solving other debt problems through Chapter 13.

For more information on how these new HAMP rules and Bankruptcy Court Mediation in Orlando Bankruptcy Court can help you, please contact Mr. Baker.

By: Richard R. Baker, Esquire
Chair of the Orange County Bar Association Bankruptcy Committee