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How can I negotiate with my lender in bankruptcy?
If you file for Chapter 13 bankruptcy, you are allowed to keep your personal assets including your home and car. If you have a mortgage on your property, bankruptcy also puts an automatic stay on your lender foreclosing against you until the bankruptcy is discharged. You should call your lender and let them know you want to keep your home. You can request a mortgage modification for your home under Chapter 13 bankruptcy. While filing Chapter 13 bankruptcy does not guarantee that your lender will give you a mortgage modification, it at least puts pressure on your lender to negotiate with you. Many states have passed laws requiring lenders to work with debtors by giving them a mortgage modification if they want to keep their home. A typical mortgage modification is when your lender lowers your interest rate and extends your loan term adding any arrearages to the back end of the loan. The interest rate is generally temporarily lowered during the 3-5 year court approved repayment plan term that you enter into with your lender. Sometimes, the lender will reduce the principal, but that is rare.
If you are filing bankruptcy, it is recommended that you hire a bankruptcy attorney. The attorney can file your bankruptcy petition, prepare the Chapter 13 reorganization plan for you, and negotiate a mortgage modification with your lender so you can keep your property. Since lenders are difficult to deal with, you have a better chance of getting your lender to agree to the modification if you use an attorney. Also, lenders tend to take mortgage modification requests more serious when you have an attorney representing you. The attorney can negotiate more favorable terms for you than if you attempt to do it yourself.
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