Published On: October 4, 2013

Using Bankruptcy to Save a Home is a Challenge and Must be Done with Careful Planning.

It is also important to have the assistance of an experienced Chapter 13 attorney. WARNING: The default rate for individuals filing their own chapter 13 is more than 98%.

Bully tactics used to scare or coerce buyers.

We have finally seen the total evolution of the mortgage crisis. From 2008 through 2011, lenders were rejecting most or all loan modifications. Clients had to file Chapter 13 bankruptcy to try and save their home and repay delinquent mortgage payments.  The majority could not afford the bankruptcy and regular mortgage payment, so many not only lost their home, but also stained their credit with a bankruptcy notation.

Now, mortgage lenders appear to be easing loan modification requirements.  While I do not have any specific numbers, I can just see the difference on a client-to-client basis.  I am not filing as many Chapter 13 bankruptcies as three or four years ago, and the ones we are filing seem to end early because the lender approves a loan modification.

Beware of clauses in the modification that say you will pay a lump sum on a specific date.

Think about the information you are giving this stranger: all your financial information, your children’s names, bank accounts and your social security number. You do this without the slightest guarantee that the information will be kept safe.

If there is an opportunity to modify the first mortgage – check into it.   Make sure the lender knows you are in bankruptcy.  Determine the exact terms (interest, balloon payments, etc).  Since you will not be inside the Chapter 13 bankruptcy for the rest of your life, this modification will help your monthly cash flow once you complete your case.  That will make your life much easier after bankruptcy.

If the modification appears to be in your best interest then you will need to obtain a court order approving the modification agreement. You may also need to modify your Chapter 13 plan payment. Most loan modifications lower your monthly payment, which will leave additional money in your budget. You will not be able to benefit from that extra money while the Chapter 13 case is still active. The trustee assigned to your Chapter 13 case will want you to use that additional money to pay more to the other creditors, including the second mortgage being eliminated. This is an important step not to ignore as your first mortgage payment may come down significantly after the loan modification.

If you have a second mortgage – A chapter 13 reorganization allows the borrower to strip off their second mortgage so long as the house is worth less than the debt of the first loan.  To completely eliminate that second mortgage the Chapter 13 plan must be completed and the debts discharged. A modification of a mortgage is completely different from a lien strip.

We have several videos on our web site.  Below are a few that might be of interest:

  • “The Chapter 13 Bankruptcy Process”
  • “Lender’s Foreclosure Rights in Arizona”
  • “Should I keep my home or let it go into foreclosure?”
  • “Meet Ms. Drain and Suggestions on How to Hire an Attorney”





Talk to your bankruptcy attorney about the chapter 13 process.  They will be able to explain how the process works and the pitfalls that you much watch for.  If your attorney does not seem to “get it or care” then hire a more experienced attorney.

By |Published On: October 4th, 2013|Last Updated: July 19th, 2022|

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About the Author: Diane Drain

Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.

*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*

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You and Jay are the best attorneys I have ever had or needed and thank God for the Honorable Robert Gottsfield in recommending you folks – I would have never made it through the entire process without you and Jay and God Bless you both always and stay in touch as well. You folks are the BEST OF THE BEST in Arizona.

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I can’t say enough good things about Diane. The way she handled my not typical circumstances was amazing. I was very nervous to start the bankruptcy process but Diane just has a very comforting way of explaining the whole process. My only regret is that I didn’t find Diane sooner. If you find yourself in a financial situation that you can’t correct on your own, please Call Diane Drain as soon as possible.

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Filing for bankruptcy can be a stressful life event, and selecting the right attorney can add to this stress. Diane and Jay were a pleasure to work with, and it is obvious that they are passionate about helping people get their life back on track. I would highly recommend them if you need a bankruptcy attorney.

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