Expert: Mark J. Markus- California Bankruptcy Attorney - 10/26/2009

Question
I'm working on setting up a loan mod with Chase - the 2nd trial payment will be this week and the 3rd next month, at which point the loan mod should be finalized. What is the impact if I file a Ch7 BK before the loan mod is finalized?  Will it stop the loan mod process?  I intend to keep the house and make modified payments, but have been advised not to reaffirm.  Would this kill the loan mod?

This was a WaMu Mortgage Plus with a fixed rate mortgage and a small home equity line of credit.  The whole thing showed up on credit reports as a revolving line of credit.  Now with Chase, the whole thing shows up as a home equity. As a home equity owned by Chase, it is not covered by the federal Home affordable plans, so I believe the mod is based on Chase policy.

Answer
There's nothing in the bankruptcy law that would kill the loan mod, but as a practical matter, if you file the Chapter 7 case before it is finalized, it will most likely stop the modification and require you to start over with the process.  Again, this isn't a law, but something the lender would decide.  

http://www.bklaw.com/