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- 1). Make sure you qualify for a modification under current bankruptcy laws. In most cases, the collateral securing your loan must now be worth less than the balance you owe, and you must have made previous attempts with your lender to restructure the loan. If you're unsure if you qualify, consult with an attorney or speak with your trustee.
- 2). Inform your bankruptcy trustee that you would like to modify your loan. He will either notify your lender of your request or give you the proper documentation to complete and submit yourself. In New York, this is a "notice/request for loss mitigation/mortgage loan modification," but the exact form can vary from state to state. You will probably have to make the overture to your creditor. Most lenders aren't willing to risk violating your automatic bankruptcy stay, which prohibits them from contacting you or doing anything to collect the money you owe them.
- 3). Serve your request on your lender by certified mail, return receipt requested. The lender should get back to you within a reasonable period of time with an alternative to your current loan. Otherwise, it will file an objection or notice with the bankruptcy court, indicating that it is not willing to enter into a modification. If the lender does nothing, give your mail receipt to the trustee, proving that the company received your request. The judge might enter an order requiring your lender to at least exchange documentation with you and negotiate.
- 4). Notify your trustee if your lender offers modified terms that you want to accept. The bankruptcy court must approve your new loan as part of your bankruptcy plan.
- 5). Notify your trustee if your lender refuses to modify your loan. If you're involved in a Chapter 13 plan and trying to modify your mortgage, the bankruptcy judge can now modify your loan to adjust your mortgage payment to a 31 percent debt-to-income ratio. Although your lender can't be forced to take part in the new federal program that allows judges to do this, the government offers attractive incentives to lenders who cooperate.
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