Chicago Bankruptcy Lawyers Explain Why Chapter 13 Can Be More Effective Than Loan Modification

Now that the government is offering a financial incentive for lenders to perform loan modifications, you should be less likely to face foreclosure, right?

Don't hold your breath.

Turns out that the $75 billion Making Home Affordable program forgot one important thing - banks are in it for the money. And in this case, the $1,000 the Obama administration is offering for each modification has proven paltry compared to what banks can pull in by keeping you delinquent, according to this New York Times story.

Even if you've completely stopped making house payments, lenders know they can more than recoup their money. In fact, it's actually more lucrative for them to keep you on the brink of foreclosure than it is to have you current. See, many big banks also own or have a stake in title and insurance companies. So as the bank gets closer to taking your house, they actually make money off foreclosure preparation steps, like title searches, appraisal, insurance or legal filings.

And when they eventually sell your home, they get reimbursed for this process. So they can actually get paid twice. Sneaky, huh?

My point is not that loan modifications never work - it's just that they aren't always the best option for everyone. Sure, some folks have been successful. But many who apply for modification get sent on a wild goose chase by their mortgage company - paperwork gets lost, incorrect phone numbers are given, the same mistakes are made again and again - basically, the mortgage company does anything to avoid modification so they can get a bigger payoff.

Banks are big businesses, meaning they're always going to choose their bottom line over yours. When you're headed for foreclosure, do you want to trust the mortgage company who stands to make a profit off your misfortune? Or would you rather find a program that favors you?

If you prefer the latter, consider Chapter 13 bankruptcy. Unlike modification, bankruptcy is your constitutional right as a U.S. citizen. From the moment you file, you're legally protected from foreclosure and other creditor actions. And at DebtStoppers, you can find out if a bankruptcy plan is right for you - plus get tips on managing your finances in tough economic times - all for absolutely free when you sign up for our complimentary one-on-one debt analysis. So you can keep your house - and beat big banks at their own game.

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