Chapter 7 following a HAMP Modification

[faceforward]

Good Afternoon Folks,
I am currently in the process of completing a HAMP Modification on the mortgage secured by my primary residence. I paid the three trial payments and received a call on 9 September from Wachovia/Wells Fargo stating that I had been approved for a permanent loan modification and the paperwork would be mailed shortly. The HAMP mod makes my mortgage payment very affordable and I very much want to keep the house under the terms of the mod. The problem is that I have 50K+ of unsecured debt that I haven't paid on in 5 months, as I was planning for a Chapter 7 filing. I'm concerned that the Chapter 7 filing will void the mod and I'll lose the house, even though I am willing to reaffirm the debt, assuming the terms of the mod could be retained. The customer service employee from Wachovia stated that a filing of bankruptcy would "void the modification, and you would not be able to apply for another one." Does anyone have knowledge of, or experience with a similar situation? any info or advice would be appreciated.
Thanks.

[AlmostAmos]

Once the mod is IN PLACE, you don't have anything to worry about. But, I would NOT file until the mod has been finalized and you have the, signed, papers in hand.

[montana59451]

Absolutely, Positively DO NOT file BK until AFTER the mod is signed, notarized, returned to Wells Fargo, Receipt Confirmed and recorded in your county!

[IBroke]

I have heard of some modification agreements that have a clause in their "fineprint", saying that the mod would be invalid once the borrower files BK. I just don't know if such a clause would be legal because they would take away your right to file BK in some way. Read your final modification agreement very carefully and in case BK is mentioned, show it to your attorney and ask him/her about any legal effects. Other than that, I can only agree to what montana said.

[faceforward]

Thank you for the responses. I received the mod package today via UPS. There is nothing in the modification regarding the consequences of a future BK filing. The modification however does not replace the orig. loan documents, it only modifies them. I guess I need to track down the old loan papers and see how a BK affects the orig. loan. I don't want to push the issue with my lender's BK dept. until the ink is dry on the mod. At any rate it seems mutually beneficial for them to allow me to keep the property post bankruptcy, as they lose less money that way...

[IBroke]

Thank you for the responses. I received the mod package today via UPS. There is nothing in the modification regarding the consequences of a future BK filing. The modification however does not replace the orig. loan documents, it only modifies them....

That's normal. Everything stays in effect with the exemption of the things that are modified. That's the difference between modification and refinancing.

You should be fine then. I guess they used the standard HAMP-form (my mother received the same modification) and that has no BK-clause. Your original mortgage shouldn't include said BK-clause.

[montana59451]

Hamp should not include an no BK clause as the guidelines are written that the investor/servicer are to continue to work with the borrower if they are in an active bankruptcy. I do believe that the way around the BK clause is to Reaffirm. Check out loansafe.org there is a lot of info on there. We personally waited until our in-house mod with B of A was completed (after a 7 month battle with HAMP) before filing BK (which we really needed to do a year ago but needed to save home first). Good Luck

[tcreegan]

Hi all,

Courts have been holding that the BK clause in contracts is not valid and that the act of filing a BK is not a breach of contract, I've seen at least a half dozen cases posted on the forum. Some state laws also back this up. Check w/ an attorney for the situation in your district.

Might be some good news for you, faceforward, I have seen posts on how easy it was to deal with Wells Fargo during a BK. No forced reaffirmation, just continue payments, payments out of escrow the same, terms the same, With the merger of Wachovia and Wells Fargo, hopefully the WF way of doing things will take root!

Tom in Colo