Chapter 13 Bankruptcy Mortgage Mediation Seems To Be Working Well

Mortgage mediation in Chapter 13 bankruptcy is turning out to be more effective than mediation ordered in state court foreclosure cases. This, according to a report presented at a local attorneys’ meeting. Mortgage lenders express greater willingness to modify first  mortgages of debtors in Chapter 13 bankruptcy compared to other debtors already facing foreclosure in state court.

The explanations given are common sense. A Chapter 13 bankruptcy debtor eliminates or reduces other debts through bankruptcy which makes it easier to pay the first mortgage and therefore, more likely the modification will succeed. A Chapter 13 permits the debtor to pay only part of his unsecured debts and only part of a second mortgage payment, if any. The debtor pays his other creditors only what he can afford to pay based on current income and expenses. The reduction of all other debts permits the debtor to concentrate on paying his modified first mortgage.

Another explanation for Chapter 13 mortgage modification success is that the foreclosure law firms have only a few attorneys concentrating on bankruptcy mediation because bankruptcy rules make the mortgage mediation procedure more complicated than the standard state court mediation. With few attorneys involved, the mortgage lender’s process and response is relatively consistent and predictable.

Whatever the reason,  mortgage mediation program started in Orlando, Florida, bankruptcy court seems to be working.