What is Loan Modification Through Bankruptcy? Effective April 1, 2013, the Southern District of Florida (Broward, Miami-Dade, and Palm Beach counties) has implemented a brand new program called Loss Mitigation Mediation (LMM). Among other things, this program is designed to function as a loan modification through bankruptcy. The goal of this program is to facilitate exchange of information through confidential means and encourage the parties to engage a mutually beneficial agreement with the supervision of the bankruptcy court.

Under the LMM program, a debtor may modify the terms of an existing mortgage, request a principal reduction, or surrender/short sale properties.  All these options are available to debtors in a Chapter 7Chapter 11, Chapter 12, and Chapter 13 bankruptcy.

Debtors who file a new case have to submit a motion to request the bankruptcy court to refer their case to the LMM program within 45 days of filing, and debtors who have already filed for bankruptcy, but has not received an order of discharge can do so before September 1, 2013. Before submission, debtors would have to have completed the modification package with a designated vendor already and all necessary materials must be provided to the debtors’ attorney. When the motion is granted by the bankruptcy court, the designated mediation will then contact the lender to schedule a mediation conference, where the lender will render a decision on whether to agree or deny the modification. If the lender denies the modification due to lack of documentation or proof/support, the debtor will be granted a one time continuance to provide sufficient information to the lender.

Prior to the mediation conference, the debtor will have to make a payment of at least 31% of his/her gross income as an adequate protection payment for the property. After the mediation is completed and an agreement reached, the 31% payment will be replaced with a trial payment. When all trial payments are completed, the modification will be considered finalized pending confirmation of the court.

Contact Kristy Qiu, Esq., a knowledgeable Fort Lauderdale Bankruptcy Attorney at (954)-282-8296 to discuss any questions you may have regarding a loan modification (LMM) though a bankruptcy.