QUESTION:
I
was forced to declare bankruptcy last year because
of a layoff. I managed to hold on to my house because
I did not have equity in it. I have a new job at
60% of my previous salary and am having trouble making
ends meet. I would like to negotiate a lower interest
rate with the mortgage holder, but am not eligible
for refinancing because of the bankruptcy. How can
I approach the lender about this? I am assuming that
the bank would rather continue to receive my mortgage
payments than foreclose.
ANSWER:
You
are correct in one assumption: few lenders want to
force a sale or foreclose. But you might not be correct
in your other assumption -- that you can't refinance
because of the bankruptcy.
As
long as the market value of your house hasn't declined
substantially since you bought it, it's still a well
secured investment for your mortgage holder. In addition,
you cannot file for bankruptcy for another six years,
and so although your credit report has the negative
mark of the bankruptcy, you're not as bad a credit
risk as you would think.
The
key for you is to gather documentation showing how
much you can pay each month, verifying your income
and if possible, substantiating your job security
-- such as a letter from your employer attesting
to your excellent performance, likely longevity,
and probable raises. Also, gather up your bankruptcy
papers showing which debts you've discharged, or
other documents that can verify that you have no
other long-term debts. Then call the mortgage holder
and make an appointment with someone in the credit
or loan department. Be upfront. But be positive,
too.
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