Mortgage Modification Mediation Program Available for Chapter 13 Debtors in WI

The U.S. Bankruptcy Court for the Eastern District of Wisconsin employed a Mortgage Modification Mediation Program (MMMP) in Wisconsin this spring. Chapter 13 debtors are able to take part in the mediation program and participation is voluntary. The goal of the program is to help debtors who are beginning the bankruptcy process obtain a timely mortgage modification and keep their homes.

Although the participation in MMMP is voluntary, certain criteria must be met in order to be eligible for the program. Namely, an individual must be a Chapter 13 debtor and unable to afford the mortgage payments on his or her primary residence. The debtor must also have a regular income and have a mortgage balance of less than $729,750.

Advantages and Disadvantages to Participation

This new program may have many advantages for a debtor. Unlike many mortgage modification company scams, MMMP is court-sanctioned and many of the pitfalls that unknowing debtors experience with modification companies can be avoided. Additionally, a lender that agrees to enter mediation and fails to do so or enters an agreement and tries to back out can be sanctioned by the Bankruptcy Court. Additional advantages may include:

• Mortgage will be restructured instead of refinanced and may result in a reduced interest rate, principal balance forgiveness or changes to the repayment terms
• Modifications are permanent
• Mediation has a specific time period of 60 days
• Mediation negotiations are privileged communications and cannot be used in court later on

MMMP may have disadvantages to the debtor as well, such as the voluntary nature of the program. Participation is voluntary for both the debtor and the lender, meaning that one party may decide not to take part in the mediation program. The structured program also offers little flexibility regarding due dates and payments during the mediation process. If a payment is late or missed, an Affidavit of Default may be issued and the property may be in foreclosure with little time to object, known as a doomsday provision.

To learn more about the mortgage modification mediation program and whether it would be beneficial for you, speak to an attorney experienced in debt relief matters. If you are facing foreclosure or considering bankruptcy, there are options available to you. The best option will depend on your specific circumstances. An attorney can discuss your situation, answer any questions you may have and help you determine the best path for you and your family.