The New Loss Mitigation Mediation (LMM) Program

Pursuant to Administrative Order 13-01, the Bankruptcy Court for the Southern District of Florida has implemented a "Loss Mitigation Mediation" (LMM) program. The goal of LMM is to "facilitate communication and exchange of information in a confidential setting and encourage the parties to finalize a feasible and beneficial agreement with the assistance and supervision of the United State Bankruptcy Court." The LMM is generally effective for individual cases filed or reopened or converted to an eligible chapter on or after April 1, 2013. The Court has implemented LMM Program Procedures and Local Forms. In chapter 7 an individual debtor may request LMM to surrender real propery and in chapter 13 an individual debtor may request LMM to modify a mortgage or surrender real property. 

Participation in the LMM program will require use of a secure online LMM Portal and Document Preparation Software that facilitates the preparation of the loan modification package. All communication between the parties is to be sent through the LMM Portal To participate in LMM, an eligible debtor must file within 45 days from the petition date a local form "Attorney-Represented Debtor's Verified Motion for Referral to Loss Mitigation Mediation" and an attached form order, Order of Referral to LMM. Prior to the filing of this motion the debtor's information must be submitted and processed through the Document Preparation Software and Debtor's initial loan modification forms are to be ready for signature and submission. The debtor or the lender may seek LMM. Co-obligors and co-borrowers must participate in the LMM process if requested. The "Consent to Attend and Participate in Loss Mitigation Mediation" is prepared. Within 7 days after entry of the Order of Referral to LMM the Lender will send confirmation that the "Lender's Initial Package" is availabe on the LMM Portal. All parties are required to attend the LMM conference and be authorized to settle all matters requested in the Verified Motion. The parties attending the LMM conference shall be ready, willing, and able to sign a binding settlement agreement at the LMM conference. Additional parties such as co-obligors and co-borrowers must particiate in the LMM. The initial LMM conference is not to exceed one hour.

Certain wording is to be included in a chapter 13 plan where mortgage modification is sought as part of LMM in a chapter 13 case. The plan language provides that while the LMM is pending and until an agreement is reached, the debtor is required to include a post-petition plan payment of no less than 31% of the debtor's gross monthly income as adequate protection. Objection to lender's proof of claim are to be held in abeyance. If a settlement is reached an approved by the Bankruptcy Court, the debtor is to amend or modify the chapter 13 plan to reflect the settlement. If there is a failure to reach a settlement, the debtor is to modify the plan to conform to the Lender's proof of claim or provide for a surrender of the property. The Mediator is to be slected from the Clerk's Register of Mediators. The debtor and the lender are to each pay the Mediator $300.00. 

Chapter 13 Bankruptcy Basics

A Chapter 13 bankruptcy provide consumers with immediate financial benefits. Unlike a Chapter 7 bankruptcy, under a Chapter 13 a debtor restructures their debts. It gives a debtor the ability to repay over a period of 36-60 months (3-5 years), all mortgage arrearages, late fees, escrow shortages, etc. All unsecured creditor debt can usually be negotiated down to a more affordable amount depending on the debtor's individual situation.

The most beneficial part of a Chapter 13 plan is ability to strip off all second mortgages, lines of credit and other liens from your principal residence. You may also be able to reduce student loan payments, wipe out IRS debt, reduce the debt owed on automobiles and significantly reduce principal balances on investment properties, pay off those properties between 36 to 60 months.

In order to strip off a second mortgage from your home, the property's market value must not exceed the amount owed for the first mortgage. As it relates to a debtor's investment properties, under a Chapter 13 plan you are able to strip off any second mortgages or credit lines, and even reduce the principal balance of the first mortgage on each property down to the property's current market value, payable at a low fixed interest rate, and under one affordable monthly payment.

Also, if a property is in foreclosure, once a debtor submits a Chapter 13 plan and stays current on the payments, the lender cannot proceed with a foreclosure of any properties listed in the plan.

As it relates to motor vehicles, if you have been paying your vehicle for more than 920 days then you may be able to cram down the vehicle's current debt down to the vehicle's current market value, payable at a low fixed interest rate, and under one affordable monthly payment between 36-60 months.

If you owe more on your first mortgage than the home is worth and have a second mortgage or line of credit, or if you own financed vehicle or investment properties and owe more than they are worth, then you may be a candidate to file a Chapter 13 bankruptcy.

Chapter 7 Bankruptcy Basics

A Chapter 7 bankruptcy is designed to protect debtors by liquidating most unsecured debt. It also provides debtors with an opportunity to start afresh and take control of their financial future. Under Chapter 7 of the Bankruptcy Code, all non-exempt property of the debtor is sold and the proceeds of the same are distributed to the creditors. In most cases where Chapter 7 is brought into force, however, the debtor has no assets to lose, therefore the fresh start takes place relatively fast.

Chapter 7 bankruptcies are the most common form of bankruptcy filing, and it accounts for as much as 65% of all Consumer Banking filings. This is one of the fastest ways of starting again, and more so if there are no objections from any of the parties involved. Ordinarily, most debts are discharged within months of the attorney filing a bankruptcy petition.

Under Chapter 7 Bankruptcy, the debtor receives a discharge on all dischargeable debts. There are, however, 19 general classes of debt, such as child support, most taxes and student loans that are non-dischargeble.

An added advantage with Chapter 7 bankruptcy is that by signing a reaffirmation agreement a debtor can continue to pay for a car loan or a mortgage on their home. This agreement is in place because, as per the US Bankruptcy Code, a debtor could be allowed to retain some or all of his property.