Loan forbearance: What to do if you cannot pay your loan.

When your loan is reinstated, you have to pay the total for all your missed payments, along with fees and interest. Are you prepared?

Everyone experiences financial hardships at some point in their life. Thankfully, things like loan forbearances can make it possible to postpone payments long enough to regain your footing and get your income in order. But what happens if the forbearance period ends and you still don’t have enough money to cover your loan?  This is a scenario many people are facing in the wake of the pandemic as they struggle to meet upcoming bills. We have the most popular solutions listed below along with the ways that debtors frequently manage forbearance payments!

Loan Reinstatement

When your loan is reinstated, you have to pay the total for all your missed payments, along with fees and interest. Once the outstanding balance is paid off, your loan is then reinstated and you continue to make your regular payments. When you do a loan reinstatement, nothing about your original loan changes.  Understandably, this option can seem daunting and overwhelming for those without a huge sum of money to pay off their outstanding debts. 

Loan Repayment

Unlike the reinstatement, a repayment plan doesn’t require you to cover your missed payments all at once; instead, this plan splits the total up over future monthly payments. This arrangement is more flexible and you can work to choose a plan that is manageable with your current income. Through a repayment plan, you may find that catching up is more doable; however, it does require higher bills for a set period of time and may lead to higher interest rates.

Loan Modification

When you choose to have your loan modified, you will see the entire structure of your mortgage or debt completely change. The debt you were unable to pay is added back to your total and then your payments are revamped. You might see the length of your mortgage extended so that the monthly payments can be cut down to a more manageable amount. 

How COVID Changed Loan Forbearance

If you had to choose to have a mortgage forbearance due to the COVID pandemic, the CARES Act did away with debtors’ ability to charge additional interest because of missed payments.  Likewise, the loan servicer is not allowed to require that all missed payments be made up in one lump sum.

What if You Can’t Manage Payments?

Even with the ease in payment options, thanks to the CARES Act, many people are still finding it challenging to regain their financial footing. Even stretched over a variety of months, issues with unemployment and reduced income can make it impossible to meet monthly bills. If you can’t manage your payments after a forbearance period ends, it maybe time to consider a bankruptcy. Bankruptcy will not only help you to catch up with your mortgage payment but also credit card and student debt that has been neglected throughout the pandemic.

On May 7, Gov. Tom Wolf imposed a four-month moratorium on evictions and amended it later to apply to tenants who have not paid rent and other amounts owed, or who have stayed beyond the lease end date. However, Wolf’s ban on foreclosures and evictions does not cover a tenant who damages property, breaks the law or breaches the lease in some other way aside from nonpayment of rent or overstaying a lease in Mount Laurel. Additionally, it may not be extended past August 31st. 

Mount Laurel residents unable to make payments should contact a local Mount Laurel bankruptcy or Mount Laurel foreclosure lawyer to help them pick the best plan of action for their financial situation. Don’t wait until a foreclosure or default occurs. Act proactively to secure your financial freedom and keep your Mount Laurel residence.

This is a challenging time in our world, but thanks to loan forbearance and financial options such as bankruptcy, you can look forward to a brighter tomorrow.

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Do you still have questions and need more help with bankruptcy, foreclosure, or other debt relief strategies? Use the below form to request a free consultation with the one of our experienced attorneys.