New Jersey Bankruptcy Lawyer - Toll Free: (866) 503-5655 | Local: (856) 797-1500

Certified as a NJ Consumer Law Bankruptcy Attorney by the
American Board of Certification, which is accredited by the American Bar Association

≡ Menu

What is the Real Estate Value Process for Modifying a Mortgage In a New Jersey Bankruptcy Case

Bankruptcy Lawyer Explains Valuation Process For Mortgage Modification In A New Jersey Bankruptcy Case

There are other blogs explaining when and how a mortgage may be modified in a New Jersey bankruptcy case. This blog explains the house valuation and associated issues. A mortgage may be modified in a chapter 13 and not in a chapter 7.

If the value of the debtor’s principal residence is less than the first mortgage payoff, than the second mortgage may be stripped completely from the house. Also, if the value of the debtor’s non-principal real estate value is less than the mortgage payoff, than the debtor may reduce the mortgage to the value of the house. However, under this scenario, any mortgage mortgage that is modified, must be paid, in full, through a 60 month bankruptcy plan. As a result of the difficulty to pay the mortgage’s secured portion within 60 months, such a reduction is extremely unlikely.

The main issue dealing with a bankruptcy mortgage modification is the value of the house. A request to modify a mortgage is initiated by the debtor’s Motion to Avoid or Modify a Mortgage. A valuation of the real estate must be filed with the court, to provide proof of the house’s value. The court will accept a house valuation that is prepared by a licensed New Jersey Real Estate Sales Representative or Broker. This type of valuation is named a Comparative Market Analysis or a Brokers’ Price Opinion. In addition to the valuation, the debtor must also provide a first mortgage payoff or recent mortgage statement reflecting the principal balance. If the debtor provides the proper proof of mailing to the creditor and no response is filed, the motion and request to modify the mortgage will be granted.

However, if the mortgage company or creditor files an objection to the motion, than an expert appraisal will be required. An appraisal by a licensed New Jersey appraiser, is necessary although the cost is substantially more than the sale’s rep. or broker’s valuation. Also, the appraiser should be experienced and available to provide expert witness of the house’s valuation in court. Typically, the mortgage company will provide and file their appraisal with the court. The appraisals may facilitate a settlement or a withdraw of the motion or the objection. If the matter cannot be resolved, the appraisers must testify to the valuation, with the judge making the determination of the final value.

The typical manner in which to value a house is to compare the recent sales’ prices of similar houses in the area of the debtor’s house. The appraiser attempts to obtain houses that are most similar to the debtor’s house. The appraiser will adjust the figures downward or upward depending on the differences between the debtor’s house and the comparable properties and condition of the houses. In other words, if the comparable house has more bedrooms, than the appraiser will make adjustments downward, etc. Also, the appraiser will adjust downward for  the costs of repairs.

You may contact the bankruptcy attorney in NJ., Robert Manchel, at 866 503 5655.

Comments on this entry are closed.