Loan modifications and debt settlements are often thought of as separate processes without any crossover values when, in fact, coordinating the two activities can have some major advantages. Don and Shannon R. (names changed) are Feldman Law Center clients that recently synchronized their loan modification and debt settlement for maximum results.

Starting 15 years ago with a small investment, Don and Shannon had built their manufacturing business into a huge success. The money allowed Shannon to stay home to raise their six year old son, paid for family vacations, and gave them the opportunity to build their dream home which they planned to live in for the rest of their lives. As the economy began slowing, so did the business for their manufacturing company. Compounding the problem, the interest rate on their mortgage began ticking higher, adding hundreds of dollars to their monthly payment.

Not wanting to lay off employees that had worked for the company since its beginning, Don first cut his salary then, as business continued to slow down, stopped taking his salary altogether. They could live off of their savings for a while, but their monthly overhead as well money owed to their general contractor for the completion of their home would deplete the account within a few months. Needing to tap the equity in their home, they had it appraised in preparation to apply for a home equity line or a second mortgage. The appraisal came back with bad news; there would not be enough equity in the home to get approved for either one.

With no other options, Don and Shannon would have to use credit cards to cover their monthly deficit until business picked up again. There were and handful of sizeable orders that had been pushed back by a quarter or two. If even a couple of the orders came through, Don could catch up on his own back pay and, in turn, pay down the accumulating debt balance on the credit cards they were living on. It would be a matter of a couple months, which they both felt confident about getting through.

Months passed and the orders they were counting on never materialized. Their credit card balances had grown to a point where sustaining payments to their creditors and the mortgage would be impossible. After missing their first mortgage payment, Don and Shannon called The Feldman Law Center to see if they could get their mortgage modified from an adjustable to a fixed with a lower interest rate. At their initial consultation, their financial assessment revealed the challenges they were having with their credit cards in addition to the mortgage. Their consultant, seeing an opportunity to save Don and Shannon thousands of dollars per month suggested that they start their loan modification combined with a debt settlement immediately, to which Don and Shannon agreed.

They initiated the debt settlement process and decreased their payment by a total of 47% immediately. Four and a half months later their loan modification was completed. Here’s a summary of their savings with a combined loan modification and settlement:
* Don and Shannon credit card payments before they started their debt settlement totaled about $3,800 per month. Starting the debt settlement process cut their payment to $2,014, a savings of $1,786 per month. Additionally, they will be credit card debt free 48 months from starting the program.
* Their loan modification with GMAC resulted in their mortgage interest dropping from 7.2% to 4.45%, saving them $1,270 per month for the next five years. Their interest rate becomes adjustable at that point but they will no longer be making credit card payments due to the completion of their debt settlement.
* Their total combined savings from the combination of their loan modification and debt settlement is over $3,000 per month. Their savings over the next five years will total over $150,000

After initiating their loan modification and debt settlement, Don and Shannon were able to sell a part of their business to another manufacturer, saving overhead and allowing Don to resume taking his salary, although at a lower level. Even with his cut in salary their monthly budget covers their payments due to the thousands they saved on their mortgage and credit card payments. They credit The Feldman Law Center, not only for saving them thousands of dollars but with giving them their lives back.