If you're considering bankruptcy and are in or trying to get a mortgage modification, there are a few things you need to know.
- If you file bankruptcy during a trial mortgage modification your mortgage may revert to its original terms. This is not to say that you can't reapply for the modification or work something out with the mortgage company while in bankruptcy. But you should be aware of this possibility while in a trail mortgage modification and filing bankruptcy.
- On the other hand, if you are in a permanent mortgage modification and file bankruptcy, your mortgage will NOT revert back to its original terms. If you file for Chapter 7 bankruptcy , as long as you continue to make timely payments on your mortgage modification, you should be able to keep your home.
- If you are in a permanent mortgage modification and fall behind on your mortgage payments, you may be able to file Chapter 13 bankruptcy and catch up on your payments in the bankruptcy repayment plan. While in Chapter 13 bankruptcy you will need to continue to pay your mortgage under the modification agreement while catching up on delinquent payments.
- If you are applying for a mortgage modification, the mortgage servicer will NOT cancel your application if you file for bankruptcy. You can be in bankruptcy and negotiate a mortgage modification at the same time. Make sure that you work with your bankruptcy attorney so that you know for sure that you are maximizing the benefits of bankruptcy while seeking your mortgage modification.
- For debtors considering bankruptcy, the important issue at hand is to find out if you are in a trial or permanent mortgage modification and if the modification will fit well with your bankruptcy plans.
(source: http://www.bankrate.com/finance/debt/bankruptcy-may-nix-home-loan-modification.aspx )