One of the reasons many people in Ohio feel good about filing a Chapter 13 bankruptcy is that they get to keep their homes. However, if you are already considerably behind on the mortgage, and the payments are large, it may be difficult to catch up while continuing to make the regular monthly payment. According to SFGate.com, it may be possible to modify the mortgage during the bankruptcy.

Although you are applying for the modification in conjunction with the bankruptcy, it is up to the lender, not the court or the trustee, to approve or deny the request. In order to ensure that all late payments and fees are covered during the bankruptcy repayment period – usually three to five years – a lender may require you to reaffirm the loan. This contract states that if you do not catch up on the delinquent amount by the time the bankruptcy is discharged, the lender may proceed with foreclosure.

An approved mortgage modification will affect your Chapter 13 repayment plan because the lower mortgage payment may result in more discretionary income. You should notify the trustee immediately so that the plan can be adjusted to suit your new financial circumstances. 

If the modification is not approved, or the lender does not process the application in time, you may not be able to make the payments because you do not have enough discretionary income to cover the mortgage payment and the bankruptcy payment. In this case, it may be a good idea to consider converting the Chapter 13 bankruptcy to Chapter 7 so that all the debts – including the delinquent mortgage payments – are discharged. You may be able to keep your home, depending on the amount of equity you have in the home already and whether you qualify for an Ohio homestead exemption.

This general overview of mortgage modifications is provided for educational purposes only, and should not replace the advice of an attorney.