January 31, 2010
If you are lucky enough to get your mortgage company to offer a meaningful modification of your mortgage while you are in a Chapter 13, you probably can get the Trustee and the Court to agree to allow it. There are a number of issues, however, that need to be addressed.
Before modifying your mortgage you will need to inform your attorney that your mortgage company is willing to entertain a modification. You will also need to present your attorney with the details of the proposed modification. Your attorney will then get the needed permission from the Trustee and/or the Court.
One of the concerns the Trustee and Court may have is how the modification will affect the amount of disposable income you have each month. If the modified mortgage decreases your regular
monthly mortgage payment, the Trustee is likely to want you to fund in the difference to your Chapter 13 plan.
Another issue is present if you were paying pre-petition mortgage arrears in your Chapter 13, and the modified mortgage removed the arrears from the plan. Without a modification of your Chapter 13 plan, the dividend to the unsecured creditors will increase. This is not necessarily a bad thing; however, it may not be necessary. If you can show that your other expenses have increased since you filed your bankruptcy, you may be able to modify your chapter 13 plan in a way that will lower your monthly payments.
If you are thinking about modifying your mortgage while you are in a Chapter 13 bankruptcy, be sure to discuss this matter with your bankruptcy attorney.