Law Office of Allan E. Dunaway, PLC

Chapter 13 and mortgage modification

A frequent topic of discussion in relation to mortgage problems and bankruptcy is how bankruptcy may help you obtain a mortgage modification. Because mortgages are not subject to a "cram down," meaning the loan would be reduced to the current value of the underlying property, you have to be able to afford your current mortgage payments for a bankruptcy to be helpful.

The basic scenario is that you have fallen behind in your mortgage payments, and your lender either is refusing to offer a mortgage modification or is dragging their feet in working with you. By filing a Chapter 13, you can prevent the lender from attempting to foreclose on your home, and then use the plan payments to regain your financial stability.

Another benefit of a Chapter 13 is that you can pay any mortgage arrears as part of the plan payments. A Chapter 13 plan can last between three and five years, and by spreading those arrears out over that period may provide you with enough flexibility to be able to afford both your current mortgage payment and your arrears. During your Chapter 13, a lender may be more willing to work with you to obtain a mortgage modification.

You may also be able to reduce some of your unsecured debt by filing a Chapter 13, and this could free up enough money to allow you afford your home. Because a Chapter 13 involves essentially the creation of a budget (your Chapter 13 plan payments) in requires an evaluation of your entire financial circumstance.

A bankruptcy attorney can help you examine your finances and determine if you can assemble a viable Chapter 13 plan. A successful plan can help you keep your home and recover your financial health.

Source:, "Will Bankruptcy Help Mortgage Modification?" Justin Harelik, June 11, 2013

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For sound bankruptcy advice you can count on, from a skilled lawyer who truly cares about your future, contact the Louisville Law Office of Allan E. Dunaway, PLC. We have two convenient locations: Louisville, Kentucky, and Jeffersonville, Indiana. Our main office in Louisville is located off the beaten path so you won't have to deal with downtown traffic and can pull right up to our door and walk right in.

Call us at 502-785-1005, or send an email message. Our law firm welcomes the opportunity to serve you in any way we can.

If for some reason personal bankruptcy is not for you, if you do not qualify for the Chapter 7 approach via the "means test" and Chapter 13 reorganization is not the answer, Allan E. Dunaway works hard to inform you of other appropriate means of debt settlement that suits your unique needs.

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