Many people forced to file bankruptcy against unsecured debts are also trying to save their primary residence from foreclosure by negotiating mortgage modification. Many of my clients and callers are very worried that a bankruptcy could mess up their mortgage modification effort. Not true.
In March, 2010, the government issued a Supplemental Directive under HAMP (Home Affordable Modification Program) designed in part to assist and protect bankruptcy debtors. Lenders must considered bankruptcy debtors’s request for mortgage modification, and homeowners in the midst of a trial modification cannot be denied HAMP modification if and when the file bankruptcy. Clients ask me often if they have to reaffirm their mortgage in bankruptcy in order to pursue mortgage modification. The answer is “no.” The HAMP rule provides that Chapter 7 bankruptcy debtors who do not reaffirm their mortgages are equally eligible for mortgage modification. The Chapter 7 debtor can modify his home mortgage without personal liability in the event of subsequent default.
The HAMP directives have other important bankruptcy protections and rule. Discuss your mortgage modification with your bankruptcy attorney.