Will Filing Bankruptcy effect my finaled HAMP loan modification signed by my lender?

[rayraysr]

Hello everyone. I have a loan (HAMP) modification that was finaled and signed by my lender 8 months ago. I have paid it on time (early) since it was completed. I have the final modification papers signed by the lender. I also have several accounts revolving credit accounts that I fell behind on and quit paying because my income was cut and I had to make the decision to pay for my cars and home with what I was making. I also have a HELOC (home equity line of credit second mortgage) which was maxed out and I have not paid that for over a year. The second was with IndyMac and they have not filed any notice of default or any other preceeding because the home is too upside down for them to foreclose. I modified the first and was willing to stay, even though the home is not worth what I owe, for my kids to be able to stay in their home and schools.

Here is the question #1. If I file for a BK now, will the finaled Modification that I have with my first mortgage holder (American Home Mortgage Servicing) be canceled? Or will they honor that if I just keep paying it. It is finaled and I have the paperwork signed by the lender.

Question #2. Which BK should I use? Chapter 13 or Chapter 7? Will my second mortgage (HELOC) be wiped out by a chapter 7 or will they come after the home even though it has no equity and they would have to pay off the first mortgage? Or should I do a Chapter 13 and put the second mortgage into that?

Thanks for any reply's.

[LadyInTheRed]

Welcome to the board.

1. A bankruptcy should not affect the modification, but review the paperwork carefully to make sure there is no clause saying otherwise.

2. In a chapter 7, your personal liability for the 2nd will be discharged, but the lien will remain. So, the 2nd can still foreclose if they want and would likely do so if the value appreciates enough to make it worth while. They also may be willing to negotiate a lump sum payment in exchange for release of the lien after your Chap 7 discharge. Since your house is worth less than the balance on your 1st mortgage, you can "strip" the second in a chapter 13, which will remove the lien when you complete the plan. There are other factors that need to be considered in determining whether a Chap 13 or 7 is best for you. While people here may make recommendations if you provide more complete information on your debt, income and assets, the best way to decide what is best is to go for a few free consultations with experienced bankruptcy lawyers who can advise you based on your unique circumstances.

In addition to consulting with attorneys, I suggest you read all of the stickies in the forums here to help better understand your options and then ask more questions about details you don't understand.

[rayraysr]

Thank you for the precise answer. I will read more of the stickies.