Now that the HAMP (Home Affordable Modification Program) guidelines allow a debtor to pursue a loan modification in Chapter 13, should you? Of course!
This guideline is at it's most useful when 1) modification application is under review and the foreclosure auction date is fast approaching; 2) motion to stay (with the new and improved mediation option) has been denied.
However, Ch. 13 is a bit premature when the foreclosure has just been filed. A foreclosure can be stopped by filing Ch. 13 at any time before the auction hammer hits, so there is plenty of time to explore other options - modification, mediation, deed in lieu, short sale, etc.
Not that you will have much time to relax! You've got things to do: 1) request mediation; 2) file a motion to stay; 3) continue talking with the lender! Perhaps you will be able to avoid BK altogether.
Oh, one more thing... If you want to wait until the last minute to file Ch. 13, PLEASE HIRE AN ATTORNEY. We've seen a few cases when debtors mistakenly filed Ch. 7, failed to get credit counseling prior to filing, never bothered to complete the schedules, etc.
Our commentary on the Maryland foreclosure and bankruptcy law, HAMP guidelines and other issues that affect borrowers and consumers.
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