It is common that with a pending foreclosure homeowners do nothing as it expects that the mortgage company will give them a loan modification. Everything may well be optimistic but bang: the home is sold at a judicial (sheriff's) sale.
Foreclosures and loan modifications work on different tracks. The train that gets to the station first wins. Often, the Bank will orally suggest that a loan modification is very likely to be approved; but it's a mirage. The mortgage company continues on with their foreclosure action until your home is gone.
Most people don't know you can file a Chapter 13 and still proceed with your loan modification. Many Chapter 13 clients are able to get their loan modified while still in the Chapter 13 case. Because you are in a bankruptcy, the creditor has to stop its foreclosure action and give you time and space to modify the loan. Even filing a Chapter 7 will stay the foreclosure temporarily, and give you a better chance at that loan modification because your budget will improve if you do not owe any other creditors.
CHAPTER 13: Save My Home
AChapter 13 case stops the foreclosure dead in its tracks.
To be eligible you have to have sufficient income to pay your current mortgage, pay some amount to the Chapter 13 trustee to catch up the mortgage arrears, and have enough money to cover your other expenses.
Even if one files a Chapter 7 to get a discharge of debts, homeowners can still apply for a loan modification.
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