Lots of clients ask, "Can I modify my mortgage if I file Chapter 13?" Unfortunately the answer is usually "no". While automobile and other secured loans can be modified in Chapter 13, so far the mortgage industry lobbyists have convinced Congress that borrowers should be held to whatever bargain they made when they got their loan, even if their house is worth less than what they owe or if interest rates have dropped way below the rate they got. In most cases all a borrower can do is gain time to catch up any delinquent payments. However, the borrower must make all future payments (those coming due after she filed) when and as they are scheduled.
There are two cases where mortgages can be modified in Chapter 13. The first case is where there are more than one mortgage. The first mortgage cannot be modified, but if the house is worth so little that all or part of the second and subsequent mortgages are more than the value left after the first, those mortgages can be modified or "stripped down", meaning the unsecured portions get treated as unsecured debt.
The second case where a mortgage can be modified is if the bank has other collateral besides the house. For example, suppose the bank took not only a mortgage but also a security interest in a car, or some stock. In that case the mortgage can be modified even if the value of the house exceeds the amount of the mortgage.
