One way for the distressed homeowner to keep his roof over his head, is to combine the use of HAMP and chapter 13 bankruptcy reorganization. HAMP is used to modify the first mortgage down to 31% of one's gross monthly income and chapter 13 is use to avoid the second mortgage if it is "underwater" and to pay usually only a small dividend to unsecured creditors.
- If one can obtain a HAMP mortgage modification before filing chapter 13, it would usually be preferrable, but otherwise, many mortgage servicers will consider a HAMP mortgage modification request during the chapter 13.
- An "automatic stay" against creditor action is imposed upon the filing of chapter 13 bankruptcy.
- First Mortgage - until the HAMP mortgage modification request is approved or denied, you pay the anticipated HAMP modified payment under your chapter 13 plan to the chapter 13 trustee
- Second Mortgage - in most cases, you are able to stop paying it in a chapter 13 plan as it is avoidable due to being "underwater," the debt is modified to be unsecured
- Unsecured debt, such as credit cards and personal loans - you only usually pay back a percentage of such claims under a chapter 13 plan.
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