This is an easy one: a loan modification is world’s better.
That being said, I don’t do loan mods. I don’t touch them. If you ask me to help you on your loan mod, I will politely tell you to do it yourself and be persistent in sending in the information to the loss mitigation department of your mortgage company.
The problem is that loan modifications take time, and they are often denied. If you do get a loan modification, if may have a principal reduction, and/or a change in interest rate, and/or hopefully lower payments, and/or your missed payments may be rolled to the back of the loan.
In a chapter 13 bankruptcy, I propose that you catch up on those missed payments over the next 60 months. This means that if you were $24,000 behind on the mortgage, when you file a chapter 13 plan, you’ll have to start making a payment of $600 a month to the chapter 13 trustee in addition to making your regular payment. You can save the house, but it costs more than a loan modification.
To be honest, the only reason you file the 13 is if the loan mod hasn’t worked or hasn’t worked in time. Even after you file the bankruptcy, you can still keep working on your modification, hoping for a miracle.
But in an emergency, like a foreclosure sale next Monday, the bankruptcy is the only way to go.