Pennsylvania Mortgage Relief: Modifications, Arrears, and Chapter 13

Falling behind on a mortgage in Pennsylvania sets a specific sequence in motion, and every stage has an option attached to it. The worst outcomes I see are not caused by the missed payments — they are caused by waiting, because the tools available at month three are far better than the tools available the week of the sheriff sale.

This page lays out the Pennsylvania timeline and the relief that fits each stage: what the servicer can offer, what Act 91 requires, what a modification realistically looks like, and what Chapter 13 does that nothing else can. It is general information about Pennsylvania and federal law, not advice about your specific loan.

Pennsylvania is a judicial-foreclosure state — the lender must sue you in the Court of Common Pleas for the county where the property sits. Roughly, the sequence runs:

• Day 1–45 late: the servicer must attempt live contact and assign continuity of care under federal mortgage-servicing rules (12 C.F.R. § 1024).
• ~60 days late: for most owner-occupied residential mortgages, an Act 91 notice must be sent. It gives you 30 days to meet with a HUD-approved consumer credit counseling agency and opens the door to the Homeowner's Emergency Mortgage Assistance Program (HEMAP) — a Pennsylvania-specific loan program administered by PHFA that can bring a loan current for a borrower with a temporary, involuntary hardship and a realistic recovery.
• 120 days late: the earliest federal law generally allows the first legal filing.
• Complaint filed: you have 20 days to respond. Many counties have a residential mortgage foreclosure diversion program that pauses the case for conciliation conferences — Philadelphia, Allegheny, Dauphin, and others run versions of this.
• Judgment, then sheriff sale: the property is scheduled for sale at the county sheriff's office, typically on a monthly cycle.

The important line is the last one: a Chapter 13 filed at any point before the gavel falls stops the sale.

Every federally backed and most conventional servicers run a loss-mitigation department. Submit a complete application and federal rules restrict the servicer from moving for judgment or sale while a complete application is pending — that protection is real, but only if the package is complete and timely.

The options you are likely to be offered:

• Repayment plan — the arrears are spread over 6 to 12 months on top of your normal payment. Fits a short, resolved hardship.
• Forbearance — payments are paused or reduced temporarily. Understand what happens at the end; a lump-sum reinstatement at the end of forbearance is how many homeowners land in foreclosure anyway.
• Loan modification — the loan terms change permanently: capitalized arrears, a lower rate, a longer term, sometimes a partial-claim second lien for FHA loans. This is the strongest non-bankruptcy outcome.
• Partial claim or deferral — arrears are moved to the back of the loan as a non-interest-bearing balloon. Common for FHA, Fannie, and Freddie loans.

Keep every submission dated, send documents through the servicer's portal, and keep a written log. If the servicer loses the package — which happens often enough that it is a category, not an accident — the log is what fixes it.

A Chapter 13 filing is the only tool that stops a scheduled sheriff sale by operation of law. The automatic stay under 11 U.S.C. § 362 takes effect the moment the case is docketed. I have filed cases the morning of a sale.

From there, 11 U.S.C. § 1322(b)(5) lets you cure the arrears over the life of the plan — three to five years — while you resume the regular monthly payment going forward. The lender does not get to demand a lump sum, and it does not get to refuse the cure. A homeowner $22,000 behind is not asked for $22,000; the arrears become part of a monthly plan payment.

Two additional tools worth knowing:

• Lien stripping on a second mortgage. If your first mortgage balance exceeds the home's value, a wholly unsecured second mortgage or HELOC can be stripped off in Chapter 13 and treated as unsecured debt, discharged at the end of the plan. This is not available in Chapter 7.
• Loss mitigation inside the case. The Pennsylvania bankruptcy courts have loss-mitigation and mortgage-modification procedures that let us pursue a modification with the servicer under court supervision while the plan protects the house in the meantime. You are not choosing between modification and Chapter 13 — you can do both.

Chapter 7 does not cure arrears. It stops a sale temporarily and discharges unsecured debt, which sometimes frees up enough monthly income to make the mortgage affordable again, but it has no mechanism to catch up what you missed.

Sometimes the honest math says the house is not affordable at any structure — the payment exceeds what your income supports, or the arrears plus a plan payment exceed the budget. Saying so early is worth more than a plan that fails in month eight.

The alternatives: a short sale or deed in lieu ends the loan with the servicer's cooperation, and either may leave a deficiency the lender can pursue in Pennsylvania. A Chapter 7 surrender discharges the deficiency entirely, which is often the cleaner exit. A Chapter 13 with surrender lets you stay in the home while the plan runs and gives you a controlled move-out date instead of an eviction after sale.

One caution: forgiven mortgage debt outside bankruptcy can generate a 1099-C and taxable cancellation-of-debt income. Debt discharged in bankruptcy does not.

Foreclosure filings are public record in every Pennsylvania county, and mailers follow within days. Rules to hold to:

• Never pay an upfront fee for a loan modification. Federal rules and Pennsylvania's Act 6 protections make advance-fee modification services improper, and legitimate HUD-approved counseling agencies are free.
• Never sign the deed over to anyone promising to "save" the house and rent it back to you.
• Never stop opening mail from the court. A default judgment removes options that were still available the week before.
• Do not drain a retirement account to reinstate a mortgage you still cannot afford next year. Those funds are exempt in bankruptcy; once withdrawn they are not.

HEMAP through PHFA and HUD-approved housing counselors are free and legitimate starting points. If you want a straight read on which relief actually fits your loan, call (717) 724-7503 for a free consultation.