Wasted Income

My Dear Wifey and I are in desparate need of Chapter 7 Bankruptcy relief. We currently have everything in order to submit a petition. We have a house, that we intend to keep, that is financed via a 5 year ARM. Our mortgage servicer is AHMSI. This note is scheduled to reset October of 2010. As of today, all of our accounts, (revolving, installment, and mortgage), are current. We live in Michigan. My DW and I both work. I am currently capped at 32 hours per week. Wifey is limited to 10 to 12 hours per week and may very well have her position eliminated altogether. Given our current income, the mortgage payment is just shy of 31% of our gross. We have been in contact with AHMSI and will be submitting paperwork the first part of this next week in hope of some type of loan modification or restructure. Ideally, I would like to refinance with a local cu. Unfortunately, home values in our county have suffered a 34% decline in value which puts us roughly $13,000 under water. I would like to emphasize here again that we are in much need of Bankruptcy relief due to our revolving accounts eating up our paychecks, savings, and etc. This is absolutely the last month in which we can remain current with all of our accounts. My questions: By filing Bankruptcy, are we going to eliminate ourselves from any consideration for a loan modification or restructure? Would I be in better shape, (for a loan mod), if we defaulted on the cc’s and waited to file our Bankruptcy petition, knowing full well that a Bankruptcy is imminent? All the while, staying current with the installment loans and mortgage? Would a Bankruptcy be considered a “good thing†as showing true hardship? Currently, our mortgage payment is just shy of 31% of our gross. This figure will change drastically if/when wifey is downsized and the mortgage resets. We are being proactive. We fully anticipate our mortgage payment to become larger than we can afford. Will these circumstances generally be taken into consideration, or will we already have to be in a position of not being able to pay our mortgage? Should we be concentrating our efforts for a loan mod/restructure with the Making Home Affordable program through our government as opposed to working with our mortgage servicer? The online calculator for the Making Home Affordable program states that we appear to be eligible for a loan modification or refinancing under the MHS guidelines. My DW and I have learned a lot from these boards and would greatly appreciate any advice given. Thank you.