Help foreclosure options / mortgage modification?! Please..?

Okay so long story short, my fiance and I separated last year. During that time we really worked out our issues and decided to get back together a few months ago. During the time we was separated he got behind on the mortgage. When the kids and I moved back a few months ago I talked with the mortgage company (JP Morgan Chase.. yuck!) about our options. We did not qualify for a mortgage modification at that time because my fiance made to much money. We decided on a repayment plan. We had to pay $3000 down payment for that which was due in November then $1500 until April then all would be back to normal. So we payed November's $3000 payment. We have Decembers $1500 payment in the bank now, however my fiance got fired (wrongfully) on Monday. We are pursing this with the labor board and have filed for unemployment and are still awaiting a decision on that.

I know that we will not be able to pay the $1500 payment's anymore as he was working 7 days a week and some 12 hour shifts to make the $1500 payments. Now that's not an option anymore. I want to apply for a mortgage modification but I am terrified it will get denied and by that point we will be to far in over our heads to fix this. I do work as a hair stylist but I don't make near enough money to pay the payments. My fiance was at his job for over 6 years and was making very good money there. What should our next step be? Apply for a mortgage modification or make the next payment? I don't want to make the next payment because we will not be able to make January's payment, and it will clear our bank account with very little money now coming in.

My fiance is a hard worker and I have no doubts he will hopefully find a job soon, but I doubt if he find's a job making the same amount of money he has been making for the past few years as it was well paying. The payment is due December 28th. Any suggestions on what to do? I know that our next move is very critical. Thanks for any help.