Bankruptcy, Debt Relief, and Mortgage Modification

For many Americans, the mortgage payment is the biggest bill they face every month. Unfortunately, that means that when troubling financial times hit, the mortgage is one of the hardest bills to pay. Fortunately, there are several options available to people who are in this position.

Mortgage Modification

If you can’t pay your mortgage one of the first things that you should consider is a mortgage modification. These agreements are made between a borrower and their bank, and are designed to temporarily reduce loan payments. In some cases, a few payments can be skipped and then added to the end of the loan (this usually comes with a small increase in the payment to cover the additional interest that has accrued). In other cases, a mortgage modification can be written to reduce an interest rate for a few months. It’s important to remember that these modifications usually only last a few months, but they are a good solution for people who are experiencing a temporary crisis such as a reduction in work hours. If you are having more long-term issues, you need to consider other options.

Debt Relief

People who are having ongoing issues with repaying their debt need to consider more permanent options. Debt relief can often be a good way to permanently reduce a family’s debt burden. These programs typically look at all aspects of a family’s finances, including credit card debt, student loans, and more. Usually, these loans are reviewed by a debt counselor who will create a new financial plan for the family. This usually involves contacting each creditor and asking for a reduction of the loan balance, interest rate, and other fees, as well as an extended period of time to pay back the debt. In some cases, this can reduce a family’s debt burden by hundreds of dollars a month, giving people who are overwhelmed by their bills some much needed breathing room.

It’s important to research debt relief companies very carefully and ask about their methods. If these loan modifications are not handled correctly, then this process can have a very detrimental effect on your credit score.


If there is simply no way to pay all of the debt that a family has accumulated, then bankruptcy is usually the best option. Typically, bankruptcy is seen as an option of last resort; most applicants have already been through mortgage modification, debt relief programs, credit counseling, and a lot more. All too often, an overwhelming amount of medical debt or a catastrophic loss of income is the reason behind a bankruptcy filing.

It is important to realize, however, that bankruptcy isn’t the end of your financial life. Unlike in years past, today many people are able to qualify for credit cards within months of filing for bankruptcy. Car loans and mortgages can be more difficult to find for people who have gone through the process, but it’s not impossible.