Ch 7, 13

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Yes, it can, depending on your financial situation. Mortgage modification programs are primarily designed to help homeowners avoid foreclosure, now and in the future. By modifying your existing mortgage and refinancing your home to make monthly mortgage payments affordable for you (and freeing up money for your other bills), these programs give homeowners a chance to stay in their homes. However, if your mortgage payment is not the only financial hurdle that poses a challenge in paying all your bills, a mortgage modification may not be the answer.

Credit Card Debt, Medical Bills, Consumer Debt

If your credit card debts, or medical bills or any other consumer debt have spun out of control and you no longer can make payments, a mortgage modification will not solve your problem. If your consumer debt is manageable, then a mortgage modification could help avoid bankruptcy. You have to make your calculations on how a monthly mortgage reduction can free up money to pay for other debt.

Student Loans and Taxes

Because student loans and taxes are not discharged in a bankruptcy filing, a mortgage modification could be a big help in freeing up money for these debts. If you are mostly struggling with these bills, a successful mortgage modification can lower your monthly mortgage payments, allowing you to pay off these debts with the extra cash from the mortgage modification.

Since your mortgage is likely your largest debt, a mortgage modification could help ease financial problems overall by lowering your payments each month. Be truthful with yourself when you see the numbers though, if your budget is still going to be tight, it might be better to consider filing bankruptcy and getting a fresh start with a smaller home.