Many people believe they must give up a great deal of their possessions if they are unable to make payments on loans. However, mortgage modification does provide a financially struggling individual with other options. Mortgages are considered "secure" by lenders. Secured means that the lender gave money to purchase a tangible object for which they can use as collateral if payments cannot be made. Unsecured refers to just the opposite, such as credit card debt. They are also an important part of the bankruptcy process.
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Secured debts and unsecured debts will be treated differently in the bankruptcy process. It will depend on the situation and the type of bankruptcy the individual chooses to file. The value of objects, amount of debt, reasons for debt, and type of bankruptcy will all affect how the debts will be handled. Most commonly, unsecured debts will be discharged. This has helped many people become free of credit card debt that has grown out of control.
There are three main options in dealing with secured debts if you choose bankruptcy as an option. The first is redeeming the debts. This means paying off the current value of the original purchase. For instance, paying the lender for the current amount of a mortgage. This turns into a different kind of loan that be considered "unsecured," as you now fully own the object and it is no longer collateral for the lender.
Reaffirming is another option. It is making continued payments. Surrendering is similar to redeeming. However, it involves an individual selling an object personally, and then whatever debt is left over will become unsecured.
Individuals considering mortgage modification to help them stay in their home may benefit from the help of an experienced mortgage modification attorney.
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