Before Filing Bankruptcy, Should You Try a Loan Modification?

 Posted on December 12, 2025 in Bankruptcy

The state of Texas moves quickly on foreclosures, leaving homeowners much less time to react than they might expect. If you are behind on your mortgage payments and it feels like bankruptcy could be the only path to saving your home, it is worth your time to first consider a loan modification.

To be clear, not every homeowner can benefit from a loan modification, and if you have a significant amount of non-secured debt in addition to your mortgage, bankruptcy could be the better option. A Fort Bend County, TX loan modification attorney can help you determine what is best for your specific circumstances.

What Is a Mortgage Loan Modification?

A mortgage loan modification is a permanent change to the terms of the existing mortgage. Loan modifications are meant to help homeowners avoid foreclosure by making payments more affordable. This can be done in a number of ways, including:

• A reduction in the interest rate or a switch from an adjustable rate to a fixed-rate loan
• An extension in the loan term, extending the repayment period, and lowering monthly payments (while also increasing the total interest paid over the life of the loan).

• A reduction in the principal balance owed
• A deferment of some of the unpaid principal to be repaid later
• Adding missed payments to the total loan balance to bring the loan current

Is a Mortgage Loan Modification the Same as a Mortgage Refinance?

A mortgage loan modification alters the current loan to prevent foreclosure, while a refinance replaces the old loan with a completely new one. Homeowners who are behind on their mortgage are unlikely to qualify for a refinance loan. To qualify for a mortgage loan modification, financial hardship must be demonstrated.

The lender should be contacted as soon as it is anticipated that there will be difficulty making the mortgage payment. This is because a bad credit score can affect the chances of a mortgage loan modification approval. The process generally requires thorough documentation, including proof of income and expenses.

When is a Loan Modification the Best First Step?

A mortgage loan modification could be the best step if the homeowner has a stable income but needs a lower payment or has had a temporary hardship that has since been resolved. Homeowners who have adjustable-rate or high-interest loans may need recalibration for lower payments and could benefit from a mortgage loan modification. FHA, VA, and USDA loans often have options that offer favorable terms for a modification. Borrowers who want to avoid bankruptcy, whether for emotional reasons or credit score reasons, could benefit from a mortgage loan modification.

When is a Mortgage Loan Modification Not the Best Choice?

If the loan servicer will not confirm that the foreclosure is postponed while the homeowner waits for approval of the modification, then it is likely not an option. If the loan servicer has repeatedly denied a loan modification due to "insufficient income," then bankruptcy may be the better option. When a loan servicer offers a Trial Payment Plan (TPP) with no clear written path to a permanent loan modification, the homeowner should beware.

In the same vein, if there are balloon provisions, an increased principal, an unreasonable loan term, or the foreclosure sale is set within 30 days, the homeowner should definitely discuss the matter with a loan modification attorney. Finally, if the mortgage arrears are too high to cure with a mortgage modification loan, then bankruptcy may be the more reasonable choice.  

Contact a Montgomery County, MD Mortgage Loan Modification Attorney

If you are behind on your mortgage payments, a loan modification may be your first option. And for many, this truly is the best financial path. For others, a loan modification can lead to months of uncertainty as foreclosure proceeds, making bankruptcy a viable option.

A Fort Bend County, TX bankruptcy lawyer from The Fealy Law Firm, PC can review your loan documents, your arrears, your budget, and your situation to determine whether a loan modification, Chapter 13, or Chapter 7 offers the strongest protections. Attorney Fealy is laser-focused on helping good people through tough financial times. To schedule your free consultation, call 713-526-5220.