Distressed real estate mortgages and leases may be dealt with in chapter 13 and chapter 11 bankruptcy.

In chapter 13 and chapter 11, real estate mortgage generally fall into three categories:

1. mortgages on principal residences
   
2. mortgages on commercial or residential real estate
3. mortgages that are wholly "underwater"

Mortgages secured only by a principal residence may not be modified, but a debtor is allowed to reinstate the mortgage by paying the arrearages over a three to five year plan.

Mortgages on commercial or residential real estate may be modified. The modifications may include the reduction of the principal balance down to the value of the real estate or a modification of the interest rate.

Mortgages that are wholly "underwater" may be avoided and provided for as unsecured creditors.