How to Stop the Foreclosure Process

Military Couple in Front of House and Foreclosure For Sale Real Estate Sign.

While no one plans to fall behind on their mortgage payments, there can be multiple reasons why a person may fail to make payments, and it’s not necessarily because the person that took the loan borrowed more than they could afford. Situations happen that are out of the control of homeowners such as the lose of a job, a major illness occurring, or just other things that make finances tighter than anticipated.

Falling behind on your mortgage can be embarrassing and can become stressful if you start missing multiple payments. If you are unable to make your mortgage payments for a long enough period, your mortgage lender can begin the foreclosure process and ultimately sell your house to recoup your outstanding mortgage debt.

However, there are several methods that homeowners in financial distress can use to stop foreclosure fast. Some methods require money, while others require agreement to forgo money by the lender or through the court system.

Here’s several steps that you can take to try and stop the foreclosure process.

Attempt to Work With the Lender

If you think that you might miss some monthly payments or have already missed a few, reach out to your lender immediately. While it may seem counter-intuitive, it’s typically in your lender’s best interest to not foreclose on you as it can cause the lender an even larger financial loss to have to take the home back from you and then maintaining the home while looking for a new buyer.

If your financial problems are temporary, either because of unexpected financial bills or because you have been laid off, make your lender aware of the setback, as you are more likely to get a reprieve until you can get back on your feet. It’s possible that they’ll lower your monthly payments temporarily or even freeze your monthly payments.

When figuring out how to lower your monthly payments, there are several options that might be possible. Remember, your lender wants to be paid, so 50% of something is much better than 100% of nothing.

A few possible options including the following:

  • Extending the life of the loan which will result in lower monthly payments for a longer duration of time – this means that you’ll end up paying more for the life of the loan, however it’s better than losing your home.
  • Try getting the interest rate lowered as this can help with making your monthly mortgage payments more manageable while paying the loan within the original time frame.

Starting a dialogue with your lender can open up multiple solutions that will allow you to make your monthly payments before foreclosure becomes the only option.

File for Bankruptcy to Stop the Foreclosure

If you’re already being foreclosed on, you can declare bankruptcy to halt the sale of your home immediately.

Once you start the process of bankruptcy, an automatic stay will immediately go into effect which basically creates an injunction that prevents your mortgage lender from continuing the foreclosure process.

To file for bankruptcy, you have to prove that you qualify for the situation which means that you will need to complete a test, go for pre-bankruptcy credit counseling, as well as fill out various documents.

If you’re filing for bankruptcy, you’ll need to decide between filing chapter 7 and chapter 13 bankruptcy. These bankruptcy declarations have their own rules, specifications and outcomes. Here’s what you need to know as they relate to stopping a foreclosure:

  • Filing for a chapter 13 bankruptcy allow you the possibility of keeping your home by restructuring your debts. When filing for chapter 13 bankruptcy, you agree to a plan to repay your debts (some in part, others in full) over a three to five year period of time. The amount of time you have to repay the debt, as well as the repayment plan itself, will depend on your income as well as the types of debt that you have. Because part of the plan will include repaying any delinquent mortgage payments, you’ll have the option of being able to keep your home as long as you’re able to keep up with the plan.
  • In chapter 7 bankruptcy, you are seeking to have the majority, or possible all, your debts erased by the bankruptcy court. If you are granted this type of relief from your debts, the court can take any property not exempt from collection, including your home, and then sell it so that the funds collected can then be distributed to your creditors. This type of bankruptcy therefore isn’t advised if you actually want to save your home, however it will delay the foreclosure proceedings and give you time to live in the home without making any type of payments for at least a few months.

If you do file for bankruptcy, the lender can, in return, file a motion for relief from the stay which is an attempt by the lender to have the court lift the stay and will allow the mortgage lender to continue with the foreclosure.

If the court does grant the motion and allows the lender to continue with the foreclosure, the process typically takes a month or two which should give you time to explore alternatives to foreclosure with your lender.

 

 

 

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