Stopping foreclosure can be a pain for most. If you’re not sure what to do when it comes to foreclosure, don’t worry – I got your back.
In this article, we will look at how to stop foreclosure. Most people aren’t aware that there are several ways to go about stopping foreclosure and sell your house before it goes to auction. Foreclosure prevention doesn’t have to be a difficult process.
First thing’s first.
Why does foreclosure happen?
There can be several different reasons why someone is unable to meet the financial requirements of their property and it is often involuntary and completely unpredictable, which can bring a lot of stress to the seller.
If you were unexpectedly fired or suffer a medical condition, if you face debt, going through a divorce or relocate to a new state and are in a tough financial situation, foreclosure is bound to happen on your property.
Although voluntary foreclosure doesn’t happen often, some house-owners do simply give up on their property if the value significantly drops – this often happens in small towns or even islands where the tourism is no longer working.
First steps you need to take in stopping foreclosure:
Take a look at the Department of Housing and Urban Development’s Foreclosure Avoidance Counseling list and select a counselor that will be able to assist you free of charge. If you are able to make payments, please do so. If not, talk to your lender and make a repayment plan.
Did you know there are several programs specifically aimed to avoid foreclosure and keep your home? Check out the Making Home Affordable program which offers lower monthly payments on your financial plan.
Ways of stopping foreclosure
So how do you go about stopping foreclosure? Here are 5 different steps that will help you avoid foreclosure.
1. Stay calm.
Before you make any quick decisions, weigh out all your options. Start the research.
2. Contact your lender
Rather than avoiding the situation, contact your lender and come up with a financial plan on how you will be able to do the foreclosure rescue. If you’re aware before hand that your payments might be late, you need to let them know.
3. Workout options
We’re not talking about fitness – your lender can provide you with options that will workout your loan arrangement. From a modification, repayment options, reinstatement, to even claiming bankruptcy, you will be provided with certain options that may work in your favor.
You are able to modify your loan and start with low payments and gradually move on to higher to compensate the difference.
5. Sell your property.
Bankruptcy is one of the most secret ways you can prevent foreclosure. It is often not mentioned in the most basic foreclosure prevention tactics. However, it is by far the best option if everything else fails.
How filing bankruptcy can help?
It delays the foreclosure process by several months, buying you enough time to come up with a financial plan.
Filing Chapter 13 or Chapter 7 bankruptcy enables the automatic stay order. Automatic stay order simply means that your creditors are unable to collect money from you instantly. This is the best way to legally postpone foreclosure as the bankruptcy goes through the pending process for 3 to 4 months.
Please note that this time might be shortened if your creditor takes things to court and is able to proceed the sale. Bankruptcy must also be considered before the notice of foreclosure is given, otherwise the creditor will be able to proceed with the sale.
Chapter 13 vs Chapter 7 bankruptcy
Chapter 7: To qualify for a chapter 7 bankruptcy, you must have very little financial income. Your credit card and medical bill debts will be erased.
Chapter 13: In the case of foreclosure, chapter 13 bankruptcy will usually apply. You will have a certain amount of income and will be able to create a repayment plan with your assets while still keeping your property.
Nolo offers an excellent insight into the Chapter 13 vs Chapter 7 bankruptcy, which includes a simple table to explain the differences.
Other ways for stopping foreclosure
Pre-foreclosure sale, aka short sale.
Pros: You will be able to sell you home and get a sum of money in return.
Con: The value of your property will be significantly lower and your credit score might suffer.
Deed in lieu
Pros: You sell your home to the bank where you took out your mortgage.
Cons: Lower value and the loss of your home.
Not happy with these options? Looking to sell your property? Why not sell to a cash home buyer?
Sell to a cash home buyer
Selling your home to a cash home buyer is becoming a popular way of stopping foreclosure. Not only are you able to sell your home fast – when you call, the offer is usually given within 24 hours and your home, if needed, can be sold in just 2 days.
Pros of selling to a cash home buyer:
- Fast sale
- You get cash in hand
- No need to worry about repairs
- Quick and efficient
Although it is known that cash home buyers are usually able to offer less money than the value of your home, you are going to save money on closing costs ($750+) as well as other expenses which include repairs.
When it comes time to get paid, you should get the option of getting a check or having the money wired into your bank account.