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Avoiding foreclosure isn't easy -- just ask the owners of the over 2.3 million U.S. properties that had a foreclosure filing in 2008, according to RealtyTrac. But having trouble with your mortgage payment doesn't have to lead to the worst-case scenario of losing money, ruining your credit and being forced out of your home. While just walking away is an option, taking a few preventative steps can help you avoid some of the worst consequences of foreclosure.
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6 possible do's when foreclosure looms: |
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1. Sell the property: If you can find a buyer before the house is auctioned, you can sell it and keep whatever equity still exists.
This is easier said than done in the current crowded marketplace, but there are still plenty of things you can do to make your property more appealing to potential buyers.
2. Work out a deal: Your lender may be willing to work with you, rather than lose money at a foreclosure sale.
This is especially true now that the government is engineering set criteria for adjusting interest rate, loan term and principal down to levels struggling homeowners can afford through the Making Home Affordable program.
3. File Chapter 7 bankruptcy: If you can't get caught up in time, you will not be able to keep the house -- but you'll generally be able to delay the foreclosure sale a month or even several months. Any remaining debt to the lender will be wiped out.
4. File Chapter 13 bankruptcy: If you can afford to make the future mortgage payments and the delinquent payments, too, file Chapter 13 bankruptcy. This is different than Chapter 7, in which assets are liquidated but debts are wiped clean. With Chapter 13, you keep your assets and, under court supervision, you repay your debts under a three-to-five-year plan.
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