How to Stop Foreclosure without Going Bankrupt

One obvious way to avoid a foreclosure is to file for bankruptcy. Many people, however, don’t want to take that route for a variety of reasons. There are other options. Some choices, such as loan modification, refinance loans, and repayment plans, allow you to avoid foreclosure while maintaining possession of your home. If your financial hardship is a long-term one, than it may not be possible to find a affordable solution. In this case, there are options, such as short sales, which would allow you to avoid foreclosure but lose your home.

Difficulty: Moderately Challenging

Instructions

1. Contact your lender and let him know the circumstances surrounding your financial hardship. The sooner you contact your lender, the better off you will be. Not contacting the lender may make him believe you are simply not fulfilling your obligations.

2. Determine if your financial hardship is temporary or long-term. This will help you decide the type of solution you are looking for and whether or not you can afford the house you are living in. For example, if the problem is that you’ve lost your job, then the financial hardship will hopefully only be temporary until you find a new job. However, if the problem is that your spouse, who was the primary money-maker, has passed away without adequate life insurance, then your hardship is going to be long-term.

3. 

   Seek financial counseling. Most areas have local agencies which offer free foreclosure prevention counseling. If you don’t have a local agency, you can contact HUD. HUD provides free foreclosure counseling nationwide.

4. Seek temporary assistance. If your financial hardship is temporary, there are many agencies that can help you cover your housing costs for a month or two. Many states now have low-interest loan programs to help home owners avoid foreclosure.

5. Pursue loan modification or other loss mitigation solutions. Lenders are often willing to work with homeowners who are trying to keep their house. You can pursue a long-term solution such as refinancing, which will pay off your original mortgage and give you a new one. Loan modification will alter one or more essential elements of your mortgage, creating a new more affordable mortgage. A mortgage/foreclosure counselor can explain these to you.

6. If your hardship is long-term and you can no longer afford your house, you should look into a short sale or a deed-in-lieu of foreclosure. Both of these solution have the ability to release you from the obligation of your mortgage while avoiding a foreclosure and bankruptcy. Both, however, have consequences. Be sure to talk them over with a financial counselor before pursuing them.

Tips & Warnings

• Don’t try to figure things out alone. Seek them help of a financial advisor.
• Avoid scams. Don’t pay anyone who promises you she can solve all your financial problems for a fee.

Resources

• HUD