How to Stop a Bank Foreclosure
While there are various ways to prevent foreclosure, there is only one way to stop it once it starts. Unless you can make up your missed mortgage payments in the next few months, you must get a lower payment plan as fast as possible. Your best bet is a loan modification. However, if your lender is not willing to grant a modification (or you are too far in debt to benefit from one) you may choose to file for Chapter 13 bankruptcy.
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Things You'll Need
- Lender's contact information
- Loan number
- Financial documents (such as bank statements and tax returns)
Instructions
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Contact your lender immediately. Ask to speak with the loss mitigation department and tell them you need a loan modification.
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Be persistent. In most cases, a bank would rather negotiate than go through with the costly foreclosure process. However, if you consistently have trouble getting through to your lender (some companies seem to make it intentionally difficult to reach the right person) or find the mortgage company unwilling to work with you, get help. Contact your local HUD office or a legitimate counselor or nonprofit group. They can advise your or contact the lender on your behalf.
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Fill out the loan modification packet from your lender. This will determine what your payments would be after the modification and whether you will be able to afford them. If you are approved for the modification, begin making your new payments. If it's determined that you are too deep in debt for a modification, consider filing for Chapter 13 bankruptcy.
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Before filing for bankruptcy, schedule an appointment with a legitimate credit counselor (see the list of U.S. Department of Justice-approved counselors below). You must receive a certificate of credit counseling to file.
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Hire a bankruptcy lawyer if possible. Bankruptcy is a complex process, and a professional greatly increases your chances of success.
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Determine a realistic repayment plan---ideally with the help of a professional. Fill out a bankruptcy petition with the requested information about your debts, assets, income and other financial details. Include your certificate of credit counseling.
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Go to you nearest bankruptcy court and file the petition along with your repayment plan. Pay the court clerk the required filing fee. At this time, an automatic stay will be granted and the bank foreclosure proceedings and other debt collections will be legally stopped.
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Attend the scheduled meeting of creditors. During the meeting, you will be able to consult with a trustee assigned to your case.
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Start making payments within 30 days from the day you filed.
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Tips & Warnings
Remember to keep up your payments. Bankruptcy will only protect you against creditor claims and foreclosure if you stick to the plan. You might hear about Chapter 7 bankruptcy as an alternative to the debt repayment plan required by Chapter 13. But while Chapter 7 allows you to bypass repayment, it leaves your debts--including your house--subject to liquidation. Chapter 13 is the only kind of bankruptcy that protects your home.
Many companies that claim to stop foreclosure are actually frauds. Check them out with the Better Business Bureau to avoid being scammed. Don't charge purchases or take on more debt before applying for bankruptcy or a loan modification. Doing so could give creditors reason to challenge your case. Try your best to negotiate with your bank before deciding on bankruptcy, as bankruptcy can stay on your credit for up to 10 years after filing. However, it's probably worth the credit blemish if it's your only option.
