Steps you can take to stop the foreclosure process

Nov 10, 2017 | Bankruptcy

Steps you can take to stop the foreclosure process

If you have received a notice of default after missing a couple of mortgage payments, it does not mean that your house will be foreclosed. You can still take a couple of alternative steps in order to stop the foreclosure process.

When you miss a few of your mortgage payments, your lender will file a Notice of Default. However, that does not mean that all is lost. You can get help from five strategies which you can use in order to stop the foreclosure process. These strategies are listed below:

Foreclosure Workout – If your house has not been scheduled for an auction yet, you can work with your lender to get back on track with your mortgage payments. Many lenders are willing to cooperate and work out a payment plan that suits you and them. This will prevent your home from foreclosure.

Short Sale – If the lender has already filed a Notice of Default, also called an NOD, your house will be put up for auction. However, if you get an offer before the auction is scheduled, your lender must consider that offer. Whenever a house is foreclosed, the lender has no other option than to try and resell it later on. But if an offer has already been made, and it is reasonable, the lender will save their time and effort and will go ahead with the offer that is on the market. This is called a short sale offer and it saves them the trouble of finding a buyer in the market.

So, if you fall behind on your mortgage payments and your home is on the market, you should still continue to aggressively seek a buyer for it. This will allow you to save your home even if it is on the market and the foreclosure process has been initiated.

File for Bankruptcy – If you file for bankruptcy, the foreclosure process will be stopped dead in its tracks. Once bankruptcy is filed, debt collectors as well as mortgage lenders are prohibited from carrying on any collection activities. As soon as the lender becomes aware of the bankruptcy, the foreclosure process will be stopped immediately.

The biggest advantage of filing for bankruptcy is that it gives you more time to get back on track. Bankruptcy buys you more time which you can use to search for a better job, and bring your finances back on track. Meanwhile, the bankruptcy trustee mediates between you and the creditors. After filing for bankruptcy, your creditors and mortgage company will work together with you in good faith to come up with a reasonable payment plan until the time your finances are back on track. Discuss with a bankruptcy attorney to find out whether filing for bankruptcy will stop the foreclosure process and if it will work for you.

Deed in Lieu – When using this strategy, the homeowner, who is facing foreclosure, signs the deed of the home back to the bank. This is done voluntarily. Deed in Lieu has the same impact as that of foreclosure. Lenders are not very willing to take back a home through a deed in lieu of foreclosure. The lender will allow the foreclosure process to proceed in order to be sure that the borrower is not making any fake poverty claims.

You may also want to consider a lease-option if you want to stop your home being foreclosed. This allows the homeowner facing foreclosure to persuade their lender to modify the loan by allowing another buyer to assume the loan. The lender will of course assess the qualifications of the new buyer, but this option is a winning situation for all parties.

Discuss your options with a foreclosure attorney and then choose the one which seems most suitable in your case.


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