Falling behind on mortgage payments can happen to anyone and is often unavoidable due to an unexpected job loss, illness, or other financial hardships. Unfortunately, once you default on your loan, the lender can take ownership of your home through foreclosure. If you receive notice of such an action, use the following strategies to help you achieve debt relief and stop the foreclosure process.
How to Avoid Foreclosure
1. Seek a Loan Modification
If your monthly mortgage payment has become unmanageable, applying for a loan modification may reduce your current interest rate or the amount you owe each month. In either case, this will provide you with some debt relief and make the loan more affordable.
The law prohibits lenders from moving forward with a foreclosure while a loan modification application is being reviewed. You may seek a modification directly from your lender or see if you’re eligible for one of the government programs available through the Making Home Affordable initiative.
2. File for Bankruptcy
Filing bankruptcy will help you gain debt relief and put an immediate stop to foreclosure. After your paperwork has been submitted, the court will grant an automatic stay that prevents creditors, including mortgage lenders, from continuing to attempt debt collection.
A Chapter 13 bankruptcy will allow you to restructure your debts and establish a payment plan, so you have enough time to find your financial footing and get caught up on loan payments.
3. Consider a Short Sale
If you expect your financial troubles to last long-term, you may want to consider a short sale. With your lender’s permission, it gives you the opportunity to sell your home for a price that will cover the balance of your loan. This will clear your contractual obligations and won’t affect your credit as much as a foreclosure. To qualify, your property generally has to be worth less than what you owe.
If you’re facing foreclosure, trust Greg Dunn, Bankruptcy and Debt Relief Attorney, to provide you with effective representation. Backed by more than 25 years of legal experience, this attorney has helped countless Honolulu, HI, residents obtain debt relief and reach their financial goals through a smooth bankruptcy process. Call (808) 524-4529 to schedule a consultation, or visit the firm’s website to learn more about the services offered.