How can bankruptcy stop foreclosure? It's the question many American homeowners have been asking lately. No one wants to think about the possibility of losing a home, yet, if you are having financial difficulties and cannot pay your mortgage, you are on your way to pre-foreclosure.
Even if you have decided that giving up your home is the best decision for you, there is one very important reason to avoid home foreclosure:
Foreclosure is the most devastating option you can choose because it destroys your credit without offering you any benefits. There are other less damaging ways to detach yourself from your property. Therefore, I strongly suggest that you consider all foreclosure alternatives before having your property repossessed.
Now, "how to avoid foreclosure?" if you love your home and want to keep it despite of its loss in value?
One great thing to note, while learning how to avoid foreclosure, is that most lenders have agreed not to foreclose properties if the homeowner has an active, pending mortgage modification.
Although the Notice of Sale will be filed, the lenders will simply postpone the sale on a monthly basis, a few days before the foreclosure auction date. This process to avoid home foreclosure is nerve-wrecking. Never trust the lender to stop the foreclosure a couple of days before the scheduled date. Call the company managing the foreclosure or the lender's lawyer to make sure the date has indeed been postponed. If you have more than one loan, you always want to initiate a loan modification with your primary lender first. If you can afford it, you may opt to pay your second loan for a while longer to avoid having to negotiate with two lenders at once.
Modifying your loan
When your first loan is finally modified, you will be placed in a trial payment plan. If you are able to make those trial payments, usually three months, you will be granted a mortgage modification. If the trial amount the lender suggests is still too high, you can ask for a re-negotiation. This may take another month or two or three.
Once that affordable loan modification is finalized, you have more decisions to make. If the total amount of your home loan is affordable to you in the long run, great! You have successfully completed your loan re-structure. Otherwise, you have more work to do. At this point you need to engage in a loan modification with the lender holding your second loan, if you haven't yet done so.
If your "second" lender does not modify your loan to an amount within your means, and you still want to keep your home, the time has come to reach out to a local bankruptcy attorney to inquire about "lien stripping". There are a lot of things to consider when learning how to avoid foreclosure. Bankruptcy may be the way to save your home when lenders are not willing to negotiate a reasonable mortgage payment. Only a lawyer can determine your bankruptcy eligibility and most of them offer free first consultations, so check out our attorney directory to find a foreclosure/bankruptcy attorney in your area; and best of luck!