Behind on Payments?

The best way to temporarily stop a foreclosure (up to) the day before an auction (and when a homeowner has unsustainable debt beyond the home mortgage) may be to declare bankruptcy. Bankruptcy is another common strategy to avoid foreclosure (temporarily). A home cannot be sold or foreclosed on (auctioned) while in bankruptcy (Ch 7 & 13).

Sometimes when a homeowner is behind on loan payments and is facing foreclosure, they will declare bankruptcy. When this happens, the lender will file a motion with the bankruptcy court to have the bankruptcy stay on the home lifted (because the owner is not paying the loan). At this point the stay is lifted and the home goes back into foreclosure and to auction. Thus, bankruptcy can be an effective, although only temporary delay of a foreclosure.

Advantages and Disadvantages

The advantage of declaring bankruptcy is that it can be done at the last minute just before the home is actually auctioned off by the lender. Once the bankruptcy is declared, the auction is stopped or nullified until the lender stay lifted.

The disadvantage of declaring bankruptcy is that the vast majority of homeowners

that declare bankruptcy to stop a foreclosure end up getting a bankruptcy AND a

foreclosure on their credit. This is because a bankruptcy only DELAYS the foreclosure, and does not prevent it. Also, fees and missed payments pile up during bankruptcy making foreclosure more likely and less preventable.

If a homeowner’s financial problems can be mostly resolved by selling their home, a short sale or other options for the seller are much better than a bankruptcy

Unfortunately – a bankruptcy attorney will rarely tell clients this! Most homeowners that consult only a bankruptcy attorney when looking for solutions to avoid foreclosure will end up concluding they have only one option - declaring bankruptcy and getting a foreclosure even though both might have been avoided.

Bankruptcy is a big decision. Before (or in conjunction with) exploring this option, make sure you talk to a creative real estate investing professional about all of your options! Regardless of your situation, income, or equity, if you would like to discuss all of your options for selling your home quickly to avoid foreclosure, please CLICK HERE

Common Questions about Bankruptcy

Question: How and How Much?

Answer: Generally you consult with a Bankruptcy attorney and complete the paperwork and they file it with the courts. Attorneys charge different fees for this. We have seen this cost around $2000 for most people (for a fairly simple bankruptcy). Complex bankruptcies will cost more. This is a specialized area of law.

Question: Does a Bankruptcy Stop Foreclosure?

Answer: Yes, but only temporarily. Bankruptcy delays a foreclosure until the lender files a motion to have the bankruptcy stay lifted. This almost always happens. During this delay, fees and missed payments pile up making foreclosure more likely and less preventable.

Question: Are there alternatives?

Answer: Yes. We’ve covered many options throughout this website

The best way to temporarily stop a foreclosure (up to) the day before an auction (and when a homeowner does not need to otherwise declare bankruptcy) may be to file a Temporary Restraining Order (TRO). A TRO is a legal order filed by an attorney on behalf of a homeowner against their lender. In most cases, it will result in a brief delay (30 days, give or take) of a foreclosure auction – which may provide enough time for a homeowner to sell a home using other strategies, or catch up the payments.

TROs are a legal specialty – you must have an attorney, with this specialty, lined up in advance if you need to utilize this maneuver.

Advantages and Disadvantages

The advantage of a TRO is that it can be done at the last minute just before the home is actually auctioned off by the lender.

In addition, it does not require the homeowner to declare bankruptcy and thus often both a bankruptcy and foreclosure can be avoided. Once the TRO is filed, the auction is stopped or nullified until the lender has the TRO lifted.

The disadvantage to filing a TRO is that it costs money and is only a temporary delay.

Before (or in conjunction with) exploring this option, make sure you talk to a creative real estate investing professional about all of your options! Regardless of your situation, income, or equity, if you would like to discuss all of your options for selling your home quickly to avoid foreclosure, contact us.

Common Questions About TROs

Question: How and How Much?

Answer: Generally you consult with a TRO attorney and complete the paperwork. Attorneys charge different fees for this. We have seen this cost around $2000 for most people. This is a specialized area of law.

Question: Does a TRO Stop Foreclosure?

Answer: Yes, temporarily. TROs delay a foreclosure until the lender files a motion to have the TRO lifted. This almost always happens.

Question: Are there alternatives?

Answer: Yes. We’ve covered many options throughout this website.

The best way to possibly avoid foreclosure after all else fails is to offer the lender a deed-in-lieu of foreclosure. A deed-in-lieu involves signing your deed over to your lender in exchange for the lender agreeing not to foreclose on the home.

Although this sounds ideal for many distressed homeowners, the truth is that lenders typically will not accept a deed in lieu until after you’ve tried a short sale. They want you to try and solve the problem first because they don’t want the house back and don’t want to have to resale the property themselves because REO’s typically sell for less than what short sales sell for. So basically, it would take as long to do a deed-in-lieu as it would to do a short sale since typically most lenders won’t accept that option until after the short sale has run its course.

In addition, from a credit standpoint most credit reporting agencies treat a deed-in-lieu the same way they treat a short sale. So there’s absolutely no difference between a deed-in-lieu and a short sale from both a time needed standpoint and from a credit standpoint. However, if the short sale doesn’t work and foreclosure is the ONLY option, a seller should definitely explore a deed-in-lieu.

Advantages and Disadvantages

The advantage to a deed-in-lieu is that it may cause less of a credit impact than a foreclosure.

The disadvantage of a deed-in-lieu is that most mainstream lenders will not accept a deed-in-lieu unless a homeowner tries to do a short sale first. In other words, the lenders don’t want to get the home back. They really want the seller to solve the problem. Generally this means they encourage the seller to explore all traditional options (like a short sale), and then only after all else fails, they MAY accept a deed-in-lieu. Or they may at that point decide to simply go ahead and foreclose.

This is a specialized area of law.

A Deed-in-lieu is usually the very last alternative. Before (or in conjunction with) exploring this option, make sure you talk to a creative real estate investing professional about all of your options! Regardless of your situation, income, or equity, if you would like to discuss all of your options for selling your home quickly to avoid foreclosure, please CLICK HERE

Common Questions About a Deed-In-Lieu

Question: Can I just give my home back to the lender?

Answer: Probably not. The lenders don’t want to take the homes back as the first alternative. They are in the lending business and not the home buying and selling business. They really want the seller to solve the problem, and generally this means they encourage the seller to explore all traditional options, like a short sale before they will even consider a deed-in-lieu. Then only after all else fails, they MAY accept a deed-in-lieu. Or they may decide to move forward with a foreclosure.

Question: Is a Deed-In-Lieu better than a Foreclosure?

Answer: Maybe yes, maybe no. It depends on how the lender reports this to the credit bureaus. You can ask the lender how they are going to report it to see how it will affect your credit. However, before the lender even considers a deed-in-lieu of foreclosure, the homeowner will have had to miss multiple payments. So those missed payments alone will have a negative impact on the homeowner’s credit.

The best way to keep (not sell) a home when a homeowner has a temporary financial hardship is a forbearance plan.

A forbearance plan is an agreement made between a lender and the homeowner where the lender allows the homeowner to miss a couple of payments (or forgives a couple of already missed payments) and then requires the homeowner to make up the payments later - in most cases by making payment-and-a-half payments for several months in a row after the missed payments. The re-payment plan can be structured in several ways.

Advantages and Disadvantages

The advantage of pursuing a forbearance plan is that it can avoid foreclosure and keep a homeowner in a home that they really can afford – if they can just be given time to catch up on their payments.

The disadvantage to a forbearance plan is that most people

are either not eligible for these plans, or those that are,are

not able to ever catch up once the payment-and-a-half payments period begin. They just cannot afford the new or continued payments.

Forbearance plans, if approved, usually delay foreclosure but often don’t permanently prevent it. Before exploring this option, make sure you talk to a real estate professional about all of your options! Regardless of your situation, income, or equity, if you would like to discuss all of your options for selling your home quickly to avoid foreclosure, please CLICK HERE

Common Questions About Forbearance Plans

Question: Can anyone get a forbearance plan?

Answer: No, in most cases the lender will have to review each homeowner's individual circumstance to see if they are eligible. If you miss payments causing a hardship due to a temporary situation (such as a one-time rough spot like a temporary job loss that is now over), then you are more likely to be eligible and the program probably makes sense. If, however, your financial hardship is on-going (such as a loss of income that has not been replaced), a forbearance plan probably won't be approved, and won't do any good anyway. In these situations, other selling options are often better.

The best way to stay in (not sell) a home that you want to keep long term may be a loan modification. This involves a lender modifying your payments so that you can afford to keep making them. The modification could include lowering the interest rate so that the payment is lower, or even adjusting the principle balance on the loan.

Advantages and Disadvantages

The advantage of a loan modification is that it can make an unaffordable loan affordable.

The disadvantage of a loan modification is that, based on our observations, most of the time the homeowner pursues these, they are ultimately not approved, or almost certainly not approved in a way in which it is helpful enough for the homeowner to stay in the home. In other words, most of the time it does not work and the result is foreclosure. We call this the "loan modification merry-go round".

In a typical scenario, a homeowner will hire an expert to negotiate the modification. Please carefully research any company that offers this service for a fee. Usually the homeowner will be told to stop making payments

during the negotiation. At this point the lender will tell the homeowner that a modification is being considered. Unfortunately, based on our observations, most of the time the modification is ultimately denied (just before a foreclosure) and the homeowner is not able to make up all of the late payments and significant interest, penalties, and legal fees, and thus the result is a foreclosure.

The types of modifications that have a higher success rate involve converting an adjustable rate loan to a fixed rate loan or pushing out the interest rate adjustment for a couple of years. The types of modifications that have a lower success rate involve reducing the principal balance on the loan. Because many homes are so far underwater that a workable loan modification are usually not achieved.

Loan Modifications rarely work. Before exploring this option, make sure you talk to a real estate professional about all of your options! Regardless of your situation, income, or equity, if you would like to discuss all of your options for selling your home quickly or even keeping your home and avoiding foreclosure, please CLICK HERE

The worst way to lose a home is through a foreclosure. We call foreclosure “the atomic bomb of credit scars” - it cuts the deepest and lasts the longest. When something effects your credit negatively, it lowers your credit score and the effects last for varying periods of time. Foreclosure lowers your score the most and for the longest period of time - up to 7 (or more years).

Some distressed homeowners reach the end of their patience and decide they simply want to “walk away” from a home believing that foreclosure will be the end of their problems. The truth is that foreclosure is the beginning of an 8-10 year nightmare that can involve everything from an eviction by the sheriff, embarrassment, battling creditors for years, deficiency judgments and lawsuits, possible tax ramifications that can even lead to garnished wages, and difficulty getting credit cards, car loans, or even many types of employment for up to a decade.

If you are facing foreclosure or in a home that you cannot afford to keep and want to sell, please CLICK HERE so that we can contact you and give you all of your options for selling your home and avoiding foreclosure.