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Do's and dont's for fending off foreclosure
 Dear Bankruptcy Adviser,
I just received a notice of default letter from my mortgage lender
that says my house will go to auction sale in four months. Can
house still be sold by owner? Paul
 Dear Paul,
It appears that you are right in the beginning of the foreclosure
process, but as long as the house is still in your name you can
save it. While you need to be careful, you also need to act
quickly. Four months can seem like a long time but it can go by in
a flash. So let's get right down to what your options
are.
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| 7 possible do's when foreclosure
looms: |
1. Sell the
property: If you can find a buyer before the house is
auctioned, you can sell it and keep whatever equity still
exists.
2. Work out a deal:
Your lender may be willing to work
with you, rather than lose money at a foreclosure sale.
3. Refinance with a subprime
lender: Your credit is poor right now because of the
mortgage delinquencies. This means most or all of the traditional
banks will not work with you. However, if there is equity in the
property, you may be able to find a lender who will refinance you
-- at a higher-than-normal rate. These are called subprime loans,
and they're increasingly common: About 20 percent of mortgages
today are subprime.
4. File Chapter 7
bankruptcy: If you can't get caught up in time, you will not
be able to keep the house -- but you'll generally be able to delay
the foreclosure sale a month or even several months. Any remaining
debt to the lender will be wiped out.
5. File Chapter 13
bankruptcy: If you can afford to make the future mortgage
payments and the delinquent payments, too, file for a Chapter 13
bankruptcy. This is different than Chapter 7, in which assets are
liquidated but debts are wiped clean. With Chapter 13, you keep
your assets and, under court supervision, you repay your debts
under a three-to-five-year plan.
6. Short sale/deed in lieu of
foreclosure: A short sale takes place when the bank allows
you to sell your property even though their mortgage won't be paid.
Be careful -- the bank may allow the sale to go through, but only
on the condition that you repay the deficiency. In a deed in lieu
of foreclosure, the property is signed over to the bank in exchange
for the bank giving up its rights against you. When might a bank
agree to either of these? Lenders spend close to or more than
$30,000 to foreclose on a property. Most lenders will consider
these options to avoid foreclosure costs.
7. Walk away from the
house: Pack your things and leave. The only issue remaining
is whether your lender can sue you for any deficiency still owed
after the sale, and that depends on the state you live in and the
type of mortgage you have. You'd be wise to speak to an attorney
before taking this step.
Any sale or transfer of property has tax
consequences, including a foreclosure sale or a deed in lieu of
foreclosure. Seeing an accountant is probably a good idea, as
well.
Here are two options NOT to consider. In
other words, they're scams.
| 2 don'ts when foreclosure looms: |
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Paul, you have options, but you need to avoid the scams and act
quickly if you want to have the best outcome. Delaying only makes
foreclosure inevitable.
10:02 AM - Sep. 25, 2007 - {0} -
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