Recently on our bankruptcy forum a user asked, “I have lived in my house five years. I lost my job six months ago. Despite my best efforts, I have not been able to make my mortgage payments. The bank notified me that they are going to start home foreclosure proceedings. I am wondering if there are certain steps I can take to save my house?”
Buying a home is a dream for many Americans. Unfortunately, with the housing market crash, mortgage requirements toughening, and the unsteady job market many Americans never get to realize their dream. The good news for you is that you were able to buy a house; the bad news is that your job loss may make it difficult to keep your home.
With that in mind, let’s take a look at some of the options you might have to keep your home.
Steps to save your home from a home foreclosure
- Sell your home
Although it sounds simple, one of the best options for many homeowners who cannot pay their mortgage is to try to sell their home. Obviously, this option is best if you’re living in a strong housing market. This option is less preferable, however, if you owe more than you can sell it for or the housing market in your area is weak.
- Complete a short sale.
A short sale allows a seller to sale their home for less than what is owed on the mortgage. Although a short sale will not allow you to keep your house, it will allow you to avoid an eviction and home foreclosure. Before attempting a short sale, however, you will have to get approval from your mortgage lender, and they will have to fully participate in the sale.
Unfortunately, the biggest complaint about a short sale is that it can be tough to coordinate with the bank or the mortgage company who may have other short sale requests that they are attempting to complete.
- File for bankruptcy protection
Although filing for bankruptcy will not discharge any of the mortgage debt you owe on your home and it will not allow you to stop making mortgage payments, filing Chapter 13 bankruptcy can initiate an automatic stay, allow you to catch up on your mortgage payments, and potentially restructure your mortgage debt in arrears.
The downside of filing for bankruptcy is that the court may expect you to be employed or have some source of income or be able to prove that you will be able to make the Chapter 13 debt payments.
- Forbearance or repayment plan to avoid home forelclosure
Given the large number of foreclosures and the desire of many mortgage companies to avoid owning homes, some mortgage lenders may agree to reduce or suspend payments on the mortgage for a certain period of time, assuming you can repay the full payment at the end of the forbearance period.
Another option a mortgage lender might consider is a negotiated repayment plan. Under a repayment plan a lender may take the amount owed and divide it up, allowing you to repay the amount over a specified time period.