About 1 in every 72, or 1,800,000 U.S. homes, filed for foreclosure in 2012. Foreclosure happens when a borrower, the home owner, is unable to make good on their payments, and the creditor has to recover the balance of the loan by repossessing the house. Have you heard about alternative options, if you find yourself in this position? There are several ways you can get help to avoid foreclosure. Here are the facts of the matter.
1. Can Bankruptcy Stop Foreclosure?
Many people are probably holding their breath for the answer to this question. The answer is yes, in many cases, it can. Bankruptcy, of course, is not an option to be taken lightly. It will be on your credit history for many years, and requires court appointments as well as a repayment plan. If you file for Chapter 7 or 13 bankruptcy, the court will issue an order of relief that directs all creditors to cease collection activities. If your home is scheduled for foreclosure, the sale will be postponed for about three to four months. It cannot help, however, if foreclosure notice was already filed. Chapter 13 is useful because it can help you pay off late payments, and drop 2nd and 3rd mortgages.
2. Can You Refinance to Avoid Foreclosure?
Absolutely. Keep in mind that the earlier you work to resolve an approaching foreclosure, the better. There are many refinancing options available, and many of them have been established by the Obama Administration as legal safeguards for homeowners. You should first contact your lenders to see if refinancing is possible to negotiate through them. Government options to refinance to avoid foreclosure include HAMP, PRA, 2MP, and HARP. HAMP, for example, stands for Home Affordable Modification Program, and it helps by lowering your mortgage payment to 31% of your pre tax income. Typically, people using HAMP see a 40% drop in their payments.
3. Other Ways to Avoid Foreclosure
If bankruptcy doesn’t give you enough time to save your home, loan modification is one potential option. Under this plan, you will permanently alter the terms of your loan. It can change the length of repayment, the interest rate, or the monthly payment. After this, you will no longer be considered defaulted. Do not rely on a pending loan modification to stop a foreclosure, though. You need to contact your lender and make sure the sale will not go through.
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