Unemployment, poor health, an absence of overtime or even a divorce can make it difficult to keep up with house payments. Identifying how to avoid foreclosure has become a priority for millions of U.S. families. A September 2009 RealtyTrac report showed that 1 in every 65,037 housing units faced repossession. Fortunately, stopping foreclosure can be achieved through a number of different methods that are specifically designed to assist struggling homeowners.
How to Avoid Foreclosure
Identifying suitable ways to avoid foreclosure is essential. A forced property sale not only reduces FICO credit score ratings for a period of seven years, it can fundamentally affect family life. Stopping foreclosure can be achieved through a mortgage loan modification, a short sale or opting to file for bankruptcy. This article will provide a breakdown of each option so that a homeowner can decide how they would like to proceed.
Arrange a Short Sale - Stopping Foreclosure Through a Private Sale
This involves reaching an agreement with the lender to sell a property below the value of the mortgages and loans secured on it. As the lender avoids costly and time consuming legal proceedings, they write off the short fall between the mortgage and the final sale price. In essence, a short sale helps to make the best of a difficult situation for both parties. Whilst the IRS typically treats the cancellation of indebtedness income' as taxable, this is unlikely to apply to the primary residence until 2012.
File for Bankruptcy - Avoid Foreclosure By Restructuring Personal Debt
Provided that a bankruptcy petition is served in good time, it will stop mortgage foreclosure from taking place. Whilst filing for bankruptcy is a rather drastic way of dealing with repossession, it can give a homeowner sufficient time to find a way of making payment and catching up with any outstanding arrears. It is most likely to offer debt relief to homeowners who have other unsecured debts. Writing off other personal debts can help to free-up money that can be used to make repayments on secured debt.
Mortgage Loan Modification - How to Avoid Foreclosure by Changing the Repayment Terms
A mortgage modification will consist of extending the loan, reducing the interest rate, switching the loan type and/or reducing the balance. This is achieved through help from both the government and the lender. The objective is to improve affordability and help a homeowner maintain that status. Qualifying homeowners can benefit from help until January 31, 2012.
Stopping Foreclosure - Seek Help Before a Mortgage Loan Modification, Short Sale or Bankruptcy
Those wondering how to avoid foreclosure can get help in a number of different ways. Whilst it can be achieved by the individual, there are a number of private organisations that can help with the negotiation process. Always seek financial assistance as soon as it becomes apparent that money problems are on the horizon.
Sources
"National real estate trends." RealtyTrac.
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