208,078 New Listings - November 2009 - Last update November 20, 2009 12:30 PM EST 
What You Can Do To Prevent Foreclosure
When someone signs mortgage papers they do not ever think they may lose their home. However, life can bring unexpected changes such as a loss of job, divorce or unexpected medical bills. A homeowner can face foreclosure very quickly. However, there are a number of things that can be done to avoid foreclosure. With some perseverance and planning, it is possible to make your way through the financial problem and retain possession of your home.
Your bank or mortgage lender will most likely be willing to assist you. Banks would rather have the money you pay than a vacant house. A vacant house can remain on the market for a number of months and this will cost the bank money. The majority of lenders do understand that most people can fall behind on their payment so they have ways to help homeowners.
So the first thing that a homeowner should do if they are behind on their mortgage is contact their lender. It is not a good idea to make the mistake that many people make of avoiding their lender. It is important to discuss your financial situation with your lender as soon as you can so that they can work out ways to help you.
Many lenders and banks have similar programs that help homeowners avoid foreclosure. The first option that the lender will give you is a repayment plan. The lender or bank will let you spread out the payments over time. You will have to agree to the payment plan and there are some nominal fees involved. This is the best option for people who have the ability to catch up and are only a few payments behind.
Some banks or lenders will modify a mortgage loan if you get behind. The usual way this is done is by putting the missed payments back into the loan and reamortizing it. This will put you back on the right road and you can start making payments again where you left off.
Another option is a short or hard money refinance. A short refinance loan will allow you to refinance your mortgage and the lender will forgive some of the money you owe on the loan. A hard money refinance involves getting a loan with high interest from a lender that will keep you afloat until the home is old. This option is not for people who are looking to keep their house.
If you are positive that you are not capable of catching up your mortgage payments or if you do not think you can stay on top of payments if your mortgage holder assists you, it may be time to consider a short sale. A short sale is when the lender or bank approves selling off the loan for less than the amount of the loan. The mortgage holder will keep the profit from the sale and forgive the rest of the balance. The homeowner would not get any money from the sale but they would not owe any money to the lender.
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I recently came across this interesting article from Forbes: http://www.forbes.com/forbes/2008/0721/058.html
I am going to using loanmod.com to modify my loan. I wll let you know how it goes.
Unfortunately foreclosures are populating fast on the MLS. I really wonder how long it will take for things to slow down.
Here are a few options:
Deed in-lieu of Foreclosure
Deed in-lieu of foreclosure means that you have agreed to deed the house to the lender as a means of satisfying the debt and avoiding foreclosure. This is the best option if the property has been on the market for at least three (3) months and not sold or if you do not qualify for other options. Use it as a last ditch effort to save your credit and not go bankrupt.
Bankruptcy
As the ultimate last attempt to save yourself from financial ruin, consider filing for bankruptcy. This is not a decision that should be taken lightly or made without legal consultation. Most people are not aware that bankruptcy will not save your house from foreclosure, yet it will buy you more time to get your finances in order. However if your creditors are granted a “relief from stay”, they can proceed with actions to foreclose.
The ramifications of bankruptcy can last anywhere from seven (7) to ten (10) years and make it very difficult to obtain credit. As adults we learn that credit makes the world go round. Without it, we have difficulty obtaining cars, homes, credit cards, and many other material goods. Creditors and lenders rank bankruptcy as the worst condition of personal or business credit upon review. So be certain that you know and understand the consequences that accompany bankruptcy. Again, seek consultation from an attorney that specializes in bankruptcies prior to finalizing your decision.
Okay, with that out of the way, allow me to provide a brief summary of what bankruptcy is and what various forms are available.
Bankruptcy is the legal means by which plans are developed by debtors who are unable to repay creditors. It is generally sought as a means of settling outstanding debts by fairly dividing assets among creditors. In layman’s terms, bankruptcy is a way to wipe the slate clean and start over. There is a possibility that certain debts will be discharged without full repayment after all assets are divided.
There are thirteen chapters in the official bankruptcy law book. However we will discuss the four most commonly sought options, which are chapters 7, 11, 12 and 13.
Chapter 7-Liquidation
Chapter 7 is the fastest and least expensive of all bankruptcy alternatives. It is used by approximately 70% of all consumers filing bankruptcy petitions because it generally takes from three (3) to eight (8) months to be discharged from non-exempt debts. It is also most often used by people who are very deep in debt or do not have a steady income. Chapter 7 involves the complete liquidation of assets as a means of debt satisfaction, and can be filed only once in every six (6) to seven (7) year period.
Dischargeable Debts
Chapter 7 Bankruptcy relieves you from debt pertaining to:
• Credit cards
• Unsecured loans (no collateral pledged) from banks, credit unions, savings and loans, or finance companies.
• Unpaid hospital or physicians’ bills
• Unpaid utility bills
Non-Dischargeable Debts
Debts that are not eliminated are:
• State and federal taxes
• Certain secured loans
• Child support required by law
• Spousal support (alimony) payments required by law
• Government-backed college loans (only dischargeable in special circumstances)
• Debts due to fraud
• Liability from damages resulting from willful or malicious acts
• Drunk driving obligations
Chapter 11-Reorganization
Chapter 11 is typically used for businesses. It allows businesses to remain operational while:
• reorganizing debt by shedding burdensome leases and contracts
• recovering assets
• optimizing operations to become more profitable
• discharging certain debts
• and/or repaying an agreed upon portion of the total debt to creditors
Chapter 11 was originally designed for large corporate debtors, but is now available to partnerships, real estate developers and sole proprietors.
Chapter 12- Adjustment of Debts of a Family Farmer with Regular Annual Income
Chapter 12 was established specifically for farmers in 1986. This chapter allows farmers to repay current debt with future earnings. It is very similar to 13 in that farmers are allowed to devise a plan to repay certain debts and discharge others over time. The advantage of Chapter 12 is that it acknowledges the fact that most farmers need more credit than most consumers, the seasonal nature of agricultural income and the challenge of forecasting the profitability of crops. If the farmer’s debt does not exceed $1,500,000, then they are eligible for Chapter 12 bankruptcy.
Chapter 13- Adjustment of Debts of an Individual With Regular Income
Chapter 13 is another very common bankruptcy option, which is utilized by approximately 25% of consumers. The Chapter allows debtors to propose a repayment plan to cure debt over a period of time. It was designed for debtors who currently have a source of steady income and can repay creditors (usually $0.10 on the dollar) based on a proposed court approved repayment plan. The difference between Chapter 13 and Chapter 7 is that individuals are usually allowed to keep their possessions versus liquidating them. Therefore debtors typically continue to reside in their homes unless they fail to comply with the arrangement. Another variation is the timing required to be completely discharged from all debt. Generally, debts are not discharged in Chapter 13 until all guidelines of the plan have been met, yet the chapter allows more debts to be eliminated than a Chapter 7 discharge.
Fees and Legal Help
When considering filing for bankruptcy, seek an experienced bankruptcy attorney for advice. If you need to obtain a referral in your state, contact the Bar Association’s referral service. In the State of Texas, contact the State Bar of Texas Lawyer Referral Service by calling (800) 252-9690. Contact several attorneys to see if they charge for initial appointments, and to interview them prior to deciding to utilize their services.
When interviewing, remember to ask the following questions:
• What information should you bring to the initial consultation?
• How much experience do they have with bankruptcy cases?
• What percentage of their cases is similar to my specific situation?
• What is their success rate?
• Will other attorney advocates work on the case, or will the hired attorney perform all research and negotiations? If others will perform work, who are they and what are their fees?
• Are they attorneys or non-attorneys? What is their level of expertise and experience?
• What obstacles do they foresee with your case
• Will counsel be provided based on realistic expectations of your current situation?
• What are their fees? Are they negotiable? Do they provide payment plans? (Get an estimated cost range in writing)
• Are there tasks that you can carry out to reduce the fee?
• Can they provide a list of client references?
• Are you available to take the case immediately?
• If questions arise, will you be able to contact them directly? How often? What times are best? (This question is particularly important if you would like to have lots of interaction with your attorney)
If you do not feel comfortable with a particular attorney, continue looking. However once you find a lawyer that you feel comfortable with, be prepared to honestly and completely disclose all family assets, liabilities and commitments in order to obtain a comprehensive assessment.
In Texas, bankruptcy-filing fees could range from:
• Chapter 7 or 13 – $150
• Chapter 12 – $200 plus
• Chapter 11 – $600
Foreclosure Auction
If you anticipate receiving a large sum of money, such as cash settlement from a lawsuit or a tax refund, then buying your house back at the foreclosure auction may be the answer you’ve been looking for. You must be in a position to pay the total bid price in cash or by cashier’s check, usually within 30 minutes of winning the bid.
The date and location of the foreclosure auction varies from state to state, however in Texas, the auction is held every first Tuesday of the month at the county courthouse. Trustees and investors are often chaotically scattered throughout the room, therefore it is very important that you attend the event with a game plan in mind. So now let’s discuss what goes on at the auction and what the advantages are of attending the auction regardless of whether you have the cash to buy your house back or not.