What Not to Do When Faced With Foreclosure
On behalf of Lynn Pollard
For many people, their homes are their most valuable assets. For this reason, if you cannot pay your mortgage, it can seem like the end of the world when there is a possibility of losing it. However, it is important to understand that if you keep a few things in mind, you stand a fair chance of weathering this difficult time.
When faced with the loss of your most valuable asset, it is only natural to panic. However, the old adage that panicking never solved anything certainly applies to those faced with foreclosure. It is important to realize that although you are in a serious situation, the foreclosure process does not happen overnight. Therefore, you have time to figure out a strategy. Doing so is much more productive than letting your feelings of anxiety get the better of you.
Don’t Abandon Your Home
You may think that you can avert the foreclosure process by abandoning your home and letting it be sold by the lender. However, in many cases, this is a poor strategy that can come back to haunt you. Although lenders often end up selling the home, sometimes they do not, because the lender lacks the paperwork to complete the sale, or the value of the home makes it not worth selling in the lender’s eyes. Regardless of the reason, if the sale does not happen, you can face financial consequences at a time that you are already in weak financial circumstances.
The reason for this is because the title to the home does not change if the foreclosure sale is not completed. As a result, you would still be on the hook for the costs of owning the home. Therefore, you still must pay property taxes and homeowners’ association dues (if applicable). Additionally, your abandoned home may be vandalized or invaded by squatters, causing it to fall into disrepair. This can leave you liable for the repair costs or zoning violation fines that your city may assess.
Even if your goal is to ultimately be rid of your home, it is better not to risk an uncompleted foreclosure. Instead, there are various legal options that can ensure that the home is transferred out of your hands, relieving you of the financial responsibilities of ownership.
Don’t Fail to Consider Bankruptcy
Many people faced with foreclosure fail to consider the one thing that could help them the most-bankruptcy. Many think that it will ruin their credit. Although filing bankruptcy can cause your credit score to take a hit, it is easily rebuilt back to respectable levels in as few as one or two years with responsible credit use. On the other hand, letting your home go into foreclosure can hurt your score significantly longer than bankruptcy can in many cases.
In reality, filing bankruptcy can allow you to achieve the goal of staying in your home. If you file Chapter 13 bankruptcy, your mortgage arrearage is restructured into a payment plan, allowing you to pay it off in manageable monthly payments over three to five years. Once you have completed the process, you are caught up on your mortgage and free of most other debt. Of course, you can stay in your home throughout the entire process.
Don’t Face Your Problems Alone
When faced with foreclosure, it is easy to become overwhelmed with what to do next. However, you do not need to make this decision alone. An experienced bankruptcy attorney can objectively give you your options and recommend the one that would best achieve your long-term goals.