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Residential Home

Foreclosure Options?  My house is behind or in foreclosure – I need Foreclosure Help

Being behind on your home or facing a foreclosure (or sheriff sale) is one of life’s most stressful situations.   The danger of losing your home can cause many people to shut down or go into denial about the situation.   Do not ignore the situation or go into denial: You Have Options!   We can help you.   We want to discuss what options you have when you house payment is behind or you are facing foreclosure.    Foreclosure can be stopped!  There are ALWAYS foreclosure options.

Curing the Balance, Coming Up-To-Date

The most obvious solution for stopping foreclosure is to come up-to-date on the loan.  Most mortgage companies will allow you to “come-up-to-date” on the loan instead of paying off the entire balance of the loaned amount.   Although the mortgage itself allows for an “acceleration clause” when you enter in a major default on payments, they will usually also accept the delinquent amount.   Many times your savings, friends, or other parties can assist in bringing the mortgage up to date.  In addition, a major mortgage default usually creates an adequate “hardship” for accessing funds in a 401k account.   Although we do not recommend using savings or especially accessing your 401k account usually, we wanted to make sure we gave all the options.  Make sure to familiarize yourself with every option available out there.

Forbearance

Mortgage companies frequently enter into forbearance agreements to give some sort of foreclosure help for them to continue with the mortgage and to receive payments.   Forbearance agreements can be useful, but they are generally not as “official” or alter your rights positively as much as loan modifications.   Also, loan modifications are usually permanent and recorded in your county’s recorder’s office where Forbearance agreements generally are NOT permanent and many times not recorded.

Loan Modification

A loan modification is a foreclosure option that can be a very effective way for reorganizing your mortgage loan and bringing your home up-to-date.   Loan modifications are a permanent and officially alter your loan to new terms: they are the ultimate “foreclosure help.”   They are recorded in your county’s recorder’s office.   Essentially you will have the same loan but with new terms.   Many times loan modifications will not increase your payment or even reduce your normal monthly mortgage payments.   However, you may have to pay a greatly increased amount at the end of the loan.  This could increase your balance significantly (especially if you missed years of payments).   This increased principle balance can make it much more difficult to sell your home in the absence of a short sale.

Selling or Short Selling

Another very simple foreclosure option is to sell your home.   If you cannot afford the payments on your home in the long term, selling your home can be the best option.  If you have a “negative” equity situation where you may need to bring money to the closing table in order to sell your house, you can probably be approved for a short sale.   If you “short sale” your home, you will still be responsible for the balance of the mortgage loan that was not covered by the sale price.   You may be able to negotiate with the mortgage company to either settle or have the mortgage company write-off your balance.   However, the vast majority of the time, the mortgage company will eventually try to collect on the balance via lawsuits, garnishments, or bank account sweeps (freezes).   Because of this, many times it is advisable to file Chapter 7 bankruptcy either before or after the completion of a short sale to eliminate this deficiency debt.  Chapter 7 can get you the foreclosure help you need.

Chapter 13 Bankruptcy: The “Trump” Card or “Sure Fix”

Chapter 13 is the “trump” card or “sure fix” foreclosure option.  Chapter 13 is likely the only option that can forcefully stop a foreclosure up to date of the sheriff sale AND provide a full mechanism for brining the house up-to-date and restoring regular payments.   Therefore, Chapter 13 is a VERY frequently used tool for stopping foreclosure and restoring payments.  However, with the huge advantages of Chapter 13, there are some disadvantages.  Unlike loan modifications, there is rarely a situation where payments can be reduced on the mortgage: the payment usually increases because both the ongoing payments and the arrearage must be paid through the monthly plan payments.  Therefore, although Chapter 13 is the “trump” card foreclosure option, you must be able to afford the payments for the Chapter 13 to be a long-term success.  If you cannot afford the payments long-term, it may not be the best foreclosure help you need.

Surrendering the Home and Filing Chapter 7: The “Clean Break”

Chapter 7 can also be a “premiere” foreclosure option that powerfully deals with foreclosure situations.   A Chapter 7 can temporarily stop a foreclosure action or sheriff sale, but it does not have a mechanism within it for bringing the home up-to-date or restoring payments.   Usually, Chapter 7 is used to “surrender” a home through the bankruptcy.  However, if a home is up-to-date or a loan modification can be achieved, you can keep your home during Chapter 7 bankruptcy.  If you choose to stop paying on your home, the foreclosure process usually takes 8-10 months in Indiana before it goes to Sheriff Sale.   Other times the foreclosure process can take much longer.   Remember, if you allow a house to be surrendered into foreclosure, you will be liable for the deficiency balance.  That’s why so many people file for Chapter 7 bankruptcy thereafter.

Other Options

As with most things in life, there are always a variety of other options for dealing with foreclosure situations.   Anything that can reduce expenses or increase income (such as seeking roommates) can greatly increase your options for keeping you home.   Seeking outside foreclosure help (if they are fully trustworthy) can create new foreclosure options.

Conclusion: There Are Always Foreclosure Options

Remember, there are always foreclosure options.   The worst mistake that you can make is to not seek qualified foreclosure help to make a plan for addressing your foreclosure situation.  At our office, we are very experienced at implementing foreclosure options, including bankruptcy and non-bankruptcy foreclosure options.   Our consultation is fully free.  If you need foreclosure help, call us to make a foreclosure plan with you that will alleviate some of that stress right away.