Financial hardship can be stressful and often leads to late loan repayments, which could result in your lender taking a foreclosure auction. With a lot to work through, it could seem all odds are against you but are they?
When facing a foreclosure auction, you can stop the proceedings temporarily or permanently by reinstating the loan, filing a lawsuit, or filing Chapter 13 bankruptcy. We will discuss each option and how long each alternative will help you stop the foreclosure auction.
Each state has different laws, so it's important to understand how to stop foreclosure in your state. Check one of Ascend's state guides below to help you understand your options.
Let's go through the three different options how to stop the foreclosure auction proceedings immediately.
The best way to stop foreclosure auctions immediately and permanently is to repay your outstanding debts and continue making timely repayments. Unfortunately, sometimes, you may not have enough money to repay all outstanding arrears, especially if you lost your income due to unemployment or disability. While your options may seem limited after your lender gives you a notice of foreclosure, there are some options available that most people are unaware of.
One way to stop foreclosure auctions is by filing for Chapter 13 bankruptcy. When you file for Chapter 13 bankruptcy, you can stop the foreclosure and other creditors' actions in an attempt to recover their money. You will also get a chance to catch up on your arrears and get debt relief at the end of the payment plan.
While Chapter 13 will take a long time to complete, it is quite an effective option to stop ongoing foreclosure auctions. As soon as you file for bankruptcy, the court will place an automatic stay on your property, irrespective of whether the foreclosure process has begun.
You can file two types of bankruptcy- Chapter 7 and 13. Chapter 13 is a better option because when you file Chapter 7, your assets, including your house, could be liquidated to repay other debts you may have. Therefore, file Chapter 13 to stop foreclosure.
You are facing foreclosure because you were unable to meet your payments. Unfortunately, filing for bankruptcy is not free. You will incur some filing costs and attorney fees. Under Chapter 13, you will also devise a monthly payment plan for your creditors. How much you pay will depend on your current financial situation.
For example, someone could be paying $200 a month while another pays $4000 monthly, depending on their income. So, before filing for bankruptcy, it is important to understand the cost of filing and how much your monthly repayment will be. Use our Chapter 13 monthly payment calculator.
The calculator mirrors the bankruptcy forms used to determine how much you pay. Accessing the estimate before filing can help you decide if filing for Chapter 13 bankruptcy is the best option for you. If not, there are two other options to consider.
If you don't want to or don't qualify to file for Chapter 13 bankruptcy, consider reinstating your loan. You will need enough cash upfront to pay back your dues, alongside accrued interest and late fees. Paying what you owe can make your lender stop the foreclosure proceedings, and you should ensure you continue making repayments as agreed.
Ignorance is no defense and understanding the law and how much time your lender should give you before beginning the foreclosure process is important. How did your lender handle the foreclosure? If there is a chance your lender overstepped their legal boundaries or initiated the foreclosure process earlier than the law states, then you can file a lawsuit against them.
Your lender should give you a chance to find a solution or make up for the missed payments before starting foreclosure. Consult an attorney; if the lender did not follow the proper channels, you could file a countersuit. The countersuit will pause the foreclosure proceedings and give you time to reevaluate.
Unfortunately, this option has a risk. Suing is a costly process, especially if you lose your case. Therefore, it is important to seek legal opinion before filing the lawsuit.
The foreclosure proceedings could lead to losing your property and shouldn't be taken lightly. Fortunately, you have the three options above. It is important to communicate with your lender once you are unable to make payments to work an alternative payment schedule to avoid foreclosure. If your lender has initiated the foreclosure process, you can also communicate with them and try to find a way forward. Here is everything you should know about foreclosure.
It is a legal proceeding a lender undertakes to seize and resell the property after a borrower misses several mortgage repayments consecutively. Different states have different laws on foreclosures. Some states demand the lender wait at least 90 days before beginning foreclosure, while others give as many as 120 days before the lender is allowed to initiate foreclosure proceedings.
When taking out a mortgage, you usually have a reliable source of income and a strong repayment plan you intend to follow. Most people don't consider losing their source of income which could force them to protect themselves against foreclosure.
Unfortunately, life is unpredictable. Sometimes, you can fall in, and the burden of medical expenses can be greater than expected, leaving little to no income to make mortgage repayments. You can also lose your job or become bankrupt following a divorce.
Whatever the reason behind your inability to meet your monthly payments, it is important to always communicate with your lender. Reach out to them before missing a payment, and devise an alternative repayment plan. Most lenders are willing to negotiate the repayment terms depending on your current financial situation.
When you discuss your situation with your lender, they can offer four options to you.
They can offer:
For your lender to be willing to work a new repayment plan or offer any of the options above, you should communicate with them before missing a payment or before missing consecutive payments. Being honest about your financial situation with your lender and asking them for help can benefit you. But if you have already missed a few payments and your lender has started the foreclosure proceeding, it is important to understand the process.
The foreclosure timeline varies from state to state. Therefore, it is important to understand the timeline in your state to try and make it right by repaying the payments before the period lapses. Here is a step-by-step guide to the foreclosure process;
If they provide this proof, the court will likely rule in their favor, and your lender will get an order of foreclosure auction authorizing them to auction your property.
At this point, not all hope is left. You can still negotiate with your lender to see if any options exist to keep up with the payments or defer for some months.
Depending on the laws in your state, it could take between 4 to six months to complete the process.
It could be overwhelming and intimidating if your lender has started the foreclosure process. Fortunately, we have discussed options you should explore should your financial situation change and how to stop foreclosure. This article also explains what you can do to avoid foreclosure auctions altogether. Remember to use our Chapter 13 payment plan calculator to estimate how much your plan would cost under Chapter 13 bankruptcy.