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Unfortunately in today’s economy, more people are facing the threat of foreclosure due to job loss and rising interest rates on their adjustable mortgages. There are ways to avoid a foreclosure, including bankruptcy, so let’s discuss these options.

Deed in Lieu of Foreclosure – If you’ve waited too long to save yourself from foreclosure altogether, handing over the deed to the bank before foreclosure happens can save your credit a little bit, and possibly your dignity. You basically let the bank know that you can’t afford the home and would like to walk away without damaging the home. They take the home back into their possession and you are taken off the deed. There can be tax implications, but you will avoid foreclosure and the legal fees you may be charged during foreclosure, plus will lose fewer points off your credit, which can help with getting a rental home and any other credit you may need.

Short Sale – A short sale is when you sell your home for less than you owe on it. In order to do a short sale and avoid foreclosure, you must find a buyer, approve what they want to pay for the house and then submit the offer to the bank. The bank will then approve the sale if they think it’s in their best interest, and you can walk away from the house without facing foreclosure.

Mortgage Modification – President Obama has recently introduced new legislation that is making mortgage modification easier for those facing foreclosure, or in fear of foreclosure due to job loss, lower property values or rising interest rates on adjustable mortgages. Banks have incentives to lower your payments, lower your interest rates, extend the length of your mortgage and forgive some principal in order to help you keep your home and avoid foreclosure. It’s important to speak with your bank as soon as you have problems paying your mortgage as modifications do take time.

Chapter 13 Bankruptcy – A ch 13 bankruptcy is a type of bankruptcy where you create a payment plan with the bankruptcy court in order to pay your creditors a portion or all of your debts over 3-5 years. Once a ch 13 is approved, you will submit a monthly payment to the court and they will pay your creditors. You can include past due mortgage bills and legal fees in the bankruptcy, allowing you to stop foreclosure and keep your home.