Strategies
What Can Help after Foreclosure Papers Were Served
After the foreclosure papers are served, there are still a few to mitigate loss. Once this happens, we highly recommend contacting an attorney to help navigate this process and mitigate as much financial stress and hardship as possible. Your attorney may suggest one of the following strategies, depending on your legal situation.
Short Sale
If you owe more than your home is worth and you’ve not qualified for refinancing or any loan modification options, a short sale may be right for you. This allows you to sell your home quickly. Your lender will have to agree to let you sell your home for less than what you owe to satisfy the debt and avoid foreclosure. If your lending organization agrees to this and you sell your home in a short sale, you will not owe anything else on the home. However, all lienholders have to agree to this option, and that can be difficult if the secondary lienholder(s) have little incentive based on the amount of money they are set to receive after the short sale. .
Note: that if your lender(s) agree to this, and you sell your home, you will not owe anything on the original loan, however you may be subject to income taxes if the IRS deems any forgiven debt income.
Bankruptcy
Declaring bankruptcy may be another strategy to help after foreclosure. Filing for bankruptcy triggers the court to release an order for relief (called “automatic stay”), which halts attempts of creditors to collect debt from you, including foreclosure.
If you prefer to keep your home, it’s typically advisable to file for Chapter 13 bankruptcy versus Chapter 7. Chapter 13 makes it allowable for you to catch up on payments in a 3-to-5 year payment plan.
Deed
In Lieu
In a Deed-in-Lieu of Foreclosure, the homeowner will release ownership of their home to the loan servicer to fully satisfy the amount due. The title of the home must be free and clear of mortgages, liens and encumbrances.
For this strategy to be available, the lender must agree to it, and there may be tax consequences afterwards.
PFS Program - Is a program the addresses all the issues
Loans aren’t as assumable as they used to be– most mortgages include a “due on sale” clause, meaning, when signed, the loan borrower agrees to pay the loan in full if and when they transfer the property. However, in an effort to help with foreclosure, the lender may opt to modify your loan to remove this clause and allow another buyer to assume it.
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