Stopping Foreclosure Legally

Getting behind on your mortgage payments often leads to foreclosure. Mortgage payments are often high depending on the cost of your house and it can be almost impossible to come up with a large amount of cash to pay your current payment plus the payments that you have missed. This is often a very frightening situation for homeowners as the bank may begin calling and sending letters. There are many options available that can help you get caught up on your payments, but there are often good and bad sides to each. You will have to assess your personal situation to decide which is the best option for you.

Begin by looking at refinancing. Many people will look at is option first because it is often a solution. The downside to refinancing is that not everyone qualifies for refinancing. To qualify for refinancing you will need to have good credit as well as enough equity in your home to pay off the debt that has accumulated.

Many people that find themselves in foreclosure also have bad credit. Many of these individuals do not qualify for good loans with good interest rates. Many of these people also find that they do not have enough equity in their home as well. There are also many people in foreclosure because they did refinance and the situation did not work out for them as well as they thought that it would.

Another option is a withdrawal from your 401K or Retirement Plan. This should not be at the top of the list for your options because you are using your retirement money, but it may be what you need to come up with enough cash to get you back on track. If you have a retirement plan you are often allowed to take a loan out against the plan and then pay your mortgage lender. Your other option is a direct withdrawal. When you do make a withdrawal you will have to pay a minimum of 20% for federal income taxes plus a 10% penalty tax. Be sure that you figure the amount beforehand so that you are withdrawing enough to cover the taxes plus what you need to pay your debt. This withdrawal will also require that you report it on your taxes for that year.

Bankruptcy is also seen as another option, usually the last. However, bankruptcy doesn't really stop foreclosure but it really only slows it down. You usually have two options depending on you situation. Chapter 13 is essentially a debt repayment plan and Chapter 7 is the full liquidation of your debt. Different states have different laws and the federal laws have recently been changed, so it is important to consult a lawyer on your options. You also have to qualify for bankruptcy and this can also be a challenging situation. The main downside to bankruptcy is that the lender is often able to filed a relief of stay and they can pull your home out of the process and continue with the foreclosure. Many individuals who choose to take this route end up in foreclosure anyway and they end up with both a bankruptcy and foreclosure on their credit report.