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Resources on Foreclosure, Credit & Debt, and Bankruptcy

How to File for Chapter 7 Bankruptcy

Chapter 13 Bankruptcy

The New Bankruptcy: Will It Work for You?

Selling Your House in a Tough Market

Foreclosure: Articles and FAQs

Guide to Avoiding Foreclosure (HUD)

Avoiding Foreclosure: State Resources (HUD)

Foreclosure Survival Guide

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Foreclosure Survival Guide (1st Edition)

Dealing With Fear

If you’re like many homeowners, the thought of foreclosure triggers fears of ending up in the street. So let me reassure you: It just doesn’t happen like that.

Foreclosure is an orderly process. You’ll get notice before the process starts and before the house is eventually sold, if it comes to that (see Ch. 2). And these days you will most likely have at least several months after the foreclosure sale before you will actually have to move out. This is because homes put up for sale at public foreclosure auctions often fail to garner an acceptable bid. So the property ends up with the lender—which then must locate someone else who wants to buy and occupy it. (See Ch. 9 for a more detailed explanation of how this works.)

Even if the property ends up in the hands of a new owner at the foreclosure sale, in almost all states the new owner will have to give you a formal written notice to leave. Typically, you’ll have from three to 30 days. And if you don’t leave at the end of that period, the new owner will have to go to court and get an eviction order. In other words, you’ll almost certainly have enough time to make new housing arrangements.

Were You Nesting or Investing When You Bought Your House?

Much of this chapter—and the book, for that matter—assumes that you have an emotional attachment to your house. But maybe you don’t, or at least not much of one. Maybe you bought your house primarily as a way to build some wealth. Some of my bankruptcy clients have lived in an apartment and rented out their houses. Others, while living in their houses, have been ready to move on, if necessary, in the same way as any other small business owner would move on when the economics of the business dictate. The fact is that the residential housing boom presented a small business opportunity to many people.

If you bought your house primarily as an investment, your decision-making process should be based on the economics of your situation. If you are way upside down, get out the best way you can. If you are close to the line, decide whether or not to hang in there and hope things get better. If you are living in your house but aren’t particularly attached to it, stay as long as possible without making a payment. (See Ch. 9.)