Legal Solutions for You,
Your Family & Your Business

Chapter Introduction

• Do You Have Enough Time to Negotiate?
• Working With a Nonprofit Housing Counselor
• How Nonprofit Counseling Agencies Work
• Can a Housing Counselor Help You?
• What Happens When You Contact a Counseling Agency
• Basic Workout Options
• Repayment Plan: Keeping Current and Catching Up
• Forbearance: Getting a Break From Payments
• Modification: Lowering Your Payments
• Workouts for Government-Backed Mortgages
• Special Protections for Service Members on Active Duty
• Judicial Foreclosure Is Required
• Default Judgments Can Be Reopened
• Interest Rates Must Be Reduced
• More State Protections

When you’re worried about foreclosure, you have three main options for keeping your house:

Negotiating with your lender. That might seem impossible, but most lenders actually want to avoid foreclosures, too (they’re expensive). And you’ve got a free source of help: nonprofit housing counseling agencies. These agencies are dedicated to helping you work something out and head off foreclosure. They can explain your options, negotiate with your lender, and do a lot for your peace of mind.

Filing for bankruptcy. If you can’t work out an agreement that will let you stay in the house under certain conditions—and you don’t have the wherewithal to reinstate your mortgage under your state’s law (see Ch. 2)—your next step is to explore filing for Chapter 13 or Chapter 7 bankruptcy. Chapter 13 can give you time to make up your missed payments and might lower your other secured debt payments (your car note or a short-term home equity loan, for example). Chapter 7 bankruptcy can quickly do away with credit card and other unsecured debt and free up income to use toward your mortgage payments, thereby allowing you to keep your home.

Challenging the foreclosure in court. Finally, you may be able to successfully challenge the foreclosure in court because of irregularities in the paperwork or the procedures followed by the foreclosing party. You will likely take this route only if your negotiations with the lender have failed.

This chapter concentrates on the first approach, negotiating with your lender. Later chapters cover filing for bankruptcy and fighting foreclosure in court.