How To Avoid Foreclosure

By: Jon Henshaw, M.A.

The looming possibility of foreclosure can be a nightmare come true for homeowners. It usually happens after a job has been lost for an extended period of time, or after a family has become financially over-extended from hospital bills or careless spending. Fortunately, there are many ways for homeowners to avoid foreclosure.

It's important for homeowners to try to avoid foreclosure. HUD's foreclosure website states:

Both foreclosures and deficiency judgments could seriously affect your ability to qualify for credit in the future. So you should avoid foreclosure if possible.

The HUD website also offers some good ideas for what homeowners should do when they find themselves in a position of not being able to pay their mortgage. Some of those ideas include not ignoring letters from your lender, staying in your home for the time being (not abandoning it), and contacting a HUD-approved housing counseling agency.

Many options exist to help homeowners avoid foreclosure. The Illinois Legal Aid, part of the Illinois Institute of Technology, has outlined eight options to avoid foreclosure. They include:

  1. Reinstatement
  2. Repayment Plan
  3. Redemption
  4. Home Sale/Short Payoff
  5. Refinance
  6. Loan Modification
  7. Bankruptcy
  8. Deed-in-Lieu of Foreclosure

eHow provides helpful steps to avoid foreclosure. Those steps include:

  1. Analyzing your financial situation
  2. Calling your lender
  3. Requesting a payment compromise
  4. Realizing that any compromise is a temporary fix
  5. Make plans to remedy your situation
  6. Stay in touch with your lender throughout the process

Janet Wickell, of, offers this excellent parting advice:

If your home loan is past due, your other obligations probably are too. A nonprofit credit counseling agency might be able to help you work with your creditors to reduce your monthly payments by lowering interest rates or extending repayment periods.

The key word here is nonprofit. Steer clear of companies that promise you quick, easy results for all of your credit problems--if you pay them a large fee. You know better--that's not how it works in the real world. The National Foundation for Credit Counseling is a good place to start.

Many options exist for avoiding foreclosure, and all of them should be exercised before settling on foreclosure as your only option.

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