My mortgage is three months behind. Do I have to file bankruptcy?
By Doreen M
For a homeowner who has fallen behind on their mortgage, they may think the only alternative to foreclosure is bankruptcy. However, banks have no real appetite to foreclose on a property due in large part to the time and expense that is involved in the process. Borrowers may seek remedies through the bankruptcy court as a way of forestalling bankruptcy but in reality, this is not their only option and in many cases, may not be their best option.
There may be opportunities for borrowers to work with their lender to avoid foreclosure without filing bankruptcy. Some of these options include:
Deed in Lieu - Some lenders will agree to accept the deed in lieu of foreclosure allowing the homeowner to avoid bankruptcy. Before accepting this option, it is important to negotiate with the lender how this will be reported on your credit report.
Forbearance - Borrowers may be able to negotiate with their lender for a forbearance agreement which would allow them to reduce or eliminate mortgage payments for a specific period of time. Generally, if these agreements are accepted, they would be for 90 days or less.
Repayment options - Lenders may be willing to add your late payments to your existing payments until you are caught up. This option is typically best when a homeowner has fallen behind due to being laid off and have returned to work.
Short sale - For a homeowner, a short sale may be a good alternative to bankruptcy. This option is used when the value of the home exceeds the outstanding mortgage amount. The mortgage lender does have to agree to accept the sale price before the transaction may be complete.
These are a few of the alternatives to bankruptcy that can help a homeowner who is facing foreclosure. Each option has advantages and disadvantages. Keep in mind there are also programs offered through lenders including programs that may be offered by the government at various times to help homeowners who are facing foreclosure.
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My mortgage is three months behind. Do I have to file bankruptcy?
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