Consequences of going into foreclosure include losing the home, not seeing any profits at all from the county sheriff sale, having a scarred credit report with a full foreclosure showing for years, and having to explain to landlords afterwards that the homeowners failed to come to any kind of solution to resolve the foreclosure. This is not to mention having to move furniture where things break, get lost, get stolen, or need to be moved into storage. Thus, avoiding foreclosure is in every homeowner's best interests, if at all possible. But few foreclosure victims really know what to expect when facing foreclosure, how such processes as short sales and deficiency judgments work, and what options they could really qualify for, both in and out of the court system.

Adjustable Rate Mortgage Increases

If the homeowners have a mortgage that is going to reset in the next few months, then it is important to discover what the payment will be after it goes up. If it is affordable, then the entire situation might still be alright, if not as comfortable. But if the payment will be too high too foster a stable financial environment, then they will have to figure out another solution.

The best option is probably to examine the possibility of a refinance to prevent foreclosure first, especially if the mortgage is being paid on time now and the homeowners' credit is pretty good. Qualifying for a refinance in the midst of the current foreclosure crisis may not be as easy as it was a few years ago, but this is still an option that can help homeowners with stable incomes and decent credit to avoid the possibility of facing foreclosure down the road.

Voluntarily letting the property go into foreclosure should be the very last option, in the event that homeowners have tried everything else and just can not unload the property through a sale, short sale, or deed in lieu of foreclosure, and can not keep the property. It is almost never a good idea to start thinking of letting it go into foreclosure until the homeowners seriously can not afford the house anymore due to the increased payment.

Being Sued for a Deficiency after Foreclosure

The lender probably will not go after a deficiency by suing the former homeowners after the sheriff sale, unless they know that the foreclosure victims have a lot of liquid assets and went into foreclosure just to avoid paying some of their bills. Obviously, this is a rare occurrence, and if that is not the case, then pursuing the deficiency would most likely cost the bank more in time and money to sue after the foreclosure than they would ever be able to collect. Lenders almost never sue the homeowners after the house has been foreclosed, because they know there is little chance of recovering any of the judgment, and the bank will not want to act as a collection agency.

If the homeowners sell the property through a short sale, where the bank takes less than the total amount owed on the mortgage, there is no deficiency, and the loan is shown as paid in full on the credit report. The lender forgives the remaining amount of the debt that is not paid through the short sale, and can not sue for debt it has forgiven. The homeowners may have to pay taxes on the amount forgiven, though, since the IRS considers this to be income, as if the bank gives them the extra money to be used to pay off that portion of the mortgage. However, all homeowners should consult with a tax adviser or check the tax laws for the exemptions and ways around paying this, as there are protections for homeowners in foreclosure, of course.

Escaping the Foreclosure Process

During the legal foreclosure process that works its way through the courts, homeowners can request some assistance to work with their lender. If they can come up with some repayment plan with the lender and meet the requirements of the plan, then the loan will be out of foreclosure. To accomplish such a plan, even if the representatives from the lender turn it down directly with the foreclosure victims, the homeowners can request that the court give them a hearing in order to work out a solution with the lender. A settlement can be reached that keeps the house out of foreclosure, especially if there is enough income to pay extra every month to pay back the arrears.

Foreclosure is simply the legal process of attempting to sell a piece of real property in order to pay off a defaulted loan secured by that property. If the owners and the lender work on some other, mutually agreed-upon process, then they will hold off on continuing the foreclosure. Then, once the repayment plan, loan modification, or other solution is completed, the loan will not be in default for any money at all -- therefore, no legal grounding to pursue foreclosure.

Filing Bankruptcy to Stop a Sheriff Sale

Chapter 13 bankruptcy is a legal process that puts a hold on the collection of any debts until a court-ordered payment plan is established. It also puts collection activities on hold, such as any further foreclosure proceedings, for as long as the homeowners are making payments on the bankruptcy.

Because of the automatic stay of collection activities, filing a Chapter 13 bankruptcy will automatically put a hold on the foreclosure process, which is one reason it is used frequently to stop a sheriff sale. It does not save the house, but merely gives the homeowners another opportunity to repay the defaulted amounts and get the loan current again over time, under the protection of a court-ordered plan.

If the owners miss a bankruptcy payment, the house will go back into foreclosure at the point that it was left off. The lender does not have to start the whole process over again, and it will not hesitate to try any way possible to have the house removed from the bankruptcy at every point. Banks do not like having to deal with homeowners who have missed numerous mortgage payments and then file for bankruptcy, as they see little reason to believe the mortgage will ever be paid on time again.

There are a number of different aspects of the foreclosure process that homeowners need to be made aware of, if they have any real hope of understanding the process and making a stand against the loss of their homes. Without at least a basic understanding of how foreclosure works and what methods are commonly used to stop it, families may find themselves taken advantage of by their lenders, scam companies, or just miss out on valuable opportunities to save the home. Adjustable rate mortgages, deficiency judgments, court procedures, and bankruptcy to avoid foreclosure are just a few issues homeowners should begin to research when facing the possibility of having to save their homes from foreclosure.

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