Foreclosure Signs (Photo credit: ImageMD)
Mortgage foreclosure is one of the biggest fear of homeowners today. But part of the battle in dealing with it is to know how mortgage foreclosure comes about and what can be done about it.
1. What is foreclosure?
First of all, while it’s often associated with bankruptcy, in particular with bankruptcy 13, or chapter 13 as it is known, it isn’t the same as declaring bankruptcy. In fact, with the right legal advice and protection, people can declare themselves bankrupt and it won’t affect their ownership of their house.
So what is it? Well it’s part of a process followed once a party has defaulted on a loan (usually for a property) to recover the money owed by the defaulter. It’s important to note that it’s the last part of the process and it is only the last resort.
2. Can we Stop Foreclosure?
Yes. There is a number of effective ways on how to protect yourself from mortgage foreclosure.
- Income protection. If you have a job at the moment and you’re not likely to get laid off for at least six months, then the first step is to sit down with a qualified person and work out how much insurance you’ll need to cover any costs, should you get laid off or have an injury at work. This type of insurance is very important, and many banks want to see it when mortgages are taken out. It is often facilitated by a home appraisal company. Make sure your insurance is all up to date and paid.
- Good legal advice. The next part of the process is to make sure you’re getting the right legal advice. Foreclosure is a legal process and it’s important to make sure that due process is followed. Failure to do so can result in disaster for the one that doesn’t (even the banks have been known to lose for not following due process). By getting the right legal advice, you make sure that every part of the process is followed and increase the chance of being able to keep your house, giving you more time to follow through with the next point.
- Tell the creditor your situation. By telling them well before everything becomes an issue (as soon as you know there are problems paying the bills) and the steps you’ve taken to remedy the situation, you’ll get a better response and they’ll be willing to work with you. It also means that they know they will have to follow due process too.
- Find the money for the payments. This might mean getting an extra job, selling some other assets like the second car or a boat, but finding the money to make the payments is the key. All the creditor wants is their money back.
These are just a few of the steps to take to protect yourself against foreclosure. By following these, the chances of coming through the process and keeping the family home are greatly increased.