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What options are available to prevent foreclosure?

Long Island residents can fall behind on their various financial obligations from time to time. These obligations often include mortgage payments, which can result in foreclosure proceedings. The reasons for missing mortgage payments may include an illness, a lost job or increased expenses. When a homeowner fails to make two or three mortgage payments in a row, the financial lender may institute a foreclosure on their home. What exactly is foreclosure and what options do homeowners have in these situations?

Foreclosure is the process under which a creditor repossesses and sells the home of a delinquent borrower. The proceeds of the sale are then used to pay back the outstanding balance on the mortgage and any legal expenses incurred in enforcing this right. As stated above, a lender typically won't begin the foreclosure process until the homeowner is a couple of months behind on their payments, meaning that the borrower should have time to assess their situation and choose the best solution to remedy their financial issues. Some of the options available include a short sale on the home or requesting forbearance on the mortgage. However, if the lender refuses to work with the homeowner, the most likely solution is often bankruptcy.

If a homeowner files for Chapter 7 or 13 bankruptcy, the court will issue an Order for Relief, which requires all creditors to immediately stop collection attempts. This stay on collections can delay a foreclosure for an additional three to four months. Chapter 13 bankruptcy allows homeowners to devise a payment plan to meet their current and overdue payments to creditors. Additionally, borrowers are often able to discharge additional mortgages through this process. Chapter 7 bankruptcy, on the other hand, will completely remove the mortgage debt, but will not remove the lien or prevent foreclosure.

Each homeowner that falls behind on their mortgage payments is subject to unique circumstances. They must decide which foreclosure relief solution is best for them. A bankruptcy attorney can assist a homeowner through this process.

Source: FindLaw, "Facing Foreclosure? How Bankruptcy Can Help," accessed on July 12, 2015

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