The number of households facing foreclosure increases daily. If the threat of foreclosure is a reality, you should seek alternative solutions wherever possible. Several options are available to the homeowner which preserves their financial integrity while allowing them to save their homes as well. The comprehension of these options are essential in determining which option is right for you.

• Mitigation of Terms
• Deed in Lieu of Foreclosure
• Selling the Property
• Chapter 7 Bankruptcy
• Chapter 13 Bankruptcy
• Short Sale

Mitigation of Terms
For those interested in keeping their homes, as well as their financial integrity intact, Mitigation of Terms may be the best option. It provides a temporary reprieve which lowers the monthly mortgage payment a substantial amount by lowering the interest rate to 3 or 4 percent. This type of loan modification is easily arranged with the mortgage lender and can last for a period of six months. After this time, the amount of the mortgage that went unpaid is tacked onto the back of the loan. Be aware that the loan will be recast at the end of the modification term and there is a possibility that the mortgage payment could then be higher than what it was prior to the modification. 

Deed in Lieu of Foreclosure
The lender will sometimes take back the deed as satisfaction of the mortgage. If you are insolvent, and show no absolute ability to repay through a deficiency judgement, the lender will sometimes accept this option. This saves them the time and costs of going through with a foreclosure. However, deed in lieu of foreclosure is dependent upon many factors, including the amount of equity that is held in the property. If you have a second mortgage, then a deed in lieu will not be an option.

Sell the Property
If you can manage to sell the property outright, then this would be the most beneficial, and also, a profitable alternative to a foreclosure. This option is contingent upon the amount of equity built into the home and/or fair market value. Please be advised that this could be a lengthy process, as sales in a soft market may take as long as 8-9 months to receive a reasonable offer. The seller would also be responsible for the real estate commissions associated with the sale.

Chapter 7 Bankruptcy
If you cannot afford your house, then Chapter 7 Bankruptcy may be the option. While this form of bankruptcy will not keep you from losing your home, it will absolve many of your other unsecured debts, creating some flexibility in your finances. One of the most essential benefits of Chapter 7 is that it protects the homeowner from incurring the legal ramifications of a deficiency judgment.

Chapter 13 Bankruptcy
This chapter of the bankruptcy law offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 protection.

Short Sale
Many homeowners are finding relief through short sales. The short sale provides a beneficial solution for all parties. The lender receives more money than they would through a foreclosure, and the homeowner gets to walk away with their financial integrity intact. A short sale is a complex process and it is advised that you seek the help of an attorney and/or cpa for this service, as extenuating legalities may be involved.