When is it Too Late to Stop Foreclosure

When is it Too Late to Stop Foreclosure?

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Financial catastrophes often leave people feeling distraught, agitated, angry, and depressed. Foreclosure is one of the worst because it means the potential loss of your home. A lot of homeowners, when they face this situation, are in shock, denial, or just plain afraid, and they often hide from the issue, when what is needed is immediate action.

If you’re currently facing foreclosure, get with your mortgage lender immediately to discuss options. Foreclosure happens when you fall behind in monthly payments and default on the loan. The lender or bank then has the right to foreclose or seize the property to sell it to recover their money.

Most lenders understand financial hardship, and if you talk with them, arrangements can be made to delay proceedings. However, if you ignore the situation and don’t speak with your lender, and you wait till the last minute to stop a foreclosure, you limit your options and the only ones left are more severe.

But at what point is it too late to stop foreclosure? When is it too late for you to do anything to save your house, and you should sell instead of keep trying?

How the Foreclosure Process Works

The home foreclosure process varies by state and lender. Every state allows judicial foreclosure, so proceedings take place in the court system, but take several months, sometimes even years, to complete.

Nonjudicial foreclosure (or Power of Sale) is available in some states and does not go through the court. Rather the lender handles the proceedings over a course of 60 to 90 days.

Step-by-Step Foreclosure Process

Step 1: You miss payments. After 3 months of missed payments, the lender issues you a Demand Letter or Notice to Accelerate, giving you 30 days to bring your loan current. That period of 30 days is known as pre-foreclosure, and if you fail to pay, the lender begins official proceedings.

Step 2: Foreclosure proceedings begin. The lender’s attorney files Notice of Default with the foreclosure court, and you have 20 to 30 days to respond.

Step 3: Notice of Sale is issued, and the foreclosure sale is scheduled.

Step 4: Foreclosure auction. The property is sold to the highest bidder, and you are served with an eviction notice. You may also be charged with a deficiency judgment to reimburse the outstanding balance that remains post sale.

Redemption Period

Some states give you a chance to reclaim your house after the public auction. This redemption period is temporary and depends on your state and whether foreclosure is judicial or nonjudicial. If you hope to redeem your property, you’ll have to pay the mortgage, all late fees and foreclosure costs.

Honestly though, the date of auction, and the moment the house is sold with the court’s approval is when it’s too late to stop foreclosure because it’s a done deal. You should research the legal process and speak with a foreclosure attorney to better understand your options before the date of sale.

how to stop foreclosure calculating debt to save house How to Stop Foreclosure Proceedings

Anyone who knows they’re going to miss a payment should speak to their lender right away to discuss options. BUT in the event a homeowner does not take immediate action, and they wait till proceedings start, there are still ways to bring things to a halt.

File Bankruptcy

Declaring bankruptcy is a legal process by which you seek relief for your accumulated debts. There are two types of bankruptcy that a homeowner can file in this situation:

  • Chapter 7 Bankruptcy – sells assets to pay off debts
  • Chapter 13 Bankruptcy – restructures debt into a repayment plan

Both chapters issue an “automatic stay”, prohibiting creditors from pursuing collection efforts till the stay is lifted.

Chapter 7 lasts only a few months, while Chapter 13 can last 3 to 5 years. Between the two, Chapter 13 is the better option, if you want to save your home and need more time paying down your financial situation.

Bankruptcy is a difficult, costly process and has its consequences, including:

  • Severe damage to your credit score
  • A derogatory mark on your credit report for 7 years
  • Does not discharge all forms of debt
  • Securing new loans or refinancing will be nearly impossible for 7 years
  • Obtaining new credit cards will be difficult after the fact
  • High deposits and high rates on new utilities, including phone plans
  • Loss of job opportunities that require credit verification
  • You’re responsible for the filing fee ($300+)

Its advantages, however, include:

  • Delaying foreclosure temporarily, up to the date of sale
  • Strips second and third mortgages
  • Discharges non-priority, unsecured debts
  • Stops eviction

Bankruptcy laws vary by state, so you may want to speak with a bankruptcy attorney to better understand your options before filing.

Loan Modification

A loan modification is a change to the existing terms of your mortgage. The change can be an interest rate reduction, time extended for repayment, a different loan type, or a combination of all three. Your hopeful outcome is a lower monthly payment.

This option does not always work and has disadvantages:

  • Lower monthly payment, BUT you’ll owe more money overall if term is extended
  • New amount due may be more than the property is worth
  • Processing and legal fees, late fees and back taxes are added on
  • Any principal portion the lender writes off is taxable income
  • Your credit score takes a hit if the lender reports the modification as a “debt settlement”

File a Lawsuit

If it’s nonjudicial, you can file a lawsuit against the lender. Also called mortgage litigation, you can claim one of the following scenarios:

  • Mortgage terms are unfair
  • Trustee failed to follow state procedure
  • Lender made an error
  • Bank cannot provide documentation proving they own the mortgage

Understand, you will lose money in legal fees, and you’ll need the right attorney to help prove your version of events to the court. Most cases never even make it to trial.

Deed in Lieu of Foreclosure Deed in Lieu of Foreclosure

If you want to walk away from the problem entirely, you can always transfer the deed to the property to the lender. To put it simply, you’ll forfeit your claim to the house and surrender your equity in it in exchange for mortgage relief.

The only time to consider a deed in lieu is at the very last minute, after you’ve exhausted all possible alternatives. It’ll still leave a negative mark in your credit report, and you may have to pay taxes on the forgiven debt.

Sell the House

Selling may seem extreme but often it’s the best way to avoid your situation. How you sell depends on how much time is left before the auction date. Chances are, you’ll want to sell to a cash buyer who can purchase quickly, with no lender approval delays. By selling to a cash buyer, who oftentimes is a real estate investor, you can pay back the mortgage company, avoid having foreclosure in your credit report, and be free and clear of the issue. 

Sometimes the only way to do this is through a short sale, which is more common during a Buyer’s Market and underwater situations, when your mortgage is actually more than your house’s current market value.

A short sale is when a borrower sells their mortgaged property for less than what they owe the lender. The lender must agree to and approve the sale. Any proceeds left over you can either pocket or use to settle other debts.

So there’s no misunderstanding, short selling still hurts your credit but is easier to recover from than the alternative. A short sale stays on your record for a period of 2 years, while foreclosure stays with you for up to 7 years and causes a significant decrease in points. Plus you may have to pay taxes for the forgiven amount.

How to Sell a House in 7 Days

A home foreclosed by a lending institution is too late to save once it sells at auction. Lenders often prefer not to proceed with a foreclosed property because it costs them money. So a pitch to sell might bring things to a temporary halt.

At SolidOffers, we know trusted investors who can pay cash for a property “as-is” – no repairs or renovations necessary. They have experience in speaking with lenders and sometimes have their attorney negotiate the situation. Oftentimes, investors will also cover closing costs and additional lender fees, clearing you of any foreclosure or house loan related debt. Better still, because they can prove to have the available funds in hand, mortgage servicers are willing to give more time, and many investors can close in 7 days.

What has been stated in this article does not constitute legal advice. Real estate law and foreclosure law differs between states, and we recommend you get advice from a foreclosure attorney or bankruptcy lawyer or other professional to determine your best option to avoid foreclosure.

Does Bankruptcy stop foreclosure

Does Bankruptcy Stop Foreclosure?

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No one wants to lose their house, but when you fall behind on your mortgage payments, and therefore default on your loan, the lender has the right to foreclose the mortgaged property to recover their money.

Filing bankruptcy is one option that stops foreclosure at the last minute, but it’s not necessarily the best option. Bankruptcy is a grueling, tedious process that costs money and has its own set of consequences, and if it does not pan out well, you can still find yourself facing foreclosure. BUT if all goes well, you’ll find some debt relief and (hopefully) bring your loan balance current, and thus keep your house.

So, can bankruptcy stop foreclosure? Yes, if it’s done right, and the house isn’t sold yet, filing for bankruptcy can stop (or at least delay) foreclosure and help you save your home.

What is Bankruptcy?

Bankruptcy is a legal process through which people who cannot repay their debts seek debt relief. Relief does not necessarily mean those debts are canceled. Instead, the debtor’s assets are measured and sold to repay a portion of the outstanding debts, OR a repayment plan is put in place, so the debtor can pay back what they owe overtime.

The bankruptcy process starts when you file a petition. Depending on what type of bankruptcy you file – Chapter 7 or Chapter 13 bankruptcy being the most common to prevent foreclosure, an “automatic stay” is granted, so creditors cannot pursue collection efforts against you. The automatic stay also puts a stop to foreclosure proceedings.

You’re assigned a bankruptcy case number and then a bankruptcy trustee. The trustee represents your estate and is responsible for ensuring that all collectors get paid, whether it’s with cash from selling off your assets or via a repayment plan.

What is Chapter 7 Bankruptcy?

Chapter 7 (or liquidation bankruptcy) liquidates nonexempt assets to pay past due payments over a course of 3 to 4 months. Assets that are not exempt from the bankruptcy process include the following:

  • Stocks and bonds
  • Second properties
  • Second vehicles
  • Watercraft
  • Heirlooms and antiques
  • Jewelry (beyond a specified value)

Property or assets that are exempt from the process include:

  • Furniture
  • Appliances
  • Clothing
  • Pensions
  • Social Security
  • Unemployment Benefits
  • A portion of unpaid earned wages

Is my House Exempt from Chapter 7 Bankruptcy?

Depending on how much equity you have in it, your primary residence could be exempt from the Chapter 7 bankruptcy filing. You’ll have to discuss it over with the trustee.

What is Chapter 13 Bankruptcy?

Chapter 13 (or reorganization bankruptcy) is also called a wage earner’s plan because you follow a 3 to 5 year plan to repay collectors. You provide the trustee a list of creditors, total debt owed, and total monthly income, and monthly expenses. The trustee then creates a plan, so you can pay off arrearages, including missed mortgage payments and late fees, and thus (hopefully) bring your mortgage balance current.

First and Second Mortgages

The goal of Chapter 13 bankruptcy is to help you play catch up with a first mortgage. Should you, however, have a second (or even a third) mortgage, but your house is worth less than what you owe on the first, the second and third can be “stripped.” The junior mortgages become unsecured dues, and thus can be eliminated with a discharge.

secured debt vs unsecured debt credit cards What is Secured Debt vs Unsecured Debt?

These terms are common when discussing bankruptcy, and they’re easy to confuse.

Secured: a line of credit that’s secured by an asset. The best example is your mortgage because you put up the house as collateral, and in the event you default, the lender can foreclose and sell the property to recover their money. Additional examples include car loans or secured credit cards.

Unsecured: a line of credit that has no collateral backing, like credit card charges, student loans, child support, and personal loans.

Between Chapter 7 and Chapter 13, which is Going to Stop the Foreclosure Sale?

Both types of bankruptcy will stop the foreclosure sale dead in its tracks, BUT Chapter 13 bankruptcy is the better of the two if you want to save your house.

Chapter 7 temporarily stops foreclosure (for 3 to 4 months), and that’s only if the lender does not file a motion to lift the automatic stay with the bankruptcy court. It discharges other debts (e.g., credit cards, medical bills, and personal loans) but not a lien on the property, and that’s just what a mortgage is – another type of lien.

Chapter 13, on the other hand, creates a 3-to-5-year repayment plan, which you, the trustee, and lender will hammer out and agree upon. So long as you do not miss a monthly payment, you’ll clear your debt, including past dues, interest, and penalties, and catch up on missed payments.

You can consult a bankruptcy attorney to evaluate your situation and guide you in choosing a solution for your financial problems.

How long will Bankruptcy Delay the Foreclosure Process?

Bankruptcy can delay the foreclosure process by a few months or, if you establish a plan, a few years. However, as we alighted to before, the mortgage lender can file a motion with bankruptcy courts to lift the automatic stay to proceed with the foreclosure sale. A motion to lift the stay is more common with Chapter 13 than Chapter 7, because a lender may not want to wait 60 months to recover their money.

You can fight the lender’s motion, but you’ll have to prove the equity is sufficient to repay the loan, so the lender is protected from financial loss, and also that you can bring the loan balance current, if given time, and a plan is approved.

Pros and Cons of Filing for Bankruptcy

The truth is, when you file bankruptcy, there are serious consequences, and it’s up to you to decide if it’s worth it in the long run.

Pros of Filing for Bankruptcy

  • Stop the foreclosure process, preventing a foreclosure sale
  • Potential bankruptcy discharge
  • Delay other debt collection efforts and eviction

Cons of Filing for Bankruptcy

  • Need enough income to make monthly payment and pay arrearages
  • It’s expensive – filing fee and court fees included
  • Not all debts can be discharged
  • Severe impact to credit score

Yes, if you file for bankruptcy relief, your credit takes a big hit, as much as 200 points (if you had a good score to begin with). This derogatory mark will stay with you for 7 to 10 years, making it difficult or even impossible to apply for new lines of credit, refinancing, or jobs that ask for credit reports, and new utility contracts will be higher and ask for a safety deposit.

The Basics of Foreclosure

What is Foreclosure?

When you fail to make mortgage payments, and therefore default on the loan, and you make no arrangements to pay what you owe, foreclosure is the legal process by which the mortgage lender seizes the property to sell it to recover their money.

State laws vary on how foreclosure is done. All states allow for judicial foreclosure which goes through a court process. Other states permit nonjudicial foreclosure, but it only applies to deeds with power of sale clauses, in which case the lender can foreclose the property without a court order. The state court is not involved.

Does Bankruptcy Stop Foreclosure chapter 7 bankruptcy Deficiency Judgment

If the bank does not recover all their money at the foreclosure sale, they might move against you to collect the deficiency balance.

Credit Damage

Foreclosure is a serious mark against your credit. Your score will drop 100 to 160 points, and foreclosure will stay on your record for up to 7 years. Bad credit, as a result of foreclosure, makes it difficult to apply for new forms of credit, or to secure new housing or renting options, and can even hinder new job opportunities.

How Else Can I Avoid Foreclosure?

You can research other options to stop foreclosure – loan modification, reinstatement, refinance, etc. However, the easiest, fastest way to remove yourself from this situation is to sell the property before the foreclosure sale date.

We know selling is probably the last thing you want to hear, but unless you can come up with the money to make a lump sum payment to bring your loan current, it is the best option and saves your chances of buying another house.

Sell a House in Pre-Foreclosure to a Cash Buyer

Your best option, if you need to sell fast, is to sell to a real estate investor for cash, because:

  • No buyer lender mortgage approval is needed
  • No buyer lender appraisal approval is needed
  • No repairs or clean-ups are necessary
  • No fees or commissions
  • Many investors pay the closing costs
  • Guaranteed fast closing 

Most investors buy a house “as-is,” so it doesn’t matter if the house is old and outdated, damaged, or mid-renovation. An investor is happy to buy it. You can close in a few short days, return proceeds to the lender, and walk away from your problem property. Even better, some of our expert investors are able to take care of everything with the lender, and all you have to do is sign the title papers and move on.

Depending on the market, your equity and due mortgage amount, a short sale may be the only option left to you to get it sold in a timely manner to avoid foreclosure.

What is a Short Sale?

A short sale is the sale of real estate at a price that is less than the amount owed on a mortgage. The lender must agree to take less money and approve the buyer’s offer before you accept. You also want the lender to agree to forgive the deficient amount after sale.

This type of sale takes longer, but it has lender approval, so it stops the foreclosure process and turns it into a short sale process. 

A short sale still impacts your credit, but far less than a foreclosure or if you file bankruptcy. You’ll still lose points (up to 160), and the mark will be in your report for about 2 years, BUT it’ll be easier to recover your credit, with consistent payments.

What has been stated in this article does not constitute legal advice. Real estate law and bankruptcy law differs between states, and we recommend you get advice from a foreclosure attorney or bankruptcy lawyer or seek professional help to determine your best option to avoid foreclosure.

handshake house sale Pros and Cons of a Short Sale

Pros and Cons of a Short Sale

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When a homeowner is financially distressed and cannot pay their mortgage, their best option is to sell. A traditional listing takes too long. Even if a buyer showed immediate interest, they (and their lender) will request repairs. There is no time to restore the house, no time for negotiations. You need to sell fast and pay off the lender.

Home sellers in these situations often turn to a short sale. It is a better option than facing foreclosure. Let’s compare and discuss the advantages and disadvantages of a short sale.

Why You Should Avoid Foreclosure?

Foreclosure is when the lender takes possession of the mortgaged property because the borrower defaulted on mortgage payments. The lender will then try to sell the house to cover their losses.

The consequences of a voluntary foreclosure include:

  • Credit Impact: your credit score plummets as much as 160 points, and “foreclosure” stays on your credit report for up to seven years.


  • Housing Issues: it will be several years before you can buy another house, because a foreclosure discredits you with lenders.


  • Deficiency Judgement: there is a chance that if the lender sells the house for less than what you owe, you will be ordered to pay the difference.


  • Debt Relief Taxes: even if the deficiency is forgiven, the IRS views the canceled debt as taxable income.

What is a Short Sale?

A short sale is when a property owner at risk of default sells their property for less than the amount owed on the mortgage. The lender must approve the sale after being given collective documentation by the seller as to why it’s a good idea.

A short sale is actually a chance for a lender to get more money than if the property were to go to foreclosure auction. Once they receive your package, the short sale process takes more than 30 days to complete. If approved, and a buyer makes a good offer, the lender will issue a short sale approval letter.

Pros of a Short Sale

The advantages of a short sale include:

  • Avoiding foreclosure and being released from your mortgage obligation.


  • Recovering your credit score sooner.


  • Getting financial approval for another house more quickly.


  • The lender might pay the closing costs.

Cons of a Short Sale

The disadvantages of a short sale include:

  • More parties are involved in negotiations: the lender has a higher stake and must approve a buyer’s offer.


  • If there is more than one mortgage or lien against the property, all lienholders are involved in negotiations.


  • A buyer’s pre-approval for financing could expire before the lender approves their offer.


  • If the property is in bad condition, the buyer’s lender may not approve a loan to purchase.


  • A deficiency judgement could still be issued if the lender does not forgive the difference between the sale price and outstanding mortgage balance.


  • Your credit score will still take a hit, also as much as 160 points, and a short sale will stay on your credit report for up to seven years.

Short Sale versus Foreclosure: Credit Score

I have said here that both foreclosure and a short sale will hurt your credit score. So which is the lesser evil? The difference is:

  • With foreclosure, the entire unpaid loan amount, as of the date of foreclosure, is shown on your report.


  • With a short sale, the reported balance is the outstanding loan balance minus the sale amount received.

If the difference between these balances is significant, the negative impact will be less severe with a short sale.

Sell for Cash to an Investor Buyer

You can speed up a short sale by selling to a real estate investor. Investors pay cash for a property “as-is,” be it damaged, neglected, or vacant. They do not require traditional sale warranties, an appraisal or inspection. Forgoing these steps will save you time and headaches.

The investor pays 100% of closing costs and associated sale fees, saving you and the lender money. Furthermore, you and the lender choose the closing date, which can be in 15 days or less. You can offload the source of your financial distress, satisfy your debt, and start over with a new home.

solid offers How to sell house in pre-foreclosure or foreclosure

How to Avoid Foreclosure and a House Auction

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Life is full of ups and downs. Sometimes the job market is great, and other times we are left scrambling to make ends meet. For many homeowners, a downturn can mean coming face to face with pre-foreclosure and even foreclosure.

The good news for the distressed homeowner is that there are options. Before we can discuss which options are viable for you, you will first need to determine precisely how much you owe on the property and if any assistance is available from either the government or the mortgage provider.

Contact Your Lender

The best time to call your lender is before you start missing payments. This puts you in a much better position, and the mortgage provider may be able to offer you payment deferral or other assistance. At the very least, you will be able to establish precisely how much you owe and when you have to pay it. Collecting the facts is the first step towards resolution. 

Are you already in Pre-Foreclosure?

The term pre-foreclosure frightens many folks, but it does not mean your home is being taken away or sold out from under you. At least not yet. Pre-foreclosure means that you are behind on your mortgage payments and have received, or should have received, a Notice of Default for lack of payment. During pre-foreclosure, the lender will initiate the legal proceedings to repossess the property eventually. As long as you can pay what is owed during the pre-foreclosure period, then all legal proceedings cease, and you never have to face foreclosure. 

Even if you are unable to afford the back payments, there are many ways to avoid foreclosure. And, believe me, you want to avert foreclosure if at all possible. I’ll explain why before we delve into the various options available to you.

What a Foreclosure means for the Homeowner

Without taking evasive action, a house in pre-foreclosure will inevitably end in foreclosure. Here is what that means.

  • A court ruling gives the lender full ownership of the property.
  • The occupants of the property will be forcibly evicted from the premises.
  • The lender will sell the property, generally at auction, and keep all proceeds of the sale.

Unfortunately, the consequences do not end there.

  • The foreclosure will go on your permanent record.
  • You will be unable to qualify for a loan even years after.
  • Your credit score will plummet.
  • You will be ineligible for relocation assistance.
  • The foreclosure will turn up on rental and employment background checks.

For these reasons, not to mention the stress and psychological trauma, foreclosure and the house sale at auction are a very last resort. Thankfully, there are ways to avoid it.

Option A: Find the Funds and Make the Payments

This is, by far, the best outcome. It certainly won’t be easy, but there are ways to raise the money necessary to stave off foreclosure. Doing so will enable you to retain ownership and residency of your property while protecting your credit and generating equity.

Here are a few methods to consider (the more you can apply, the better):

  • Delve into your budget and cut out any non-essentials. 
  • Consider getting a second job or renting out any unused bedrooms for supplementary income.
  • Investigate a loan modification to lower your monthly payments.
  • Some lenders will offer forbearance, meaning you won’t have to make mortgage payments (or at least not all of it) for an agreed-upon time. This can provide the time needed to get back on your feet and save up money to make the back payments.

These options are great for those going through a temporary rough patch and need some time to catch back up. If, however, you see no chance of alleviating your financial difficulty in the near future, other options may serve you better.

Option B: Equity in Your House? Sell Quickly

Why quickly? Because, depending on what stage of the foreclosure process you are in, you may not have much time before the lender takes ownership of the property, and you are left with nothing. 

This option works best if you have equity in your house, meaning your mortgage is less than the property is worth. Selling your house under these circumstances will enable you to pay off the mortgage (thereby avoiding foreclosure), save your credit score, keep a foreclosure off your record, and let you keep any money left over from the sale to start fresh.  

Here are your two best options to sell and walk away with cash in your pocket:

  1. Hire a Real Estate Agent. Although you may net a little more this way, a traditional sale typically takes months. This time factor makes it risky since that is time you may not have. Not to mention the house’s risk falling out of escrow, the expenses involved while the house is on the market (taxes, insurance, utilities, etc.), or the money that is so often needed for required repairs during a traditional sale, money you may not have.
  2. Sell quickly to an investor for cash. By using a trusted network of investors, such as offered by SolidOffers.com, you can have a cash offer on your house within 24 hours. A cash buy also means a fast close (usually within 7-14 days, so the bank won’t have a chance to foreclose). You won’t have to pay any real estate commissions, you can pick your moving day, and a cash buyer will often cover all the closing costs. You may not net as much this way, but you will be able to walk away with money in your pocket (instead of in the lender’s) while avoiding the long-term consequence of a foreclosure. 

If you are pressed for time, selling your house quickly to a cash buyer is often your best route in avoiding foreclosure. Not everyone has equity in their property, though. So, what to do if you owe more on the mortgage than your house is currently worth?

Option C: Money out of Pocket

Of course, you could sell your house for less than the mortgage amount and then make up the difference yourself. This, of course, only works if you have the funds to do so. Even then, it is a reluctant option. Nobody wants to pay the bank out of pocket and receiving nothing from the sale of their house, but the consequences are far less severe than a foreclosure. For some, it may be their only option.

Option D: Short Sale

If you are upside down on your mortgage, you may want to consider a short sale. A short sale allows you to sell your house for less than you owe on it and, usually, walk away without debt. But there’s a catch. 

Since your lender will receive less than the mortgage balance, they first have to agree to a short sale. Not all lenders will, and those that do will have the final say on any offers. Your credit score may still dip, but not nearly as much as with a foreclosure. There are some other drawbacks too.

Since the lender is involved in the selling process, the escrow period can take months or years once a buyer is found. And there are no guarantees with a short sale. If the best offer is well below the mortgage balance, the lender may refuse the sale or try to hold you responsible for the difference (depending on the laws in your area).

A foreclosure is never easy, but fast action can save you time, money, and grief. Your best option is to make up your payments.

Your second-best option, if you have equity in your property, is a quick cash sale. Doing so will avert foreclosure while putting the remaining proceeds in your pocket instead of the lenders. And that, we can all agree, is where your money belongs.