What You Need to Know About Chapter 13 Bankruptcy and Your Credit Report How does filing Chapter 13 affect credit scores? When considering Chapter 13 Bankruptcy due to overwhelming debt, this question often arises. Filing Chapter 13 bankruptcy allows people with regular income to reorganize their obligations and create a three to five years for repayment plans. While Chapter 13’s goal is debt relief, it can hurt one’s credit score. A Portland bankruptcy lawyer provides guidance on how Chapter 13 can affect you. Consulting with Michael D. O’Brien and Associates, P.C., can help you make decisions about your finances. In…
5 Tips to Avoid Foreclosure
5 Quick Tips to Avoid Foreclosure
Few words that start with F are as worrisome as the word “foreclosure.” There is nothing gentle or happy about that word but the reality is that good honest people sometimes find themselves facing foreclosure. Whether you fall behind because of a job loss, a medical situation, providing assistance to a family member in need…the causes vary but the risk of losing your home to foreclosure can be overwhelming.
In this article, we are going to break down what foreclosure is and provide five tips to help avoid the problem.
Tip #1: Obtain A Lawyer
Tip #1: Obtain A Lawyer
With a lawyer on the other side, you should strongly consider having a lawyer on your side. Many people try to do this on their own and hire a lawyer too late. The later you get started, the fewer options you have.
Because foreclosure is a legal process, there are strict rules that must be followed.
In Oregon, the first of these rules, applicable to most but not all lenders, is they must obtain a certificate of completion from Oregon’s Foreclosure Avoidance Program or OFAP for short. We did a video explaining OFAP in more detail and I’ll link it below.
That is only the first of many rules. Next, there are two different legal paths to foreclose that can be followed in Oregon. These will either be a judicial foreclosure – meaning a lawsuit in court, or a nonjudicial foreclosure, which is an out-of-court process. I’ve done a video explaining each of these processes as well and will include those links below.
There is an awful lot of info on the internet about challenging foreclosures and we go into some of that in our video on the specific types of foreclosure.
But this process is governed by state law so whatever the internet says about any state other than Oregon is NOT going to apply here.
OK, now what do you do if you have fallen behind on your mortgage payments but no foreclosure has been filed yet?
Tip #2: Be Honest.
Tip #2: Be Honest.
Be honest with yourself about your priorities and finances. I have talked with so many people over the years who cannot bear the thought of losing their house. They work two or three jobs, never see their family, when they do see their spouse or kids they’re so tired or stressed out that tempers flare. It’s a house NOT your home. Re-focus on your family and find a new home – maybe you have to rent for a while to get back on your feet, but so what!
Maybe your kids have graduated and it’s time to downsize anyway. The point is to control your own narrative. Instead of feeling as if you’re losing your house, reframe and see that you have an opportunity to start a new adventure in a new home.
Be honest with your finances. If the mortgage default has grown so large or the home is not worth what is owed on it, you may be better off taking that pot of money needed to get current and putting it as a down payment on a future home.
Tip #3: Communicate
Communicate with the lender – generally, no foreclosure is commenced until you are four months behind on your payments. Once you fall four months behind, the lender may reject any payments that don’t bring you totally current.
ASIDE – doesn’t that seem crazy? You can afford to make one payment but they want all four and refuse to accept your one payment? Crazy but true.
So if you have slipped a little, do everything you can to NOT miss that fourth payment. Don’t forget how mortgage payments are applied and review my video on that topic if you haven’t already. If you anticipate the cash flow problem to extend beyond four months, request a loan modification packet, or a forbearance agreement, NOW.
Unless your mortgage loan is privately owned, the loan servicer will have some sort of loss mitigation option. Take detailed notes of who you spoke with, what they said, and how you responded. If you don’t successfully ward off foreclosure, then these notes may help you defend that action.
Tip #4: Consider Refinance or Sale
Consider a refinance, maybe with a co-borrower, if your credit is bruised or your income is down. It may be tough to ask family or close friends for assistance, but they are going to know anyway if you lose your house to foreclosure.
You can also consider selling the home on your own. Even after a foreclosure has been started against you, you still have the right to voluntarily sell your property. Many people ask me about this so let’s say it again –
Yes, you can still voluntarily sell your property!
The timing may be tight because the foreclosure is typically not put on hold while you sell, but it is almost always way better to sell yourself than to be foreclosed.
Tip #5: Explore Bankruptcy.
Bankruptcy can be a scary process but compared to a foreclosure? It’s really all about control. In foreclosure, the lender controls the process and you are on defense. With Bankruptcy, you take control back over the process, stop the foreclosure dead in its tracks and give yourself some time to deal with the situation.
With a chapter 13 bankruptcy, the Court will force your lender to give you three to five years to get caught up on your payments while staying current.
We generally advise bankruptcy as a last option, but sometimes people wait too long and the payment default gets so large that they don’t have the income to get current, even over five years.
To recap what we’ve just covered, my 5 main tips for you if you are facing foreclosure are:
- Obtain a Lawyer
- Be honest about your priorities & finances
- Communicate and take detailed notes
- Consider Refinancing or Selling the property yourself
- Explore Bankruptcy protection
Consult a Portland Foreclosure Defense Attorney
If you’re interested to know more about how you can avoid foreclosure, don’t hesitate to consult with a Portland foreclosure defense attorney. Our Oregon law firm will be more than glad to assist you.
Our Oregon Attorneys are here to help!