How Can I Stop a Foreclosure in Alabama?

How Can I Stop a Foreclosure in Alabama?
According to the Midyear 2019 U.S. Foreclosure Market Report from Attom Data Solutions, new foreclosure activity is down again in 2019. Most metropolitan areas analyzed have enjoyed steady declines across the past several years and are currently at below pre-recession foreclosure rates. Unfortunately, Birmingham is an exception. New Birmingham, Alabama foreclosures in the first 6 month of 2019 were up 26% compared with pre-recession rates. 

In that environment, it’s no surprise that Alabamans are concerned about how to stop foreclosure--even those who have just fallen behind on their mortgage payments and aren’t yet facing foreclosure action.

The best response to a looming foreclosure action depends on a variety of factors, including the value of the home, your goals, your income, your monthly payments, your other expenses, how much equity you have in the property, and what other assets you have.

4 Ways to Stop Alabama Foreclosure

Catch up on past-due balances

If you want to keep your home, the first line of defense when your mortgage falls into delinquency is to attempt to catch up on past-due payments. In some cases, Hardest Hit Alabama may be able to provide funds to help bring a mortgage current. But, think carefully about the longer-term effects before you take drastic action to do so. For instance, before gutting retirement accounts or borrowing a chunk of money from a family member, take a realistic look at whether this one catch-up payment will solve your problems. The idea of losing your home is scary, especially if you have a family to provide for, but you can’t afford to let that fear drive your decision-making. If the reality of your budget is that a lump-sum payment of past-due amounts will only push the crisis back a few months, you may want to consider other options.

Apply for a loan modification

You may be able to work with your lender to make your mortgage more affordable through adjustments like reducing the past-due balance or lowering monthly payments. In some cases, a loan modification may be exactly what you need to get back on track and keep your home. But, be cautious about agreeing to terms you may not be able to keep up, and beware of scams. Unscrupulous individuals and companies know that foreclosure is a frightening experience, and many will prey on that fear. If you are seeking assistance with a loan modification, do your research and work only with an established, reputable program or local attorney. Importantly, be aware that the foreclosure process in Alabama is very short. You can lose your home within just a couple of months after a default on your mortgage payment occurs.

The left and right arms of a mortgage servicer don’t always know what the other is doing. One department may be working with you towards a modification while the other is moving full steam ahead with a foreclosure. You should not rely upon a modification until everything is in place and you have been provided with an assurance, in writing, that a foreclosure will not take place.  If you have been given a foreclosure sale date, schedule a consultation with a qualified attorney well in advance thereof so that the attorney has sufficient time to help you. - Bond & Botes attorney, Gail Donaldson

Consider a short sale or deed in lieu of foreclosure

A short sale or deed in lieu of foreclosure won’t save your home, but if you know that you can’t afford to keep up your mortgage payments, either can be a way to get out from under your loan on agreed terms. In a short sale, your lender agrees to the sale of your house for less than the outstanding mortgage balance, providing a solution for some people who are unable to sell their homes because they owe more than the property is worth. A deed in lieu of foreclosure is similar, but involves transferring the house to the lender rather than selling to a third party. These solutions make the process easier and less expensive for your lender, so you may be able to negotiate--for instance, if you agree to a deed in lieu of foreclosure, your lender may allow you to stay in the house for an agreed amount of time.

File Chapter 13 Bankruptcy

Chapter 13 bankruptcy won’t eliminate your past-due mortgage debt, but can restructure it into more manageable payments. Rather than paying the full past-due amount in a short period of time to avoid foreclosure, people in Chapter 13 spread the delinquent balance out across three to five years. A court order called “the automatic stay” freezes collection action right away when most Chapter 13 cases are filed. If a plan is confirmed and the homeowner stays current, the lender can’t take any further collection action on that past-due balance while the case is underway. Chapter 13 isn’t a solution for everyone, though--you must have sufficient funds to make monthly payments on past-due balances while keeping current mortgage payments up to date as they come due.

What about Chapter 7 Bankruptcy?

Though Chapter 7 bankruptcy is more popular than Chapter 13 bankruptcy, it is generally not a long-term solution for those facing foreclosure. There are, however, two ways Chapter 7 may help people on the verge of losing their homes. The first is that Chapter 7 filers also get the benefit of the automatic stay. It won’t prevent foreclosure for long, but can temporarily halt foreclosure. 

The other is that a person who loses a home to foreclosure may end up with a deficiency judgment--a court order making the former homeowner responsible for any remaining balance on the loan after the property is sold. Surrendering a home in Chapter 7 bankruptcy or filing for Chapter 7 after foreclosure can liberate the borrower from responsibility for any deficiency. 

The Best Way to Stop a Foreclosure in Alabama

There is no one right answer for everyone fighting foreclosure. But, there is one right first step: educating yourself about your rights and options. Some responses to impending foreclosure require quick action, so you can’t afford to delay. You can begin gathering information right now by scheduling a free consultation with one of the experienced bankruptcy attorneys at Bond & Botes.