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Bankruptcy Law Blog

Thursday, February 25, 2021

5 Possible Alternatives to Foreclosure

Being delinquent on your mortgage is a scary time. You’re faced with potentially losing your home at a time when stability is what you need. In 2008, U.S. mortgage foreclosures spiked as a result of overextended lending and poor credit standards. Currently, millions of Americans are struggling to make their mortgage payments due to the impacts of COVID-19.

Alternatives to Foreclosure

If you’re behind on your mortgage payments and facing foreclosure, there are several potential options to avoid foreclosure and protect your future.

1. Sell the property.

If you are behind on mortgage payments and owe less on the home than it is worth, you can sell the home, repay the loan in full, and keep the difference to help rebalance your finances.

2. Rent the property.

In a situation where the rental income would cover the mortgage repayment and you have an alternative place to live, you can avoid foreclosure by continuing to pay the mortgage via the rental income. Similarly, you can rent out a room or area of your home or property to help supplement your income while remaining in the home to help pay the mortgage payment.

3. Negotiating a workout agreement with your lender.

In most situations, the lender does not want to foreclose. The costs of foreclosure are high. Many lenders are likely to find themselves in a situation where they are losing money by attempting to foreclosure and sell. Rather than foreclose, many banks are happy to consider workout agreements. A workout agreement is a mutual agreement between the debtor and lender establishing new covenants and repayment terms. For many individuals who are behind on their mortgage payments, a simple call to your lender or mortgage servicer can provide the relief that you need.

4. Short sale.

If you owe more on the home than it’s worth, the lender may agree to a short sell. A short sell is a sale of the property for less than the value of the mortgage. While the bank loses money on the difference in the sale price and outstanding mortgage, it may still agree as this could be less costly to them than foreclosing. In doing so, this can free you from any ongoing obligations.

5. Deed in lieu of foreclosure.

As noted above, foreclosure can be a costly endeavor for a lender. Rather than spend the money on the legal fees of a foreclosure, the lender may be willing to accept a deed in lieu of foreclosure. A deed in lieu of foreclosure transfers the property from the debtor to the lender to satisfy the outstanding debt. The process can reduce the stress of foreclosure on both parties, and will result in the lender discharging any outstanding debt secured by the property.

Bankruptcy and Foreclosure Attorney in Mobile, Alabama

At Padgett & Robertson, we help families in the Mobile area navigate through financial distress. In these unprecedented times, we are working harder than ever to protect families from the stress caused by financial difficulty. In our experience, foreclosures have lasting psychological and financial consequences and homeowners should do all that they can to avoid this damage. If you are concerned about foreclosure or have questions, please contact us today to schedule a free consultation.


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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”