The key to stopping forclosure starts with the timing of the initial debtor action. This may seem like a ridiculous thing this to even mention, but the most likely reason for someone losing their home may be they wait too long to repsond or never react at all. Contrary to popular belief there are dozens of ways to save a house from foreclosure. When starting from prior to missing a mortgage payment all methods in this article may potentially save the home. As the auction date comes closer options continually become unavaiable until only a bankruptcy remains. Below you will find many of the most common methods to avoid foreclosure. Most ways to stop a foreclosure come up as sub categories of these main groups:

Let's broadly define a workout as any arrangement negotiated with a creditor outside of the original terms of the loan. This method allows all parties to make the most of a bad situation and therefore it's favored over the other options when possible. A workout on property may take one of the following forms:

1. Short pay or Short refinance. In most situations people accomplish this through a refinance of the property facing foreclosure. Example: The debtor owes $100,000 on their mortgage with another $15,000 in arrearage and legal fees. Someone negotiates for the loan to be settled for $80,000 and arranges a new loan for $85,000 to cover paying off the original bank and all associated transaction fees. The debtor has now avoided the foreclosure and eliminated $30,000 of debt. Sometimes a friend, relative or investor buys or pays off the mortgage from the creditor at a discount
2. Modify the existing mortgage. In simple terms, the creditor, usually a bank, agrees to change the terms of the loan. Most often the changes are temporary. Reducing the interest rate, principal portions of payments, or extending the amortization in an effort to reduce overall payment obligations, remain the changes most acceptable to creditors. Unless the delinquency remains small with a loan at a local bank or the debtor has a nasty hardship under a government program this can be a tough plan to get through the creditor's guidelines.
3. Repayment plan. Easy to understand, easy for creditor acceptance. The debtor pays a portion of the arrearage and agrees to pay the rest in addition to the regular payment over a period of months. With proof of the income and the proper down payment most lenders will accept this type of plan all day. Expect half of the arrearage plus their legal fees get paid up front with a promise to pay the rest of the arrearage in addition to the regular payment within six months. Plans with less down and paid over a longer period of time can be negotiated by loss mitigation professionals.
4. Deed in lieu of foreclosure. Here the debtor gives the property back to the creditor usually in exchange for their forgiveness of potential deficiencies.
5. Short Sale. The property sells to a third party; the creditor accepts this price as full settlement of the debt.
6. Friendly Foreclosure. The creditor or a friendly third party that has bought the mortgage sells the property at foreclosure to clean the title of other lienholders. Later the property sells back to the debtor or another predetermined entity.
7. Repurchase after foreclosure. Just as it says, buy back a foreclosed property after the auction.
8. Forbearance. In exchange for money or the debtor taking some other action (perhaps listing the property with a realtor or making repairs) the creditor agrees to temporarily cease legal actions.
9. Baby-sitting. I made up this term for a situation I sometimes see; it's really a form of forbearance. A property owner, most times with investment property, can not pay the mortgage. The bank does not want to take title to the property, probably because of environmental, management or other liabilities. The property owner keeps title and "baby-sits" the property until one party or the other can execute another option.

Filing for Chapter 7 or Chapter 13 protection sometimes paves the best path for debtors to retain their houses and deal with their creditors. Advantages of bankruptcy include the debtor's ability to stop foreclosure without creditor acceptance and encompassing more than just the mortgage debt with a single action. If bankruptcy emerges as our first recommendation your personal circumstances must be well suited for this option, in most cases bankruptcy comes as a last resort.

In Chapter 7 all nonexempt assets are turned over to the bankruptcy trustee and debts discharged. Exemptions vary by state. In most cases the debtors possess so few assets that they may keep everything and have all of their debts wiped out completely. If a chapter 7 will not yield this result it may not be the best option. In Chapter 13 a plan outlines how the debtor will pay creditors over a three to five year period. Only a Chapter 13 can stop a creditor from foreclosing on a delinquent debtor over a period of years. Under a chapter 13 the court retains the right to scrutinize finances of the debtor for the life of the reorganization plan. For a Chapter 13 to work payments under the plan must be kept up or the court protection will evaporate and the house will go to foreclosure.

Borrow enough money on a new mortgage to pay off the balance on the old mortgage including arrearage and legal fees. This happens more often then one might guess. If the debtor has enough equity in the house bad credit will not stop them from getting a new loan.

It doesn't get easier than this, find out how much arrearage is owed and pay it in full. If a debtor could do this they probably wouldn't be reading this, but just in case, know it exists as an option. In fact, most state laws grant the home owner the absolute right to re-instate before the foreclosure and require that the bank accept the full re-instatement and stop the foreclosure.

Too often people refuse to examine this as an option. The problem may be the homeowner can not afford to stay where they are. If the debtor will not be able to keep the house in the long run it may not be advisable to throw a lot of money into a futile effort to save it for the short run. Any cash available may serve them better put towards a new place to live.

Nothing contained herein should be construed to constitute advice for your personal circumstances. This is intended as a peripheral exposure to the various options available, but by no means is this a comprehensive or exhaustive analysis of the bankruptcy laws or their alternatives. Whether or not you should file a Chapter 7, Chapter 13 or any bankruptcy, will vary depending on your personal circumstances and should only be undertaken after careful consideration, analysis and after consultation with an attorney experienced with such matters. These pages may contain information and rules peculiar to the Commonwealth of Massachusetts.