How to Stop Foreclosure: 7 Ways to Avoid

Losing your home through foreclosure can be devastating, both financially and emotionally. While it may seem hopeless when you’ve fallen behind on payments, there are ways to stop foreclosure, no matter what stage of the process you are in.

What Is Foreclosure?

Foreclosure happens when the lender that holds your mortgage takes your home back, usually because you haven’t made a mortgage payment for three or more months. Every state has different foreclosure laws and processes, but in every state, there are steps a lender is required to take before a foreclosure is final, and you will be notified each step of the way.

The basic steps in the foreclosure process are:

1. Missed Payments. Federal law requires that lenders wait 120 days without receiving a payment before starting foreclosure proceedings. However, it’s likely they will send you letters and begin calling once 60-90 days have passed, warning that foreclosure is imminent.
2. Public Notice. Also called a “notice of default,” this is the official start to the foreclosure process. The lender notifies the court or county clerk that they are foreclosing on the property.
3. Notice of Sale. If the court finds that the lender can foreclose, a notice of sale is filed with the court or county setting the date the lender will auction the property. This can be anywhere from 120 days to several months from when the notice was filed in a judicial proceeding. It can be as soon as 30 days in a nonjudicial one.
4. The home is sold at auction with the bank hoping to recoup what it lost on the mortgage.
5. Post-foreclosure. Once the bank takes possession of the home, the owner who was foreclosed on is evicted.

7 Ways to Stop Foreclosure on Your Home

There are many ways to stop foreclosure, or at least slow it down. The first and most obvious is to make your payments on time and catch up if you fall behind.

If that’s not possible, whatever option you choose, the earlier you start, the more successful you will be at stopping foreclosure. Don’t be afraid to contact your lender and ask for help working something out. Foreclosures cost them money and they want to avoid it if at all possible.

Which option is right for you will depend on a lot of things, including how far behind you are, how much you owe on your mortgage, what your overall financial situation is, the terms of your mortgage, and even the location of your home and your age.

1. Don’t Ignore the Problem

Not being able to make your home payments may be overwhelming or embarrassing, but ignoring the problem won’t make it go away. As soon as you realize you are going to fall behind, call your lender. If you are getting calls or letters in the mail, call the number they provide as soon as possible. Your lender may be willing to work with you. A foreclosure costs them money and they’d rather help you find a way to keep your house. The sooner you address the problem, the easier it will be to solve.

2. Mortgage Forbearance

Forbearance means that payments are paused for a limited period. It’s often used if you can’t pay because of a temporary hardship, like a natural disaster or illness.

The first step is to contact your lender. Some only offer forbearance for hardship, or specific reasons. If you qualify, the agreement will include forbearance length, how interest will accrue while payments are paused, and how you’ll catch up. It could be a lump sum, or with installments.

3. Set up a Mortgage Repayment Plan

Another solution for those whose financial challenges are temporary, is a repayment plan with the lender. The plan would be unique to your situation and what your lender agrees to do. The lender would want to be assured that your financial setback was temporary and that you are now able to pay, so be prepared with documentation and answers to questions about your finances.

4. Loan Modification

Your lender may agree to rework your loan to help you catch up. Common loan modifications are:

• Adding the past-due balance to the outstanding balance, and adjusting the length of your repayment term, allowing you to catch up. This may mean a higher monthly payment.
• Lengthening the loan term.
• A lower interest rate.
• Reducing the outstanding loan principle.

5. Deed In Lieu of Foreclosure

With a deed in lieu of foreclosure, you sign the home over to the lender, who forgives the balance of the mortgage. You can ask to waive the deficiency, which means you won’t owe any difference between what you owe and the home’s value, if you owe more than it’s worth. Some lenders will approve this, others will ask you to pay it.

While you lose your home to the lender, you save money and time, and it doesn’t go on your credit report. Regulations vary, depending on the state, and not all lenders offer this option.

6. Selling Your Home

Your lender may agree to a short sale, in which you sell the home for less than what you owe. The lender keeps the proceeds, and you may have to pay the difference between the sale amount and what you owe.

You could also ask for a short refinance, which is a new loan on what you owe. If your lender agrees to it, you’ll pay much higher interest than on your original loan.

While not offered by traditional lenders to avoid foreclosure, a hard money loan, aka bridge loan, is an option from investors or nontraditional lenders. The property is collateral, and the loan must be paid back within a few years. You use it to pay your original lender, then sell the home to pay the new lender. The application process is quick, but interest is high, as are monthly payments. If you can’t pay it back, you’re saddled with high payments and still face foreclosure by the new lender.

7. Filing a Lawsuit

Some states allow nonjudicial foreclosure, in which the lender gives the borrower a period of time to catch up, and if they can’t, the property is sold without going through the courts. Some of these states allow borrowers to file a lawsuit to stop foreclosure if they can prove the lender doesn’t own the promissory note, made errors in the process, or violated state law. Weigh whether the time and expense of filing a lawsuit to stop foreclosure is worth it, particularly if you haven’t been able to keep up with monthly payments.

If You Can’t Stop a Foreclosure Consider Filing for Bankruptcy

If all else fails, both Chapter 7 and Chapter 13 bankruptcy can stop a foreclosure – either for good or temporarily. With both, the court issues an automatic stay that pauses a foreclosure proceeding. The stay is in place until the bankruptcy is sorted out. Neither form of bankruptcy forgives a mortgage, though. You still have to make monthly payments during an automatic stay.

Before considering bankruptcy as an option to stop foreclosure, consult a bankruptcy lawyer. It’s a complicated process that will impact your finances for years.

Chapter 7 liquidates most unsecured debts – credit card debt, personal loans, etc. – but not debt secured by collateral, like a mortgage or vehicle loan. It’s a better option for homeowners who won’t be able to pay their mortgage even after the bankruptcy is discharged. The federal government allows a certain amount of equity in a home to be exempt in a Chapter 7 filing. If you don’t have much equity, it’s not worth it to the court to sell your home to get money to pay creditors, so you would likely be allowed to keep the home. If you haven’t been able to keep up payments, and can’t catch up after the bankruptcy is discharged, the foreclosure will proceed.

With Chapter 13 bankruptcy, debt is restructured according to your income. The court agrees to a 3-5-year plan to repay all debt. Once the plan is completed, any unsecured debt is discharged. Chapter 13 allows you to stay in your home, but you have to make your monthly mortgage payment as well as pay extra to catch up on what you owe.

Only about half of people who file Chapter 13 bankruptcy make it to the end of the plan. If your Chapter 13 bankruptcy is dismissed, you’re back to where you started. If you are behind on your mortgage, foreclosure likely will proceed.

Recovering Your Home

Every state has different foreclosure laws, but all of them allow you to catch up with what you owe, including fees, and stop the foreclosure before the home is sold. This is known as the “right to cure.”

A little more than half of the states also have redemption laws. For a certain amount of time, after the house is sold at auction, you can buy it back from the third party for what they paid for it. You also must pay the outstanding mortgage and any fees associated with the foreclosure process. This option is available for a limited time and laws vary in states that allow it. You regain your home, but It doesn’t stop the foreclosure.

Avoid Foreclosure Recovery Fees, Scams

If you are being foreclosed on, you may be contacted by foreclosure prevention companies and home recovery scams.

For-profit foreclosure prevention companies, while legitimate, charge fees that can equal 2-3 mortgage payments or more. It’s money that you’re better off using to pay your mortgage. The information and services these companies provide are available to you for free from your lender, or with help from a nonprofit housing counselor.

If a firm promises to stop foreclosure immediately if you sign a document appointing them to act on your behalf, you may be signing over the title to your property. Before signing such a document, get advice from an attorney or nonprofit housing counselor.

Homeowner's Assistance Fund (HAF)

The Homeowner’s Assistance Fund (HAF) was created by the American Rescue Plan Act of 2021, providing almost $10 billion for states to assist homeowners in danger of losing their homes. It expires in September 2026, or when the money runs out. Money from the HAF is distributed by states, and some have closed applications to their programs.

The money may be used for mortgage payments, homeowner's insurance, utilities and other costs associated with maintaining a home. Homeowners who have experienced the greatest hardships are prioritized. As of 2024, HAF-funded programs assisted more than 549,000 homeowners, according to the U.S. Department of Treasury. To find out if your state is still accepting applications, and how to apply, visit ncsha.org/homeowner-assistance-fund.

Get Financial Help

No matter what your situation, if you can’t keep up with mortgage payments, nonprofit housing counselors can help you sort out options and possibly stop foreclosure. You will not be charged if you contact a counselor at a HUD-approved housing counseling agency, including InCharge Debt Solutions foreclosure prevention counseling.

During the confidential session, the counselor will review your financial situation, go over possible solutions to your financial challenges, and assess options for stopping foreclosure. The counselor may suggest:

• A nonprofit debt management plan. The counselor works with your creditors to lower monthly payments on unsecured debt, like credit cards, and you make one fixed monthly payment to the agency for 3-5 years while your cards are paid down. While debt management plans don’t cover mortgage payments, they can lower your monthly credit card payments enough that you can afford to make your mortgage payments.
• Nonprofit credit card debt forgiveness for up to 50% of your card balances. The programs are also through nonprofit agencies. You pay 50%-60% of your balance in fixed payments over 36 months, then the rest is forgiven.

Foreclosure can devastate your finances for years to come. Even if it seems like there’s not much you can do, you do have control. If you are facing foreclosure, contact your lender as soon as possible, as well as a nonprofit counselor who can offer advice and support, and take steps to turn things around.