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Is your house already gone when you receive a foreclosure letter?

| Apr 30, 2021 | Bankruptcy Law Basics

Few things may make your heart race faster than seeing a foreclosure letter in your mailbox. After all, mortgage servicers and financial institutions often use scary and threatening language to encourage you to catch up on any payments you have missed.

By the time they receive a foreclosure letter, many Tennesseans believe their homes are already as good as gone. Fortunately, that is typically not the case. If you are facing foreclosure, you may have some options for keeping your house.

Recognize the bank’s position

Unless you have significantly more equity in your home than you owe, foreclosing on your house may not do the bank much good. While there are limitations, financial institutions can often use scare tactics to obtain payment. Still, foreclosure is a multi-phase process that must comply with applicable laws. Foreclosure letters usually go out early in the process.

Stop foreclosure proceedings

Even if your foreclosure has moved beyond the scary letter phase, you may be able to stop it entirely. When you file for bankruptcy, you typically trigger an automatic stay. During this stay, the financial institution may not foreclose on your home. While the stay is temporary, it may give you time to develop a plan for saving your house.

Address your financial situation

Because you are financially responsible, your missed mortgage payments likely did not happen for no reason. If you want to keep your home, you should address the underlying reasons it is heading for foreclosure. If you have outstanding medical bills, car loans or credit card debt, exploring bankruptcy protection may free up funds to spend on your mortgage.

Whether you are able to keep your home after receiving a foreclosure warning letter may depend on my factors. Still, if your primary goal is to keep your residence, exploring your bankruptcy options probably makes sense.