Hablamos español

Know your options when facing foreclosure

Understanding what things you can do and acting promptly are the key factors that will determine the best outcome for your situation.

9 options you have to avoid a foreclosure

Chapter 13 bankruptcy

Chapter 13 restructures your existing debt. Contrary to chapter 7 bankruptcy, chapter 13 bankruptcy can stop a foreclosure. A chapter 13 bankruptcy has a 3 or 5 year payment plan.

These are the pros:

  • Legal protection against creditors and property.
  • No taxes on unpaid debt.
  • No qualification necessary.

These are the cons:

  • High damage to credit report and credit score.
  • Possibly low availability to credit after filing.
  • Low payment flexibility.
  • Length of time (3-5 years).
  • On public record.
  • Low to medium success rate.

Loan Midification

If you’re struggling with mortgage payments due to financial hardships, a loan modification may be suitable. The modification process aims to reduce monthly payments, preventing credit damage and legal actions.

Modification Options:

  • lower interest rates
  • principal reduction
  • fixed-rate conversion
  • extended loan terms
  • temporary payment postponement.

Eligibility for a mortgage loan modification:

  • Home is your residence
  • Experiencing financial hardship
  • Enough income to afford payments under new terms


  • Cant be done if the foreclosure date is too close (at least 45 days)
  • Lenders are usually not flexible enough
  • May require legal counsel and action

Reinstate loan

In a nonjudicial foreclosure, Texas law gives the homeowner the right to reinstate their loan by paying the amount that was past due, not the total loan amount, within 20 days after receiving the notice of default. Reinstatement involves making a single payment to catch up with everything due on a loan.


  • Lenders are usually willing to stop the foreclosure if the loan is reinstated.


  • You can’t negotiate the term of reinstatement
  • You need a good amount of cash to pay back the missed payments
  • You may need to pay late fees, attorney fees, costs of foreclosure proceedings, costs of property inspections, and a recording fee to cancel the foreclosure sale

Repayment plan

Basically a repayment plan allows you to slowly pay back the payments you missed while simultaneously continuing to make your normal mortgage
payments. The length of a repayment plan varies depending on the past-due amount and how much you can afford to pay each month, among other things. A three- to six-month repayment period is typical, although it could be longer.
  • Allows you to slowly pay off any missed payments instead of having to pay it all up front
  • Lenders are often hesitant to do this
  •  A portion of your delinquent amount is added on top of your mortgage payment.
  • May include late fees

Forbearance Agreement

A forbearance agreement provides short-term relief for mortgage borrowers. With a forbearance, the lender agrees to reduce or suspend mortgage payments for a while. Unlike a repayment plan, the lender usually agrees in advance for you to skip payments or pay lower amounts.

During the forbearance period, the servicer (on behalf of the lender) won’t initiate a foreclosure. In exchange, the borrower has to resume making payments at the end of the forbearance and get current on the missed amounts, including principal, interest, taxes, and insurance.


  • Gives you time to make arrangements to get current.


  • Its for a limited period of time. Some lenders limit the deferral option to around two payments.
  • You must pay the deferred amounts when the loan ends, sell the home, or transfer, refinance, or otherwise pay off the loan


Refinancing your mortgage to a more affordable payment is possible but must be done before foreclosure proceedings start and ideally before any missed payments.

While this isn’t always feasible, there are still options available within different types of refinancing. If you anticipate difficulties in paying your mortgage, it’s crucial to communicate early with your mortgage servicer, even if they’re not the original lender. Early communication is key to prevent the situation from worsening. Delaying action in hopes of avoiding the problem can have adverse consequences.


  • Able to get a lower interest rate
  • Lower monthly payment amount


  • Isn’t possible if you’ve missed a lot of mortgage payments and have bad credit
  • You need to have a stable income and, usually, equity in the home to qualify

Selling your home

While selling your home might not be the easiest decision, it can bring relief to your current financial situation. It can be an opportunity to get back on your feet without your credit getting affected. There’s two ways to sell your house.
Listing it on the market with an agent. The advantage of listing it on the market is you will receive your current market’s value for your property. Some downsides however are that you will have to pay commission, you might have to pay for repairs, and the process takes longer and involves showings.
If you need to sell the house sooner, you can sell the house to a cash buyer. Cash buyers usually are investors that will pay below market price for your house, but they will be able to buy it as-is, they will cover closing costs and fees, and will buy it quick (usually 7 days).
  • Your credit will not be affected
  • You can end up with 0 mortgage debt plus money from the sell to get back on your feet.
  • You might have to sacrifice some equity in exchange for convenience.

Deed in lieu of foreclosure

By signing the Deed in Lieu of Foreclosure, the Borrower is legally transferring title to the property back to the Lender in exchange for the cancelation of the unpaid balance owed on the Promissory Note secured by the property.


  • Though a deed in lieu will show up on your credit report, its impact isn’t as severe as a foreclosure.


  • You will sacrifice any equity that the house might have and you walk away with no money.
  • A lender might reject A Deed In Lieu based on factors as a depreciated home value, Liens or tax judgments on your property, or Poor home condition


A short sale occurs when a homeowner in dire financial trouble sells their home for less than they owe on the mortgage. The lender of the original mortgage gets all of the proceeds of the sale, and either forgives the difference or gets a deficiency judgment, which requires the original borrower to pay what’s left over.

There are two critical factors that the lender will consider when deciding whether to approve a short sale:

  • The home has to be worth less than what the homeowner owes on it. 
  • The seller must be able to prove financial hardship. 


  • Foreclosure prevention
  • Debt absorption
  • In a short sale, the lender pays commissions.
  • It’s possible that the lender will accept the proceeds of the short sale and write off the remaining debt as a loss.


  • No negotiation power. The lender is the only one with the power to negotiate the purchasing price of the home.
  • You won’t receive any of the proceeds of the sale of their home.
  • Credit score damage. (although fewer points than foreclosures)
  • Delay in obtaining another mortgage. Outside of an FHA loan, the waiting period may be anywhere from 2 – 7 years.

Free or low cost foreclosure help

Although the process of foreclosure makes it seem you have run out of help, it is actually beneficial to the state if you stay in your home. Here are some local resources by the State of texas that offer help during a foreclosure process.

Texas department of housing and community affairs

Foreclosure Frequently Asked questions

U.S. Department of Housing and Urban Development Housing Counseling Locations

Professionals that can help you

Understanding what is your best option and having the right professionals by your side is important. Here are some professionals that can help you.

• Filing for bankruptcy: Ascend Fincance 

• Short sale expert: Short Sale Queen

• Listing your home on the market or selling your home for a cash offer: MapleDFW.com