First, a disclaimer.  Foreclosure is a very complicated process with far-reaching results.  I cannot stress this enough:  consult your lenders, your attorney, your CPA and your real estate professional to ensure you fully understand all ramifications of the options discussed below.

In the first part of this post, I wrote that some homeowners have faced difficult choices as the economy declined.  Rather than lose your home through a contentious bank foreclosure, some of the options below may be a better choice, depending on your individual situation.

Forbearance or Repayment Plan – the homeowner negotiates repaying back payments over a period of time.  Usually, the owner makes the current payment as well as a portion of the overdue payments.  Most lenders require homeowners to be qualified for this option.

Deed in Lieu of Foreclosure - also known as a “friendly foreclosure” because it allows a homeowner to return the property to the lender.  It requires lender approval and the homeowner must vacate the home.

Bankruptcy – if you have non-mortgage debts whose payments are causing you to fall short of paying the mortgage, a personal bankruptcy may eliminate some or all of these debts.  However, bankruptcy can be very costly and is not as easy to accomplish as it once was.

Read Part 1

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