Owning a home is, for many in Colorado, the “American Dream.” People will spend years saving for a down payment so that they can take out a loan to purchase the home they hope to live in for years to come. Yet, they need to understand that taking out a mortgage entails certain obligations.
When taking out a mortgage, the homeowner agrees that they will pay back what they owe to the bank, with a certain amount due each month. It is, essentially, a contract. So, if a homeowner fails to pay the mortgage, they have broken that contract. The bank then has the ability repossess the house so that it can recover its investment. The repossession process is called “foreclosure” and it can be a frightening experience for homeowners who have simply fallen on hard times and cannot pay their mortgage.
Fortunately, a homeowner may have options to try to stop the foreclosure process. First, they can contact their lender. Lenders are often agreeable to working with homeowners to resolve the issue in a way that is satisfactory to both. This is because foreclosing on a home is a lengthy and costly process for lenders, so a solution may be preferable to actually foreclosing on the house. Some solutions that could be negotiated are: refinancing the loan; extending the repayment plan; offering a forbearance; or modifying the loan.
Any of these options may be ways to stop home foreclosure. One other option homeowners could consider is filing for bankruptcy. In a Chapter 7 bankruptcy, the debtor’s assets are liquidated, which generally includes the home. However, in some instances, there may be an exemption for a person’s home, and even without an exemption the homeowner may no longer be in debt to the lender. In a Chapter 13 bankruptcy, a workable repayment plan will be established and enforced through a court order that will allow the homeowner to make manageable payments to the lender, so they can keep their home.