3 Costly Mistakes Homeowners Facing Foreclosure Make Before Filing Bankruptcy

If you're behind on your mortgage and worried about losing your home, it's easy to make decisions based on fear, bad information, or advice from people who have never been through a foreclosure. Unfortunately, some of the most common mistakes homeowners make before filing bankruptcy can make their situation worse.

The good news is that many of these mistakes can be avoided if you seek advice early.

Mistake #1:

Waiting Too Long to Talk to a Bankruptcy Attorney

The best time to explore your options is months or weeks (not days!) before the foreclosure sale.

Many homeowners wait until a foreclosure sale is only days away before seeking help. Some assume it's already too late. Others hope their financial situation will somehow improve on its own. In reality, the earlier you speak with an attorney, the more options you may have.

A Chapter 13 bankruptcy can often stop a foreclosure and provide time to catch up missed mortgage payments through a court-approved repayment plan. A Chapter 7 bankruptcy may also provide valuable options depending on your circumstances.

When homeowners wait until the last minute, it can limit the strategies available and create unnecessary stress. While emergency filings are possible, they are rarely ideal.

It is almost always too late to start searching for a bankruptcy lawyer the day of the foreclosure sale!

Rule of Thumb: Call a bankruptcy lawyer as soon as you fall behind on your mortgage. It is best to know your options as soon as possible! Our consultations are free, confidential, and no obligation.

Mistake #2:

Draining Retirement Accounts to Save the House

Many people facing foreclosure withdraw money from retirement accounts or borrow against them in a desperate attempt to catch up on mortgage payments. This can be a costly mistake.

Retirement funds are often protected under bankruptcy law. Once those funds are withdrawn and spent, that protection may be lost. Worse, homeowners sometimes empty retirement accounts only to discover that they still cannot afford the mortgage long term.

Before cashing out a 401(k), IRA, or other retirement account, it is wise to understand all of your available options. In many cases, preserving retirement savings may be far more valuable than making a temporary mortgage payment that does not solve the underlying financial problem.

Mistake #3:

Ignoring Other Debt While Trying to Save the Mortgage

When homeowners fall behind on their mortgage, they often focus every available dollar on the house. Credit cards go unpaid. Medical bills pile up. Personal loans are ignored.

While keeping a roof over your head is important, neglecting other debts can create a financial crisis that becomes impossible to manage.

Bankruptcy can often eliminate or restructure many of these other debts, freeing up income that can be used to maintain mortgage payments going forward. Sometimes the problem is not the mortgage itself—it is the overwhelming amount of other debt competing for the same paycheck. Looking at your entire financial picture is usually more effective than trying to solve only the mortgage problem.

Don't Assume Foreclosure Means You've Run Out of Options. Chapter 13 Bankruptcy Can Save Your Home!

One of the biggest misconceptions about foreclosure is that homeowners believe losing their home is inevitable. In many cases, that simply is not true.

Often Bankruptcy is the best solution for a foreclosure

Bankruptcy can stop collection activity, halt foreclosure proceedings, and provide breathing room to evaluate your options. Every situation is different, but homeowners generally have more choices when they seek advice sooner rather than later.

If you're worried about foreclosure, don't rely on internet rumors or wait until the last possible moment.

A free consultation with our office can help you understand your rights and determine the best path forward for your family.