If you’ve exhausted all of these options and have received a foreclosure notice from your lender, there are still three things you can do to stop the foreclosure:


1. Apply for a loan modification.

This isn’t really as much of a last-minute option as it is a next-to-last-minute option. This can be helpful to you because it may restrict the bank from a practice called “dual tracking”. Dual tracking is when the bank proceeds with a foreclosure while you have a loss mitigation application pending.

Some state laws prohibit dual tracking locally. If you are dealing with a foreclosure situation in Minnesota, Colorado, California or Nevada, state laws apply that prohibit dual tracking. What this means is that banks cannot start or continue a foreclosure process if a loss mitigation (foreclosure prevention) application is in process. The servicers — the company that handles your mortgage account — for those applications must make a decision to approve or deny the mitigation before foreclosure proceedings can progress.

In the other 46 states, federal law applies, and if a loss mitigation application is received more than 37 days before a foreclosure sale, the servicer may not move forward until: 

  • that servicer denies your loss mitigation/loan modification and all appeals are exhausted
  • you reject loss mitigation offers, or
  • you fail to comply with the terms of a mitigation such as trial modification.

Additionally, if your loan modification is approved, the foreclosure is stopped permanently as long as you make the modified payments. If it is not approved, however, the servicer is generally not required to review more than one application from you. If you do bring the loan current after submitting an application, the servicer is required to consider it.


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2. File for bankruptcy.

If a foreclosure sale is scheduled within the next few days, you can halt the sale immediately by filing for bankruptcy. When you file for bankruptcy, an “automatic stay” is placed that prohibits the lender from foreclosing on your home or otherwise attempting to collect debts. All foreclosure activity must stop during the bankruptcy process.

Now, the bank isn’t out of options, and it can file for a motion for relief from the stay. That being said, the foreclosure will still be delayed for a month or two, which may buy you enough time to negotiate an alternative to foreclosure with your bank —even if you are prohibiting them from selling your home under foreclosure. 

If you are simply trying to buy some time by stalling the foreclosure sale, a Chapter 7 bankruptcy may be right for you. If you want to try to keep your home by filing for bankruptcy, however, filing for Chapter 13 bankruptcy is likely a better option.

Chapter 13 bankruptcy allows you to keep your home by restructuring your debts. Additionally, it can help free up payments towards unsecured debts like 2nd and 3rd mortgages entirely, so that you can put more money towards your first mortgage payments. Because any delinquent payments will be made through the restructuring plan, you may be able to keep your home and stay in it.


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3. File a lawsuit.

This will only work if your bank is using a nonjudicial process to foreclose on your home — that is, they aren’t offering you the chance to challenge the foreclosure in court. If they have offered you the chance to challenge them in court, this won’t work.

If you want to win a lawsuit against your bank, there are some very specific circumstances you must prove to the satisfaction of the court, such as:

  • The bank violated the Homeowner’s Bill of Rights
  • The bank can’t prove that it owns the property with a promissory note
  • The bank didn’t take all of the steps required by the state’s foreclosure process
  • The bank didn’t act in compliance with state mediation requirements, or
  • The bank made some other grievous error.

Of course, the downside to this is that if you are unable to prove your case in court, then the most it can do is delay the foreclosure process. Lawsuits are expensive, and the court may find you responsible for the bank’s court costs and attorney’s fees in addition to your own. As with anything involving the court system, you definitely should seek the advice of an attorney before proceeding with any attempt to sue your lender. Ending up further in debt due to an unnecessary lawsuit isn’t where you want to be.