Filing for bankruptcy will stop either type of foreclosure process as long as the foreclosure sale hasn't occurred. You can find out more about the foreclosure process in your state in State Foreclosure Laws.
Challenging the Foreclosure in Court You can delay a foreclosure by challenging it in court—either by filing an answer in a judicial foreclosure or filing your own lawsuit to stop a nonjudicial one.
In foreclosure cases, Bankruptcy trumps State foreclosure laws. The bankruptcy process can put a halt to the foreclosure process, prevent a foreclosure judgment from being entered, stop a foreclosure auction and even delay eviction proceedings associated with a foreclosure sale.
Most mortgage creditors will not consider you for future mortgages if you have a foreclosure on your credit history. In contrast, bankruptcy lets you start fresh. It still damages your credit, but because you are debt-free, you begin rebuilding good credit sooner.
If a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy. The automatic stay will stop the foreclosure in its tracks. Once you file for bankruptcy, something called an "automatic stay" immediately goes into effect.
Foreclosure determinations affect the ownership of property under state law. So probate cannot stop foreclosure. Quite the opposite. The probate court must know who has a right to the property before it can be properly distributed.
Fannie Mae defines extenuating circumstances as "nonrecurring events that are beyond the borrower's control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations."3 This might include job loss, divorce, illness, or the death of a wage earner.
Foreclosures. A 7 year waiting period is required before conventional financing is available. Exceptions can be made for a 3 year waiting period if extenuating circumstances can be documented AND the CLTV is (at or below) 90% and the loan is to purchase a primary residence.
Summary — All Waiting Period RequirementsDerogatory EventWaiting Period RequirementsMultiple Bankruptcy Filings5 years if more than one filing within the past 7 yearsForeclosure17 yearsDeed-in-Lieu of Foreclosure, Preforeclosure Sale, or Charge-Off of Mortgage Account4 years2 more rows
The answer to this question is yes, you can give your house back to the bank to avoid foreclosure in a process known as deed in lieu of foreclosure. Before pursuing this option, first look into a short sale, loan modification, or simply selling the property.
A foreclosure or short sale, as well as a deed in lieu of foreclosure, are all pretty similar when it comes to impacting your credit. They're all bad. But bankruptcy is worse. Going through a foreclosure tends to lower your scores by at least 100 points or so.
Foreclosure information generally remains in your credit report for seven years from the date of the foreclosure. Even if you have a bad credit history or a low credit score, you may qualify for an Federal Housing Administration (FHA) loan.