Foreclosure 101: Your Guide To Navigating the Process

What Is Foreclosure?

Foreclosure is the legal process lenders use to take ownership of a home when a borrower defaults on their mortgage.  Mortgages are secured loans, meaning the home serves as collateral. If the homeowner defaults — usually by missing multiple payments — the lender can foreclose to recover the unpaid loan balance.

Foreclosure laws vary by state, but there are two main types:

• Judicial foreclosure: Requires the lender to go through the court system before foreclosing.

• Nonjudicial foreclosure: Allows the lender to proceed without court approval if the mortgage contract includes a power of sale clause.

Once foreclosed, the home is typically sold at a public auction, and the homeowner may be evicted if they haven’t already left.

Foreclosure can have serious consequences, including credit damage, eviction, and potential financial liability if the sale doesn’t cover the full loan amount. However, homeowners often have options to avoid or delay foreclosure.

In this section, we’ll cover:

• The most common reasons foreclosure happens and how lenders define default

• The differences between judicial and nonjudicial foreclosure, including timelines and legal protections

• The foreclosure redemption period and whether you can buy back your home after foreclosure

• How foreclosure trustees play a role in nonjudicial foreclosure

Why Does Foreclosure Happen?

The most common reason for foreclosure is missed mortgage payments. 

However, a borrower can default in other ways, depending on their mortgage contract. For example, some lenders define default to include:

• Failing to pay property taxes

• Not maintaining homeowner’s insurance

• Engaging in illegal activity on the property

• Causing extreme property damage

• Transferring ownership without lender approval

When a borrower defaults, the lender will issue a notice of default. This notice outlines how much time the borrower has to cure the default by catching up on missed payments and paying any fees. It’s usually 30–90 days. 

If the borrower doesn’t catch up on missed payments or fix the issue, the lender may invoke the acceleration clause. This means they can require full repayment of the remaining balance before moving forward with foreclosure.

Judicial vs Nonjudicial Foreclosure: What’s the Difference?

There are two main types of foreclosure: judicial foreclosure and nonjudicial foreclosure. 

👉 The biggest difference between them is whether the lender has to go through the court system to complete the process. 

Some states allow lenders to choose between the two, while others only allow one type. You can check whether your state allows judicial or nonjudicial foreclosure by looking at your mortgage documents (such as the deed of trust) or researching your state's foreclosure laws

Both processes end with a foreclosure sale, where the property is auctioned off to the highest bidder. However, the timeline, homeowner protections, and complexity of each process vary significantly.

Judicial Foreclosure

A judicial foreclosure requires the lender to file a lawsuit in court before foreclosing on a home. This process provides homeowners with more time and legal protections, but it can take months or even years to complete.

Here’s how it typically works:

1. The lender must first send a notice of default to the homeowner.

2. The lender files a foreclosure lawsuit in court.

3. The homeowner has a chance to respond and fight the foreclosure.

4. If the court rules in favor of the lender, the home is scheduled for a foreclosure sale.

5. The home is sold at a public auction, often to the lender or a third-party buyer.

6. Depending on the state, the homeowner may have a redemption period to buy the home back.

Judicial foreclosures are common in states that want to give homeowners more time and legal recourse to challenge a foreclosure. They also allow lenders to seek a deficiency judgment if the home sells for less than the amount owed on the mortgage. However, because this process takes longer and costs lenders more money, it’s not preferred by banks when other options are available.

The Redemption Period: Can You Buy Back Your Home After Foreclosure?

If your state has a redemption period, you may have a set amount of time to buy your home back after the foreclosure sale. The rules vary by state, but there are two types of redemption:

• Equitable redemption (before the foreclosure sale): Every homeowner has the right to stop foreclosure by paying off their mortgage balance before the sale.

• Statutory redemption (after the foreclosure sale): Some states allow homeowners to buy back their home even after the sale.

If your state allows post-foreclosure redemption, you’ll need to pay either the full mortgage balance or the foreclosure sale price plus interest, fees, and other costs. The redemption period can range from one month to a year, depending on state law.

Some states extend the redemption period if the lender seeks a deficiency judgment (when the foreclosure sale doesn’t cover the full loan amount). However, most homeowners struggle to redeem their home because it requires a large lump sum payment. If buying back your home isn’t an option, you may want to explore alternatives like loan modification, forbearance, or a short sale before foreclosure happens.

Nonjudicial Foreclosure

A nonjudicial foreclosure allows a lender to skip the court process and move forward with a foreclosure based on the terms in the mortgage agreement or deed of trust. This process is much faster, sometimes taking just a few months. However, homeowners have fewer opportunities to challenge the foreclosure.

Here’s how nonjudicial foreclosure typically works:

1. The lender must wait at least 120 days before starting foreclosure, per federal law.

2. The homeowner receives a notice of default and a chance to resolve the missed payments.

3. If the homeowner doesn’t catch up, the lender files a notice of sale with the county.

4. The foreclosure sale is advertised publicly, and the home is auctioned off.

5. The new owner receives the title, and the homeowner may have to vacate the property.

Nonjudicial foreclosures are preferred by lenders because they save time and money. However, homeowners often have fewer protections, and the timeline for stopping a foreclosure is much shorter. Some states allow limited ways to challenge a nonjudicial foreclosure, but options depend on state law.

What Is a Foreclosure Trustee?

In nonjudicial foreclosures, a foreclosure trustee oversees the foreclosure process instead of a judge. The trustee is typically appointed by the lender and is responsible for handling key foreclosure steps, including:

• Issuing notices of default and sale

• Managing the foreclosure auction

• Ensuring the process follows state law

The trustee is supposed to act as a neutral third party, but since they are often chosen by the lender, their actions may favor the lender’s interests. Unlike judicial foreclosures, where a judge provides oversight, the trustee has significant control over how the foreclosure proceeds.

If you’re facing a nonjudicial foreclosure, it’s important to know your rights and ensure the trustee follows state laws. If you suspect misconduct, you may want to consult a foreclosure attorney for guidance.

Foreclosure Process

The foreclosure process varies by state and whether it’s judicial or nonjudicial, but most follow a similar timeline. 

In this section, we’ll cover the key stages of foreclosure, including:

• Missed payments: A foreclosure typically begins after multiple missed mortgage payments. Federal law requires lenders to wait at least 120 days before officially starting the foreclosure process.

• Notice of default (breach letter): The lender sends a notice informing the homeowner of the default and providing a deadline to catch up on payments.

• Foreclosure filing: In judicial foreclosures, the lender files a lawsuit in court. In nonjudicial foreclosures, the lender files a notice of sale instead.

• Foreclosure sale: If the homeowner doesn’t resolve the default, the property is auctioned to the highest bidder. If it doesn’t sell, the lender takes ownership as a real estate-owned (REO) property.

• Eviction: If the previous homeowner is still living in the property after the foreclosure sale, the new owner may start the eviction process.

The following sections go more into detail about each state in a typical foreclosure timeline.

1️⃣: Missed Payment  

Foreclosure doesn’t happen after just one late payment. Federal law requires lenders to wait until you’re 120 days delinquent before starting foreclosure. This typically means at least four missed payments. Your mortgage documents may also explain how many late payments it takes before the lender can start the foreclosure process for your particular loan.

Your lender will first send a missed payment notice after one late payment. If you miss a second payment, they may send a demand letter, which is more serious. If you continue to miss payments, you risk defaulting on your mortgage.

2️⃣: Notice of Default (Breach Letter)

If you miss three payments (you’re 90 days delinquent), your lender will send you a notice of default. This is also sometimes called a breach letter. Your lender may place a copy of the notice on your property and inform you that the notice will be publicly recorded. 

In the notice of default, your lender will let you know how much time you have to cure the default and reinstate your loan. This is called the reinstatement period. It typically lasts 30 to 90 days. If your lender will use a judicial foreclosure, this is also when it will file a foreclosure lawsuit.

3️⃣: Foreclosure Filing — Court Order or Notice of Sale

At this stage, the foreclosure process takes different paths depending on whether it’s a judicial or nonjudicial foreclosure. In a judicial foreclosure, the lender must get court approval before selling the home. In a nonjudicial foreclosure, the lender can move forward without going to court.

In a judicial foreclosure, the lender must go to court and explain why they have the right to foreclose. You have the chance to fight the foreclosure by raising legal defenses. If the lender wins, the judge will issue a court order authorizing the sale of your home. This process can take anywhere from a few months to a few years.

In a nonjudicial foreclosure, the lender doesn’t need court approval. Instead, they file a notice of sale with the county, publish it in a local newspaper, and mail a copy to you. The notice of sale usually includes:

• A description of the property and its address

• The name of the property owner(s)

• A statement that the property will be sold at a public foreclosure auction

• The date, time, and location of the sale

Lenders can typically use nonjudicial foreclosure if the mortgage includes a power of sale clause or if the home loan is secured by a deed of trust. Both allow the lender to foreclose without going through the court system.

A strict foreclosure works a little differently. In some states, if a home is worth less than the mortgage balance (called being underwater), the lender can ask the court for ownership instead of selling the home at auction. Strict foreclosures are rare and only happen in a few states, like Connecticut and Vermont.

4️⃣: Foreclosure Sale

If the lender follows all foreclosure requirements, the property will be sold at a public auction. The lender's goal is to recover as much of the unpaid mortgage balance as possible while transferring ownership to a new buyer.

Before the auction, the lender sets a minimum bid based on the remaining mortgage balance. This amount may also include unpaid taxes, penalties, interest, fees, and foreclosure-related costs.

The property is then sold to the highest bidder. To complete the purchase, the winning bidder must meet certain requirements. This often includes making an initial deposit and proving they can pay the full price, usually in cash. Depending on the auction rules, the buyer may need to pay the full amount immediately or make a partial payment with the rest due shortly after.

If the property fails to sell at the public auction (which is common), the lender becomes the owner of the property. These are often referred to as real-estate owned (REO) properties. Here, the lender may retain a real estate broker or REO asset manager to find a buyer for the property and help with upkeep until the property sells.

5️⃣: Eviction

Even after foreclosure, you can usually stay in the property until it’s sold. This sale may happen at a foreclosure auction or later as a real estate owned (REO) sale if the lender takes ownership. Once a new buyer purchases the home, the homeowner has a limited time to move out.

If the homeowner doesn’t leave by the deadline, the new owner can start the eviction process. If the court approves the eviction, the homeowner will receive a formal eviction notice. If they still don’t leave, a sheriff’s deputy may be called to remove them from the property.

What Are Your Rights During the Foreclosure Process?

If you're facing foreclosure, you have legal rights at every stage of the process. Understanding these rights can help you protect your home, explore alternatives, and ensure lenders follow proper procedures.

In this section, we’ll cover:

• The key rights homeowners have during foreclosure, including notice requirements and repayment options

• Whether a bank can change the locks on your home before foreclosure is complete

• When eviction can happen and whether you can be forced to leave before the foreclosure process is finalized

Your Rights as a Homeowner Facing Foreclosure

If you're facing foreclosure, you have legal rights throughout the process, including:

• The right to receive notice: Your lender must send proper written notice before starting foreclosure and before selling your home.

• The right to stay in your home: You don’t have to leave until the foreclosure process is complete and formal eviction proceedings begin.

• The right to a 120-day waiting period: Federal law prohibits foreclosure from starting until you're at least 120 days behind on your mortgage.

• The right to respond in court (judicial foreclosures): If your state requires judicial foreclosure, your lender must file a lawsuit, and you have the right to contest it.

• The right to request an account statement: You can ask your lender for a breakdown of what you owe, including late fees and foreclosure costs.

• The right to explore repayment options: You may qualify for loan modification, refinancing, or a repayment plan to stop foreclosure.

• The right to redeem your home (in some states): Certain states allow you to buy back your home after the foreclosure sale by paying the full amount owed.

Knowing your rights can help you take action to avoid foreclosure or better understand your options as the process moves forward.

Can a Bank Change the Locks Before a Foreclosure Is Complete?

If you’re still living in your home, your lender can’t legally change the locks before foreclosure is complete, even if you’ve fallen behind on payments. You have the right to stay in your home throughout the foreclosure process, and even after the home is sold, the new owner must go through a formal eviction process before they can legally remove you. Locking you out before that is illegal.

The only exception is if the home is abandoned. If the lender believes no one is living there, they may secure the property by changing the locks, making repairs, or removing personal belongings. But sometimes, these decisions are made in error. If your locks have been changed and you still live in the home, you have the right to take action, such as replacing the lock, notifying your lender, or seeking legal help.

Can You Be Evicted Before Foreclosure Is Finalized?

In most cases, homeowners can’t be evicted before foreclosure is complete. Until the foreclosure sale is finalized and ownership officially transfers, the homeowner still has legal rights to the property. 

However, there are some exceptions:

• If the property is abandoned: If a homeowner moves out before foreclosure is finalized, the lender may take steps to secure the property. In some states, lenders can request court approval to take possession early if the home appears vacant.

• If a tenant is renting the home: If a renter lives in the home, they may have different rights than the homeowner. Under the Protecting Tenants at Foreclosure Act (PTFA), renters generally can’t be evicted immediately after foreclosure and must be given at least 90 days’ notice to vacate. Some states offer even stronger protections.

• If the lender gets a court order: In rare cases, if the lender proves the homeowner is causing significant damage to the property or engaging in illegal activity, they may seek a court order for early eviction before the foreclosure process is complete.

For most homeowners, eviction only happens after foreclosure is finalized and the new owner (often the lender) takes possession. Even then, homeowners may still have time to leave or negotiate a move-out agreement. If you’re facing foreclosure, it’s a good idea to review your state’s laws or consult a housing counselor or attorney to understand your rights.

How To Stop or Avoid Foreclosure

If you’re behind on mortgage payments, you may have options to avoid foreclosure. Most lenders prefer to work with homeowners to find a solution since foreclosure is costly and time-consuming. The pre-foreclosure process often includes loss mitigation, which allows borrowers to explore alternatives before losing their home.

In this section, we’ll cover:

• Loss mitigation options, including loan modifications, forbearance, and repayment plans

• Refinancing and government relief programs that may help you get back on track

• Short sales and deeds in lieu of foreclosure as alternatives to foreclosure

• How to find state and local assistance programs that offer foreclosure prevention support

Exploring these options early can increase your chances of keeping your home or minimizing the financial impact of foreclosure.

Loan Modification

Loan modification is a loss mitigation option with the goal of making your monthly mortgage payments more affordable. To do this, you and your lender agree to change one or more of your mortgage’s terms. 

Potential changes may include:

• Turning the adjustable interest rate into a fixed interest rate

• Lowering the interest rate if you have a fixed interest rate already

• Extending the mortgage loan’s term

Mortgage Forbearance

Mortgage forbearance is a loss mitigation option that allows you to temporarily reduce or pause your mortgage payments, usually for three to six months. 

Lenders offer forbearance to help homeowners facing short-term financial hardship avoid foreclosure. But forbearance isn’t loan forgiveness—you’ll have to repay the missed payments once the forbearance period ends.

Repayment options typically include:

• Lump-sum repayment: Paying all missed payments at once.

• Repayment plan: Adding extra to your monthly mortgage payments until you're caught up.

• Loan modification: Changing your loan terms to make payments more manageable.

• Payment deferral: Moving the missed payments to the end of the loan or until you sell or refinance the home.

Since forbearance is usually offered before foreclosure begins, it may not be an option once foreclosure proceedings have started. If you’re struggling to make payments, it’s best to contact your lender as soon as possible to explore your options and avoid foreclosure.

Repayment Plan or Refinancing

If you’ve fallen behind on your mortgage but can now afford your payments, a repayment plan or refinancing might help you avoid foreclosure.

👉 A repayment plan lets you catch up on missed payments by spreading them out over a set period while making your regular monthly payment. This can be a good option if your financial hardship was temporary and you can now afford to pay extra each month.

👉 Refinancing replaces your current mortgage with a new loan—ideally with better terms, like a lower interest rate or a longer repayment period to reduce your monthly payment. But refinancing isn’t always an option if you’re already in foreclosure or have a low credit score due to missed payments.

To explore these options, contact your lender as soon as possible. Many lenders have hardship departments that handle loan modifications, repayment plans, and refinancing requests. You can also work with a HUD-approved housing counselor for free guidance on available options. Acting quickly increases your chances of finding a solution that works for you.

Short Sale Or Deed in Lieu of Foreclosure

If keeping your home isn’t possible, you may be able to avoid foreclosure by working with your lender to voluntarily give up the property through a short sale or deed in lieu of foreclosure.

👉 A short sale allows you to sell your home for less than you owe on the mortgage, with the lender agreeing to accept the sale price as full or partial payment. While this avoids foreclosure, it may still impact your credit score, and in some cases, you may still owe the remaining balance, known as a deficiency balance.

👉 A deed in lieu of foreclosure lets you sign over ownership of your home to the lender in exchange for being released from your mortgage. This option can be quicker and less damaging to your credit than foreclosure, but approval isn’t guaranteed. Lenders may refuse if the home has additional liens or is worth significantly less than the loan balance.

Mortgage Relief Programs

Several federal and state programs help homeowners struggling with mortgage payments. If you're facing foreclosure, you may qualify for assistance through:

• The Homeowner Assistance Fund (HAF): HAF is a federal program that provides financial aid to homeowners who struggled during the pandemic. Many states still have HAF programs open, offering help with mortgage payments, property taxes, and other housing-related costs.

• The Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), and USDA loan relief programs: If you have a government-backed loan, you may qualify for special forbearance or modification options such as payment deferrals, extended repayment plans, or loan modifications for borrowers facing financial hardship. Check with your loan servicer or visit the HUD or VA website to explore available options.

• State & local assistance programs: Many states and localities offer foreclosure prevention resources. You can find local foreclosure prevention resources by visiting your state’s housing agency website or contacting local nonprofits that specialize in housing assistance.

Legal Options for Homeowners Facing Foreclosure

If you're facing foreclosure, you may have legal options to delay or stop the process. Your options depend on whether your foreclosure is judicial (handled through the court system) or nonjudicial (processed outside of court).

In this section, we’ll cover:

• How to fight foreclosure in court if your lender has filed a lawsuit

• Common foreclosure defenses that could help you challenge the process

• How the statute of limitations might stop foreclosure in some cases

• What wrongful foreclosure is and how to fight it

• Where to find free or low-cost legal help if you can’t afford an attorney

How To Fight Foreclosure in Court

If you’re facing foreclosure, you may have legal options to fight it in court, but it depends on whether your foreclosure is judicial or nonjudicial:

• Judicial foreclosures go through the court system, which means you have a chance to defend yourself. 

• Nonjudicial foreclosures don’t require court approval, so homeowners don’t automatically get a chance to contest them in court.

How To File an Answer in a Judicial Foreclosure

If your foreclosure is judicial, your lender must file a lawsuit to foreclose on your home. Once you’re served with a complaint and summons, you usually have 20–30 days to file an answer. Filing an answer is crucial because:

• It prevents a default judgment, which would allow the lender to foreclose without opposition.

• It gives you a chance to raise defenses or counterclaims that might help you delay or stop the foreclosure.

• It ensures that you stay informed about all legal proceedings related to your case.

If you don’t file an answer to the foreclosure lawsuit, the court will likely issue a default judgment in favor of the lender. This means you’ll lose your opportunity to fight the foreclosure, and the lender will be able to move forward with selling your home.

Possible Foreclosure Defenses

Homeowners may have legal defenses to challenge a foreclosure, including:

• Errors in mortgage servicing: The lender applied payments incorrectly or charged illegal fees.

• Lack of proper documentation: The lender can’t prove they own the mortgage or follow state foreclosure laws.

• Violations of foreclosure laws: The lender didn’t provide the required notices or followed improper procedures.

• Dual tracking: The lender moved forward with foreclosure while reviewing a loan modification request.

• Wrongful foreclosure: The foreclosure was based on incorrect information or lender fraud.

If you believe any of these apply to your case, consider consulting a foreclosure attorney or legal aid organization to determine the best way to present your defense.

Can a Statute of Limitations Defense Stop Foreclosure?  

In some cases, a statute of limitations can be used as a legal defense to stop foreclosure. A statute of limitations is a law that limits the amount of time a lender has to take legal action to collect a debt. If too much time has passed since the homeowner defaulted, the lender may no longer have the right to foreclose.  

Each state has different statutes of limitations for foreclosure. In many states, the clock starts when the borrower misses a payment or when the lender accelerates the loan, meaning they demand the full balance due. The time limit varies widely—from as little as six years in some states to 20 years or more in others.  

If a lender tries to foreclose after the statute of limitations has expired, you may be able to challenge the foreclosure in court. In a judicial foreclosure, you can raise the statute of limitations as a defense in your answer to the lawsuit. In a nonjudicial foreclosure, you may need to file a lawsuit to stop the foreclosure. However, lenders can sometimes restart the statute of limitations if the borrower makes a partial payment, agrees to a loan modification, or if the lender “decelerates” the loan after previously accelerating it.  

Because foreclosure statutes of limitations are complicated and vary by state, it’s a good idea to consult with a foreclosure attorney if you think your lender has waited too long to foreclose.

What Is a Wrongful Foreclosure and How Can You Challenge It?

Wrongful foreclosure happens when a lender forecloses on a home without following the required legal procedures or without a valid reason. This can occur due to lender errors, miscommunications, or violations of state or federal foreclosure laws. 

Common issues include:

• Misapplied payments

• Failure to honor loan modifications or forbearance agreements

• Improper notices

• Violating homeowner protections under laws like the Truth in Lending Act (TILA)

If you believe your foreclosure was wrongful, you may be able to challenge it in court by filing a lawsuit or seeking an injunction to temporarily stop the foreclosure sale. In a legal case, you’ll need to prove the lender’s mistake or misconduct caused harm, such as loss of property value, damage to your credit, or wrongful eviction. If successful, you may be entitled to compensation for financial losses, emotional distress, or even punitive damages if the lender acted in bad faith.

Since wrongful foreclosure cases can be complicated and difficult to win, it’s often best to hire an experienced attorney to help with your case. If you’d like more detailed information, check out our full guide on wrongful foreclosure lawsuits.

How To Get Free or Low-Cost Legal Help During Foreclosure

If you’re facing foreclosure and can’t afford a lawyer, you still have options. Many homeowners qualify for free or low-cost legal assistance to help them understand their rights and navigate the foreclosure process. Here are some resources to explore:

• Legal aid offices: Organizations funded by the Legal Services Corporation (LSC) provide free legal help to low-income homeowners. Check LSC’s website to find legal aid near you.

• Pro bono attorneys: Some private lawyers volunteer their time to help homeowners facing foreclosure. You can find pro bono services through your local bar association or foreclosure assistance programs.

• Free legal clinics: Some nonprofit organizations, public libraries, and law schools offer foreclosure defense clinics where you can get legal advice at no cost. Search “foreclosure defense clinics near me” online to find local options.

• Free lawyer consultations: Many foreclosure attorneys offer free initial consultations, where you can discuss your situation and get advice on your options. Upsolve can help you set up a free consultation with a local attorney.

• Limited-scope representation: If you can’t afford full legal representation, some attorneys offer flat-fee or hourly services to help with specific legal tasks, such as reviewing documents or negotiating with your lender.

🚨 Since foreclosure moves quickly, it’s important to seek legal help as soon as possible to protect your rights and explore your options.

Filing Bankruptcy To Stop Foreclosure

If you’re facing foreclosure, filing for bankruptcy can temporarily stop the process and, in some cases, help you save your home. When you file for Chapter 7 or Chapter 13 bankruptcy, an automatic stay goes into effect, which pauses foreclosure while your case is active.

In this section, we’ll cover:

• How Chapter 7 bankruptcy can delay foreclosure

• How Chapter 13 bankruptcy can help you keep your home by setting up a repayment plan

• The role of the automatic stay and how it temporarily halts foreclosure proceedings

• Potential downsides of using bankruptcy to stop foreclosure

How Chapter 7 Bankruptcy Affects Foreclosure

Chapter 7 bankruptcy can delay foreclosure but won’t permanently stop it. When you file, the automatic stay temporarily halts foreclosure proceedings, giving you a short window to figure out your next steps. However, since Chapter 7 doesn’t include a repayment plan, it won’t help you catch up on missed mortgage payments.

If you’re behind on your mortgage, the lender can ask the court to lift the automatic stay so they can continue the foreclosure. If the court grants this request, the foreclosure process will resume. Even if the lender doesn’t request this, once the bankruptcy is complete, they can still move forward with foreclosure if you haven’t brought the loan current.

On the upside, Chapter 7 eliminates other debts like credit card and medical bills, which may free up money to help you get back on track financially. If you’re already planning to move and just need more time before foreclosure, Chapter 7 may be a good option.

How Chapter 13 Bankruptcy Can Help You Keep Your Home

Chapter 13 bankruptcy is often the better choice for homeowners who want to stop foreclosure and keep their homes. Instead of wiping out debt immediately, Chapter 13 creates a 3–5 year repayment plan that allows you to catch up on overdue mortgage payments while continuing to make your regular monthly payments.

As long as you follow the repayment plan and stay current on new mortgage payments, the lender can’t foreclose on your home. Some bankruptcy courts even offer a Mortgage Modification Mediation Program, which helps streamline the process of adjusting your mortgage terms.

Chapter 13 can also eliminate certain types of second mortgages if you owe more on your first mortgage than your home is worth. This process, called lien stripping, can remove a second mortgage from your home, reducing your overall debt burden.

If you’re interested in learning more about Chapter 13, Upsolve can help you schedule a free consultation with an experienced bankruptcy attorney near you.

The Automatic Stay and How It Delays Foreclosure

One of the biggest benefits of filing for bankruptcy is the automatic stay. This legal protection goes into effect as soon as you file and temporarily stops foreclosure, wage garnishments, and other collection efforts.

The automatic stay gives you time to explore options like loan modification or selling your home before foreclosure moves forward. However, the lender can ask the court to lift the stay, especially if you’re behind on payments. If this happens and the court grants the request, foreclosure can resume even before your bankruptcy case is complete.

Downsides of Using Bankruptcy To Stop Foreclosure

While bankruptcy can be a useful tool for stopping foreclosure, it’s not the right solution for everyone. Some potential downsides include:

• Filing for bankruptcy damages your credit, though foreclosure also significantly impacts your credit score.

• Chapter 7 only provides a temporary delay and doesn’t help if you’re behind on mortgage payments.

• Chapter 13 requires a long-term repayment plan, which can be challenging to stick with if your financial situation doesn’t improve.

• The lender can request to lift the automatic stay, which means foreclosure could still move forward.

Before filing for bankruptcy, it’s a good idea to explore other foreclosure alternatives like loan modifications, forbearance, or repayment plans. If you aren’t sure which option is best, consider consulting with a bankruptcy attorney to review your situation.

What Happens After Foreclosure?

What happens after foreclosure depends on your state’s laws, the type of foreclosure (judicial or nonjudicial), and whether your state allows a redemption period. Some homeowners may be able to stay in the home temporarily, while others may need to leave right away.

In this section, we’ll cover:

• Whether you can get your home back through a right of redemption

• If you can rent the home from the new owner after foreclosure

• What happens if you don’t leave voluntarily and how eviction works

• How a cash-for-keys agreement could help with moving costs

• Whether you might still owe money after foreclosure if the sale didn’t cover your full loan balance

• Tips for finding rental housing after foreclosure

Can You Get Your Home Back? (Right of Redemption)

Some states give homeowners a limited time after foreclosure to buy back their home. This is called the right of redemption. If your state allows this, you may be able to reclaim your home by paying the full sale price plus interest, fees, and other costs. 

Redemption periods vary by state and can range from one month to a year. However, this option is difficult for most homeowners since it requires a large lump sum payment.

Can You Rent the Home From the New Owner?

In some cases, the new owner — whether it’s the lender or a third-party buyer — may allow you to stay in the home as a tenant. Some lenders and investors offer rent-back programs after foreclosure, letting former homeowners lease the property instead of moving out immediately. 

However, rent payments may be higher than what you were paying on your mortgage. If renting isn’t affordable, you’ll likely need to look for alternative housing.

What Happens if You Don’t Leave Voluntarily?

If you’re unable to stay in the home, you may need to leave voluntarily or wait for the new owner to begin the eviction process. While it can be tough to move, leaving voluntarily has advantages. It helps you avoid an eviction on your record, which can make it harder to find new housing.

If you stay in the home without permission after foreclosure, the new owner will need to file an eviction lawsuit to remove you. The eviction timeline depends on state law. Some states require a formal notice and court process, while others allow for quicker removals. Once the eviction deadline passes, law enforcement may step in to physically remove occupants.

What Is a Cash-for-Keys Agreement?

In some cases, the new owner may offer a cash-for-keys agreement, where they pay you to leave the home by a certain date. This agreement often requires you to move out quickly and leave the property in good condition. 

The amount offered varies but can range from a few hundred to a few thousand dollars. This money can help cover moving expenses or a security deposit for a new place. If you're interested in this option, you can ask the new owner if they’re willing to negotiate.

Will You Owe Money After Foreclosure?

Depending on your state’s laws, you could still owe money after foreclosure. If the foreclosure sale didn’t cover the full amount you owed on the mortgage, the lender may seek a deficiency judgment for the remaining balance. In legal terms this is called a deficiency balance.

Some states protect homeowners from this, but in others, lenders can pursue legal action to collect the difference. If you’re facing a deficiency judgment, you may want to explore debt relief options like bankruptcy or debt settlement.

Renting After Foreclosure: How To Find Housing

If you've recently gone through a foreclosure, you might be worried about finding a new place to live. Many landlords check credit reports as part of the rental application process, and a foreclosure can make them hesitant to approve your application. 

Foreclosures appear on your credit report and can stay there for up to seven years, which may impact your ability to rent. But while it may take extra effort, finding a rental home after foreclosure is possible.

Here are some steps you can take to improve your chances of securing a rental:

• Act quickly. If possible, find a new rental before your foreclosure appears on your credit report. It may take some time for the foreclosure to be reported, so applying early could help you secure a lease before it affects your credit score.

• Keep up with other bills. Landlords may be more understanding if your foreclosure was due to specific circumstances, but a history of late payments on other accounts could be a red flag.

• Prepare for tenant screening. Gather documents like pay stubs, tax returns, and letters of reference to show you're a responsible tenant.

• Be honest about the foreclosure. If it's already on your credit report, explain the situation and what steps you're taking to rebuild your finances. Lying on a rental application can lead to rejection.

• Choose an affordable rental. Many landlords require that rent be no more than one-third of your gross income.

• Offer a larger security deposit. This can help reassure a landlord that you're financially stable.

• Consider a cosigner. A friend or family member with good credit may be able to help you qualify for a rental.

• Look for “no credit check” rentals. Private landlords and smaller rental properties may have more flexible requirements than large apartment complexes.

Finding housing after foreclosure can be challenging, but with the right approach, you can secure a stable place to live and start rebuilding your financial future.

Foreclosure FAQs

Foreclosure is a complicated process, and if you're facing it, you likely have a lot of questions. How long do you have before foreclosure starts? Can you sell your home to avoid it? What happens to your credit afterward?

In this section, we answer some of the most common foreclosure-related questions, covering everything from how long foreclosure stays on your credit report to whether you can buy a home again after foreclosure. Understanding your rights and options can help you make informed decisions and navigate this difficult time with more confidence.

What Is the 120-Day Rule in Foreclosure?

If you fall behind on your mortgage payments, federal law generally requires your lender to wait at least 120 days before starting the foreclosure process. This rule is meant to give you time to explore options like loan modification, forbearance, or repayment plans to avoid foreclosure.

During this 120-day period, your mortgage servicer must contact you to discuss loss mitigation options. They’re also required to send written notices about available assistance programs. If you apply for a loss mitigation plan within this period, the lender can’t move forward with foreclosure until your application is reviewed.

This rule applies to most federally related mortgage loans, including those backed by the FHA, VA, USDA, Fannie Mae, or Freddie Mac. However, some small mortgage servicers and certain types of loans are exempt.

Keep in mind that this rule only delays foreclosure—it doesn’t erase your missed payments. Once the 120-day period is over, your lender can begin foreclosure if you haven’t worked out a solution.

Can You Sell Your Home To Avoid Foreclosure?

If you're facing foreclosure, selling your home before the process is complete can help you avoid serious financial consequences. A traditional sale may allow you to pay off your mortgage in full, while a short sale — where the lender agrees to accept less than what’s owed — can be an option if your home’s value has dropped. Acting quickly is key, as lenders may be willing to delay foreclosure if they know you're actively trying to sell.

Selling before foreclosure can help protect your credit, as foreclosures stay on your credit report for up to seven years and can make it harder to get a mortgage or rent a home. It may also help you avoid a deficiency judgment, which happens when a home sells for less than what’s owed and the lender seeks the remaining balance. If selling isn't an option, other alternatives like loan modification, refinancing, or bankruptcy might help you avoid foreclosure.

What Is Voluntary Foreclosure?

Voluntary foreclosure occurs when a homeowner chooses to give up their property to the mortgage lender instead of waiting for the lender to initiate foreclosure proceedings. This is often done through a deed in lieu of foreclosure, where the borrower transfers ownership in exchange for being released from the mortgage debt. 

Homeowners may opt for voluntary foreclosure if they can no longer afford their payments, have an underwater mortgage, or find that keeping the home is no longer financially beneficial.

While voluntary foreclosure can save time and legal costs compared to a traditional foreclosure, it comes with drawbacks. It significantly impacts credit scores, may lead to a deficiency judgment if the home’s value is less than the mortgage balance, and could create tax consequences if debt is forgiven.

How Long Can You Stay in Your Home During a Foreclosure Proceeding?

You can usually stay in your home until the foreclosure process is complete and the title officially transfers to the new owner. This can take several months to over a year, depending on whether your state uses judicial or nonjudicial foreclosure. 

After the foreclosure sale, you may have additional time if your state has a redemption period, which allows you to repurchase the home or catch up on missed payments. Once the redemption period ends (if applicable), the new owner can begin the eviction process, which may give you anywhere from a few days to several weeks to move out. 

Some homeowners also negotiate a cash-for-keys agreement to receive money in exchange for leaving the property sooner.

Should I File a Chapter 7 Bankruptcy Case After Foreclosure?

Filing Chapter 7 bankruptcy after foreclosure can help if your lender gets a deficiency judgment — a court order requiring you to pay the remaining balance on your mortgage if the foreclosure sale didn’t cover the full amount you owed. 

In some states, lenders can collect this debt through wage garnishment, a bank levy, or by seizing other assets you own, which can make it even harder to recover financially. A Chapter 7 bankruptcy can erase the deficiency judgment, stop wage garnishments, and end collection efforts, giving you a fresh start.

How Much Does a Foreclosure Lawyer Cost?

The cost of hiring a foreclosure lawyer varies based on several factors, including the complexity of your case, the lawyer’s experience, and where you live. In general, foreclosure attorneys charge anywhere from $1,500 to $20,000 to represent homeowners, depending on the services provided.

Most foreclosure lawyers use one of the following fee structures:

• Hourly rate: You pay for the time the attorney spends on your case, typically ranging from $100 to $500 per hour. This option can be expensive if the case drags on.

• Flat fee: The attorney charges a fixed amount, usually between $1,500 and $4,000, for handling your foreclosure case. This provides cost certainty but may limit the amount of work the lawyer is willing to do.

• Monthly rate: Some lawyers charge a monthly fee to handle your foreclosure for as long as needed. This can be more predictable but may become costly if the case takes a long time to resolve.

If you can’t afford a foreclosure lawyer, you may have other options. Some attorneys offer free consultations, where you can get basic legal advice before deciding whether to hire them. You can also look for legal aid organizations, pro bono programs, or foreclosure defense clinics that provide free or low-cost assistance to homeowners in need.

What Happens If a House Goes Into Foreclosure During Divorce?

If a home goes into foreclosure during a divorce, both spouses may still be responsible for the mortgage if their names remain on the loan. This means foreclosure could damage both of their credit scores and create financial challenges even after the divorce is finalized.

If one spouse wants to keep the home, they may need to refinance the mortgage in their name or negotiate a loan modification to make payments more affordable. If neither spouse wants to keep the property or if making payments is no longer possible, selling the home, doing a short sale, or signing a deed in lieu of foreclosure may help minimize the financial impact.

Since foreclosure can complicate divorce settlements and property division, it's important to communicate with your lender and divorce attorney to explore all available options.

Should I Take a Bailout Loan To Stop Foreclosure?

A foreclosure bailout loan might seem like a quick fix, but it comes with significant risks. These loans — also called hard money loans — often have high interest rates and short repayment periods, which can put you right back into financial trouble. Many require refinancing again within a few years, and if you can’t refinance when the time comes, you could end up facing foreclosure all over again.

If you're considering a bailout loan, take time to explore other options first. You may qualify for a loan modification, forbearance, or a repayment plan with your lender. In some cases, a short sale or deed in lieu of foreclosure may be better alternatives. 

Can My Mortgage Lender Bid on My Home at a Foreclosure Sale?

Yes, your mortgage lender can bid on your home at a foreclosure sale. This is called a credit bid. Since the lender already has a financial interest in the property, they can place a bid without paying cash—up to the amount you owe on the mortgage.

Lenders often make credit bids to protect their investment and ensure the home isn't sold for much less than what’s owed. If no other buyers bid higher, the lender can take ownership of the home and try to sell it later, often as a real estate owned (REO) property.

How Does a Tax Lien Foreclosure Work?

If you don’t pay your property taxes, the local government can place a tax lien on your home. In some states, this lien is sold to an investor, who then collects the unpaid taxes plus interest. If you don’t pay the debt within a set period (called the redemption period), the investor may gain ownership of your home through a tax lien foreclosure.

In other states, unpaid property taxes can lead to a tax deed sale, where the government sells the property at auction instead of just the lien. This process usually offers less protection for homeowners, and in some cases, the property can be sold for much less than its market value.

Since tax liens take priority over other debts, a tax foreclosure can wipe out your mortgage and other liens on the property. 

My Landlord’s Home Is in Foreclosure — What Are My Rights as a Tenant?

If your landlord is in foreclosure, you may have legal protections under federal and state laws. The Protecting Tenants at Foreclosure Act (PTFA) generally allows bona fide tenants to stay in the property until their lease ends or for at least 90 days if they don’t have a lease.

Your new landlord (usually the bank or a new property owner) must honor your lease unless they plan to live in the property themselves. If they want you to leave, they must give you a 90-day notice to vacate. Some owners may offer cash-for-keys deals to encourage tenants to move out early.

If you’re renting a home in foreclosure, you must keep paying rent until ownership officially changes. If your utilities are in your landlord’s name, you may need to check whether they’re being paid to avoid service interruptions.

Can You Buy a Home Again After Foreclosure?

Yes, you can buy a home again after foreclosure, but most lenders require you to wait a certain period before you qualify for a new mortgage. 

The waiting period depends on the type of loan: 

• FHA loans require a 3-year wait

• VA loans require 2 years

• USDA loans require 3 years

• Conventional loans typically require 7 years but may be reduced to 3 years with extenuating circumstances. 

📆 The waiting period starts from the date the foreclosure is finalized, not when you stopped making payments.

During this time, it’s important to rebuild your credit, save for a down payment, and show financial stability. If you can’t qualify for a traditional mortgage right away, alternatives like rent-to-own agreements, owner financing, or credit repair mortgage programs may help. While foreclosure can be a setback, it doesn’t mean you’ll never be able to buy a home again. Many people become homeowners again after taking time to improve their finances.

How Long Does Foreclosure Stay on Your Credit Report?

A foreclosure stays on your credit report for seven years from the date of the first missed payment that led to the foreclosure. During this time, it can lower your credit score and make it harder to qualify for new loans or credit. However, the impact lessens over time, especially if you take steps to rebuild your credit.

You can improve your credit by making on-time payments on other accounts, reducing debt, and avoiding new negative marks like late payments or collections. You can also boost your credit by self-reporting your utility bills, rent, and other recurring monthly bills to the credit bureaus.