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5 Options You Have When Facing Foreclosure 1. Bankruptcy Chapter 13 bankruptcy requires you to make a repayment plan for your debts. If you are earning income but not enough to cover your current mortgage payments, this option may allow you to catch up on missed payments using a renegotiated payment plan. During Chapter 7 bankruptcy proceedings, a trustee sells your assets and uses the proceeds to pay lenders. 2. A Forbearance Plan A mortgage company will agree to reduce the amount of the monthly payments for a set period. In some cases, they may suspend payments altogether. Forbearance plans are meant to help homeowners with a temporary setback, such as unforeseen expenses, an illness, a divorce, or a job loss. 3. A Loan Modification You may be able to change specific factors, such as the interest rate or the length of the loan term, which could make the payments more manageable. More importantly, once you apply for loan modification, the bank cannot continue foreclosure proceedings until they give you an answer on your application. 4. A Short Sale Is when the homeowner avoids foreclosure by selling the home for less than they currently owe on the mortgage. The profits from the sale go to the lender instead of the homeowner. 5. Deed in Lieu of Foreclosure and Deed for Lease You simply sign the property over to the lender, and they forgive your debt. However, they agree to let you stay in your home as a tenant as part of the agreement.