In a short sale, the house is sold and the lender agrees to accept the purchase price. In negotiating this type of arrangement, the homeowners need to read all the fine print of the contract to ensure they are not liable for any deficiency. Using the same example, if the lender agreed to a short sale and did not include language in the contract holding the homeowners responsible for any deficiency, then the individuals are free of any further obligation. Perhaps one of the ways to stop foreclosure is to apply for Bankruptcy protection. Experts advise bankruptcy as only a last resort. However, if the homeowners have no other choice due to overwhelming debt, they are advised to seek competent legal counsel before filing a petition with the courts.
If the homeowner is unsuccessful in negotiating a settlement with the lender, he or she may need to consider contracting with a bankruptcy attorney for loss mitigation negotiation. This person is specially trained to assist in these types of situation and may be able to negotiate an agreement with more favorable terms than the homeowner could get on his or her own. Other ways to stop a foreclosure include a deed in lieu of foreclosure and having a short sale. In the former, the lender agrees to take back the property instead of foreclosing. In almost every case, any deficiency between the selling price and the outstanding amount of the loan will need to be made up by the former homeowner. For example, the total amount of the original loan plus arrearages and legal fees may equal $175,000. If the lender sells the property for $165,000, the individual still owes $10,000.