9 Ways to Escape Financial Distress and Foreclosure

ways escape financial distress home bank foreclosure

The burden and cost of financial distress can be a lot to carry on your shoulders. Debt is a vicious cycle that is hard to get out of. If you can relate, you’ve come to the right place. We’ve rounded up some of the best options to help get you back on your feet. 

From how to save money to where to turn for help, this guide can help you break the cycle. Let’s start getting you out of debt. 

1. Speak with Your Lender and Attorney First 

If you’ve recently come under financial hardship, the first thing you should do is to call your mortgage lender. Your mortgage company can’t work with you if they don’t know what is going on. They may have deferment or modification programs available to assist you and avoid default. 

A debt attorney can work with them on your behalf to work out an agreement or loan modification. Defaulting will be harder to work through the farther behind you get. With a modification, you may be able to reduce your monthly payments and drop late fees. 

2. Make a Plan 

Knowing how to escape financial distress, is tough without a plan. You need a plan for how you’re going to pay your bills, living expenses, and get through this crisis. If you don’t have income coming in anymore, you’ll want to take a look at your assets. Once you see how much you have, you can make a plan for stretching it as long as possible. 

Next, write out all your expenses. Your mortgage, car payment, and student loans are examples of fixed expenses. These are bills you have to pay each month. Your grocery bill and entertainment fund are all expenses that you can change. You’ll want to see where all your money is going. You’ll quickly be able to see if you’re underwater or if you have a few months to float yourself through. 

3. Look for Assistance Programs 

If you’ve recently been laid off, you may want to consider filing for unemployment. While it isn’t something anyone dreams, they will do, life happens. There is no shame in taking help when you need it. These programs are intended for a financial crisis such as losing your job. 

With unemployment income coming in, you’ll be able to pay your mortgage and keep yourself afloat while you look for another job. You can’t receive benefits if you don’t apply, so make sure to enroll right away. 

4. Call all of Your Accounts 

In addition to your mortgage lender, you’ll also want to call your other service providers. If you speak with them about your hardship, they may be able to pause your services or give you a grace period. 

You should call your utility companies and anyone you have an account with. Try and work out a payment plan or a grace period to give you a little time to get back on your feet. 

If you have federal student loans, there are forbearance and deferment options available. During this time, you can pause making your payments without penalty. Student loans aren’t debt you want to default on. 

5. Stop Using Credit Cards 

When you get into financial trouble you should stop using your credit cards, right away. Credit card debt can accumulate quickly. Especially when you aren’t able to pay it off each month. You’ll end up paying double in interest fees and late payments the more debt you rack up. 

Having too much debt will also cause a lot of damage to your credit score. Stop using your credit card and start paying in cash. When you have to use cash, it forces you to stick to your budget. If your credit card debt is too much for you to handle, you’ll want to call a debt professional to help you. 

6. Make Cuts 

After you have called all your service providers, it’s time to make some cuts. Things like gym memberships and music subscriptions can be suspended until you have more income coming in. You’ll also need to cut back on entertainment and eating out. 

You’ll be surprised at how much money you can save by making a few small adjustments. You may also find you are paying for things you don’t use. It’s easy to sign up for movie streaming services or extra channels and then forget you have them. 

Cooking, making your own coffee, and doing free workouts at home can all help you reduce your spending. This will help to keep you from accumulating more debt as well. 

7. Loan Modification 

A loan modification can help keep you out of foreclosure. You’ll be able to modify your mortgage and reduce your monthly payment. This can help keep you in your home while making more manageable payments. Your attorney may also be able to drop your late fees. 

Your attorney will also work with your lender to roll in your late payments, lower your interest rates, and reduce the balance of your loan. The goal here is to get you back on track and into a payment, you can afford. 

8. Debt Relief 

Bankruptcy and other debt-relief programs are also available. Your attorney can help you come up with which solution makes the most sense for you. This process will take a load of stress off of your shoulders. You won’t be harassed by creditors anymore and will have more time to get your finances back on track. 

9. Mortgage Litigation 

If you’re already facing foreclosure, you need to speak with an attorney as soon as possible. Your legal team can help fight foreclosure on your behalf. They will come up with the best legal strategy possible to keep you in your home. Protect yourself and your home by working with a professional. 

Fight Financial Distress and Come Back Stronger 

If you’re in financial distress, you’re not alone. Know that there are resources available to help you get through these tough times. From loan modifications to government assistance, there are programs designed for financially troubling times. 

For more helpful guides, check out the finance section for tips and resources to learn more about mortgage management and ditching debt.

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