Foreclosure can actually provide a great opportunity to save some serious money. That’s because legal procedures—including foreclosures—typically take many months, and because many houses don’t sell at foreclosure auctions. While the foreclosure proceeding goes on, and then while the house sits vacant after a failed attempt to sell it at auction, you probably won’t have to move—or make any payments for your housing.
For example, if your mortgage payments are $2,000 a month, and you stay in the house for nine months without making a payment, you could save $18,000. Of course, you might not be able to save the entire amount of your mortgage payment, but even if you saved half, you would still have a considerable amount of money in the bank when the time comes to leave.
As long as you remain, you also save the house from nine months of deterioration (and vandalism) it would suffer by being vacant. This does your community a great favor.
How long can you stay in your house payment free once you decide to give it up? There is no way to give you a precise timeline for your personal situation. Each phase of the process, from your first missed payment to your last day in the house, involves variables unique to your situation. However, reviewing your state's foreclosure laws will give you an idea of whether you’re likely to have three months, a year, or something in between. Once you've gotten a rough idea of what to expect, I highly recommend that you talk to a HUD-approved housing counselor (see Ch. 4) to get a reality check on how fast events are moving in your community. A second opinion can only help. (To get help from a HUD-approved housing counselor, call 888-995-4673 or visit www.995hope.org.)
Filing for bankruptcy shortly before the sale date can buy you more time. If you file for Chapter 7 bankruptcy after the foreclosure sale has been scheduled, the sale will be delayed for several months while the bankruptcy is pending. If you file for Chapter 13 bankruptcy, you can probably delay the foreclosure sale for at least five or six months, especially if you hire a lawyer to navigate the tricky Chapter 13 shoals. To find out more, see our article on how Chapter 7 or Chapter 13 bankruptcy can help you avoid or delay foreclosure.