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Alternatives to House Repossession

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House repossession is probably one of the worst things a family would ever have to face. Not only have you had to deal with all of the negatives that come along with being delinquent on your bills, such as the constant letters and phone calls but you also have to deal with the long term effects for house repossession, such as loan denials and bad credit. Depending on your circumstances, you may be able to work out alternatives with your finance company to keep you in their good graces and keep your family and your credit above water.

Option 1 - Loan Modification - This option can stop house repossession because it's almost exactly like a refinance except you don't necessarily have to be current on your loan to qualify. A loan modification can add any past due principle, interest, and even escrow payments back into a loan. The loan is then re-amortized for a new term and you get a fresh start. In addition to the fresh start sometimes you may even be offered a lower interest rate to keep your payments manageable and keep you from facing house repossession in the future.

Option 2 - Repayment Plan - A repayment plan is probably the easiest way to go because there is little more than just a verbal agreement between you and your finance company needed to set this up. Repayment plans usually take your total delinquent amount and divide it up over a 10 month period and add it to your existing mortgage payments. The reason I listed this as option 2 is because you may remain in a delinquent status for the time you're repaying what was agreed upon until it's completely paid off. Though this may affect your credit rating it is nothing compared to having a foreclosure on your record.

Option 3 - Short Sale - Unfortunately with a short sale you do actually have to sell your house but it is generally a lot less damaging to your credit report than house repossession. The way a short sale works is you sell your house for whatever the current market values is and the proceeds go to the finance company. Most of the time if you're in this situation the amount you owe is more than what the house is worth. The bank still takes a loss in a short sale but it will usually only reflect on your credit report for 3-5 years as opposed to the 10 years a foreclosure stays on.

Though these options are common they may not work for everyone. If you find yourself in a situation without a way out you should contact your finance company directly. Keep your finance company in the loop. If they are familiar with your situation they'll be willing to think outside of the box to try and develop an alternative to house repossession that will work for you.