Foreclosures in the United States increased nineteen percent in January, 2007. During this same period, New Jersey saw a 28% increase in the foreclosure rate. This is approximately one foreclosure for every 670 households in the state.

While individual reasons vary, I am sure the adjustable rate mortgages (ARMs) have increased significantly. This is due to the increase in general interest rates which may continue to increase if the threat of inflation grows. Low
down payments and interest only loans, as well as, corporations downsizing have contributed significantly to the rising rate of defaults.

So, what do you do to avoid foreclosure? Here are my top five suggestions:

1. Try to refinance your loan. If you have enough equity in your home, it may cost you more in the long run, but it will help alleviate your immediate problem.

2. Ask your lender if you can make arrangements to avoid a problem. Perhaps they will allow you to pay only the interest for a few months.

3. Sell your house now. It's definitely better
to sell your home than go into foreclosure.

4. Consider renting your home for a time while you get back on your feet.

5. Try getting counseling. You may be able to work with one of the companies who provide this service. They will arrange with your creditors to reduce payments etc.

If all else fails and you can't get back on track yourself, considering borrowing from relatives. As a final resort, you can file bankruptcy. Bankruptcy will affect your credit for more than seven years. You can file totally by filing Chapter 7. This will wipe out all your bills but the lenders can put liens on your property. If you file Chapter 13, you can pay off your debts in three to five years.

The bankruptcy laws have changed significantly in the past year. You will need to contact a professional to help you determine if you are eligible and how to go about this.

Home Ownership Preservation Foundation gives advice and help to people with these problems.

As usual, I recommend you do your due diligence in verifying all information before you proceed.

Author: Nicci Barnes

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