There are several ways to stop a foreclosure:
 | REINSTATEMENT |
| BANKRUPTCY |
| REDEMPTION |
| SHORT SALE |
| DEED IN LIEU OF FORECLOSURE |
Some ways are better than others. Probably the best way to stop a foreclosure is to do what is called "reinstate". Reinstate means that the borrower on the note pays back what is owed, with interest and late fees and all fees associated with the foreclosure. A borrower has a minimum of 106 days to reinstate (up to 5 days before the property is scheduled to sell at an auction) after the notice of default is recorded with the County recorder's Office. If a borrower cannot come up with all the money during that time to reinstate, then the borrower must use another means to stop the foreclosure. Filing a bankruptcy will prevent the property from being sold at a foreclosure sale (an auction). A Chapter 7 Bankruptcy will usually only cause the sale date to be delayed, whereas a Chapter 13 Bankruptcy will allow the past due payments and fees to be paid over a period of time, up to five years.
The foreclosure process will also be stopped if the loan is "redeemed." Redeemed means that the loan is paid off in full. This can happen if the house is sold or refinanced for at least the amount that is owed on the loan. If the home cannot be sold for the amount that is owed, then a short sale may be necessary. A short sale consists of an agreement between the borrower and the bank whereby the bank agrees to take what it can from the sale of the property, and forgive the balance. Similarly, a deed in lieu of foreclosure is a deed which conveys title back to the bank in return for a promise by the bank to stop the foreclosure process and not sue the borrower for the balance due. Neither a short sale nor a deed in lieu of foreclosure may be possible if there is more than one loan securing the property (a first and a second).
There are less favorable ways to stop a foreclosure, which I do not recommend. The bank holding the note may offer what it calls a "deferment". These agreements usually allow the bank to sell the home without giving the homeowner notice; generally not a good thing for the homeowner. There are also various schemes where someone will offer to pay the homeowner's reinstatement amount in return for the homeowner's title. The homeowner is promised that title will be returned to him when the homeowner refinances or pays back the debt with interest. These schemes are almost always fraudulent and illegal. It is highly recommended one stay away from them.
You could owe what is called a deficiency balance in the following situations:
| You have more than one loan secured by your house and the at least one loan was not obtained at the time of purchase. |
| Your house has been refinanced. |
| The house is investment property |
Often, a homeowner will not be liable for an amount due after the foreclosure sale of his or her home. However, there are important exceptions to this rule. If a second loan secured by the property was obtained at a date after the original purchase, the homeowner could be liable to the holder of the second note. Also, if a homeowner has refinanced his or her home, the homeowner could be liable for a partial deficiency. Likewise, if the property is not the residence of the borrower, then the borrower could be liable to a non-foreclosing note-holder after the foreclosure sale.