For many homeowners in North Carolina, the possibility of foreclosure is a significant concern. People who have experienced financial difficulties may struggle to make mortgage payments while also covering other essential expenses. Missed payments could cause a mortgage lender to contact a homeowner and inform them that they could face penalties if they do not pay the amounts owed and any applicable late fees or other penalties. In these situations, the fear of losing a home and the stress of addressing financial issues can take a toll on a person’s emotional and mental well-being. For those who are facing a potential foreclosure, it is important to understand the options that may be available. One potential solution may involve filing for bankruptcy.

The Benefits of Filing for Bankruptcy

Bankruptcy is not something most people initially consider when facing foreclosure. They may be concerned that they will not qualify for debt relief or worry that they will be required to give up certain assets, including their home. However, bankruptcy can provide several benefits for those who are facing the threat of foreclosure, including:

• Automatic stay

  When a bankruptcy petition is filed in court, an automatic stay goes into effect immediately. This legally requires all creditors to stop any collection efforts, including foreclosure proceedings. The automatic stay can provide temporary relief from creditors while giving a homeowner time to determine what options they may have to address their outstanding debts and prevent a foreclosure.

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How the Pandemic Has Impacted Mortgages

The COVID-19 pandemic has wrought wide-reaching economic implications throughout the country, including substantial layoffs and furloughs in many business sectors. If you have recently lost employment or income as a result of the pandemic, you may have been worried about making your mortgage payments.

Thankfully, the CARES Act, passed on March 27, 2020, introduced emergency mortgage forbearance opportunities, giving many homeowners much-needed relief. Those with loans backed by Fannie Mae, Freddie Mac, the FHA, VA or the USDA, which together encompass almost 75% of the mortgage market, were eligible to apply for forbearance. If approved, you had the opportunity to request up to 180 days of forbearance, and an option to request up to another 180 days if you were still unable to pay at the end of the first period. Many private banks not covered by the CARES Act have also elected to offer forbearance and relief programs.

However, forbearance is not equivalent to forgiveness, and the delayed mortgage payments will eventually need to be repaid. Given the extent and further uncertainty of the pandemic's fallout, it remains possible you will still be experiencing financial difficulties when your mortgage forbearance period ends. If you are still unable to make your resumed mortgage payments, your lender may choose to initiate foreclosure proceedings, meaning you could lose your home.

For many, there's no greater accomplishment than owning a home. On the same note, losing your home through foreclosure can be demoralizing and embarrassing, leaving families in financial ruin. If your North Carolina home is at risk of foreclosure, there are several defenses you may pursue to avoid it.

1. Loan Modification

Loan modification is an option to explore as soon as you know that foreclosure is on the table. This requires the lender and the borrower to come to an agreement regarding new loan terms. You may be expected to present proof of your budget, how much you can afford, and your ability to pay moving forward. The process can take several months, which is why it's crucial to apply as soon as possible.