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Practical tips for avoiding foreclosure

Many people in Tennessee had the unpleasant experience of watching increasing debts threaten their financial well-being. One of the most pressing questions is whether financial difficulties will result in foreclosure and the loss of the family home. This blog has discussed how the automatic stay that is issued when a person files a bankruptcy petition halts all foreclosure proceedings until the bankruptcy process is completed. But, the law and differing lending practices provide a number of less dramatic ways to avoid foreclosure.

As the threat of foreclosure grows, a homeowner should take the following steps. The first step is to collect and read all documents concerning the loan that was used to buy the home. These documents usually include the deed, the promissory note that is the borrower's agreement to repay the loan and the mortgage, the document that gives the lender the right to seize the house, if payments on the note fall behind schedule.

A person must take care to understand the key terms of the mortgage, including the amount of each payment, the due date for each payment and any penalties that may attach to late payments. And, understanding the interest rate is crucial, especially with adjustable interest rate mortgages. The interest rates on such mortgages can increase dramatically after the period specified in the promissory note.

With this information in hand, a phone call to the lender can reveal whether the mortgage and loan were sold by the original lender to a servicing company. That company will have the most to say about what happens if a loan default occurs.

The state of Tennessee has a number of agencies that can offer advice and occasionally financial assistance to persons facing a default and foreclosure. Every lender has its own foreclosure procedures. A person concerned about the consequences of a default should take care to fully understand these procedures. The name, phone number and, if available, e-mail address of each person who has provided information should be recorded and saved.

If the lender or its agent has decided to commence a foreclosure action, the services of an experienced lawyer may be helpful. A knowledgeable attorney may be able to spot a defect in the foreclosure proceeding or in the original loan documents that will halt the foreclosure proceeding. A capable lawyer can also provide advice on whether filing a Chapter 13 bankruptcy petition is a good idea.

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