The stress of foreclosure is gone, but what about now?
Understanding the options after a foreclosure can help alleviate the stress.
Going through a foreclosure can be stressful and overwhelming. Foreclosure is the process where the lender uses legal means to take back the property (collateral) on which they lent money if the borrower defaults on payments. In many states, including Michigan, the property is sold through a Sheriff Sale. But what happens after the foreclosure has happened? Do you have to move out right away? Will your belongings be put outside?
Once the foreclosure has occurred, it’s time to regroup and begin to recover from the ordeal. In Michigan, there are usually six months after the Sheriff Sale, called the Right of Redemption period, where the homeowner can stay in the property and get ready for their next steps. That allows time to save, as no mortgage payments need to be made during this time, to plan and process what happened. During the redemption period, the lender may visit the property to make sure it’s occupied but the homeowner may continue to live in the property. In addition, the homeowner has the right to sell the home during the redemption period. If there is equity in the home, it is definitely advantageous to try and sell the home as any proceeds over and above the bid price at the Sheriff Sale will go to the homeowner.
Where to start?
- Review and revise the family spending plan. Assess the current financial situation and determine needs for the next residence. Decide how much you can afford to pay for rent and review where you want to live. Start saving for the security deposit and first month’s rent and moving costs. Begin to think about what belongings to keep and which to get rid of now.
- Identify community resources and take advantage of those that apply to your situation. They may have local rental opportunities or moving assistance.
- Set a plan of action for the next steps. Put the plan into motion so that you’re moving forward and not looking back. Foreclosure can happen despite the best efforts of homeowners just as unexpected events happen to good people. It can take between three to four years to recover financially but it is possible to look forward to becoming homeowners again.
Michigan State University Extension has released a new toolkit for homeowners who are experiencing or have previously experienced foreclosure. This toolkit will equip these individuals and families with tools to help them recover their financial stability, in the case that a recovery of their home is not possible. The toolkit is available to download free at the MI Money Health website.
Michigan State University Extension offers financial literacy and homeownership workshops throughout the year to help you become financially healthy. For more information about classes in your area, go to the events page or the MI Money Health website. Additionally, you can take the Financial Health Survey at MI Money Health to access if you’re financially healthy and discover more ways you can improve your financial health.