Recovering from foreclosure can be an emotional experience. There is definitely a great sense of loss and it is often not just the loss of the house. All loss needs to be grieved to some degree or another, so healing can begin. Don’t ignore the grief, but do work through it. People do this in different ways, maybe talking it out with a trusted friend, counselor, pastor or reading related books that help walk you through the healing. You need to take care of yourself and your family through this. Remember though, that good can come from this and you can get through this.
In the meantime, keeping a hold of the fact that recovering from foreclosure will happen and using this time to make things better in your life is highly probable if you keep focused on the good. There will be some days of discouragement, but keep focused on positive things as much as possible.
Debt will make you a slave, get rid of it as soon as possible and when you do, avoid getting more. Get rid of the credit cards. Credit card companies enslave Americans. If it scares you not to have a credit card, keep one, but do not use it unless you truly absolutely have to. Pay cash for everything. Good rule of thumb is “if you don’t have it, don’t spend it”.
If by chance you have been living off your credit cards to pay the mortgage in an effort to save your house and you now have lots and lots of debt, maybe a 2nd mortgage that will not be dismissed in the foreclosure, you may want to consider bankruptcy. I am not a strong advocate for bankruptcy, but there are circumstances that may make that a viable option for some. If you are a single mother who has tens of thousands of dollars in debt, you may want to consider it. Be sure to educate yourself on the pros and cons. Talk with a knowledgeable lawyer. You may want to read Dave Ramsey’s thoughts on bankruptcy. Ultimately, you have to decide what works for you after considering all things. Also, note that if the bankruptcy is close to the foreclosure, it is easier to prove that the bankruptcy was related to the foreclosure and much easier to explain away down the road when you are hoping to buy your new home. For a FHA loan, underwriters typically won’t even consider you for a loan until the bankruptcy is over 2 years old. You most likely will have to wait 3 years for the foreclosure anyway. I am not advocating bankruptcy, but your first priority is your family and if you have a ton of debt, but not the income potential to pay it all back before they garnish your wages, it is something that should be considered. Reversely, just know that you cannot file bankruptcy again for 7 years. My hope is that you develop a financial plan that makes that fact irrelevant. Either way, the well-being of your family takes priority. This may mean pursuing bankruptcy or not pursuing it.
So basically, the steps to recovering from foreclosure are:
1. Work through the loss emotionally in healthy ways. Start making a plan to take care of yourself and your family, obviously having a secure place to live, if you haven’t done this already.
2. Determine, based on your circumstances, whether bankruptcy is imminent and seek competent advice regarding doing that after your foreclosure is official. Note: If you have a second mortgage, it will not be included in the foreclosure. It will become unsecured debt.
3. Look for any ways that you can decrease your expenses and change your lifestyle accordingly. Don’t think of it as loss, maybe just change and find ways to make it fun even. Fun doesn’t have to require money. Use this to make family bonds stronger.
4. Start working on building a “baby” emergency fund of $500-$1,000. This fund is for just what it is named, nothing else. Maybe keep it in a separate account.
5. If you have debt that you plan to repay, then make a plan to get rid of it and do not incur more. Many respected financial experts say to target the smallest one first. Once it is gone, then take the payment you were making to that one and add it to the next smallest debt. Continue this until all debt is gone. Get rid of those credit cards. I love Dave Ramsey’s material and strongly urge you to take his Financial Peace University program. It is likely offered at a church near you. The paying off of these debts should help your credit report down the road and will better your chances when you are ready to buy a new home.
6. Pay your bills on time and keep those records in a safe place or easy retrieval later on.
7. Find ways to increase your income, maybe find a new job field that is more stable and something more enjoyable for you. This could be the time to find a career that brings not only more money, but more enjoyment.
During this time when you are recovering from foreclosure, it can easily tip your life out of balance with stress, but it can also help to bring your life more in balance. This will take some effort, but it will get easier if you keep positive and look at it as an opportunity to get healthier financially. Whatever path you decide to take, be sure it is keeping that balance as much as possible. Discover what is right for you and your family and work together on it. Make it enjoyable. It is a great feeling to make a living doing something you enjoy and help others as well. I wish you well in your recovery from your foreclosure.