Overview: Quick choices when foreclosure is looming
If you’re behind on mortgage payments in Los Angeles, three common strategies that homeowners and attorneys consider to avoid a completed foreclosure are: a short sale (pre‑foreclosure sale), a deed‑in‑lieu of foreclosure (“deed in lieu”), or filing bankruptcy (usually Chapter 13 or Chapter 7 with distinct outcomes). Each approach has tradeoffs for timing, credit impact, relocation, and whether you can remain in your home. The right choice depends on your goals: keep the home, minimize credit damage, avoid deficiency judgments, or get a quicker exit.
This article explains how the options work in California law and practice, highlights servicer duties and federal loss‑mitigation rules, and provides practical next steps and local Los Angeles resources you can contact today.
How each option works (what to expect)
Short sale (pre‑foreclosure sale)
In a short sale the homeowner sells the property for less than the mortgage balance and the lender agrees to accept the net sale proceeds as full or partial satisfaction. Short sales are negotiated with the servicer and typically require a marketing period, buyer approval, and a servicer decision on whether to release deficiency claims. Short sales can reduce the risk of a formal foreclosure on your credit report but may still leave tax or deficiency issues depending on lender agreement. Federal and agency servicers (FHA, GSEs) include short sale (pre‑foreclosure sale) as a loss mitigation option.
Deed in lieu of foreclosure (DIL)
With a deed in lieu you voluntarily transfer title to the lender in exchange for a release from the mortgage obligation (subject to the servicer’s terms). A deed in lieu can be faster than a short sale and avoid a trustee’s sale, but servicers may refuse if there are other liens or potential buyers. FHA and other program rules list deed‑in‑lieu as an available disposition option and sometimes include relocation assistance or limited borrower compensation.
Bankruptcy (Chapter 13 or Chapter 7)
Filing bankruptcy immediately triggers the federal "automatic stay," which stops most collection activity—including foreclosure—until the bankruptcy court or a creditor asks the court for relief from the stay. Chapter 13 creates a plan to cure arrears over time, which is often the only bankruptcy pathway that allows homeowners to keep their home by making current and plan payments. Chapter 7 can temporarily delay a sale but generally lacks a mechanism to catch up missed mortgage payments and is therefore usually a short‑term delay rather than a permanent solution to foreclosure. The automatic stay can be lifted by the lender through a court motion, and state foreclosure timing (e.g., notices required before a trustee’s sale) interacts with the effectiveness of filing.
Side‑by‑side comparison: Pros, cons, and likely timelines
| Option | Goal | Timeline | Credit & legal effects | When it’s best |
|---|---|---|---|---|
| Short Sale | Sell home, avoid completed foreclosure | 1–6+ months (listing, buyer approval, servicer review) | Less damaging than completed foreclosure; potential deficiency or tax issues unless released | If you can market the home and want to avoid foreclosure on record |
| Deed in Lieu | Transfer title, clear mortgage lien | Weeks to a few months (servicer review) | Less damaging than foreclosure; may include relocation help but not guaranteed | If you cannot sell and servicer will accept title without junior liens |
| Bankruptcy (Ch. 13) | Stop foreclosure; keep home by repaying arrears | Immediate stay; plan typically 3–5 years | Significant credit impact but may let you keep the house; discharge of other debts | If you have regular income and want to retain the home |
Note: timelines can change if a lender files a motion to lift the automatic stay or if a trustee’s sale timing has already advanced. For Los Angeles homeowners, acting early—before a trustee’s sale date—is critical.
Practical decision steps and Los Angeles resources
- Clarify your goal: Do you want to stay in the home, sell with minimal damage to credit, or get a fresh start through bankruptcy?
- Get loss‑mitigation and servicer info in writing: Submit a complete loss‑mitigation application as soon as possible; servicers must acknowledge receipt and follow CFPB/RESPA timing rules while reviewing options. Keep copies of all correspondence.
- Ask about program specifics: If you have an FHA, VA, or GSE loan, particular HUD/FHA or agency loss‑mitigation rules (and temporary program changes) may affect compensation, eligibility, or timelines—ask whether Pre‑Foreclosure Sale or Deed‑in‑Lieu options apply.
- Consult a bankruptcy attorney if considering filing: A Chapter 13 plan can cure arrears and halt foreclosure but requires steady income and careful budgeting. Filing triggers the automatic stay immediately, but lenders may ask the court to lift it; timing matters.
- Use local, free counseling and legal help in Los Angeles: Contact LA County Department of Consumer and Business Affairs’ Foreclosure Prevention Unit for free counseling, forms assistance, and referrals (phone and email support). Local housing counseling agencies approved by HUD can also help prepare loss‑mitigation packages.
If you need immediate steps (72‑hour checklist)
- Call your servicer and confirm deadlines; ask for a loss‑mitigation application.
- Gather pay stubs, tax returns, bank statements, and a hardship letter.
- Contact LA County DCBA or a HUD‑approved counselor for free assistance.
- If a sale is scheduled within days, consider consulting a bankruptcy attorney immediately to discuss whether a filing will generate an automatic stay in time.
Every case is unique: liens, second mortgages, investor guidelines, and recent Federal agency changes (including updated FHA loss‑mitigation rules) may change what options are available. If a lender or servicer refuses an option, get their reason in writing and consult counsel or a HUD‑approved counselor.