What are my options when I can’t pay my debt?


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If you’ve fallen behind on paying your debt, there are options available to help you catch up. While the options available may depend on how far behind you’ve fallen, we’ve put together a guide that may be helpful below.

What happens if I can’t pay?

While there are several options available to you if you are struggling financially, usually, if you can’t make your debt repayments, your lender can take steps against you. Generally, your lender can send you a default notice giving you 30 days to make the repayments you’ve missed, as well as the regular repayment due on your loan.
Generally, if you have not made payment after 30 days, your lender will be able to start legal action to claim the entire amount of your home loan. Eventually, your lender may be able to repossess your home if repayments are not made. They may also need to recover any leftover outstanding amount by taking further action to claim your assets, such as any vehicle that you own.
The foreclosure process on your home may begin after your lender gets a court order against you. This is when your lender will take possession of your home. This actual legal process varies by state and may have a variable time frame depending on where you reside.

What options are available?

It’s best to contact your lender as soon as you become aware that you may fall behind on your repayments. They may be able to help you come to a temporary solution, such as a temporary payment reduction, or changes to the structure of your loan. However, some other options that may help you are:

  • A forbearance plan – This plan generally allows you to make reduced payments for a period of time if you’re dealing with a temporary hardship.
  • A loan modification – Your lender might be able to change your loan to make your payments more affordable.
  • A repayment plan – These plans are designed for borrowers who are only a few payments behind. Usually, they can help you to catch up on missed payments, depending on your lenders’ terms.
  • A short sale – A short sale lets you sell your property for less than your outstanding debt balance. Sometimes it will require approval from your lender, so it’s best to check before you begin the process.
  • Downsizing – If you can downsize to a more affordable home, it may be helpful to rent out the home in which you are having trouble making repayments. This will not only give you extra income but may help you to catch up on your repayments.

Prevent Falling Further Behind

If possible, it might be helpful to try and find a way to increase your income, such as taking on a second job for a while until you’re caught up. Working a temporary job may help you stay in your home and avoid falling behind if you haven’t missed too many repayments. Depending on your circumstances, renting out a room may also be a viable option.

*Disclaimer: This article contains general comments and recommendations only. It is not intended to be and should not be construed as legal advice. This article has been prepared without taking account of your objectives, financial situation or needs. Before taking any action, you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs.

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