What Happens After a Foreclosure?

Arjun Kulkarni Jan 9, 2019
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When people look at the bleak possibility of a foreclosure, they can't help but wonder what happens after the entire ordeal. There are, fortunately, some things that you can do to alleviate the stress of handling the process.
A foreclosure is one of the most heart-wrenching processes one can go through. In brief, a person who is going through this process will see most of his assets sold, till either his debts are cleared, or he has run out of assets. It is really very hard to decide which is worse; bankruptcy or foreclosure.
But to overcome a foreclosure, as with bankruptcy, you need to take many quick steps. You are left with practically no assets. Your car, house, everything gets sold off. The other consequence is that your credit score plummets, and hence, lenders aren't too willing to give you a loan. Let us learn to tackle each of these problems, one by one.

Redemption Period

An interesting clause law, which many people miss, is about the redemption period of foreclosure. If you have to sell your house, the state laws grant you a time frame to arrange funds to buy your house back from the party that bought it during the foreclosure process. You have to pay the auction price to the purchasing party, and claim your house back.
Unfortunately, not all states grant a redemption period, and there is no uniform redemption period either. But here are some of the states that do grant this facility, along with their respective redemption period.

Redemption Period of Few States

  • Oregon - 6 months
  • Minnesota - 2 months
  • California - 4 months
  • Alabama - 1 year
  • Arkansas - 1 year
  • Iowa - 3 to 6 months
  • North Dakota - 3 months
  • Vermont - 7 months

Do Not Wait to be Evicted

A lot of people will tell you that you can stay in your house till the new homeowner evicts you by initiating a legal procedure. This, in my opinion, is a bad idea. With an eviction, you not only lose face in society, but also get blacklisted for having been evicted once.
A foreclosure is bad enough, but a legal eviction will basically prove to society that you are not trustworthy, and hence, you might find it tougher to find a homeowner who is willing to rent you his house. So, once your redemption period is over, move out peacefully.

Rebuild Your Assets

The next thing you must do is rebuild your assets. This basically means that you should save money and invest it properly. Building your assets helps improve your credit rating, and also enables you to a mortgage for any loan which you might need in the future. Hence, rebuilding your assets and spending wisely are important things to do afterward.

Improve Your Credit Score

A foreclosure mark on credit history never looks good. A good credit score is important if you want to take a loan. It is well-known that a person with a good credit score will always get a loan at less interest rate than a person with a poor credit score. So, pay debts on time, build assets, and your credit score will improve, so you to get a cheaper loan.
A foreclosure can be mentally debilitating, but to emerge out of the experience better, you need to show immense mental strength and composure.