What Happens After Foreclosure?

After foreclosure, what is next? Exactly what happens after foreclosure? Do you know what to expect and what are the best actions to take to get your life back on track?

If the end result of your situation is foreclosure - whether it was voluntary or involuntary, don't despair...there is life after a financial disaster...a good life.

Going through foreclosure is such an emotional and traumatic process, that by the end, many homeowners actually experience a great sense of relief once it's over.  You can finally put it behind you and look forward to your new life without the shackle of a mortgage loan you could no longer afford.

So what happens next?

Here are 8 Steps to Bootstrap Your Life After Foreclosure

Congratulations...yes...Congratulations on a fresh new start!

1.  Back on Track Mindset

First and foremost, clear yourself and anybody else of the mistakes made in the past that brought on the foreclosure.  It's all history at this point.  You can't change it.  You did the best you can for youself and your family.  You can only learn from it and do everything you can to prevent the same mistakes from happening in the future.

The peace of mind that comes from liberating yourself from house payments that have been dragging you down is, just like the commercial says,  "priceless".  You literally feel the weight sliding off your shoulders and it is exhilirating to explore all the possibilities of your new found freedom.  

Perhaps the American dream was overrated and oversold - especially when it dragged you down into financial distress and mental and emotional anguish.  Now that you know the pitfalls, you will be better equipped to handle your next opportunity to pursue a new American dream...one where what matters most are your happiness, health, family, and friends.

"In life, it is not what we achieve that matters.  It is what we overcome that matters."
      - Tiger Woods (spoken wisely after he apologized for his "transgressions")

2.  Do a Post-Mortem

This sounds a bit morbid, but what I mean is, as part of the "learn from your mistakes" process after foreclosure, force yourself to acknowledge all the reasons that led to the foreclosure.  In fact, grab a pen and paper and write them down -- overspending,  making poor decisions, ignoring the warning signs, gambling, substance abuse, playing the blame game, poor budgeting, overindulgence, keeping up with the Joneses, etc.

Use this opportunity start a new plan, educate yourself on a disciplined financial strategy, then commit to it...and before you know it, you will not only be back on track, you will be at the top of your game - wiser, happier, and at peace with yourself and the world.

3.  Be Accountable

Most of us have a hard time holding ourselves accountable.  It's easy to give yourself some slack ... too much slack in fact, that most end up in a perpetual ground hog day of "I'll start tomorrow."  

In order to effect change and necessary lifestyle changes, you must have a coach or a partner who will hold you accountable.  If even the best Olympic athletes must have a coach, then let alone us ordinary human beings who are not subjected to the same rigorous training for top performance and results.  

No matter what happens after foreclosure, it is imperative that you partner up with someone who can hold you accountable.  It could be your significant other, a close family member, or a colleague.
  • Create a budget together.
  • Develop a path to achieve your financial goals.  You must have a road map to get to where you want to go if you've never been there.  You can do this by creating a one year chart starting with where you are now and where you'd like to be at the end of one year.  This will keep you updated with your progress and keep you moving through all your personal and financial milestones you set to achieve.  Repeat this every year.  Nothing will feel as good as seeing real progress and moving closer to your goals.
  • Practice good habits together - Dilligently keep track of your cashflow coming in and going out.  Living simply and within your means will guarantee peace of mind.

4.  Don't Be Shy - Ask for Help from Friends and Family

You will know who your true friends and family are after foreclosure.  They are the ones who tried to help and support you before and during foreclosure and are still there afterwards.
  • They will be your best source of emotional support, love, and encouragement.  You will need all the positive energy they can give you at one of the lowest moments of your life.
  • These are also the people who can extend a helping hand in the form of a temporary loan or even a job.
  • They can pitch in to help watch your children if you have to take on an extra or part-time position.
  • They can help you move to a new place.
  • They can even provide a place for you to live temporarily during the transition.

5.  Moving to a New Place

After foreclosure, whether you decide to stay in the same neighborhood or not, you will need to find a new place to live.  Consider your options of moving to another city or even out of state where the quality of life is good, but the cost of living is less.  You may have to look for a new job, so that's one of the considerations you have to think about.

The quality of the public schools (if you have school-age children), the weather, community services and amenities, affordable housing, and a good local economy are just some of the other things you have to take into consideration.  Do some research online or at your local public library as to which towns or cities have the best of all the criteria you are looking for.  Several magazines like Money Magazine publish their Top Ten picks yearly so that's one resource.

The one thing that could affect your ability to rent after foreclosure is your tarnished credit.  As you alreaddy know, foreclosure leaves a black mark on your credit report for at least 7-10 years.  You may have to explain your situation in writing and in person to state your case to a new landlord.  If you can demonstrate that you are able to afford the monthly rent and can convince them that the foreclosure was a result of extenuating circumstances which will not affect your ability to make your rent payments every month, you'll have a good chance.  Your new landlord has not likely been hiding under a rock recently and knows the state of the economy and the millions of homeonwers experiencing the same foreclosure predicament.  

Many people who have had to downsize or move into an apartment after foreclosure have been able to recognize the positive aspects of their new living space:
  • Much lower housing expense for rent vs their former mortgage payments + property taxes + insurance
  • Nice but inexpensive apartment complexes have well maintained grounds that include swimming pools, jaccuzzis, exercise gyms, and club houses (kids love these amenities)
  • When something breaks in your rented house or apartment, you can call your landlord or property manager to fix it at no cost to you.
  • More disposable income to pay off other bills, and spend more on quality living like family vacations, extracurricular and enrichment activities for yourself and your children.
  • Less space to clean up. This one's my personal favorite!
  • And more importantly, much less stress and anxiety over not being able to afford your living expenses.  Peace of mind allows you to sleep soundly at night, knowing you can provide for your family.
After you've secured a new place to live, get started with credit repair immediately.

6.  Restore Your Battered Credit

Seeing your credit scores after foreclosure is probably the equivalent of wincing at a gory movie.  It's okay.  Your credit is repairable!  First, you must learn how your credit score components impact your credit score so you know what to work on.

There are 2 ways you can get your credit restored after foreclosure:
  1. Do it yourself - Doing your own credit repair is entirely doable.  Click here to learn how to start credit repair after foreclosure, and free credit repair tips.  
  2. Hire a Credit Repair Company - If you have the extra funds to hire a professional to help repair your credit, please be sure to research prospective companies thoroughly and make sure they can do the job for you in a timely manner.  Again please go to the credit repair section for a thorough coverage of this topic.

7.  Cutting back on your Expenses and Living Costs

Remember when you were in college and you were sooo poor, you probably ate Top Ramen for breakfast, lunch and dinner?  And yet you were sooo happy and carefree, embracing life with so much gusto and fervor (well...commensurate to how much beer you've consumed).  Life was so much simpler back then -- no mortgage payments, no kids, no debt, no money, no furniture, no car, no obligations but to make sure you pass your classes and graduate!   And then life happened....

Well, not all of us have the desire to relinquish all our worldly attachments and run off to a Tibetan monastery to search for complete detachment and enlightenment.  Nor do you need to become a penny pincher and lead a life of austerity and complete depravity.  There is a very simple and time tested strategy:  Live within your means!  You must adjust your spending according to your income especially after foreclosure.  And make sure you save at least 10% of what you make.  That's it!

8.  Finding Ways to Increase Your Income and Earning Power

On the flipside of cutting back on your expenses, you can find ways to earn more after foreclosure.  
  • If you have the time and energy, you can find a second job to earn additional income.  
  • If your company pays for educational expenses, you can look at obtaining certifications or an advance degree that would advance you to the next level in your position as well as your pay scale.  
  • Additional family members living with you could also look for employment so they can contribute to paying bills.
  • You can volunteer to take shifts that offer overtime or premium bonuses.
  • Research passive income opportunities.  If you have other talents you can use to do freelance work, this is a great way to earn extra income.  

Related Topics:  

How Does Foreclosure Work

Debt Collection Laws

Credit Repair

Debt Freedom

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