The best way to temporarily stop a foreclosure (up to) the day before an auction (and when a homeowner has unsustainable debt beyond the home mortgage) may be to declare bankruptcy. Bankruptcy is another common strategy to avoid foreclosure (temporarily). A home cannot be sold or foreclosed on (auctioned) while in bankruptcy (Ch 7 & 13).
Sometimes when a homeowner is behind on loan payments and is facing foreclosure, they will declare bankruptcy. When this happens, the lender will file a motion with the bankruptcy court to have the bankruptcy stay on the home lifted (because the owner is not paying the loan). At this point the stay is lifted and the home goes back into foreclosure and to auction. Thus, bankruptcy can be an effective, although only temporary delay of a foreclosure.
Advantages and Disadvantages
The advantage of declaring bankruptcy is that it can be done at the last minute just before the home is actually auctioned off by the lender. Once the bankruptcy is declared, the auction is stopped or nullified until the lender stay lifted.
The disadvantage of declaring bankruptcy is that the vast majority of homeowners that declare bankruptcy to stop a foreclosure end up getting a bankruptcy AND a foreclosure on their credit. This is because a bankruptcy only DELAYS the foreclosure, and does not prevent it. Also, fees and missed payments pile up during bankruptcy making foreclosure more likely and less preventable.
If a homeowner’s financial problems can be mostly resolved by selling their home, a short sale or other options for the seller are much better than a bankruptcy.