Your options: reinstate, modify, sell, short sale, deed in lieu, bankruptcy basics

Bottom line first. You usually have more than one way out of a foreclosure, and each one has a different cost. Some let you keep the house. Others let you leave on your own terms. The earlier you pick, the more of these are still open. This lesson is general information, not legal advice, and what applies to you depends on the dates on your notices and the terms of your loan. A HUD-approved housing counselor or a lawyer can look at your actual papers.

First, who do you talk to?

Your servicer is the company that collects your payments and handles your loan. Colorado law says that no later than the forty-fifth day of your delinquency (being behind), the servicer must promptly set up a single point of contact: one person or team you can deal with, instead of being passed around. The servicer must then give you, in writing, a direct way to reach that contact (C.R.S. 38-38-103.1).

That contact must give you accurate information about the options the loan owner offers, what you must submit to be considered, where your application stands, when the servicer may send the loan to foreclosure, and the deadlines that apply (C.R.S. 38-38-103.1). Smaller servicers that meet the law's size test are exempt, and a servicer that follows the matching federal rule is treated as complying, so ask the servicer which rules it is following (C.R.S. 38-38-103.1).

Keep copies of everything you send and write down the date and name for every call. Paper is your best protection.

Option 1: Reinstate

Reinstating means paying everything you are behind, plus the late charges and costs the loan allows, so the loan is current again. Nothing about the loan changes. It works best when your trouble was short, such as a medical bill or a gap between jobs, and you now have a lump sum.

In a Colorado foreclosure this is done through a cure: you pay the amount listed on a cure statement, which is the itemized total the lender's side must file. The payment is due to the public trustee (the county official who runs the sale) no later than 12 noon on the day before the sale (C.R.S. 38-38-104). The total leaves out principal you would not owe if the lender had not sped up the loan. Cure amounts can change, so ask for an updated figure and do not wait for the last day.

Option 2: Modify or other loss mitigation

Loss mitigation is the name for the lender's programs that help a borrower avoid foreclosure. A loan modification changes the loan terms for good, for example by stretching the term or adding the missed payments to the balance. A forbearance or repayment plan gives you time or spreads the catch-up over several months. Which of these exist depends on who owns your loan, so ask your single point of contact what is offered and what a complete application requires.

Dual tracking, and why it matters

Dual tracking is when a lender keeps pushing the foreclosure forward while also reviewing your request for help. Colorado limits it. If the servicer has confirmed that your application is complete, or you have been offered and accepted a loss mitigation option and are following it, you can ask the officer to hold the sale (C.R.S. 38-38-103.2(3)). To do that, you must give the officer your written notice from the servicer no later than fourteen calendar days before the sale date. The notice must show the servicer received your complete application at least thirty-seven days before the sale, or that you accepted an option (C.R.S. 38-38-103.2(3)).

Once you do, the officer must contact the servicer's side to ask about the status, and the sale is continued until they answer. If they say the option was accepted and you are following it, the sale stays continued and the foreclosure is to be withdrawn within one hundred eighty calendar days if you keep following the terms. If they dispute it in writing, the officer goes ahead with the sale (C.R.S. 38-38-103.2). This protection has conditions and exemptions, so do not rely on it without checking your dates.

Option 3: Sell the house

If you cannot afford the loan long term but you have equity (the home's value minus what you owe), selling on the regular market can pay the loan off in full and put money in your pocket. A foreclosure sale usually ends worse for you than a market sale, and a foreclosure shows on your credit for years. Selling needs time, because a house must be listed, shown and closed on before the sale date.

Option 4: Short sale

A short sale is a sale where the lender agrees to take less than the full payoff and release its lien (C.R.S. 6-1-1103). It is for homes worth less than the loan. The lender must approve the price, so it can take a while. Read the approval letter closely for whether the lender is giving up the right to collect the leftover amount.

Option 5: Deed in lieu

A deed in lieu of foreclosure means you voluntarily sign the property over to the lender to settle the loan, instead of going through the sale. It is usually offered when selling has failed. Like a short sale, ask in writing whether it clears the whole debt. Be careful with any stranger who asks you to sign a deed: that is different from giving a deed to your own lender, and Lesson 5 covers the legal protections.

Option 6: Bankruptcy, in general terms only

Filing for bankruptcy can pause a foreclosure through the automatic stay, a court order that takes effect when the case is filed and bars most collection actions. Colorado's sale rules recognize it. When a bankruptcy petition automatically stays the officer, the sale does not go forward on its scheduled date (C.R.S. 38-38-109). If the case later ends, is dismissed, or the stay is lifted, the holder can ask the public trustee to restart the foreclosure. If that request is not received within one year, the foreclosure is to be withdrawn (C.R.S. 38-38-109). Bankruptcy has big long-term effects and the rules are federal and technical. Please talk to a bankruptcy lawyer before deciding; many offer a free first visit, and legal aid groups may help if money is tight.

Example with real numbers

These dollars are made up to show the thinking. Priya owes $240,000 on her mortgage. She is $9,000 behind, and the lender's cure statement adds $1,500 in fees and costs.

1. Keep the house by reinstating: $9,000 + $1,500 = $10,500 due by noon the day before the sale. She would still owe $240,000 and the same monthly payment going forward.
2. Sell instead. A buyer would pay $300,000. Selling costs (agent, closing, repairs) come to $21,000. The payoff is $240,000.
3. Leftover equity: $300,000 - $21,000 - $240,000 = $39,000 to Priya.

So the question is not just "can I stop the sale?" It is "can I afford the monthly payment after I catch up?" If a new job pays enough, reinstating at $10,500 keeps the home. If her income dropped for good, selling turns the same house into $39,000 in her hands, and waiting could shrink that number through more fees and interest.

What to do this week

• Find your notice and write down the sale date, if one is set.
• Call your servicer and ask for the single point of contact and a list of options in writing.
• Book a free session with a HUD-approved housing counselor.
• Do not sign anything from a stranger who contacts you about your foreclosure until you read Lesson 5.