The most common reason why people lose their homes is that they wait too long before they respond to a foreclosure notice or do not react at all. Explore your options earlier. As the foreclosure auction date nears, options become more and more limited, until a bankruptcy is the only way out. If you begin early enough, there are many options.

1. Foreclosure workouts are a good option. A foreclosure workout is an arrangement that is negotiated with a creditor, outside terms of the original loan. This gives all parties a way to make the most of the situation and it can take one of many forms.

. A short pay or short refinance is achieved through refinancing of the property that is facing foreclosure. It modifies the existing terms of the mortgage and the creditor agrees to temporarily reduce the interest rate, reduce principal payments or extend amortization.

. A repayment plan can be worked out under which, the debtor pays a part of the arrears up front and agrees to pay the rest over a period of time, in addition to the regular payments.

. A deed in lieu of foreclosure is when the debtor voluntarily gives the property back to the lender. Whether you give the house back or the bank forecloses, you may owe the bank the deficiency in what they make from it and your debt. So working out a forgiveness of potential deficiencies is a good idea during this stage.

. A short sale is another option. The debtor sells the property to a third party and the lender accepts the selling price as a full settlement. Be sure the bank does not attempt to take the short sale price and still ask for a deficiency.

. A friendly foreclosure is when a third party has bought the mortgage, sells the property at foreclosure and later, sells it back to the debtor or to another predetermined party. This option allows the debtor to repurchase the house after the foreclosure or to buy back the foreclosed property after the auction.

. Forbearance is the process where, in exchange for a sum of money or for some other action on the debtors part, like listing with a realtor or making substantial repairs, the lender agrees to temporarily suspend legal action.

2. Filing for a Chapter 7 or Chapter 13 bankruptcy can help debtors to retain their homes while dealing with creditors. However, your personal circumstances have to be suited to this option. In general, bankruptcy must be your last resort. You can file bankruptcy on your own, but it is advisable to hire an experienced bankruptcy attorney. In Chapter 7, all the nonexempt assets are turned over to the bankruptcy trustee and all debts are discharged. In Chapter 13, a plan is arrived at, outlining how you will pay your creditors over a period of time. Chapter 13 can stop foreclosure and the court retains the right to scrutinize your finances during any stage of the reorganization plan. Payments must be made regularly or the house will go to foreclosure.

3. Borrow money on a new mortgage in order to pay off the old one, its arrears and all legal fees. This is actually more common then you might imagine. If there is enough equity in the house, a bad credit rating will not prevent you getting a new loan.