Foreclosures are Rising: Don’t Panic, Get Informed

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Unfortunately, there has been a significant uptick in both personal bankruptcy and foreclosures. As homeowners struggle to keep pace with escalating mortgage payments, this trend threatens families’ financial stability, but also the broader health of the housing market and economy.

Having guided thousands of clients through the foreclosure maze, often using bankruptcy as a strategic tool, I can state with certainty that the moment a foreclosure is filed, informed action is your greatest asset. Panic and procrastination only narrow your path. The single most decisive factor in protecting your home is securing a clear, actionable grasp of the legal mechanisms and solutions available.

Updated on October 27, 2025.

Key Focus Areas for Homeowners:

This analysis, focused on market data, will guide you through the essentials:

• Foreclosure Rate Analysis: Highlighting the states and metropolitan areas currently experiencing the highest foreclosure activity based on leading industry data.
• The Foreclosure Process: A clear, step-by-step breakdown of the legal proceedings from initial complaint to final action.
• Legal Options: A detailed review of available defenses, mitigation strategies, and the critical role of Chapter 7 and Chapter 13 bankruptcy in foreclosure defense.
• Deficiency Judgments: Clarifying the debt liability for any mortgage balance remaining after a foreclosure sale.

Expert Data Analysis: The Current Foreclosure Landscape

According to the latest Foreclosure Market Report published by ATTOM, a recognized leader in housing market data, the rate of rising foreclosures is clear.

The national foreclosure rate currently stands at one out of every 4,279 housing units. This financial strain is common in the following areas:

State	Foreclosure Rate (Units)
South Carolina	1 out of every 2,248
Florida	1 out of every 2,632
Ohio	1 out of every 2,828
Connecticut	1 out of every 2,884

Metropolitan Hotspots (Population Less Than 200,000)

Within these states, the data reveals concerning local concentration. The following cities have the highest foreclosure rates:

• Columbia, South Carolina: 1 out of every 1,478 housing units.
• Lakeland, Florida: 1 out of every 1,600 housing units.
• Spartanburg, South Carolina: 1 out of every 1,742 housing units.
• Merced, California: 1 out of every 1,794 housing units.
• Florence, South Carolina: 1 out of every 1,809 housing units.

This “annual uptick in U.S. foreclosure activity hints at shifting dynamics within the housing market,” as observed by Rob Barber, CEO at ATTOM. These shifts underscore the necessity for homeowners to be prepared if they are facing foreclosure or the foreclosure process has already begun.

The Foreclosure Process: A Legal Roadmap

Drawing on my experience as a bankruptcy and foreclosure attorney, let’s break down the formal legal steps of the foreclosure process.

The foreclosure process formally commences when the mortgage lender files a foreclosure action. The foreclosure will be filed in the county where your property is located.

The first crucial step for the homeowner is formal notification. This occurs when you are lawfully served with the lawsuit, known in legal terms as the Complaint for Foreclosure.

• Service: This document is typically handed to you by a certified process server or the local Sheriff’s Office, depending on the jurisdiction.
• Responding to the Complaint: Upon being served, you must file a response to the complaint. This deadline is firm, typically within 20 to 30 calendar days, and the exact timeframe will be clearly listed on the summons. Failure to file a response allows the lender to request a default judgment from the court, which will expedite the foreclosure and set a date for the property auction.

Navigating a Contested Foreclosure

If a formal response is filed to the foreclosure complaint, the case proceeds as any other civil lawsuit. This path is often necessary for a mortgage defense when the homeowner disputes the lender’s right to foreclose.

Discovery and Defense

The process moves into discovery, where relevant documents and information can be formally requested from the lender and the homeowner. This phase is crucial for establishing a defense. I have represented clients facing foreclosure where the underlying facts were highly disputed, such as situations where they were being foreclosed on by a company they never had a mortgage with, or where a change in loan servicing was never properly communicated, and the lender could not prove they “owned” the mortgage.

The Mediation Process

Some jurisdictions mandate that foreclosure cases attempt mediation before a trial date can be set. For example, in Miami-Dade County, local rule requires mediation. However, based on my experience, while required, the process often proves ineffective in leading to final settlement agreements.

If an agreement is not reached, then the case proceeds to trial.

The Deficiency Judgment: Post-Sale Mortgage Liability

A key factor for any homeowner facing foreclosure is the risk of a deficiency judgment. Depending on state law, if the property sells at auction for less than the outstanding mortgage balance, the homeowner may still be liable for the difference.

For instance, if the mortgage balance is $300,000 and the property sells for $200,000, the homeowner could be sued for the $100,000 deficiency. It is essential to understand that filing for bankruptcy would eliminate this deficiency judgment.

Bankruptcy as a Strategic Solution

When facing a foreclosure, the decision to file for bankruptcy is a powerful, tactical option, but the appropriate chapter depends entirely on the homeowner’s ultimate goal for the property.

Chapter 7 Bankruptcy and Foreclosure

Chapter 7 bankruptcy will not save a home. The primary benefit of a Chapter 7 filing in the foreclosure context is the activation of the automatic stay. This powerful injunction immediately halts most creditor actions, including foreclosure, temporarily delaying the sale. However, the lender will almost certainly file a motion to lift the automatic stay, and the court will typically grant it, allowing the foreclosure to proceed after a delay.

Chapter 13 Bankruptcy and Home Retention

If the goal is to keep the home, Chapter 13 bankruptcy is the strategic choice. Chapter 13 creates a reorganization plan (typically lasting three to five years) that achieves two main objectives:

1. Curing Arrears: The total amount of mortgage payments you are behind (the arrears) is stretched out and paid back over the life of the plan.
2. Maintaining Payments: During the plan, you must continue to make all future regular mortgage payments on time.
3. Chapter 13 is highly complex. Statistical data show that success rates for self-represented debtors in Chapter 13 are less than 5%. It is strongly suggested that this process be undertaken only with an experienced bankruptcy attorney.

Other Options to Avoid Foreclosure

Besides litigation, homeowners have several non-bankruptcy options to resolve a looming foreclosure:

Selling Your Home with Equity

If the home has sufficient equity, the difference between the home’s market value and the mortgage balance, selling the house is often the best financial choice. For example, if a house is worth $300,000 and the mortgage is $200,000, the $100,000 in equity is what the homeowner walks away with, avoiding a foreclosure judgment entirely.

Strategic Foreclosure Delay: Using Bankruptcy to Secure a Successful Home Sale

Refinancing While in Foreclosure

Even when a foreclosure has started, if there is equity in the home, some lenders may still allow a refinance. This avoids the foreclosure and provides an immediate reduction in monthly payments by extending the term, though the total cost of the home increases over the long run.

Deed in Lieu of Foreclosure

A Deed in Lieu of Foreclosure is a voluntary agreement where the homeowner transfers the property deed directly to the lender to stop the formal foreclosure process. In some cases, especially where the lender anticipates minimal loss, the lender may even offer the homeowner a financial incentive (“cash for keys”) to ensure the property is vacated quickly and left in good condition.

The rise in foreclosure activity, while concerning, is not an insurmountable crisis. The most critical takeaway for any homeowner is this: Do not panic, and do not delay. Take action! The sooner, the better.

As an attorney and law professor who has navigated thousands of these cases, I emphasize that your strongest defense is rooted in informed action.

Summary of Key Steps:

Take Action Immediately: Your 20 to 30-day window to respond to the foreclosure complaint is mandatory. Failure to do so results in a default.

Assess State Liability: Understand whether your state is a “deficiency” state, as this dictates your financial exposure after a sale.

Consider Bankruptcy: For those seeking to save their home and cure arrears, Chapter 13 bankruptcy is your best option. For those needing debt relief and time, Chapter 7 can provide time, thanks to the automatic stay.

Explore Alternatives: Options like a Deed in Lieu of Foreclosure or strategically selling with equity are viable paths to mitigating loss and avoiding the final judgment.

Ultimately, your best protection against losing your home starts not at the auction block, but with a clear plan of attack. Seek qualified counsel to help you interpret the legal terrain and secure the most favorable outcome for your financial future.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.

Updated initially on November 20, 2024.