There are several workout solutions that a lender will offer if you the borrower is willing to make some major changes in the way you handle your financial affairs. The following list will help you decide which is best for you if that is what you want to do.

1. Workout. This is an option that allows you to enter into a binding "composition" and or "composition-extension" agreement with your lender in which I will discuss in length because this is the type I am very familiar with because we chose this as a remedy to our own foreclosure problem in the past.

2. Forebearance agreement. This is generally a temporary agreement by a lender to refraim from exercising or continue to exercise some or all of its default remedies. It is generally not intended that the forbearance agreement will waive existing defaluts or extend the maturity date or create a permanent modification of the creditor/debtor relationship. Creditors must ensure any forbearance agreement does not result in such actions.

If the debtor's financial difficulties are temporary, the forbearance may be negotiated in order to permit cure of the default. In other situations, more expansive restructuring will be necessary. A forebearance agreement may also be used to allow the creditor time to prepare an exit strategy from the creditor/debtor relationship by a refinancing of the debt or permitting the debtor to liquidate assests in an orderly manner.

3. Deeds in Lieu of Foreclosure. In order to avoid the time and expense of judicial foreclosure, either the creditor or the debtor may consider obtaining from the debtor a deed in lieu of foreclosure.

If you want a quick exit expecting none of your earnest money or investment in the property back including all of your deficiencies and your lender is willing to accept the title and property "as is" at his/her expense then this is a possible solution to stop a foreclosure in its tracks. But guess what your credit could also get ruined with this option especially if the lender takes it in the shorts because of any undisclosed liabilities and injuries to the property. You'll have a very difficult time trying to borrow money at the prime rate and maybe not even be rentable for at least seven years. Good luck on this one.

4. Workout. This is the best choice if you sincerely desire to save your home from foreclosure and keep your home, the American Dream, and save your credit as well. I want to discuss this option at length because my heart and soul went into it.

After studying and experiencing what a workout solution is I found that if you are willing to accept a difficult and long complicated process with your lender this alternative is strong medicine to not only save your home from foreclosure and perhaps learning a hard lesson about how to live within your means by budgeting your money and becoming more responsible in paying your bills on-time.

My wife and I were able to manage this process without the need of hiring a real estate attorney. We consulted with one but could not afford to pay his rate let alone pay our full mortgage payments. We are both college educated and understand legal matters well enough do our own research and negotiations.

Before I go too much further into the discussion about this workout plan I want you to understand that I am not a licensed attorney and do not offer legal advice of any kind. I have attended several workshops related to what practicing attorneys should be learning. So my advice to you is to seek competent legal advice and learn more about foreclosure law.

If you do not have time or patience learn about foreclsoures law or to deal with your lender and fear the risk of a law suit hire a real estate attorney that specializes in lender negotiations and practices foreclosure contract law. Make sure you have at least $5,000 available to hire him or her, just for starters.

Even if you do not choose to hire a real estate attorney you can do this yourself successfully if you will spend the time gathering all of your financial and legal documents and organize them into chronological order from the date that you purchased your home. Use an expandable file folder for all of your financial papers like bank statements, cancelled checks, receitps etc and one for your legal papers like your promissory note(s), mortgage, title insurance, taxes, maintenance and repair contracts and other documents that required a notary seal. Label your folders with months and year and by all means keep them in a safe place.

If you hire a real estate attorney he or she will need to see all of your proof of facts if you want him or her to be effective in representing you.

A Workout requires that you enter into a legal and binding contract with your lender, so choose a real estate attorney wisley. You can ususally save money by hiring someone that has completed and graduated from an accredited law school, received and maintains a license to practice law in New Mexico, worked for a law firm for 5 - 10 years specializing in foreclosure contract law and is now on their own. There are a lot of attorneys practicing this type of law that meet this criteria. You can find them listed in the Yellow Pages.

A workout plan between you the debtor and your lender, ie. the creditor is a favorable alternative to foreclosure, R. Thomas Dawe, 2006, "Examining Workout Options". A "Workout" is generally understood to mean a non-banruptcy negotiated debt modification procedure.

There are basically two types of workouts. They are as follows:

1. A " composition" is an actual contract between the debtor and one or more creditors in which the creditor agrees to accept a specified partial payment in full satisfaction of the debt.

2. An "extension" is an agreement between a debtor and one or more creditors to extend and/or change the payment schedule of the debt. It may be part of an composition.

To be a "workout" the agreement must be between the debtor and one or more creditors. A workout agreement is subject to contract law.

The benefit to such an agreement is that it can preserve existing financial and security arrangements with other creditors and preserve the debtors the right to file bankruptcy. It can provide for more immediate payment to the creditor than the bankruptcy alternative.

Creditors and Debtors must, however, do a cost/benefit analysis to determine whether a compsition/extension is more advantageous than a true bankruptcy and whether the threat of a future bankruptcy will be outweighed by an immediate settlement.

CASE STUDY: Armijo Farm, 1998

We accrued long term liabilities of $188,500 with assests of $151,500 from 1981 and 1998. We were upside-down by $37,000! Our original mortgage got refinanced one additional time in 1984. Our monthly payment was $1,264 per month @ 6.75% average interest among four loans, two farm operating loans and two long-term real estate loans. Our income after taxes was approximately $3,400 per month. Our total farm and living expenses were $4,232 per month. In our cost/benefit analysis with our lender showed that we were unable to make this payment consistently.

Our options at the time were either to sell, take the workout or file Bankruptcy under Chapter 13. The thought of more stringent controls through Bankruptcy over our lives and the thought of an automatic stay being lifted by the lender's attorney even before we had started giving all of our income to a trustee to pay our bills made selling or the "workout" the better choices. We would have been at the mercy of the Federal Bankruptcy Court with the lender still in the picture. Ugh!!

We tried selling. Without making repairs, selling "as is" the realtor could only promise $150,000 max if he could find the right buyer within 90 days. Well that option did not work out. He only showed our home twice. When you're raising small children and trying to run a household, work at two jobs a house in disarray really isn't going to make a very good impression on a potential buyer.

Our lender's advice to us was to take a composition/extension "workout". We had 90 days to comply with all of the applications, agreements, provide proof of income, three years of tax returns, a five year financial plan for our farm including living expenses, a land appraisal, a title report and in the end a ten year committment to stick to the plan making regularly smaller payments we could afford.

After the workout plan was approved by our lender our loans were adjusted to meet our ability to pay.

In the summer of 2008 we completed our "workout" referred to by our lender as a "shared appreciation" agreement. We paid the difference in what our property appreciated in value over the ten year period, a small sum of $5,000 and the balance of the debt was officially cancelled. We beat the foreclosure, we pay the same lower monthly payment and on time and we still live in our home and are completely satisfied with the outcome. We still maintain a good relationship with our lender. They're happy because they get a good return on their money and have a happy customer because we got to keep our home.