Oregon 30-Hour Real Estate Law Practice Test

What action could a borrower take to temporarily stop a foreclosure process?

1. Declaring bankruptcy

2. Applying for a home equity loan

3. Listing the home for sale

4. Refinancing the mortgage

The correct answer is: Declaring bankruptcy

A borrower facing foreclosure may take the action of declaring bankruptcy to temporarily halt the foreclosure process. When a person files for bankruptcy, an automatic stay is issued that immediately stops most collection activities, including foreclosure. This stay provides the borrower with a chance to reorganize their financial situation and create a plan to catch up on missed payments. It can give the borrower valuable time to negotiate better terms with their lender or explore other financial alternatives. Other options, while they may have different financial implications, do not provide the same immediate legal protection against foreclosure. For example, applying for a home equity loan, listing the home for sale, or refinancing the mortgage might be strategies to improve financial standing or mitigate loss but will not directly prevent the foreclosure process from moving forward if the borrower is already facing one. Only the action of declaring bankruptcy invokes an automatic stay that legally stops the foreclosure proceedings.