10 steps to a graceful exit

Invoice and past-due notices

You've got a mortgage you can't afford. You've already missed a few payments or are about to fall behind on your loan.

You've done everything you can to fight foreclosure. But your lender won't reduce the payments, so it's just a matter of time: You're going to lose your home.

Now, you need to avoid an angry, chaotic eviction.

Our 10-step plan shows how to move out on your terms and get the fresh start you need.

Step 1. Stop paying the mortgage.
Once you've decided there's no way to avoid foreclosure, don't make hit-and-miss payments. If the payments on your adjustable-rate mortgage have soared beyond your ability to make every month, sending a check every two or three months or making partial payments won't help.

Step 2. Leave your retirement accounts alone.

Don't take money out of a 401(k) or IRA, even if it's your only significant savings. A Transamerica survey found that more than half of all workers earning between $50,000 and $100,000 now rely on those accounts as their primary source of retirement income. You can get through this crisis without risking your financial future.

Step 3. Find a place to live.

Start looking right away. The rental market is tight, especially in cities suffering through lots of foreclosures. But there are so many unsold homes, and especially bank-owned foreclosed homes, that you may be able to rent a place in the same neighborhood for much less than you were paying on your mortgage. The sooner you start looking, the more choices you'll have and the better your credit report will look.

Step 4. Save enough cash for the move.

Take the money you would have paid on your mortgage and set it aside to finance your move. It shouldn't take more than a couple of months to save all you need for the first and last month's rent that most landlords demand, plus security and utility deposits and the cost of a rental truck or van line.

Step 5. Pay down your credit cards.

Once you have those costs covered, use your mortgage money to pay off credit cards. (Our calculators can help you devise a payment plan for one card or a bunch of cards. Those cards may be the only source of credit you can tap for a while, so you want to have as much as possible available to you.

Step 6. Time your exit.

It takes three months to a year for a foreclosure to be finalized, depending on where you live. Plan to move before you're served with an eviction notice to inflict as little stress and strain as possible on your family. Avoid moving during the holiday season, for example, or in late spring. Let your kids get through the school year, then move in July or August, before classes resume for the fall.

Step 7. Prepare for the move by selling what you don't need.

Sort through what you must have and what you can live without. Then have a yard sale or post unneeded belongings on free Web sites like Craigslist.org to raise a little extra money for your post-foreclosure life.

Step 8. Keep current on your car payment.

You still need to get to work, so don't risk having your ride repossessed. If you're struggling with $500- or $600-a-month payments, you can save a bundle by downsizing to a smaller car or SUV. But do it quickly, before lots of missed mortgage payments and foreclosure proceedings show up on your credit report. Once they do, you may have trouble qualifying for a new loan or lease or be stuck with an astronomical interest rate.

Step 9. Create a new budget -- and stick with it.

Once you have a good idea of how much less you'll be paying in rent, create a new budget that ensures you won't spend more than you make. This may mean fewer vacations or "make me feel better" purchases. But credit will be hard to come by.

Step 10. Start rebuilding your reputation.

Our 7 smart moves to improve your credit score will show you how. Beware of anyone who wants to "fix" your credit score for a fee -- often a very hefty fee of $1,000 or more. Some guy with an 800-line or an office between the check-cashing store and carryout pizza joint at your local strip mall can't do anything you can't do yourself. They often claim to have a special relationship with the credit bureaus that allow them to get legitimate reports of unpaid bills or late payments deleted from your history. But they don't. And they can't.