Today, some recent home buyers are finding themselves squeezed between an unusually slow resale market and little, if any, appreciation in the past couple of years. In fact, in some areas, homes have actually declined in value, based on ability to resell in today's market. To make matters worse, you may have accepted an adjustable rate loan when you bought, hoping that you could sell for a fast profit before your loan payments increased to unaffordable levels.

Now you can't afford to make the new, higher payments. And you can't sell for enough to cover the high-balance mortgage that covers your property. You are literally stuck in an untenable situation.

What are your options?

• Call your lender and ask for help. Many lenders are smart enough to know that taking the house back after a foreclosure is a losing proposition for them as well as you. They will likely have to sell the house for less than the amount owed on the loan, and your credit will be severely damaged for several years to come.

What you may not know is that your lender might be able to restructure the loan in such a way that you can afford the monthly payments. The lender can offer to recast the loan, a process in which the loan is re-amortized based on a longer period of repayment in order to lower your monthly payments. Recasting is most effective if you have paid on the current loan for 10 years or longer and becomes less helpful for newer loans.

The lender can also agree to replace the loan with another loan, perhaps with graduated annual payments, so that you could continue to live in the house and continue to make payments on a timely basis. If the proposed monthly principal and interest payments are less than the currently accruing interest payments, you may be looking at a negative amortization loan in which the principal loan balance actually increases each month that the payment fails to cover the interest charge. As a result, your loan balance goes up instead of down on a monthly basis. If the home is not increasing in value, such a loan simply postpones your original problem by digging your debt hole deeper month after month. The only time I might recommend a negative amortization loan is when you are certain you will have an improved financial condition on a future date, such as an inheritance or a large bonus payment at year-end. Even then, it's rarely a good idea to enter into a plan to go deeper into debt on a continuing basis. If your lender is open to negotiating a replacement loan, try to avoid any negative amortization. Unfortunately, your options get less attractive from here:

• Next, you might ask if the lender would be willing to accept a "deed in lieu of foreclosure" with a release of liability. In this scenario, you agree to transfer ownership of the house to the lender along with the keys on a certain date. In exchange, the lender agrees to accept the house as payment in full, and to release you from any further liability in connection with the loan.

Unfortunately, few lenders find this option to be in their best interest. They may agree to take back the house to avoid the foreclosure process but will sell the house for whatever they can get and then seek payment from you for any deficiency. In these negotiations, it may be helpful to have an attorney talk to the lender's representatives on your behalf.

• Finally, if all else fails and the lender is planning on selling your house at a foreclosure auction, there is still one course of action you might consider. You may wish to seek protection from your creditors under a petition for bankruptcy.

The filing of a bankruptcy petition acts as an automatic stay on the process of nonjudicial foreclosure, and the lender is prevented from taking any further collection action until the bankruptcy court has reviewed the circumstances surrounding your case.

However, filing a petition of bankruptcy is not an action you should consider lightly, as it can have devastating consequences for your credit and your ability to purchase a home in the future. I strongly recommend that you talk with an attorney who can answer all your questions before taking this step.