As the economy has slowed down in the past few years, there’s been a lot of talk of foreclosure and people losing their homes. It’s enough to cause anyone to worry. But what exactly is foreclosure? What is the process and why does it happen?

Foreclosure is a legal action taken against you by your bank or lender. Imagine the worst: you’ve lost your job, burnt through your savings, and can no longer make your mortgage payments. Once you have fallen a few months behind on your payments, your bank will begin the foreclosure process. This lawsuit will allow the bank to repossess your home and sell it. This is the bank’s attempt at satisfying the debt that you can no longer repay. Once the property is sold, you will be evicted from your home.

There are two main types of the foreclosure process: judicial sale and power of sale. Judicial sale takes place entirely under the supervision of a court. Power of sale, on the other hand, happens without court supervision, which makes the process faster and cheaper. In this case, the demand for payment will be given by the mortgage lender instead of by the court. It’s important to note, however, that foreclosure by power of sale is subject to judicial review and is only legal in 29 states.

The causes of foreclosure are usually due to unfortunate circumstances. Maybe you were laid off or fired. Maybe you were forced to stop working due to injury or illness. Even though your inability to make payments was unforeseen, you will face foreclosure after missing several payments. And as if suffering the emotional distress of losing your home wasn’t enough, your credit score will be damaged as a result of foreclosure. This could make getting a job and finding a new home much harder than it once was. On the bright side, with good behavior your credit score can rebound within a couple of years and your foreclosure can become a thing of the past.