Owning your own home is the American dream, but for many people, it has created fear and frustration as they try to avoid a foreclosure nightmare. These days, people of all income levels are fighting off foreclosures, from those caught in the subprime mortgage crisis to the wealthy. Some are winning the battle, others aren't.

It's not only lower-income folks trying to make ends meet who are fighting off foreclosure. Baseball star Jose Canseco and boxing champ Evander Holyfield are among the celebrities who defaulted on their homes. Even TV personality Ed McMahon and Michael Jackson, the 'King of Pop,' were facing the repo man, until they were bailed out.

People with good jobs are also losing their homes due to circumstances such as a divorce or job relocation. If you're concerned that you're nearing the point of delinquency or foreclosure, pay close attention, because there are ways you can avoid getting caught in this mess.

'The first thing I would do would be to get information about the laws in your state and information so that you can analyze your situation and not just your mortgage but your credit card debt and other debt so that you can determine what it is you should be doing,' says Richard Geller, CEO of MortgageReliefFormula.com.

Answering some tough questions will help you decide what action to take. Carla Douglin, who runs The Douglin Group and Douglin Foundation, a Maryland-based nonprofit firm that provides foreclosure counseling, offers the following advice for averting foreclosure.

Step 1: Get Clear About Your Finances

'It's very important for homeowners, when they think they are facing foreclosure, to look at their finances very carefully,' says Douglin, who is the author of 'The Foreclosure Workbook' (Xulon Press).

Although many experts advise troubled homeowners to immediately contact their lender, Douglin says that shouldn't be the first step.

'If [homeowners who are] facing foreclosures contact their lender first, the first person they interact with is the customer service agent who may threaten them: 'We're going to foreclose on your home right away,' and scare them into not taking action,' Douglin says. 'If they get to a loan-mitigation person and they are talking to them, they may agree to a workout that they cannot afford just to get the phone calls to stop. However, if they agree to a workout they cannot afford and they miss a payment, [the homeowners] have essentially lied to their loan agency, and that's not good.'

Step 2: Call the Lender

If you still can't find a way to make your mortgage payments after researching your finances, then it's time to call to the lender. But make sure you have all your financial records on hand. When you call, explain your situation and ask the lender what kind of agreement can be worked out so that it is mutually beneficial.

Step 3: Find Extra Money

This is not a joke! It sounds a bit ridiculous to say that step three is finding extra money but it is and, according to experts, this step is often overlooked. Employers can sometimes be a source of extra money for homeowners who are facing tough times. Douglin recommends that people check with their employer's human resources department and inform them of their foreclosure problem. 'They may have a loan program or a grant program or be willing to set something up to assist homeowners.'

Another good source is a housing counselor. Extra cash can come through the federal government's Housing and Urban Development grant programs. Other options include taking in boarders or renting out the entire house. Selling your car, especially if your family has a second vehicle, will also help. The point is, get creative in order to help save your home.

Step 4: Don't Walk Away

In some foreclosure cases, distressed homeowners simply give up and walk away. Don't do that. It's very important that you look at your situation smartly instead of just throwing in the towel.

However, not giving up does not necessarily mean you keep the home that you can't afford. Douglin advises that you work with the bank to buy it back from you, either through a short sale or a deed in lieu of foreclosure, or selling your home to an investor.

Abandoning your property doesn't solve the problem, because a foreclosure is something that will follow you for the next seven to 10 years. Even something as easy as renting an apartment becomes more difficult after a foreclosure. 'A foreclosure is worse on a credit report than a bankruptcy, because it shows that you weren't willing to or you didn't take the action necessary to solve your situation,' Douglin says.

Step 5: Don't Let History Repeat Itself

Some homeowners tend to be 'repeaters.' They are able to bounce back from a default notice now, only to get another one in three months. If that's the case, closely consider options other than owning a home until you can rectify your financial woes. It's critical that you find ways to make ends meet by coming up with solutions, such as moving in with family members, selling valuable items that you don't need and lessening expenses. Also, make sure you understand how your mortgage works. If it's an adjustable-rate mortgage, find out how much more you will have to pay when it resets and whether you afford it.

Says Douglin: 'It's really important for people to start planning for the rainy days by putting 10 percent of their salary away, by establishing that 401k that may be able to be tapped into if there's an emergency.'

Finally, don't bank on the equity in your home. As property values decline, homeowners are finding that one the hardest realities to face is that their home cannot be used as an ATM.