Lesser of Two Evils?…
By Heather Faucher | Posted on July 3, 2009 | Filed Under Bankruptcy
All across the nation, homeowners are facing the financial squeeze from the ailing economy. From outright job loss, to cutbacks in salary, to declining home sales and skyrocketing health care costs, many now must make an awful choice. Which is “better” for their credit reports? Letting their homes be foreclosed on, or declaring bankruptcy?
Like so many other things in life, there’s no easy black and white answer to this question. Either road can definitely be a hard one to travel. A foreclosure, for instance, will stain your credit report for 7 years. A bankruptcy’s going to show up for 10. Don’t immediately assume, however, that foreclosure is automatically the better choice just because it shows up for less time on your credit report.
“A foreclosure is very serious to mortgage lenders,” says Ray Hooper, Education and Housing Director for the Consumer Credit Counseling Service of Greater Dallas, a non-profit agency that tries to help people facing foreclosure keep their homes. “They’re going look at a foreclosure more seriously than they will a bankruptcy that doesn’t include the house.”
If your home is in danger of foreclosure, your first step is to immediately contact the lender and see if there’s any kind of payment arrangement they can work out with you. Even if you’ve already received an official notice of default on the mortgage, maintaining communication with the lender can help you at least stay abreast of the entire situation and make a more informed decision. You need to consider whether you want to try and keep the house or give it up. If the former, you absolutely MUST work out a plan to get your mortgage payments current again. One example of a possible solution here is trying to get the loan modified to a lower interest rate, if possible. Alternatively, you could try for a “forbearance” on the loan, which means the lender would suspend payments until you can get back on your feet financially. If you bought way too much house for what you can afford, however, these options probably aren’t going to help you out much.
Filing for bankruptcy is another viable option that may help you keep your home. Chapter 7 bankruptcy will free you from most if not all dischargeable debt, such as credit card debt and the like, though you’re going to have to keep paying your house payments if you want to keep the home. You’ll probably want to consult a knowledgeable bankruptcy attorney to find out whether you qualify for this type of bankruptcy, however, since there are certain requirements to be met. Chapter 11 bankruptcy, on the other hand, means you’re going to have to set up a payment plan to meet most if not all of your debts over the next several years. Again, a knowledgeable bankruptcy attorney will prove invaluable to guiding you through the ins and outs. It may seem like an unnecessary expense to someone already in financial hot water, but in the long run it may be well worth it.
No matter which fork in the road you decide to take, try your best to stay positive and do as much research on your options as possible. There ARE ways to lighten your financial burden. There IS light at the end of the financial tunnel!
Looking for foreclosure assistance? Find it here.
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Tags: Bankruptcy, foreclosure, home foreclosure
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