Foreclosure Vs. Bankruptcy
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If you are having trouble making your mortgage payments, you may be considering whether you should opt for foreclosure or bankruptcy. There are obviously negative consequences to both options but when faced with foreclosure verses filing for bankruptcy, which would be best for you?
Both foreclosure and bankruptcy will appear on your record, but while bankruptcy stays for there for 10 years, foreclosure is normally removed after about 7 years. However, after your bankruptcy has been finalized, you can start rebuilding your credit immediately, with it taking most people only a couple of years before they are able to qualify for personal loans and home mortgages again, albeit at quite a high interest rate. It is much more difficult to recover from foreclosure and it is considered the worst indicator of risk when evaluating a potential borrower for a home loan. As such, if you wish to own a home again in your future, foreclosure may not be the best answer for your financial problems.
Bankruptcy comes in different forms, such as the traditional liquidation of assets in Chapter 7 or the repayment scheme of Chapter 13. In some cases it is possible to keep your house, either by using the homestead exemption credits of your state of residence, or by reaffirming your mortgage, or by having it placed as a top priority on the list of creditors for repayment.
Other options besides foreclosure and bankruptcy include asking your lender to suspend payments until you can get back on your feet, offering to turn over the deed in lieu of foreclosure, or having a “short sale” and promising to pay back any remaining amount after the sale of the property.
When it comes to foreclosure verses bankruptcy to deal with your mortgage payment troubles, it is best to consider whether you would like to own a house again at some point in your future. If the answer is ‘yes’, it is best to file for personal bankruptcy rather than foreclosure. To learn more about the bankruptcy process and to find out how much it costs to go bankrupt, consider setting up a free consultation with a reputable bankruptcy attorney.
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