Is one option, bankruptcy vs. foreclosure, a better alternative when compared to the other? While both may seem like bleak routes, one alternative is actually significantly better when compared to the other.
To understand why, you must first understand the full consequences of foreclosure, and most importantly, how to avoid it. If you’ve been struggling to pay your mortgage due to overwhelming debt and you’re now facing the possibility of losing your home to foreclosure, you’ll want to act now.
Is Foreclosure Closing In On You?
Unfortunately, many good people who find their financial situations spinning out of control also find themselves forced into foreclosure. Surrendering your home to foreclosure only opens the door to more problems and future headaches. Luckily, there is another way out to help with both unfortunate circumstances.
One of the biggest foreclosure headaches is the fact that, not only do you lose your home, but you could also face deficiency. Your lender has the opportunity to pursue you legally due to a deficiency, which will create more debt.
A deficiency occurs when the difference between what you owe on your mortgage is more than the fair market value at the time your property is sold. It is increasingly common for banks to pursue deficiencies.
Credit recovery after a foreclosure is another headache you’ll have to deal with if your home is seized by your lender. It is far easier to rebound your credit after bankruptcy when compared to foreclosure because all of your debts are taken into account and dealt with in bankruptcy.
Whereas if you decide to surrender your home to foreclosure, you may momentarily escape the debt of your past-due mortgage, but you will still owe on other debt -- the same debt that possibly led to foreclosure in the first place. Plus, you may still owe the lenders due to a possible deficiency.
What Does Bankruptcy Have To Do With The Foreclosure Process?
When done properly, the bankruptcy process can actually save you from losing your home. Although your credit score may initially seem to suffer more with bankruptcy when compared to foreclosure, the long-term benefits of bankruptcy far outweigh those of foreclosure.
When you think about it, there aren’t any benefits to foreclosure. You lose your home, your credit is damaged and you may still owe money to the lender for a deficiency, plus you still have to deal with all your other unrelated debts. Filing for bankruptcy, on the other hand, can save your home and offers a fresh start full of opportunity to not only keep your existing home but to buy a new home in the future. One of the most important benefits, that is necessary for your fresh start, is that you lose all of your debt, tax-free.
How Do I Prevent Foreclosure With Bankruptcy?
In most cases, it is entirely possible to completely stop the foreclosure process on mortgages by filing for either Chapter 7 bankruptcy or a Chapter 13 Repayment Plan. The Chapter 13 Repayment Plan offers you the ability to retain possession of your home and to catch up on any delinquent mortgage payments.
Filing for Chapter 7 can stop or prevent the process all together, if done before it is too late. Once you’ve filed for Chapter 7, an “automatic stay” immediately goes into effect. This means the banks collection process of any mortgage debt is now prevented or delayed.
By filing for bankruptcy, you’ll stop the foreclosure process, keep your home and any debt associated with your property will be discharged.
To Find Out More
If you’re facing the possibility of losing your home to foreclosure, there is no time to delay. You need to act immediately. To find out more about how filing for bankruptcy can save your home from foreclosure, contact an experienced bankruptcy attorney today.