Facing Foreclosure...Is Bankruptcy The Best Answer?

Foreclosure and bankruptcy are usually the last resort after a long financial struggle. Neither is an outcome that you probably envisioned when you bought your home. However, the bursting of the housing bubble and lingering economic recession have left more and more American families contemplating financial futures they never thought possible.  It is important to compare the long term effects of both before taking any action. Here are a few things to consider before pulling the trigger on either.

Alternatives for People with Short-Term Financial Setbacks

Foreclosure and bankruptcy have their own levels of urgency. To determine your level of urgency start with the number of payments that you have missed. If you have only missed one, your lender may be willing to work with you to avoid foreclosure. Before you make any rash decision, call whoever is holding the lien on your home. If your financial trouble is short term, ask for a forbearance or if there are other options that will help you get back on track.  Many lenders do offer programs of some sort for people experiencing short-term financial setbacks.  This may include an extension of your payment due date or revised payment schedule.  In either case, be sure to receive approval from your lender for such benefits in writing.  Otherwise, it could be difficult to prove that you were, indeed, given an extension.

Bankruptcy vs Foreclosure: Which is Best?

If your money troubles are indeed going to be a long term issue, you may have to choose between foreclosure or bankruptcy. Since both will damage your credit score for seven to ten years, it is best to think clearly. Chapter 13 bankruptcy can definitely be embarrassing, as well as a real pain, but future lenders have been known to look at it more favorably than a foreclosure.  That's probably because Ch. 13 shows that you have a willingness to repay debts on a restructured scale, while foreclosure demonstrates that you are capable of just walking away from a debt. Chapter 13 also allows you to hold onto the equity that you have built up in your home.
With foreclosure you will be facing the need for a new home. Even if you decide to go down the Chapter 7 route, you will be facing this need. You will have to plan for this because you may have difficulty renting with a bankruptcy or foreclosure on your credit report. 
Being in financial trouble is never pleasant. The stress can tear a marriage and family apart. Take the time to get advice from a qualified adviser before deciding whether bankruptcy or foreclosure is the right choice for you and your loved ones.

This article has been brought to you courtesy of Taylor Brown, a financial writer specializing in bankruptcy and auto financing.  For people with a bankruptcy or foreclosure on their credit report, working with local in house financing car dealers in often the only way to get approved for a car loan.


Bill is a chief editors for Hertz auto occasion website based in France...(Read More)

Around the web