The single most important question consumers ask themselves during the present economic crisis: Is it better to lose your house to foreclosure or file for bankruptcy protection?
A foreclosure will remain on your credit report for 7 years, while a bankruptcy remains for 10 years. If you ever plan on getting any kind of loan, especially a mortgage, lenders are going look at a foreclosure more seriously than they will a bankruptcy that doesn’t include a house.
Even in the heyday of the subprime loan era you could obtain a loan 1 day out of bankruptcy. But a foreclosure was ALWAYS a black cloud and lenders usually wanted 3-4 years time to pass before considering a borrower for a loan, even with terrible terms.
No one will argue that the days of banks lending to anyone with a pulse is over. What this translates to for the consumer is that you should expect to have to wait at least four years from the time of bankruptcy discharge to obtain a mortgage with favorable loan terms.
The main goal in trying to perform a loan workout with your lender is to avoid the catastrophic credit implications of a foreclosure or bankruptcy. But sometimes, even the best efforts to save your home and your credit fail.
Hoping for the best but preparing for the worst is the mindset anyone in the foreclosure process should maintain. There are no guarantees that even the hardest efforts to work with your lender will meet with success. If you are to be prepared for the worst, then it is important to consider the process of bankruptcy.
There are different ways to file for bankruptcy and not all of your debts have to be included. So even if faced with bankruptcy, you’ll need advice from someone, either a good credit counselor or a bankruptcy attorney that can walk you through the choices you’ll face.
While the bankruptcy process in the U.S. is governed by federal laws and handled by a system of federal bankruptcy courts, state laws regarding consumer debts and the disposition of property also come into play. There are also different types of bankruptcy filings. No matter which course you take, the filing stays on your credit record for 10 years. This makes it very difficult to get any type of loan during the bankruptcy process and even afterwards. If you can obtain a loan it will surely be more expensive than if you did not file for bankruptcy.
The two most common forms of personal bankruptcy are called Chapter 7 and Chapter 13. Under a Chapter 7 filling, you get to keep certain property (this is where state laws vary), but the rest is turned over to a court-appointed trustee who sells your stuff or gives it to lenders to satisfy your debts. Under a Chapter 13 filing, you pay back your debts under a plan worked out by the court. The trustee collects payments, pays off your debts and makes sure you stick to the plan.
If you own a business, you may want to consider a Chapter 11 filing. This let’s you stay in business, as long as the court and the people you owe money to approve of the plan to pay off your debts. If the court decides a trustee needs to be appointed, the trustee takes control of your business and its assets.
Not all debts can be wiped clean in bankruptcy. The list includes alimony and child support, taxes, court fines and most student loans. New debts, taken on after the discharge, aren’t included. And if the judge finds out you’ve lied or committed fraud, your discharge can be denied.
You can also choose which debts you want to have discharged while you keep paying off others. You might want to work out a payment plan so you can keep your car, for example. To do this, you have to sign a “reaffirmation agreement,” which says that you promise to pay off that debt. If you don’t pay it back, the creditor can send it to a collection agency like any other debt.
If you’ve filed a Chapter 7 bankruptcy and gotten a discharge, you’ve got to wait 8 years before you can do it again. There are different limits on filing for Chapter 13, depending on whether you’re trying to get debts discharged.
If you’re having trouble making payments or even if you are behind by a month or two, contact and attorney and or your lender before you get further behind. If you can, do this before you are 30 days late or before you receive the official “notice of default,” saying you’re several months behind. This will insure you have time to get prepared before the formal foreclosure process begins.
First of all, you need to get honest with yourselfabout your situation. You need to take a good hard look in the mirror and decide if you can really afford your home and if you really want to save it. Either way, you are going to have to make a plan and you are going to have to act on that plan.
You may have to consider moving. Even if you do lose your house, you don’t want a foreclosure on your record when you go looking for a smaller house or a place to rent. One option is to ask the lender to hold off on foreclosing until you sell. If you’re mortgage balance is greater than your house is worth, you have the option of negotiating with your lender what is called a “short sale.” You’ll still owe money to the lender even after the house is sold. In some cases, lenders will let you off the hook for that amount rather than go through the expense of foreclosing. But you may not be completely off the hook: you may owe taxes on that amount.
You can also try something called a “deed in lieu of foreclosure” which basically means you turn over your house to the lender and walk away without owing anything. But you’ll need to work this out with the lender as well.
A good attorney who knows real estate and mortgage law can help you when you are facing foreclosure. If you cannot afford proper legal representation, then you should seek assistance for a legal aid or pro bono attorney. You can also seek a referral from your local BAR Association or get help from a legitimate credit counselor (from an accredited, non-profit agency, not the slime balls who spam you with bogus promises of making your debts “go away”).
A competent third party is a great choice for most people because they may be able to help smooth out the process and make sure that no laws have been broken by the lender when you received the loan.
If it is found that Truth in Lending Act, RESPA and other predatory lending laws violations occurred, then you may have legal recourse to sue your lender. A bankruptcy, then, would not be necessary and you can save your home and your credit form a foreclosure.
If you never seek proper legal advice, then you will never truly know what rights you have to “properly” defend yourself against your lender.
Deciding whether foreclosure or bankruptcy is worse for you can be difficult to define. What makes this such a difficult question to answer is that no two loans are the same, no individual consumer hardships are identical with another consumer’s and what is best for you will not be the same for others. Getting advice from competent and trustworthy sources and educating yourself about the process of foreclosure and the options at your disposal is the best way to begin to make a sound decision.
Great places to look for consumer advocate attorneys:
www.NACA.net ~ The National Association of Consumer Advocates (NACA) is a nationwide organization of more than 1000 attorneys who represent and have represented hundreds of thousands of consumers victimized by fraudulent, abusive and predatory business practices. As an organization fully committed to promoting justice for consumers, NACA’s members and their clients are actively engaged in promoting a fair and open marketplace that forcefully protects the rights of consumers, particularly those of modest means.
Email: info@naca.net
Phone: (202) 452-1989
Fax: (202) 452-0099
1730 Rhode Island Avenue NW, Ste 710
Washington, DC 20036
www.NACBA.com ~ National Association of Consumer Bankruptcy Attorneys – NACBA is the only national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy. Formed in 1992, NACBA now has more than 2500 members located in all 50 states and Puerto Rico.
NACBA has also played a critical role in many important court cases affecting the rights of consumer bankruptcy debtors by filing amicus briefs in U.S. Courts of Appeal and the Supreme Court, with many of those case decisions influenced by NACBA’s participation. In addition, NACBA provides the most comprehensive educational programs in the country for consumer bankruptcy attorneys with its annual convention seminars.
Candace Lambrecht
Administrative Director
1501 The Alameda
San Jose, CA 95126
Phone: (408) 350-1173
Fax: (202) 331-8535
National Association of Consumer Bankruptcy Attorneys
2300 M Street, Suite 800
Washington, DC 20037
Disclaimer: The comments made by the author and the materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.
Get FREE foreclosure help loan modification loan modification predatory lending manufactured home loans home loans countrywide home loans option one mortgage chase mortgage FHA Secure hardship letter loan modification mortgage help foreclosure process mortgage fraud
{ 9 comments… read them below or add one }
This is oh so true. These lenders continue to send out propaganda and the American people eat it up like always. At least you recognize this and have the cajones to report on it. Be careful Moe, these guys are worse than the mob.
Keep up the good work and thanks for being soooooooooooooooooooooooooo honest duuuuuuuuuuuuuuuuuuuuude. Another sweeeeeeeeeeeeeeeeeeeeet post by Moe Didley.
Moe, great synopsis of what can be a very complicated, confusing subject. Easy to read and understand even for me. I’ll be in training soon to become an Intervention Counselor Resource Provider through our local Community Housing Council, HUD and Realtors. May I use this post(all or in part) in presentations or promotions to “at risk” homeowners?
Thank Art!
You can use my post in part or whole but just give me credit. I’m glad you are doing the right thing and I wish you the best.
plogonot 76 post
all about plogonot and top news
krunitomul 16 post
all about krunitomul and top news
Ambien buy ambien online starting from per.
Ambien buy. Buy ambien cr. Buy ambien.
Ambien buy ambien online starting from per.
Ambien buy. Buy ambien cr. Buy ambien.
You have one year from the date of rescission notice to file a lawsuit in the courts to enforce the rescission but, if you are under foreclosure now, you must move fast! If you have received the notice of sale, you must consult your local court law library for the laws, talking with the law clerks who should be able point you to your local laws. Then contact the courts and notify them immediately of your intent to defend against the action and at that time, present the complaint onto the court as your defense or file the complaint as soon and as quick as you can. I am not a lawyer but am suing my lender for mortgage loan document forgery and mortgage fraud, the dirty rotten sobs have perpetrated against my once very good credit. RESPA & TILA laws are very complex, you really should try to find an honest lawyer, though, we have had no luck here in Maryland because most are corrupt or work for the creditor behind your back or want to lend you the same creditors money or, if they are not currently working for the creditor, they will be by the time it is all over so be careful if the lawyer takes your case and then does nothing, this is what they do, the corrupt lawyer usually will fleece you for every penny you have so you then have no….money and then, after he strips you of the money, he allow the trustee to sell the property or, encourages you to refinance, never assisting you with the RESA and TILA lawsuit, or, this is what has happened to us! Be careful of corrupt bankruptcy judges and trustees if you are thinking about going this way. There is a more sophisticated consumer scam known as the bankruptcy foreclosure scam wherein your lawyer, the bk trustee and judge conspire to steal your property and force you into a life of high cost credit! How the scam works, you innocently find one of these corrupt lawyers for whom most practicing bk in our area are dirty, rotten and corrupt sobs because they must join the corrupt thing known as the “bankruptcy club”,(do your research, this is a club of corrupt judges, trustees and outside lawyers who serve victims up to these clubs); the would be consumer lawyer generally lends money for your….lender with the lawyer failing to ever tell the consumer they have a conflict of interest. Once the corrupt lawyer files the stay for you the victim, he then does nothing…..tells you nothing, does not assist with the schedules, files nothing but begins to work with the corrupt trustee wherein they both collude together to harm you under the courts eyes with the corrupt judge presiding over the whole thing but, essentially, they collude to have the case dismissed making you out to be the villain so they have scared you in the judicial eyes of all courts. If you make to the 341 meeting, you are then met by the corrupt trustee who also, without you knowing, works for your same lender or most of your creditors, and this corrupt trustee ignores your TILA and RESPA claims; and, the screwed up BK draconic laws, essentially allow him to ignore your claims; he will have no part of litigating your claim and will shut you up but quick! The lender now has you where he wants you, in the bk club…..with the judge being placed there to hear a particular lender/investment banks cases exclusively. The corrupt judge, then works in tandem with your lawyer who is to first get you to refi the loan in order to cause you to waive your legal recourses; should you have figured out what is going on, and refuse the refi, then the lender seeks the lift stay, your lawyer may appoint himself as special counsel to the trustee, to make sure you are silenced, and then the judge orders the property sold; be very, very, very careful because you are dealing with the mafia and consumers and honest lawyers have been killed! If you are already there, or in bk and this is happening, motion to dismiss your case and file lawsuit in your circuit court; the courts cannot force a discharge on you. Good luck, Best R, k
I need help!! I’m in foreclosure and I just found out that the people “helping” may not be on the up and up – how do I find someone who is honest? Is there any one?