How To Choose Between Bankruptcy And Foreclosure

Both bankruptcy and foreclosure can be quite damaging

. However the homeowner has to decide which of the lesser evil that they are willing to use. There are disadvantages for both options and the homeowner should consider all the other options before opting for foreclosure or bankruptcy. Bothe foreclosure and bankruptcy can have serious consequences and this is the reason, that the homeowner should weigh their options carefully.

There are many bankruptcy chapters that can help the homeowner in discharging the problem; however Chapter 7 and Chapter 13 can be used by homeowner in discharging personal debt such as mortgage loans. For those that have a huge debt burden in addition to the mortgage loan using Chapter 7 bankruptcy can be quite helpful. In such a case, the burden of debt can be removed, for this the homeowner would need to sell off all their assets. This would also include their home and other movable and immovable assets that they possess. In case of foreclosure option, the bank can pursue the homeowner for deficiency. In case of bankruptcy, the lender / bank cant pursue the homeowner for deficiency. Chapter 7 will save the homeowner from foreclosure, but wont be able to save the home. Therefore the homeowner should make arrangements for alternative housing when they are filing for bankruptcy under Chapter 7.

Chapter 13 bankruptcies should be filed by that homeowner that have mortgage loan problems and want to retain their home. For those homeowners that are still gainfully employed and want to retain their home, this is a great option. Accordingly, the homeowner will pay back all the dues over a period of time. During this time, the lender / bank cant foreclose the homeowner if they continue to make payments. The payment schedule is given by the homeowner to the bank and a trustee is appointed by the court to overlook the payments that are going to be made. If the homeowner fails to make the payments then the bank can still foreclose the homeowner. This is the reason that the homeowner should be certain that they can make the payments before filing for bankruptcy.

Foreclosure laws can differ from one state to another. Judicial foreclosures are available in some states, while in other states, judicial foreclosure isnt available. The time taken for foreclosure can also differ as can other rules. Some states offer a reinstatement period, while others dont. The homeowner should be aware of all the rules and the foreclosure laws before they file for bankruptcy or look at foreclosure. Further when the homeowner has undergone foreclosure or bankruptcy, they can find it difficult to get another mortgage loan for some time. This period can last for about 5 7 years. In case, they are able to get a mortgage loans, the rates of interest are extremely high as compared to the prevailing market interest rates for the mortgage loans. Therefore its important to weigh all the options very carefully before using bankruptcy as an option to stop foreclosure or go ahead with foreclosure.

by: Mandy

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