Loan Modification Programs In Minnesota: bankruptcy Foreclosure Or Loan Modification

If you have fallen victim to the flailing Minnesota economy and a financial crisis has hit you

, you may be in danger of losing your house. The first thing to do is to examine all your options.

If you have communicated early and well with your lender or bank as well as with loan modification specialists you may be able to work something out to save your home and restore your finances.

Most people feel that loan modification is probably the better option to go for, before either foreclosure or bankruptcy. Working together with a reputable firm of loan modification specialists you may be able to work out a solution that is workable and sustainable for you.

However despite their best efforts, sometimes people simply cannot pull themselves out of the debt trap they are in or the financial crisis that has hit them, such as loss of employment or illness or accident, and they have to go for the more drastic options. These are to file for bankruptcy, allow foreclosure, or to apply for a short sale.

People sometimes wonder whether they should let foreclosure happen or should they look at filing bankruptcy as the better of the two evils.

You should know that your credit report will reflect a foreclosure for seven years, while a bankruptcy will remain a blot for ten years. However, when a house is involved, you will, in the future, find it more difficult to get another mortgage loan [and sometimes other loans too] if you have a record of a foreclosure rather than a bankruptcy. If you are fortunate enough to get another home loan you might have to settle for really unfavourable terms. This does not seem to happen so readily after recovery from bankruptcy.

Filing a Chapter 7 or Chapter 13 bankruptcy will stop foreclosure but these are temporary stops that will just give you a time breather to sell or refinance your home. Chapter 13 will gain you perhaps as much as five years. But you need to use this time to catch up on your defaulted mortgage payments. Either that or sell while you can.

If your monthly mortgage payments are simply more than you can afford, declaring bankruptcy Chapter 13 is not going to save you. At present filing Chapter 13 bankruptcy only takes care of previously defaulted payments. You will still have to continue paying your current monthly instalments. This law is at present under review and it is expected that it will shortly be changed to permit mortgage modification of residential mortgages. This will be overseen by bankruptcy judges.

A short sale is an arrangement whereby the bank or lender arranges the sale of your house, even if it doesnt reach the full price to cover the mortgage loan you have. You probably will walk out free of debt. It has possibly less damaging consequences to your credit report, but, beware, its impact can last a long time. You need to get really expert advice about this and all its implications before you make your decision.

by: Lance Peters

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