REASON # 2 TO FILE FOR BANKRUPTCY : FORECLOSUREby Victorianne C. Maxwell (Maxwell Law Firm, PLLC)
REASON # 4 foreclosure
BY Maxwell Law Firm
Foreclosure is the Legal process initiated by the lender by which borrower is deprived of his interest in the property, typically triggered by default by the debtor/borrower.
Deficiency- Another ACTION brought Following a foreclosure sale the proceeds of which are not sufficient to cover debt, lender can sue the borrower to recover remainder of debt.
Borrower may have to pay income tax to IRS for unpaid balance paid to the lender, unless certain criteria are met (see conditions for mortgage tax relief.)
Foreclosure stays on your credit report for 8 years like any other negative item, making it difficult to buy another home or a car int he near future.
What are your options If you are facing foreclosure
Option # 1 Deed In lieu of Foreclosure-Mortgagor hands over a deed to mortgagee in satisfaction of the debt. First lender must accept this arrangement and they typically do not. This is almost like a voluntary repossession and stays on your credit report just as long as a foreclosure.
Option # 2 Equitable Right of Redemption- Debtor’s right to redeem foreclosed property. Requires full payment of the mortgage debt in it’s entirety. Typically if you are in foreclosure you are not able to do this. Further more the damage has been done to your credit (Missed payments).
Option # 3 Short Sale –Within the lenders control and has the same impact on your credit as a foreclosure.
Option # 4 Bankruptcy–Federal protection from foreclosure and stops all foreclosure proceedings. With this option if you file and qualify for a chapter 13 you can modify your mortgage loan interest. If you qualify and file a chapter 7 you can catch up on the payments and keep your home and possibly submit a loan modification during the process. Yes Bankruptcy stays on your credit report for the same amount of time as foreclosure BUT you can take care of other debts that you have as well such as unpaid medical bills, tax debt, stop car repossession, and the list goes on.