Few words strike fear in the hearts of homeowners, or aspiring homeowners faster than the word foreclosure. It’s a word that represents their hopes and dreams for homes of their own, evaporating into nothingness.
Unfortunately, current economic conditions leave many American families facing the foreclosure they fear so much. This current situation includes long-term unemployment for middle-income Americans and a real estate market that continues to struggle with the one-two punch of devalued properties and reluctant lenders.
People are looking for answers. They want solutions that will help them save their homes, yet they can’t pull the money out of thin air. The problem many Americans face is that they simply don’t have enough money to pay their bills at the end of the month. To compound the problem, many of them have been living on credit cards, creating even more debt for themselves. Bankruptcy is a word that many people turn to in hopes of a last resort solution.
Does Bankruptcy offer a Viable Option for Stopping Foreclosure?
There are essentially two different bankruptcy options available to you, each with its own strengths and weaknesses. Filing for bankruptcy will delay foreclosure proceedings either way, but neither present a “get out of jail free card” allowing you to escape foreclosure without paying for your home.
Chapter 7 Bankruptcy
The Chapter 7 bankruptcy option allows you to delay the foreclosure while the proceedings commence. which can buy you a little time to catch up on delinquent mortgage payments. However, this does not help if you have no income or too little income to make the mortgage payments each month – even if other debts are forgiven.
Chapter 13 Bankruptcy
Chapter 13 bankruptcies provide more options. The initial filing does stop foreclosure, but bankruptcy cannot eliminate the amount of money owed on the home or lower the interest rate on the home loan. However, it does drastically increase the likelihood of saving your home from foreclosure, provided you have an income source, and the means to repay the debt. It accomplishes this by creating an income-based budget and appointing a trustee to pay your bills focusing first on secured debts, such as mortgages, and then moving on to unsecured debts like taxes, and then credit cards and medical bills, etc. Often credit card debt and medical bills are settled for pennies on the dollar.
The Downside of Bankruptcy
While on the surface, bankruptcy seems like a viable option to get out of debt and still have a place to call home at the end of the ordeal, there are some substantial negatives associated with bankruptcy, just as there are with foreclosure. Here are a few you should consider carefully.
- Instant and profound drop in credit score.
- Remains on credit report for ten years where other credit mistakes remain only seven.
- Records of bankruptcy proceedings are public. This isn’t something you can hide from friends and family.
- Negatively impacts future employment opportunities.
While you may feel like your financial situation puts you and your firmly between a rock and a hard place, it’s a good idea to consider all options available to you. One option, that allows you to leave the ordeal with your credit and good name intact, is working with a real estate solutions company. Home Remedies, LLC, a client-oriented company that specializes in real estate solutions, and is dedicated to assisting at-risk homeowners find the best solution possible based on their specific situation and needs. We have been helping Connecticut homeowners for the past 15 years, tackle the most daunting real estate issues, and we can help you as well. So, when facing challenging real estate problems, don’t go it alone, trust the professionals at Home Remedies, LLC, and let us find a cure for your home ownership blues!