For anyone facing financial difficulties, especially foreclosure, bankruptcy is going to cross their mind. The challenging decision is trying to figure out which is better or worse? Unfortunately, that is a question that only you can answer because it all depends on your current financial situation. Every situation is different and brought on by different circumstances. Those circumstances will determine which option is best for you.
While bankruptcy can stop foreclosure, here are some basic pointers on the consequences of both to help you decide which course to take;
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1. Bankruptcy can stay on your credit report for 10 years inhibiting your ability to get another home in the future. Foreclosure can roll off your credit report as early as 7 years.
2. If the lender doesn't get all their money back after the auction in a foreclosure, they may come after you for the remaining balance and seek what called a deficiency judgment. If they get one, then they can take you tax returns and garnish wages in your future. Bankruptcy would prevent a future deficiency judgment. Please know that not all states allow a deficiency judgment.
3. Medical reasons for bankruptcy (and medical bills on your credit report) on not always seen as damaging as other things like late house payments (and foreclosure). If you have medical bills as a factor in your foreclosure, you may consider doing some research on how those could play out in your future credit recovery.
4. If foreclosure is you only reason for filing bankruptcy, then you may want to research the many ways to prevent foreclosure available to you. There is a limit on how often you can file bankruptcy. You wouldn't want to find yourself in a situation where you needed to file bankruptcy in the future due to an unforeseen crisis, but can't because you already filed to stop foreclosure in you past.
A bankruptcy attorney will always be the best bet for understanding bankruptcy laws. It would also be worth it to do extra research on how bankruptcy affects your credit by calling the credit bureaus. Since bankruptcy attorneys aren't usually experts in credit repair, credit bureaus aren't experts in bankruptcy or foreclosure, and neither are usually experts in foreclosure prevention, it is best to use several different resources before determining whether bankruptcy or foreclosure is best for you.
Another option is to call a loan officer at a bank you trust and ask them how they view bankruptcy versus foreclosure in terms of getting a new loan and see what they say. Lenders even have a different view on which will be a better option.
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