Sometimes it happens in your life when you are in a situation where you have to select between bad and worse. And that is precisely the situation you can get into when you have severe financial distress and have to select between filing for bankruptcy or going into foreclosure.
If you can go into foreclosure with the lender to avoid bankruptcy, should you do it? Should you file for bankruptcy to stop a foreclosure?
When you struggle to pay the bills, people have got the choice to declare bankruptcy or face foreclosure. The option depends upon many factors, involving income, living expenses, other debts that require servicing, and outlook for future income growth.
A foreclosure affects the home while a bankruptcy affects all debts. When it comes to bankruptcy vs. foreclosure, know that these 2 procedures aren’t the same. Bankruptcy is an insolvency procedure designed to give people a way to remove their debts and rebuild their financial lives. Foreclosure is a situation where a lender forces the sale of an asset because of a lender not making payments.
In a foreclosure, the bank will seize your house and sell it to recover some of the money it’s owed. If you want to know whether bankruptcy will stop a foreclosure or if you can avoid bankruptcy with foreclosure, then you should know that bankruptcies don’t involve secured debts. Secured debts are debts that are backed by assets, like mortgages. However, filing for bankruptcy can remove your unsecured debts, like your credit card debt, and removing these debts can make it possible for you to afford your mortgage payments.
What Is Foreclosure?
Foreclosure is a legal process that occurs if you can’t pay the mortgage and the lender takes over ownership of the property. The lender then sells the home to pay the balance of the debt. If the home sells for less than you owe on the mortgage, you can face a more legal judgment which forces you to pay the balance which the lender cannot recover by selling the home. If you have trouble paying off your mortgage and miss 2 payments, your lender will get in touch and request you catch up on those payments instantly. If you miss another payment, or you can’t catch up and stay current on the mortgage, the lender will probably begin foreclosing.
What is Bankruptcy?
Bankruptcy occurs when you’re unable to pay back your unsecured debts, like credit card bills. It’s a legal process for dealing with debts. In the case of a bankruptcy, a trustee will take over your assets and will sell them to pay as many debts as possible. Bankruptcy is serious enough that no one wants to utilize it, but sometimes you’re in such a bad condition that you should at least consider it. Bankruptcy has serious long-term implications and it is not essentially the right choice for every borrower.
Is Bankruptcy Better Than Foreclosure?
Every financial condition is different and there’s no one option that’s right for anybody. if you should know whether filing for bankruptcy makes sense for you, you need to speak with a Licensed Insolvency Trustee. When it comes to which choice is good for you, or the question of does bankruptcy stop foreclosure, you can get answers that apply to your certain circumstances by speaking with a trustee. Neither choice is something you essentially want, but talking to a trustee will help you understand the options.
Is Foreclosure Better Than Bankruptcy?
As mentioned, every financial condition is best and the good way to determine which option or choice is right for you is to speak with a Licensed Insolvency Trustee. There isn’t a universal situation that’s good and talking to a trustee may help you find an option that may help you resolve the debt issues. If you are hoping to avoid bankruptcy with foreclosure, you will need to think about your other debts as well, not your home payments. If your mortgage is the debt that you’re having difficulty with, you can want to speak with the lender before the situation gets to the point of foreclosure. Secured debts like mortgages can’t be involved in bankruptcy. If you have other debts that are making it difficult for paying your mortgage, these debts will exist even if you lose the home. By working with a Licensed Insolvency Trustee, you can find a solution that’ll aid you to deal with the debt issues.
Which Is Worse Bankruptcy or Foreclosure?
When it comes to comparing bankruptcy vs. foreclosure, neither is a condition that you probably should be in. Bankruptcy will negatively impact your credit rating and foreclosure will mean you’ll lose your house. Struggling with debt is tough. A Licensed Insolvency Trustee may help you understand what possible next steps exist so you can resolve financial issues. Then you will not have to worry about which bankruptcy stops foreclosure and other such questions.
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