While bankruptcy doesn’t carry the same stigma that it used to, the idea of filing for Chapter 7 or 13 protection from creditors fills many with fear and even shame. It needn’t. In fact, in may be the best way to keep your home if you own one and inflict the least amount of damage to your credit score. The key is to act quickly when you get that pink slip or those divorce papers. Months of waiting, avoiding the mailbox and screening your calls will only make things far worse — a clean break may be the best route. For example:
Working as a loan officer, I had a recently-divorced client come in who had always had good credit. When she realized that a creditor of her ex-husband’s was coming after her for a six-figure debt, she promptly got a lawyer and filed for bankruptcy relief. She reinstated all of her own debts and continued to pay them as agreed. The bankruptcy discharged the ex-husband’s obligation and she was approved for a mortgage within months. What my client did that was so smart was that she didn’t wait until she had missed a bunch of payments on this debt — she halted it right away and her credit score remained in the 700s.
Denial results in all kinds of evils — foreclosures when you don’t want to talk to your loan servicer, late or missing payments, and credit scores that can even make it harder to get a new job after losing the old one. By facing the problem and asking for help — from your creditors, a credit counseling service, or an attorney — you can solve the problem quickly and limit the damage.
- |
- |
-
(24 votes, average: 4.54 out of 5)
Loading ...
So filing for bankruptcy is better than going through a foreclosure?
Often it is. But for a detailed explanation check out this article on Bankruptcy and Foreclosure: Which Does More Damage?
It has been proposed to modify the bankruptcy code thus promote an increase in bankruptcies in an effort to help distressed homeowners. In some ways passing a law that simply turns distressed homebuyers over to the legal system to allow them into bankruptcy prematurely undermines existing public policies and reform efforts.
I believe there are more prudent paths to reform that will strengthen the economy and address the concerns of overextended homeowners without resorting to a modification of bankruptcy laws.
I agree with you. The current bankruptcy code was changed in order to force more people out of Chapter 7 and into Chapter 13, requiring them to at least make good on part of their obligations when they can afford. Truly distressed homeowners should be able to pass the “means test’ required by the current law; everyone else should not be allowed to stick the rest of us with their bills.
What is captcha code? I’m kinda new at this so I’m sorry if I don’t understand. Thanks in advance.
We don’t require one. But it’s normally the squiggly letters / numbers that you have to type in when coommenting so we know it’s not spam. But did you actually have a mortgage question?