Avoiding Bankruptcy: Find out if it’s Possible for You

Photo courtesy of Davi Sommerfeld

If you’re at the point where bankruptcy appears to be the only option you have left – be sure that you have truly exhausted all other options and made all attempts to settle your debts through alternative means.  Many times, people filing for bankruptcy don’t realize that they have options.  Seeking the help of a qualified bankruptcy attorney is one way to find out what all of your options really are.

Did you know that a bankruptcy attorney can often negotiate debt settlement deals with your creditors, enabling you to stay out of bankruptcy?  It’s also possible to re-negotiate the terms of your mortgage with your bank or mortgage company with a mortgage refinance.  If you aren’t sure how to go about doing this, or who to contact, once again, a bankruptcy, or credit repair attorney, can be your best friend in this situation.

Prioritize your debts.  Make sure you are paying your mortgage and car payments first, rather than doling out money to credit card companies every month.  Even though credit card companies can be quite aggressive when it comes to collecting their money, it’s much more important that you stay up to date on your home loan and vehicle payments than on your credit card debt. In order to keep yourself from filing bankruptcy, you need transportation so that you can go to work and keep getting a paycheck, and you also need somewhere to live.

In those moments when bankruptcy seems like a good idea, remember that it is going to destroy your credit score for at least seven years and will have lingering effects for ten years or more.  Although many of your debts will be erased, it will be very difficult and sometimes impossible for you to obtain any sort of loans or make any large purchases during that seven to ten years after your bankruptcy discharge is issued. Even getting a bank account or a credit card will be a huge challenge.  You will likely lose your car and possibly even your home.

After bankruptcy, buying or renting a place to live is also very difficult because lenders and even landlords now are very choosy about their debtors and renters.  Credit scores are checked by everyone these days, and the effects of filing for bankruptcy may even reach your employer or a future potential employer if you are looking for work.

Financial advisors and credit repair attorneys are usually of the opinion that filing for bankruptcy should literally be your absolute last option, a ‘Hail Mary pass’, so to speak, because bankruptcy presents so many problems of its own.

Many talented financial advisors and credit repair attorneys can help you find your way around filing for bankruptcy, even if you think there is absolutely no way anyone could help you out of the financial mess you are currently in.  Perhaps you’re thinking that you couldn’t even afford to pay a professional to help you, so why bother?  The good news is that the best advisors and attorneys who deal with these matters want to help people like you, and they will find a way to help you that stays within your budget.

If you’re on the verge of filing for bankruptcy, think twice.  It may very well not be your only way out.

 

Foreclosure or Short Sale: Do You Know the Difference?

It seems that we can’t even turn around these days without hearing about another short sale or foreclosure. If you, or someone close to you, might be heading in that direction, make sure that you have all of the facts.  There are a lot of misconceptions because faulty information abounds.  Always be sure to check with an attorney who has experience handling short sales and foreclosures before you make any decisions. Here, we will give you a basic overview of the differences between the two so that you at least know what your options are.

Let’s face it – going through either a short sale or a foreclosure is going to have an impact on your credit.  The question is: which one will be most appropriate for you? Here, we’re going to take a look at several different ways you will be impacted if you choose foreclosure, and compare that list with short sales.

Your Credit Score

  • Foreclosure – Your score may ultimately end up 300 points lower than it is currently.
  • Short Sale – Only if you have any late payments during the short sale period will your credit score be affected. When the short sale is finished, the mortgage will be labeled as “settled”. Luckily, you may only end up losing 50 points or so on your credit score, and you can probably bring that back up within a year.

Your Credit History

  • Foreclosure – A foreclosure will remain listed on your credit history for seven years.
  • Short Sale –  Although a short sale may be listed on your credit report, they are usually marked as ‘settled’ or ‘paid as agreed’.

Your Future Purchases

  • Foreclosure – On future Uniform Residential Loan Applications (1003), you will be required to reveal that you have experienced a foreclosure or given title or deed in lieu thereof for the seven years immediately following your foreclosure. This will affect your interest rates and willingness of lenders to work with you.
  • Short sale – Short sales are not addressed on the 1003 Loan Application.

Your Responsibility for Deficiency

  • Foreclosure – In most states, including New Jersey, the bank is allowed to pursue you for a deficiency judgment, which is the bank’s way of getting the money it lost due to the low foreclosure sale price. This can mean that, just when you thought you could move forward, your nightmare is still continuing. (Check your state’s deficiency policies.)
  • Short sale – Typically, if the short sale is successfully negotiated, banks will not pursue the deficiency, meaning they will take the loss and will not attempt to recover it from you.

Your Current Employment

  • Foreclosure – Since employers are free to check the credit of any employee with a sensitive job title, a foreclosure could have an impact on your current employment. This is a case-by-case scenario however, and is dependent upon your company’s policy.
  • Short sale – Being listed on your credit history as ‘settled’ or ‘paid as agreed’ means short sales will not create any problems for you regarding your current employment.

Your Future Employment

  • Foreclosure – Currently, employers have the right to perform credit checks on all job applicants. Since foreclosures are listed on your credit history for seven years, it could definitely pose a problem in getting hired.
  • Short Sale – Being listed on your credit history as ‘settled’ or ‘paid as agreed’ means short sales will not create any problems for you regarding future employment.

Your Security Clearance

  • Foreclosure – If you are in a position that requires you to have security clearance, a foreclosure on your credit report could seriously affect your ability to perform required job duties, which may result in termination.
  • Short Sale – Since short sales are almost always listed on your credit history as ‘settled’ or ‘paid as agreed’, they will not create any problems for you regarding security clearance.

The information we have provided you with is intended for your use as a general guideline in order to educate yourself about your potential choices. Remember that there are variables in every single case, and Veitengruber Law can help you make the most appropriate decision for you.

Photo courtesy of Images_of_Money