Bankruptcy Considerations before you go in action

Bankruptcy and Foreclosure Will Negatively Impact Your Credit Score

Over the past few years, many people throughout the United States have considered surrendering their home to foreclosure. However, before you go about doing this, there are some issues to consider such as a negative mark on the credit report and a much lower credit score.

A Drop In Credit Score Due To Foreclosure and Bankruptcy

A similar option is to seek out bankruptcy protection, which provides the debtor protect from impending lawsuits and wipes out some or all of his/her debt.  In a bankruptcy, a person may surrender the home without having to worry with both a bankruptcy and foreclosure on the credit report.

Any person seeking bankruptcy protection will notice their credit score drop significantly. Of course, a debtor surrendering their home or loses it to foreclosure will see the same issue. It does not matter if you file for Chapter 7 or 13 bankruptcy protection, its filing will negatively affect your credit even after it has been discharged. A foreclosure on the credit report will also negatively impact your credit score years after you no longer have the home.

There are number of reasons why someone’s mortgage goes into foreclosure, and it’s not just their inability to pay. Sometimes the property’s value dropped under the mortgage owed by the homeowners. Thus, you are facing a situation in which your home has negative equity in it.

Negative Equity and Practical Decisions

A homeowner who is negative equity in their home will have to make some practical decisions. Many folks dealing with this situation often think it’s better – financially – to walk away from the mortgage, letting the home go into foreclosure.  They know it’ll hurt their credit score but they take the hit and go with the foreclosure instead of continuing to pay their hard earned cash on something that won’t have positive equity for possibly many years.

It does not matter what you plan on doing – filing for chapter 7 or 13 bankruptcy or surrendering the property to the bank in foreclosure – learn what the fair market value is for your home. You don’t have to spend extra money getting the appraisal.

Rather, there things you can do to know how much your property is actually worth, and this knowledge will help you to determine the amount of negative equity in the home and if you should let the property go or continue making those monthly payments. It will also tell you if it would be best to get bankruptcy protection.

Whatever you decide, just remember that your credit score is going to be greatly and negatively impacted especially if you decide to go with foreclosure or bankruptcy.