Bankruptcy before foreclosure or after deficiency?

[C. J.]

What do you all have to say about which course to take, assuming you do not want to save the house?

1.) File bankruptcy before the non-judicial foreclosure sale.
2.) File bankruptcy after the non-judicial foreclosure sale and the deficiency judgment in entered. The deficiency is about $200k.

[BassBoy]

In my opinion, it really doesn't matter which one is first. You would definitely want to file before any judgements are brought against you for the deficency. That aside for the moment, paying your debts up until you file can help you rebound more quickly after the BK as far as your credit rating is concerned. Having a lot of late payments before you file can hurt your ability to obtain any new credit or loans after your BK.

[uofaguy]

You may want to speak with a few attorneys about your situation (most offer free consultations). We were told by attorneys we met with that if we know we will be filing BK that we should file before the home forecloses, so that we don't have the double whammy on our credit of the foreclosure & then the BK (i.e. if you file BK then your credit reports should state included in bankruptcy and not include the later foreclosure). I'm still waiting for the house to foreclose to validate this, but it makes sense.

Also, from our situation, we played the game with the banks for many months of attempting a short sale or deed in lieu, which turned out to be a waste of time. Bad thing for us is that during that time we had months of late mortgage payments hit our credit report which really killed our credit scores. In retrospect, I wish we had filed BK before we were late with our first payment - - oh well. Good luck.

[r.m]

This is a myth.

The foreclosure IS a separate event and WILL show up in the public record portion of your credit report.

Your note will show discharged, but the FC is not wiped out.

Furthermore, you have to disclose the FC on future mortgage apps.

If you're occupying the property and the BK would re-set the timeline and give you a few more months, then that might be the way to go.

Also, I've worked with LOTS of people who should have filed sooner than they did. If your situation were to miraculously improve somehow, you'd have a situation on your hands.