Bankruptcy before Foreclosure or other way around?

[crynow]

I have heard some mentioning that they filed for banruptcy before foreclosure and others letting the home foreclousre before filing. What's the difference, benefits etc. Thanks!

[BKOnce]

Well, the difference is the amount you owed versus the amount you obligated to pay back, that's all. It's a game/skill of debt/stress juggling to me.

[lrprn]

I have heard some mentioning that they filed for banruptcy before foreclosure and others letting the home foreclousre before filing. What's the difference, benefits etc.

The best option is to file bk and turn your home over to the lender(s) at the same time. That way the credit bureaus count the big hit on your credit scores as one event, not two, which helps your rebuilding efforts after bankruptcy. Also sometimes creditors and lenders see the two events far apart on your credit reports and can think that you couldn't manage your money well enough to prevent the second event from happening - this can prevent you from getting credit in the future.

Hope this makes sense. Sometimes we debtors just have to do what we have to do. But when you have control of events and know you are going to file bk and give up your house, it's best to do both within a short period of time if possible.

[twuoo]

In a foreclosure, the house goes to sale in an auction. Are you responsible to pay the difference between what the house actually sells for and what is still owed on the mortagage note?

How does foreclosure usually happen then?

[SinkingFast]

Foreclosures depend on the State.

Many States allow for a "Right to Sale" clause in the Mortgage Instrument. If the buyer defaults, the Lender can Foreclose.

Some States, like NY, are Judicial Only Foreclosure States. The process goes thru the Courts before the Lender can Foreclose.

Generally, the Lender has to advertise the property for 20-30 days prior to the scheduled Sale date in a local publication. Some States allow for a notice to be posted on the property in lieu of advertising in the paper.

Then there's an Auction held. On the Court House Steps in most cases. And the house is sold to the highest bidder. Generally, the highest bidder is the Lender holding the note. Very few Foreclosure Sales have many other actual bidders.

Depending on State Law, buying a house at a Foreclosure Auction can be a sticky wicket. The winning bidder has to pay all past due taxes, HOA dues, etc. The house is sold "As Is" with no warranties or guarantees. The bidder would be responsible for all repairs needed as well.

For a person facing BK and a possible Foreclosure, it's best, credit wise, to file BK first. Surrender the house in BK and then the Lender steps in to Foreclose. That's typically viewed as one single negative event. If the Lender Forecloses, and then the person files BK, that can be viewed as 2 separate and distinct negative events.

[CindyLou]

Funny, there is the same discussion right now about cars on the chp. 7 thread! My view is that if you file and do not reaffirm, then the house will go back and not be listed as a foreclosure....it will be listed as Included in BK. The Bk could (depending on your state) delay the foreclosure process a bit. If you foreclose then file bk, it will show foreclosure with a zero balance once the bk is filed.

Have you already made plans for a new place before either of the above occurs? Its tricky to rent with BK and/or forclosrue. Not impossible, just harder than usual.

[Beach Bum]

Our situ is similar to this

New member here.
Our Attorney is advising us to file first so we can pass the means test with using our current fully amortized mortgage payment ($4200/mo). Then we can go back to paying the Neg-Am payment during the case. After that we can dump the house.

We bought at the top of the housing boom and those payments were going to go from $2200/mo to $4200/mo in 18 months. (adjustable loan & int. only heloc)

With $65K in cc debt costing $1800/mo it just wasn't going to pan out. So we (the wife and I) thought we'd act before home values dropped even more.

Hope it goes a s planned.

[lrprn]

Welcome to BK Forum, BB! Glad you found us!

Unfortunately you are not alone in your house problem. So many here took a huge chance on an ARM that spiraled out of control quickly and forced them into foreclosure or bankruptcy. I haven't heard the term 'neg-am payment' before - what is that?

I'm assuming you intend to file Ch 7 and are current on your home mortgage payments? When are you going to file? What state are you in? Again, welcome!

[Beach Bum]

Welcome to BK Forum, BB! Glad you found us!

Unfortunately you are not alone in your house problem. So many here took a huge chance on an ARM that spiraled out of control quickly and forced them into foreclosure or bankruptcy. I haven't heard the term 'neg-am payment' before - what is that?

I'm assuming you intend to file Ch 7 and are current on your home mortgage payments? When are you going to file? What state are you in? Again, welcome!

I'm in CA. Neg Am or Negative Amortization is when you can make a minimum payment of less than the amount of interest that is charged. So the unpaid interest gets added to your loan balance and the balance increases over time.