Should you file bankruptcy if you are 12000 in debt and your house has been foreclosed on?

Answer 1

== == Maybe. The foreclosure alone is not sufficient grounds to pre-emptively file bankruptcy. Normally it is a good idea to wait and see if the bank that foreclosed ever comes after you for any deficiency balance before filing bankruptcy. If they never come after you, which is common, then you won't need to file. If they do send you a massive bill after the foreclosure sale, you can file bankruptcy then. Generally you don't want to file bankruptcy just because you MIGHT get a big bill since banks pursuing people for deficiency balances is not extremely common (mostly because some states do not permit it in self-help foreclosures, and in many cases the bank bids what they are owed to protect themselves from someone buying it cheap, and then there is no deficiency balance). Regarding the $12,000.00 in unsecured debt, there are usually five options available, with the amount those things cost being inversely proportional to how much they affect your credit score. (1) Keep paying the minimum payment until the credit cards are all paid off. This is the most expensive thing to do but is best for your credit. Of course, as an example, $12,000.00 at the minimum payment might take about 20 years to pay off and cost maybe $23,000.00, so this is also the most expensive thing to do. And, while I said it is best for your credit, this is theoretical more than realistic. In other words, your credit score will be the highest if you just keep paying them timely, but this doesn't mean you can get loans easiest because your debt-to-income ratio may be bad with all that unsecured debt. A lender may prefer to give a loan to someone with a lower credit score but no other debts to pay rather than give it to someone with a high credit score but who is strapped each month paying credit card bills. So in theory, you might have a higher credit score and be more lendable, but realistically no creditor will actually make a loan to someone who they know has a lot of debt they are carrying. (2) Do consumer credit counseling. This is where you drop all the bills on the desk of a credit counselor and they contact each of the credit card companies and negotiate a lower interest rate, then they put it all in one payment and you pay the payment to the credit counselor who then disburses it to the credit cards. The credit counselor usually charges $16 or $20/month to do this. This doesn't hurt your credit too bad but is the second most expensive thing to do since you are basically paying the full balances but you are saving a lot in interest. DO NOT pick a credit counselor on the internet or from TV, half of them are scams and under investigation for this or that. Go somewhere local so there is a human you can go talk to if something goes wrong. Again, while this doesn't lower your credit score as much as options (3) through (5) below, you are in the repayment plan for 4 or 5 years so sometimes you are able to get better loans sooner if you do (3) through (5) despite the bigger credit hit you take in the short term. I guesstimate a payment at low interest on $12,000.00 (to stick with our earlier example) plus the credit counseling for would be about $230.00/mo for 5 years (60 months). (3) Debt settlement. This is a good size hit on your credit but can help you get out of the debt for about half of what you owe if you have a source of funds to do it (tax refund check, rich uncle, etc). To settle, you contact each credit card company once the credit card payments are behind a couple of months (i.e. they won't settle current accounts) and offer 30% in a lump sum payment as full and final settlement. The credit card companies will say no way, they'll want 80% etc etc but eventually, if you wait long enough and keep calling back, they accept around 40%. So, you could settle all $12,000 for around $5,000 cash. This problem is of course you have to have $5,000 cash sitting ready to go (i.e. you can never settle and then make payments, they will only settle for lump sum payments). 3 things to watch out for during settlement is that they will LIE, so they'll tell you to send 40% and then they'll cancel the rest, then after you send the money they'll bill you for the rest and when you call they will say "We don't have a record of any agreement" and then you'll say "But James at extension 12234 said we had a deal" and they'll say "No he doesn't work here anymore, and we don't have any record of the agreement" etc etc. So, you have to get it in writing BEFORE you send the money. Also, you have to be sure you get the money to them timely. So, they'll say they accept 50% say, but they need the funds within 24 hours or the deal is off. If you mail it, they will say they didn't get it until 48 hours so the deal was off and send you a bill. It is best to wire the money immediately so you can prove they got the money on time. Finally, the IRS considers forgiven debt to be income, so if the credit card companies forgive $6,500 in debt and accept $5,500 in settlement, then they may 1099-C you and you will have to pay taxes on the $6,500 forgiven debt the following April 15. Debt settlement is a big hit on your credit score but cuts the debt in half. (4) Chapter 13 Bankruptcy and (5) Chapter 7 Bankruptcy: These are the biggest hit on your credit score (about 75 to 150 point drop) but obviously is the cheapest by far. Like I said above however, while it is the biggest credit hit it still may not realistically affect you as long as options (1) and (2) above. Most people can get a car loan at a decent interest rate about 1 year after a bankruptcy, and can get a mortgage loan about 2 years after a bankruptcy. However, if you are paying credit cards like in (1) and (2) above, most lenders won't touch you until the five year repayment is finished. So, in theory, options (1) and (2) hurt your score less, but (3) and (4) will allow you to do more stuff sooner, so realistically they should select whichever one they want without worrying about the credit score implications so much. Regarding the differences between Chapters 7 and Chapter 13 (with Chapter 13 frequently being referred to as a "wage earner plan" or "reorganization"), . Please note that nothing in this posting or in any other posting constitutes legal advice; this is simply my understanding of the facts and law, which I do not warrant, and I am not suggesting any course of action or inaction to any person. Speak to a lawyer for specific advice. Thanks!

Answer 2

You mean you are being foreclosed. (The lender does the forecloseing).

That you don't know the difference says you really need to get personal, expert help...a combo of a financial planner and lawyer.

(Bankruptcy may stall the foreclosure, but cost you many other things....the problem that needs to be resolved is your financial ability).