"When we refinanced our home, we didn't think that we would be facing the foreclosure process. But there we were - after 15 years in our home, going through a foreclosure because we couldn't afford to pay the mortgage. We refinanced to get money out to finish the basement, but then I lost my foot in a snowmobile accident. I was laid up for a while and the bills mounted. Then we found that the mortgage payments were actually going up! After 15 years in the same place, it can be really tough. But my wife called 1st Foreclosure Prevention and they helped us out. They gave us free advice on how we could stop foreclosure and what to do. We were able to save our home from foreclosure with their help."
"When we found 1st Foreclosure Prevention, we were about to file bankruptcy. We thought it was the only way to stop the foreclosure process. We were so embarrassed at having to do this and didn't want our kids to even know. But we had to act right away if we wanted to stop foreclosure from happening to us. We had an adjustable rate mortgage that ballooned out of control and I lost my job. We had nothing to lose by getting the free foreclosure consultation from 1st Foreclosure Prevention. We were actually surprised at all of the choices we had to stop foreclosure. Thanks to them, we didn't have to file bankruptcy and are no longer in debt."
"I was going through a divorce and was about to lose the house. I didn't want to keep the house but I didn't want to go through the foreclosure process, either. But I had no idea that there were other options open to me in my state until I contacted 1st Foreclosure Prevention. I talked everything over with a very nice loss mitigation specialist and they gave me a personal and free foreclosure consultation. They were able to actually stop the foreclosure process and I was able to stay in my home until it was sold. After the divorce, I was able to buy a new home for myself and my children."
"We were struggling every month to try to pay our mortgage and kept falling further and further behind on everything else. The place was a mess because we didn't have the money to fix it up, but we didn't think we could sell it because of the state of disrepair. My wife and I were like hamsters on a wheel, just trying to get through each day to make payments on a house we grew to dislike. But we knew that foreclosure would destroy our credit, so we held on. Then we found out about 1st Foreclosure Prevention. They were able to give us foreclosure help and even helped us with the sale of our home. We got to walk away from that mess and have started a new life, without a foreclosure on our credit report."
"I couldn't sleep at night because I was so worried about my mortgage and what was going to happen to me and my kids. I had been working two jobs to try to keep up on the mortgage payments since my divorce and there just didn't seem to be an end in sight. Then I lost one of the jobs when the place closed down. A friend of mine told me I was better off to do what I could to stop foreclosure before it started, so I contacted this place that I found online, 1st Foreclosure Prevention, and they gave me so much foreclosure help! I couldn't believe that they could be so nice and caring. They took it all off my shoulders and I was finally able to sleep. They saved my home from foreclosure."
"We figured that we'd be going through foreclosure no matter what. But we didn't know there were things that you could do to stop foreclosure from happening to us. We heard about foreclosure scams and were hesitant to even contact anyone for foreclosure help, for fear of getting scammed. But 1st Foreclosure Prevention seemed pretty legitimate. They helped us out and were actually able to stop foreclosure from happening to us. We got a free foreclosure evaluation and they were very informative as well as professional. We were pretty impressed with their experience and their knowledge of the laws in our state. We're glad that we contacted them as they really gave us the foreclosure help we needed."
Home / Difference Between Foreclosure And Bankruptcy
What Is The Difference Between Foreclosure And Bankruptcy?
If you are facing foreclosure, you may be tempted to stop foreclosure by filing bankruptcy. Many bankruptcy attorneys will urge you to do this to stop the foreclosure process. While bankruptcy will stop foreclosure, it destroys your credit. The bankruptcy will remain on your credit for the next 10 years.
Another option that many people take when facing foreclosure is to simply allow the foreclosure process to happen. The foreclosure ends up proceeding and the borrower is soon evicted from the home after the foreclosure has been entered. Foreclosure also destroys your credit and stays on your credit report for 7 years.
Both foreclosure and bankruptcy are devastating to your credit and can prevent you from obtaining a new loan, a car loan, student loans, credit and even may stop you from getting a job as many employers are checking the credit history of job applicants.
In order to understand the difference between a foreclosure and a bankruptcy and what role each can play on your life, here are some frequently asked questions and answers about bankruptcy and the foreclosure process:
Does bankruptcy stop foreclosure?
Yes. You can file a Chapter 7 or Chapter 13 bankruptcy to stop foreclosure. However, this does not mean that you will not have to repay your debt. The reason why people file bankruptcy is either to eliminate unsecured debt, such as is done in a Chapter 7 bankruptcy or to consolidate debt, such as is done in a Chapter 13 bankruptcy. While bankruptcy protection can stop foreclosure and even put a halt to the foreclosure process, you still have to pay off your debt. You may get unsecured debt discharged in a Chapter 7 bankruptcy, however a mortgage is no unsecured. Moreover, you cannot file Chapter 7 bankruptcy more than once in 8 years and you cannot file Chapter 13 more than twice a year. So although bankruptcy can stop foreclosure, it is not a permanent solution.
How does bankruptcy affect my credit?
It devastates your credit. Bankruptcy should only be seen as a last alternative. Unfortunately, many people are looking at is as their first option when facing the foreclosure process. You are better off to avoid bankruptcy and foreclosure if at all possible.
How does foreclosure affect my credit?
Just like bankruptcy, foreclosure destroys your credit. You will be seen as someone who is irresponsible by other lenders, even if the foreclosure is beyond your control. You should take steps to stop foreclosure if at all possible.
Why not just save my money and go into foreclosure and start fresh?
Many people do just this. They face a foreclosure and do nothing to stop foreclosure. They wait until they are evicted and stay in their home rent free for as long as the foreclosure process takes. What most people do not count on is that lenders can go after a borrower for a deficiency judgment in many states. This means that after the house is sold at a foreclosure auction, if you still owe on your debt, the bank can seek a judgment against you in the court for the deficiency. This is usually not dischargeable in a Chapter 7 bankruptcy but can be consolidated in a Chapter 13 bankruptcy. Many people who take this route end up filing bankruptcy anyway and then have both a foreclosure and a bankruptcy on their record.
What is the difference between Chapter 13 and Chapter 7 bankruptcy?
Chapter 7 bankruptcy, which used to be pretty easy to obtain, eliminates all unsecured debt. If you have more than 20 percent equity in your home, you may lose your home when you file a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, you can keep your home but will have to consolidate your debt and repay it back through a trustee of the bankruptcy court. Current laws regarding Chapter 7 bankruptcy limit the amount of money you can make to file and what debt can be discharged. It may not even be an option for you. Both Chapter 7 and Chapter 13 bankruptcy stay on your credit history for 10 years.
Is bankruptcy worse than foreclosure?
Both are equally devastating to your credit and should be avoided at all costs. You should stop foreclosure and bankruptcy if you can by seeking alternate means to save your home from foreclosure. Bankruptcy will eliminate unsecured debt or consolidated your debt. It will affect all of your current credit. Foreclosure just affects your home, but often leads to bankruptcy. Ironically, filing bankruptcy in many cases leads to foreclosure. Many people see foreclosure or bankruptcy as the only way out and do not consider loss mitigation as a solution to stop foreclosure.
How does bankruptcy lead to foreclosure?
A study done by the American Bar Association indicated that 96 percent of the people who filed for bankruptcy protection ended up in foreclosure anyway. Many people feel that bankruptcy will stop foreclosure and save their home. However, because it entails that you continue to pay your mortgage (as in the case of Chapter 7) or that you consolidate all of your debt while still paying your mortgage (as in the case of Chapter 13) it is not a long term solution. If you are in a financial bind and unable to pay your mortgage, bankruptcy may stop foreclosure but not in the long run. More often than not, bankruptcy is just one step closer to the foreclosure process and losing your home.
How does foreclosure lead to bankruptcy?
If the lender decides to pursue a deficiency judgment against you, you may have no choice but to file bankruptcy. For example, if you owe $100,000 on your home and it sells for $75,000 in a foreclosure auction, the lender may be able to pursue a deficiency judgment against you for $25,000. This can be enforced by garnishing your wages or even freezing other assets, such as a bank account. Many people seek bankruptcy protection because of the results of a foreclosure.
If bankruptcy is so bad, why do people choose this option?
Many people look to attorneys to help them in a time of crisis and because bankruptcy protection can stop foreclosure, they feel that this is a tempting option. The first instinct that any borrower has when faced with the prospect of losing their home is to try to save their home from foreclosure. They often do not understand about loss mitigation or other avenues that can stop foreclosure without destroying their credit.
Why do some people just allow the foreclosure process to happen?
Most people are terrified of losing their home. They take the phone off the hook and ignore letters and court notices from the lender. Many are in denial. But most think that there is nothing that can be done to stop foreclosure. As bankruptcy costs money up front, many do not have the money to file for bankruptcy protection. As a result, they go into foreclosure and often wind up in much worse shape than had they acted to stop foreclosure from the start.
If you are faced with the prospect of losing your home and are torn between bankruptcy and foreclosure, you should understand that there are other options available to you. You should seek a free foreclosure evaluation from loss mitigation firms that can help you stop foreclosure without having to go through bankruptcy. You can get a free foreclosure consultation that can give you foreclosure help that you might not even have thought about. In many cases, you can get a fresh start without having to endure either bankruptcy or foreclosure.
To find out how we can help you stop foreclosure, get a free foreclosure evaluation by contacting us at 866-477-7050 or click here to get started now.
