Foreclosure and Bankruptcy Both Have a Negative Effect on Your Credit Score
November 21, 2012 By Bornmann Law Group, PLLC - Bankruptcy Lawyers
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For many people in Arizona considering to surrender their house in a foreclosure. There are some things to consider. Your credit score will suffer significantly. A comparable option is to file for bankruptcy protection. Declaring bankruptcy offers a debtor protection from lawsuits and the ability to wipe out all or a portion of his unsecured debts. Plus, within the bankruptcy a person can surrender their home and not have to have both a foreclosure and a bankruptcy on their credit report.
A debtor who files for bankruptcy protection will see their credit score drop dramatically. The same can be said about a debtor who surrenders or gives up their home in a foreclosure. Regardless of whether you file under Chapter 7 or Chapter 13, a bankruptcy filing will continue to affect your credit long after the bankruptcy case is complete or "discharged" by the Arizona bankruptcy court. Just as a foreclosure on your credit will negatively affect your credit score long after you have lost your home.
There are many reasons why a mortgage may fall into foreclosure and it isn't always because a person can't afford to make the payments. Quite often the value of the property that you own has dropped below the amount owed on the mortgage. (when the value drops below the mortgage value it is referred to as "negative equity" or being "underwater.") Both terms as you may be able to gather leave you in a dire situation when you are facing a mortgage that you have negative equity.
Sometimes when an owner of a particular property is faced with negative equity some practical decisions need to be made. Many negative equity homeowners in throughout the United States, (some of who could possibly even be your neighbors) come to the logical conclusion that they will be better off financially in the long run if they choose to walk away from their mortgage and let their house go through the process of foreclosure. Even knowing full well that a foreclosure will substantially lower their credit score, they choose to take the credit score hit and follow through with the foreclosure instead of throwing good money after bad by continuing to make payments on a property that they won't have positive equity in again for many years.
No matter if you are considering filing a chapter 7 bankruptcy, a chapter 13 bankruptcy, or if you are going to surrender a piece of property through foreclosure, it will be a great idea to find out the fair market value of your property. Without having to spend additional money on an appraisal, there are several other ways to get a good idea as to what your property is currently worth. Knowing the value of your property will give you a better idea as to how much negative equity you have and will greatly assist you in determining if you should let the property go into foreclosure or continue to struggle with the monthly payments. An accurate property value may also make your decision as to file or not to file for bankruptcy protection.
Regardless of your final decision, you should prepare yourself for a severe decline in your credit score if you are seriously pondering foreclosure or bankruptcy.
ABOUT THE AUTHOR: Parker Evan Bornmann of the Bornmann Law Group, PLLC
Parker Evan Bornmann is the managing attorney of the Bornmann Law Group, PLLC, an Arizona bankruptcy law firm that helps people file for bankruptcy. With offices in Mesa, Tucson, Phoenix, and Glendale our bankruptcy law firm offers FREE bankruptcy consultations and FREE debt evaluations.
The Bornmann Law Group, PLLC is an affordable debt relief option for people in Phoenix, Tucson, Glendale, Tempe, Scottsdale, Chandler, Mesa, Prescott, and throughout Arizona including Maricopa County, Pima County, Pinal County, and surrounding communities.
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More information about Bornmann Law Group, PLLC - Bankruptcy Lawyers
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
There are many reasons why a mortgage may fall into foreclosure and it isn't always because a person can't afford to make the payments. Quite often the value of the property that you own has dropped below the amount owed on the mortgage. (when the value drops below the mortgage value it is referred to as "negative equity" or being "underwater.") Both terms as you may be able to gather leave you in a dire situation when you are facing a mortgage that you have negative equity.
Sometimes when an owner of a particular property is faced with negative equity some practical decisions need to be made. Many negative equity homeowners in throughout the United States, (some of who could possibly even be your neighbors) come to the logical conclusion that they will be better off financially in the long run if they choose to walk away from their mortgage and let their house go through the process of foreclosure. Even knowing full well that a foreclosure will substantially lower their credit score, they choose to take the credit score hit and follow through with the foreclosure instead of throwing good money after bad by continuing to make payments on a property that they won't have positive equity in again for many years.
No matter if you are considering filing a chapter 7 bankruptcy, a chapter 13 bankruptcy, or if you are going to surrender a piece of property through foreclosure, it will be a great idea to find out the fair market value of your property. Without having to spend additional money on an appraisal, there are several other ways to get a good idea as to what your property is currently worth. Knowing the value of your property will give you a better idea as to how much negative equity you have and will greatly assist you in determining if you should let the property go into foreclosure or continue to struggle with the monthly payments. An accurate property value may also make your decision as to file or not to file for bankruptcy protection.
Regardless of your final decision, you should prepare yourself for a severe decline in your credit score if you are seriously pondering foreclosure or bankruptcy.
ABOUT THE AUTHOR: Parker Evan Bornmann of the Bornmann Law Group, PLLC
Parker Evan Bornmann is the managing attorney of the Bornmann Law Group, PLLC, an Arizona bankruptcy law firm that helps people file for bankruptcy. With offices in Mesa, Tucson, Phoenix, and Glendale our bankruptcy law firm offers FREE bankruptcy consultations and FREE debt evaluations.
The Bornmann Law Group, PLLC is an affordable debt relief option for people in Phoenix, Tucson, Glendale, Tempe, Scottsdale, Chandler, Mesa, Prescott, and throughout Arizona including Maricopa County, Pima County, Pinal County, and surrounding communities.
Copyright Bornmann Law Group, PLLC - Bankruptcy Lawyers - Google+
More information about Bornmann Law Group, PLLC - Bankruptcy Lawyers
View all articles published by Bornmann Law Group, PLLC - Bankruptcy Lawyers
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
